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THROUGHOUT the years, the Consumer Packaged Goods (CPG) industry has been experiencing rapid expansion in Indonesia where the market is estimated to reach USD82.2 billion in 2024.
The strong demand for essential products such as food, beverages and pharmaceuticals, along with the surge in e-commerce, is contributing to massive growth. As the local market develops, CPG companies need to quickly adapt to changing consumer demands by leveraging new technologies.
Based on the recently published market study, "Indonesia’s CPG Trends and Challenges" by Ringier and Siemens, companies are progressively embracing digitalization in their operations. This adoption aims to bolster resilience amid evolving consumer lifestyles and demand for new products, variable material costs, supply chain disruptions, and intense global competition.
To gain additional insights into the white paper's results, Food Pacific Manufacturing Journal sought the views of Mr. Alex Teo, Managing Director and Vice President of Siemens Digital Industries Software for Southeast Asia.
Alex Teo, Managing Director and Vice President, Siemens Digital Industries Software for Southeast Asia
From a digital technology perspective, how would you assess the CPG industry in Indonesia?
Companies in the CPG industry in Indonesia are making notable strides in their digital transformation journeys with support from the government to accelerate the adoption of smart manufacturing technologies with its "Make Indonesia 4.0" initiative. Enthusiasm for adopting digital tools is also growing as businesses prioritize optimizing production capability, enhancing product quality control, and ensuring product safety to boost their competitiveness and enhance business resiliency.
The market study identifies new product development as a significant challenge for manufacturers. How are Industry 4.0/5.0 technologies aiding in product design and implementation? In what ways can these technologies help streamline costs and expenditures related to product development?
Industry 4.0 and 5.0 technologies are revolutionizing how manufacturers develop and implement products, driving improvements in efficiency, enabling greater customization, and fuelling innovation. For instance, digital twins allow manufacturers to create a virtual replica of a product or system, enabling simulations, testing, and optimization before physical production. With that, manufacturers can identify and address potential issues early in the design phase, which helps reduce costs and time-to-market.
Production optimization is often highlighted as a major challenge. Can you provide concrete examples of how companies have successfully increased productivity and efficiency through digital solutions?
We can examine Olympia Express's digital transformation journey to learn the transformative impact of digital solutions on productivity and efficiency.
Leveraging Siemens Xcelerator’s 3D computer-aided design program, Solid Edge, product life management solution, Teamcenter, and NX computer-aided manufacturing (CAM) software, the leader in hand-crafted espresso machines reduced prototyping efforts by 50% and boosted overall productivity by up to 30%. These tools streamline their design-to-manufacturing process, enabling precise 3D modelling and rapid prototyping, which frees up resources for innovation.
Many customers have also adopted our Advance Planning and Scheduling (APS) solution to help enhance its production scheduling and also using Mendix to automate data collection. One such recent example is Freyabadi Indotama Indonesia which is one the largest chocolate manufacturer in Indonesia. The other is PT Greenfields Dairy which is one of the largest dairy companies in Indonesia who is also benefited from the use of APS during Covid to ensure timely delivery.
It is evident that CPG companies, particularly in the F&B sector, are prioritizing product quality and safety for improvement. What strategies can they employ to enhance these areas?
To support these efforts, companies can leverage Manufacturing Execution Systems (MES) to enhance product quality and safety. MES systems provide real-time data from the factory floor, enabling manufacturers to fine-tune production processes, minimize downtime, and ensure consistent product quality. These systems also play a crucial role in maintaining product safety by ensuring that production processes adhere to strict safety standards, thereby reducing the risk of contamination or defects.
The market study suggests there is considerable potential for increased MES usage. What services are available to help companies fully leverage the benefits of MES solutions on a larger scale?
MES systems can be a game changer in helping companies achieve manufacturing excellence, but many face challenges in standardizing processes across different countries.
Companies should look to implement a centralized architecture to leverage MES effectively. The Siemens Opcenter Execution Process MES solutions allow for the connection of multiple production sites, streamlining deployment and reducing costs. Customizing MES solutions for plant-specific configurations ensures that each location meets its unique operational needs while maintaining a unified system.
Global standardization of processes enhances efficiency and security, fostering collaboration and visibility throughout the production lifecycle. By adopting these strategies, companies can maximize their MES investments and position themselves for success in a competitive marketplace.
Was there a key finding or outcome in the market study that particularly resonated with you?
One finding that resonated with me is the growing emphasis on sustainability, with 18.1% of executives citing it as the top trend shaping their strategies. As a strong advocate of green practices, I’m heartened to see consumers increasingly prioritizing environmentally responsible products. This shift pushes companies to integrate sustainability into every aspect of their operations, from ethical sourcing to reducing packaging waste. It’s encouraging to witness how this collective focus on sustainability is transforming the industry, and I’m excited about the potential for further positive impact as more businesses embrace these practices.
While the CPG industry is experiencing growth, it seems that technology integration is lagging. What insights can you share regarding this trend?
One of the primary barriers is the high cost of implementing advanced technologies. Over half of respondents in the Indonesia’s CPG Trends and Challenges study by Siemens and Ringier point to financial constraints as the biggest hurdle.
This is more prominent among small and medium enterprises who often find it challenging to invest in necessary hardware, software, and skilled personnel. Furthermore, many manufacturers still operate on legacy systems incompatible with the latest technologies, exacerbating the challenge of keeping costs low. The F&B industry is also subject to stringent regulations regarding safety and quality. Navigating these regulations while integrating new technologies will add another layer of complexity and resistance from employees.
As digitalization advances rapidly, often outpacing manufacturers' adoption, what can we expect in 2025 and beyond? (a) Are there new digital technologies or trends that companies should be aware of? (b) How should companies adjust their strategies in response?
As highlighted in the Siemens and Ringier study, companies should be aware of the growing demand for functional food & beverages and the increasing consumer focus on environmental impact.
Adapting to these changes, they can harness the power of data analytics and AI to gain insights into consumer preferences. This understanding enables them to develop products that cater to specific needs. Additionally, digital twin and 3D modeling technologies facilitate rapid prototyping and testing, streamlining the creation of product variations to better target consumer segments, tap into niches, and build brand loyalty.
When it comes to sustainability, blockchain and IoT are essential tools. These technologies significantly enhance traceability, ensuring ethical sourcing and reducing waste throughout the supply chain. By embracing these digital solutions, companies can align their strategies with evolving consumer demands and position themselves competitively in a rapidly changing market.
What support can technology companies offer manufacturers aiming to integrate more advanced systems?
Technology companies can offer solutions to provide a holistic, digitized approach to production design and operations. This allows manufacturers to meet the growing demands for healthy, sustainable products while ensuring compliance with regulations and maintaining quality standards throughout the production process, from raw materials to the final product.
Companies like Siemens, for example, deliver comprehensive digital solutions that help optimize the performance of capital assets and minimize time and risk in new facilities, expansions, and retrofits. By implementing product-driven execution with adaptable automation, manufacturers can achieve greater flexibility in their operations, quickly respond to market demands and improve overall efficiency.
Conclusion
As the CPG industry in Indonesia experiences rapid growth fueled by rising consumer demands and e-commerce, digital transformation becomes essential for success. Insights from Mr. Alex Teo highlight that adopting Industry 4.0 and 5.0 technologies is crucial for enhancing efficiency, product quality, and safety. Despite challenges like financial constraints and legacy systems, the potential for innovation is significant. The focus on sustainability, driven by consumer preferences, further emphasizes the need for companies to integrate eco-friendly practices into their operations. By leveraging technologies like MES, digital twins, and AI, CPG firms can meet regulatory standards while aligning with evolving market demands. Embracing digital solutions will empower companies to navigate a dynamic marketplace, fostering resilience and ensuring long-term competitiveness.
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Read more:
Indonesia: Overcoming challenges and advancing through digitalization
Digitalization in the consumer packaged goods industry
Scan the QR code to access the full report on Indonesia’s CPG Trends and Challenges.
