THOMASVILLE, GA. — As much as Flowers Foods, Inc. has changed over the last several years, the company still aspires to be the low-cost producer in the wholesale baking industry, a longstanding Flowers ambition. Toward that and other company objectives, Flowers in February 2021 unveiled a comprehensive digital initiative. The multi-pronged project touches on three principal domains — the bakery of the future, autonomous planning and e-commerce.

Connected to the effort, a large step forward technologically will be an upgrade of the company’s aging enterprise resource planning system. A. Ryals McMullian, president and chief executive officer of Flowers, said the current ERP system, a 20-year-old platform, will no longer be supported in the future.

“So, this is not a ‘want to do this,’ project,” he said. “It’s a want to and a have to. Upgrading the ERP system is really going to enable many other things. We’ve got to have clean, well-organized data to enable us to do all the things we want to do, from a technology standpoint in the bakeries. So, our digital transformation, which is in its early stages, is really about leveraging technology and data at the bakeries to drive higher efficiency and performance. We are installing robotics and other automation where appropriate but getting the data right, getting the processes right is going to be a prerequisite to major automation.

“Costs are going up and are going to continue to go up. I believe that. There has been a fundamental systemic shift in the workforce, and people are not coming back. You’ve had millions of baby boomers exit the workforce. I’ve even seen a number that suggests over 800,000 people have left the workforce, just due to opioid addiction. We do not have a sound immigration policy in this country for unskilled labor. I don’t think that’s going to change any time soon. So what’s our solve for that? We’ve got to figure out a way to be as efficient as we can possibly be. Automation can help us do that if we have the right processes on in front of it. So that’s the vision. This is not going to happen by next Friday. It’s going to take us several years to do this. But that’s the vision we have for the future of our bakery network.”

In its pursuit of advancing the company technologically, Mr. McMullian said the company has some catching up to do with its peers in the food industry.

“I’m aware of what some of our peers are,” Mr. McMullian said. “What I would tell you is that for my perspective we’re a little bit behind. We probably should have started this three, four or five years ago. So we’re playing a little bit of catch-up. To be fair, we had a lot of other things going on over the last several years that were prerequisites to being able to launch and execute this kind of digital initiative. Today, we are much stronger from an organizational and strategic standpoint and we are well-positioned now to get ourselves modernized from a digital perspective.”

Across the span of Flowers 46 baking plants, the degree of automation installed today varies widely, Mr. McMullian said. Progress toward realizing the vision for the bakery of the future extends beyond the physical production facilities, he added.

“Remember that this is a digital transformation, and it will touch every part of the company,” he said. “I use the terms — front of the house, middle of the house and back of the house. Front of the house is sales and marketing. The middle of the house, the plants; the back of the house, think of it as finance and all the back office functions required to run the organization. All of that is being changed and digitized so that we are leveraging data in a better way to make more intelligent decisions.”

What it means to be a low-cost producer continues to change as technology advances, Mr. McMullian said.

“It will always be part of our game plan to manage our cost and to be as efficient as we can possibly be,” he said. “That’s a lot of the thrust behind our digital transformation.”

He offered the company’s Navy Yard snack cake plant in Philadelphia as an example of where Flowers had made progress. Robotics and other technologies were installed, but only after processes were carefully studied and changed.

“Automation is not a panacea,” he said. “If you digitize bad processes, then you’ve just spent a lot of money for nothing. So you really have to start with the process, and then layer the technology over those improved processes. We’ve done that at Navy Yard, which produces many of our Tastykake products, and they have made tremendous strides.”

Antiquated technology was not the principal problem facing the Philadelphia plant, which opened in 2010. Changes also were needed to modernize the bakeries core processes, upgrade the quality of the management team and improve the team’s morale.

“It’s a little bit of a complex story,” Mr. McMullian said. “But essentially, prior to Flowers’ acquisition, they overinvested in the Navy Yard bakery. They built too big. It was kind of an ‘if you build it, they will come’ approach. It broke their backs. It’s an expensive bakery to run, so it’s been tough. There are also workforce complexities in Philly. But our team has done an outstanding job collaborating to make the necessary changes. The team is better. Morale is better. Scrap has come down materially. It was a slog, kind of getting out of the ditch, but we are now on a nice upward trajectory.”

Distilling it to the basics, the bakery of the future is about improving core processes and digitizing the equipment to allow bakery operators to pull real-time data on how a line is running, Mr. McMullian said. This capability will allow supervisors to make effective decisions to reduce scrap, making sure lines are running properly.

“We have situations where folks will intuitively make on-the-fly adjustments that can sometimes hamper quality or cause higher scrap, and this technology gives you exactly what you need to know to have that line running the way it should,” Mr. McMullian said. “The biggest opportunity we have is in the bakeries. That’s where our cost is — getting efficiencies up, getting scrap down.”

Mr. McMullian also described the other core elements of the company’s digital transformation — autonomous planning and e-commerce.

“Autonomous planning is digital logistics, predictive ordering making sure that you’re getting the right product to the right place at the right time,” he said. “You know how focused the retailers are on out of stocks. Autonomous planning goes directly to that point — making sure that we are getting the right products made in the right bakeries and delivered to the customer and consumer at the right time.”

For e-commerce, Flowers is investing to ensure the company’s product images and product information are correct such that the company’s products are represented properly on e-commerce websites, Mr. McMullian said. The company also has invested meaningfully in digital marketing.

“There’s a ton of work that goes into being successful at e-commerce, and we weren’t there before,” he said. “Our product imagery and information was outdated. It took a lot of work to get that fixed. But now we’re starting to see the benefit of those gains in e-commerce. So it’s an exciting channel for us and one that we intend to be a leader in.”

To date, e-commerce hasn’t changed Flowers’ distribution model much, since most e-commerce sales are through click-and-collect or delivery, of products already delivered by the baker to supermarkets, Mr. McMullian said. Over time, with drones, autonomous vehicles or other advances, distribution methods could change. When that future arrives, Flowers wants to be well positioned, he added.

“We definitely want to make sure that our brands are front and center in this channel,” he said. “We all saw a big spike in e-commerce during the pandemic. It has moderated a bit, but over time, this is going to continue to grow, particularly as last delivery mile is figured it out. And so we want to make sure that are brands are well represented and remain at the forefront of consumers’ minds.”