Siemens and Greenfields Dairy on sustainability, efficiency and profits through digital transformation

An exclusive interview with Siemens Digital Industries Software and Indonesia dairy, PT Greenfields Dairy, on the benefits of digital transformation in attaining targets in profitability, sustainability, and addressing hyper-personalisation and shifting consumer trends. 

As part of its roadmap to development, Indonesia looks forward to its food and CPG sectors embracing full digital transformation in the near future. These sectors are among the biggest contributors to the country’s exports. In many cases, manufacturers that have started digitally optimising their systems early on, have reported better performance despite the multi-layer crises that is affecting industry. Many SMEs however have yet to learn the digital route.

In Southeast Asia, Siemens Digital Industries Software has partnered with consumer goods companies in modifying their business processes with new technology. The aim of course is to raise their efficiency and overall product quality and safety through customised solutions.

“We have been involved in the development of new technologies that address the challenges faced by the CPG industry in Indonesia. Apart from digitalisation, we talk about IoT and artificial intelligence which enable companies to optimise their production and also help us improve their supply chain,” shares Alex Teo, Managing Director and Vice President of Southeast Asia, Siemens Digital Industries Software.

“We understand that digital transformation can be quite daunting for SMEs, especially in Southeast Asia because of the size, and typically they are not technology-savvy.  For them, we offer a whole range of solutions to help them transform at their own pace, depending on the needs of the budget. This is how we help them to digitalise.”

The process can go in either of two ways, Mr Teo says. The first is to have a scalable solution to meet the needs and budget of assembly. Here, a company can start small with a simple POC and then they can scale up gradually as they see the benefit.

The second is a modular solution whereby a company can opt to go step by step, starting with that which will benefit the company the most. From there, it can slowly build its experience and ROI.

Siemens’ consulting services guides SMEs in understanding the work that goes into digital transformation. In general, this would include the identification of areas that can be improved through digitalisation; the best solutions to meet specific needs and budget; and technical support in creating a digitalisation roadmap.

From left: Alex Teo, Managing Director and Vice President of Southeast Asia, Siemens Digital Industries Software, and  Darmanto Setyawan, Head of Manufacturing Southeast Asia for PT Greenfields Dairy. 

Greenfields Dairy: A case study

PT Greenfields Dairy in Indonesia is among manufacturers that have taken the digital journey with Siemens. The dairy has its own sustainable farms, processing, and packaging facilities to ensure the quality of its products which include several kinds of milk, cheese, and whipping cream. Since operating a fully automated plant in 2017, Greenfields has attained more control and accountability of its processes, according to Head of Manufacturing Southeast Asia, Darmanto Setyawan.

“In our farm, we have a system to monitor cow activity and what feed they need. We have the software to calculate the ideal nutrition value for cows. The system advises us which materials would cost less, how much protein is needed, and how much feed to give to the cows. The system totally increases productivity in the dairy industry,” Mr Darmanto says. He also points out that given that methane is a by-product in the dairy industry, higher productivity per cow through digitalisation means that there could be as much as 50% less impact on the environment.

He adds that machine learning and AI identify their new product formulations. Modelling, for example, is used to design packages that use less plastic but are strong enough to protect the product. Such technology can be leveraged especially with the Indonesian government’s campaign to reduce packaging waste.

Sharing the positive impact of going digital, Mr Darmanto adds that companies can look at ways to recycle and measure how much a product has been recycled. “Validation is very important, and people are so afraid they might make a false claim. With digitalisation, we can be more accurate.”

Greenfields’ sustainability efforts also include producing biogas from animal waste for  electricity used in their farms. Their new plant is installed with energy-efficient equipment, chillers that use ammonia instead of freon, and boilers fuelled by biomass. In 2021 the company also started using solar panels which now supply about 15% to 16% of their electricity. “If we talk about profit and the environment as two contradicting forces, it is a hard decision; but a solution that is good not only for the environment but also for efficiency and profit is a very easy decision,” explains Mr Darmanto.

Attaining the 3Ps (People, Planet, and Profit) with digitalisation

What Greenfields has accomplished over the years with digitalisation shows that profitability and sustainability can go hand in hand in dairy production.

Hence digitalisation plays a major role in the pursuit of the People, Planet, Profit (3Ps) concept whereby companies attain their mission and vision through business practices that benefit employees, environment, and society.

In Mr. Teo’s observations, shareholders are more cognisant of ESG values, saying that companies with a good ESG track record enjoy better share prices and shareholder value. “It's an important part of the corporate agenda to make sure that they are finding ways to enhance their ESG performance. It’s not just about financials anymore but also environmental and social considerations.”

In its complex system of processes, the food industry is a huge contributor to environmental degradation, creating various types and quantities of waste from farm to fork. In recent years, however, sustainability initiatives have accelerated through use of better materials, processes, and equipment.

In this respect, digital technology has become an essential tool for companies to reduce waste. In developing a new product, for instance, a company can generate waste in the form of energy, materials, and other precious resources. Through digital simulation, this process can be made more efficient.

“Starting from a new formulation or new idea, you can simulate and model the entire production scenario. This allows our R&D team to test new formulations and processes without running a full-scale trial,” Mr Teo explains.  Needless to say, a full-scale trial is expensive, and if it doesn't work, the entire project is a waste of investment. Through Siemens’ digital team technology, the NPI (New Product Introduction) can be simulated from idea to production. 

“With NPI, companies can optimise the production process before they even commit to it physically, and that reduces waste and improves efficiency because they can optimise it before they even build or even modify the production process,” he says.

Taking Greenfields as an example, digital technology enhanced its agricultural practices. Farmers can do more with less by leveraging digital tools to model the ideal environmental conditions in which crops can grow, thereby resulting in higher yields, better efficiencies, and less impact on the environment.

“At Greenfields, data from the farm to retail is transparent,” says Mr Darmanto. “We offer fresh products with a limited shelf life, so if the product is wasted, that is a big thing. It can happen if we don’t control the inventory closely. So, a better understanding of the stock in every system is key to prevent wastage.” 

Increased resiliency through digitalisation

While industries are healing from the pain of the pandemic, other issues especially the energy crisis, changing weather patterns, and geopolitical conflict disrupt global supply chains, even raising concerns on future food security.

On this, Mr Teo says companies must consider two things: how to deal with disruption, and second, how to shield from the impact when a source in the supply chain has been disrupted.

One way companies can avoid the blows of disruption is by using advanced planning and production scheduling tools, or APS, in their operations.

“We suggest that the production schedule is still optimised based on materials that are available on the mix,” says Mr Teo. “You may have demand, but if you can’t supply them, then you have to figure out what's the next best thing to do.”

A second strategy that has become familiar to companies in recent years is supply chain diversification, or maintaining a list of good suppliers coming from different areas or regions. With a diverse list however, companies should keep track digitally for traceability and quality management.

In the case of Greenfields, supply chain digitalisation substantially improved transparency says Mr Darmanto. “We know the location of supply, and the conditions in that location. Having data for crop yield prediction allows us to make the necessary adjustments,” he says.

Personalise it!

Another area where digitalisation has become a major asset for companies is in data analytics, specifically to identify emerging trends and consumer behaviour based on vast amounts of information from social media, public forums, customer service departments, and other similar sources.

Digital analytical tools have made it easier to collect data, track consumer preferences and predict trends, giving R&D teams the ability to create spot-on personalised products at the shortest possible time. Companies can create a targeted marketing approach to sell the right products to the right people.

“We are moving towards a world of hyper-personalisation because everybody has his or her own preference. Digitalisation is necessary if you want to drive personalisation; it cannot be done manually,” says Mr. Teo.

F&B companies are moving from a B2B to B2C modality, where consumers can order according to individual preferences, according to Mr. Teo. So OEMs should already consider shifting their focus to hyper-personalised products, to develop ways to track all these orders, and to set up the logistics to deliver the products. “Supply chain visibility is very important: products are tracked from production to delivery, end to end, digitally threaded together. In a way, you can almost say that we control the entire customer journey from creation to delivering to the customer,” he adds.

Supporting SME growth

Siemens is now moving towards a subscription licensing basis model which is more budget-friendly for SMEs, according to Mr. Teo. “Companies only pay for what they use, rather than making one huge initial investment. Solutions are embedded in the cloud so companies do not have to worry about setting up, investing in hardware infrastructure, or hiring IT specialists. Siemens takes care of the security, the infrastructure, and the patching up of software. “Users just need to use it and to focus on improving their business. I think that's also one of the things that we have been moving towards: to create SME-friendly bundles in order to lower the barrier of entry from SME to adopt digitalisation.“

Mr Darmanto is convinced that investment in digitalisation brings more efficiency and sustainability to any business. It ensures that the knowledge and best practices in the company are embedded in the system throughout its lifetime. He added that embracing innovative ways also attracts the right talent. “The new generation does not want to work with the old ways. We need to get that talent working in our company. At the same time, we need to standardise the system. I think it is very important for us to see digitalisation as a tool to enable us to grow,” he concludes. -  Marijo Gonzalez