Food has always played a highly central and emotional connection in people’s lives. Dating back to the ancient civilizations of Egypt, Greece, Rome, China and India, all were aware of the link between food and health; food and community; and food and life. In today’s fast-paced, modern life that link has not weakened. But, like many other areas in our lives, it’s been through countless iterations and finally transformed into a highly volatile juggling act of ever-changing demands. Issues like health and wellness, shifting lifestyles, changing preferences, food safety, sustainability and technology have all received a heightened amount of visibility.
Not surprisingly, a generation of consumers known as Millenials have come to dominate the social discourse on issues such as these. Armed with an ease of use and familiarity with communications, media and digital technologies have given them a dominant voice in concerns that are important to them.
In this environment, food and beverage companies have had to find their own way in order to succeed. In addition to the difficulty posed by today’s high degree of competitiveness, the food and beverage industries have worked hard to find that delicate balance between client demands and regulatory bodies, faster and cost-effective processes and the need for product safety and transparency. It’s quite clear that the food and beverage industry faces challenges that other manufacturing industries have been able to withstand with greater resilience. Essentially, market pressures like consumer sentiment and the global marketplace can have a direct bearing on important challenges like cost and margin pressures, food safety and sustainable manufacturing, and the ever-increasing influence of consumer likes and dislikes.
But most food and beverage companies have weathered these challenges well, emerging on the other side of these challenges stronger and better equipped to tackle future demands. A 2017 food and beverage survey reports that most companies are thriving, with nearly 4 in 10 expecting double-digit revenue growth in the next 12 months. That is not to say that all these significant challenges have disappeared. But many of the players within this industry have worked with these challenges, found a way to survive and, in many cases, thrive.
Technology Comes to the Rescue
As we stated above, the food and beverage industry is defined by its growing complexity and the perpetual need to innovate new products in order to keep pace with consumer and major retailer demands. When we add to this the concerns over food safety and the introduction of new regulatory acts, the investment in technologies such as an enterprise resource planning (ERP) system is not only a wise choice, but a necessary one.
A well-designed ERP system is a business process management software that allows a business to integrate all of the critical aspects of its operation by using a system of integrated applications to manage and automate functions related to operations, services and human resources. A fully integrated ERP solution can help you build a cohesive and resilient organization. This helps you keep up with retailer and customer demands, regulations and digitizing your proliferation of spreadsheets. Competitive businesses operating within the food and beverage landscape require an up-to-date ERP system, capable of managing vendors, customers, logistics, production and quality control.
But the true value of any software system is defined by its ability to meet the many expectations and challenges of only one particular business. The same can be said for the food and beverage industry. A fully integrated ERP system can bring added value to many areas of your business, but streamlining your decision in order to focus on those functionalities that will make a difference for your operation requires an assessment of how industry challenges as well as your own set limitations will impact your business goals.
Food & Beverage Industry: Challenges and Opportunities
The challenges faced by a particular industry are marked by many variables. It’s difficult to determine a definitive list without taking into account all the circumstantial differences that exist among individual companies. However, it’s possible to compile a list of generic issues that, one could argue, are defined by their industry. We took a cursory look at 3 of them:
Cost and Margin Pressures
Because the food and beverage industry — generally speaking — must work with low profit margins, the need to manage cost and pricing concerns rises exponentially. This includes managing all aspects of procurement, inventory and sales management by synchronizing all actions to changing market conditions.
Another aspect of managing costs is inventory management. The procedure of rotating inventory based on the first-in, first-out methodology must become a more comprehensive system of shelf-life management, which includes incorporating shelf-life information into manufacturing requirements.
Attenuating Risk: Food Safety and Quality
Food is integral to our health and wellbeing. Unlike products from other industries, food and beverage products are meant to be consumed. Consequently, issues over general food safety occupy a high percentage of concern among the general population. Over 70% of Americans say they’re concerned about the safety of commercially produced food and beverages.
This reality ensures that product safety continues to rank as the top concern for manufacturers in the food and beverage industry. The Food Safety Modernization Act (FSMA) has added to the prioritization of food safety concerns among manufacturers.
Consumer Choices and Dietary/Health Needs
Our modern lifestyle has pushed many of us to turn to prepackaged and fast-food choices, but there’s a significant growth in the number of consumers looking to return to a more natural and healthy eating style. This explains the growth in organic food options. Governmental bodies are responsible for providing guidelines on what constitutes an organic product, so both food producers and manufacturers have very specific rules that they must follow.
Planning and managing these additional requirements requires a robust software system to ensure full adherence. This signals the advent of government intervening to legislate healthier options for consumers, forcing food processors to comply with dietary guidelines set by governmental agencies. Public health issues such as diabetes and obesity are paving the way for food and beverage companies to not only provide nutritional labeling, but also limit fat or sugar content in their products.
Food and Beverage ERP: Features and Functionalities
The role undertaken by technology to assist businesses in all the challenging areas of this industry — agility in manufacturing, product innovation, safety and compliance issues, consumer demand — is becoming increasingly significant. This often determines an organization’s degree of competitiveness and ultimate success. But as an individual company within this industry, you must build your business case for how and why an investment in an ERP system will provide the necessary functionality and value for both your present and future needs.
No two businesses are exactly alike, even though there will be many similarities across the same industry. Always focusing on what’s unique to your circumstances and ensuring that those priorities are met is an important consideration. This approach has a greater opportunity of meeting your needs and producing a successful business outcome. Below we consider a sampling of functionalities within an ERP system that add the needed expertise and value to any sized business to help you isolate what matters most to your business:
1. System Integration
The ability to integrate multiple systems for all the areas in your company is a very important feature. A single-source system allows you to locate all your business data — financial, production, inventory, compliance, etc. — into one integrated system that gives you access to all your information in real time. Business analysis is improved exponentially when data from every key area is available to you.
2. Process Manufacturing
This is a critical benefit to get right because it’s involved in completing so many production tasks. An ERP system performs tasks such as production control, quality analysis and distribution schedule. When this functionality operates efficiently, it saves time and money by maximizing workforce hours and ensuring accuracy. Important cost savings can be realized by gauging organizational productivity, identifying weaknesses and automating much of the supply chain. The efficiency of the production process is a number one priority for businesses, as it touches upon all of profitability:
- Quality Analysis: quality is essential for customer satisfaction. A worthwhile ERP solution should be capable of quality control in the management of allergens, colors, gluten free, kosher, etc., quality testing, inspections and testing plans.
- Shelf-Life/Expiry Date Traceability: knowing when a product needs to be moved or consumed by is an ongoing concern for food and beverage manufacturers. Software that has a built-in alert mechanism to advise managers when ingredients are nearing or past their expiration date is mandatory information.
- Sales and Inventory Management: sales and inventory management are an essential part of a food and beverage ERP system. inventory optimization is critical because ingredients (as noted) have a shelf-life. Recent studies confirm that over 50% of food and beverage companies make mistakes anticipating demand, either wasting stock or losing sales. Your software system should come equipped with the ability to manage stock efficiently, avoiding both spoilage and shortage. This data is then linked to sales order data to provide managers with critical information about stock levels, stock location (if applicable) and replenishing stock to optimum levels. This function saves time and money by providing data accuracy and efficiency.
- Recipe Control: recipe control is a complex task which handles a lot of technical and descriptive information like formula, quantity, costing and historical information. Also, units of measurements within the data can differ and the software must be able to handle conversions, as well as version control and formulas to ensure product and process consistency.
3. Regulatory Compliance & Reporting
Food and beverage manufacturers have some of the strictest regulations in place in order to achieve certain levels of certification. The U.S. Food and Drug Administration (FDA) has authority over more than 80% of the U.S. food supply. This statistic provides the evidence for the level of scrutiny and regulation that exists in this industry. In addition, it highlights the importance of having an ERP software solution that integrates and automates regulatory compliance.
Detailed tracking and tracing is very important to the food and beverage industry because of the importance of food safety. Much of the regulatory control requirements, as stated, can be automated. The software that enables you to capture the how, when and where of every ingredient from the start of the process saves a lot of time and effort. This ability also helps isolate a problem quickly and precisely in the event of a product recall or routine audit inspections.
4. Financial Management
Having a fully integrated financial system ensures that costs and expenses are accurately recorded, ready to provide information on the bottom line. This is an important key to successful business management because it provides the ability to analyze your company information for informed decision-making from all areas of your business.
5. User Experience
When choosing an ERP system for food and beverage, keep user experience high on your list of priorities. The system works best if it’s used properly and willingly. It should be easy to navigate so that users can quickly identify the key areas that relate to their job. A real-time ERP where data is updated instantaneously across the system is a big benefit to users as well. Dashboards and widgets play a big role as they display key information to users in an easy-to-understand graphic format.
6. Deployment Options
Study the deployment options available to you and consider carefully which option covers most, if not all, of your priorities. Many ERP systems are offered as cloud-based solutions. However, many good on-premise solutions are also available. On-premise solutions require servers within your business, while cloud-based systems are accessible online and housed by the ERP provider. Usually, vendors offer various subscription options based on your company’s unique needs and requirements.
7. Vendor Maintenance and Support
ERP maintenance and support is another major requirement for food and beverage companies. Having an ERP vendor that ensures that all the necessary technical and maintenance support will be provided to your company on a timely basis relieves many future technical concerns that you shouldn’t have to take on.
For those reasons, ensure that your provider has a sound business reputation and will be around for the long term. This provides you with some assurance that your system will not be out of date or unsupported for some length of time. Look for a provider that includes the following services as part of your support contract:
- Remote login support
- Support desk availability
- Regular system updates
- On-site maintenance and support
8. Key Industry Players
Principal players in this industry are important to include in your final list of vendor selection. IFS, Infor, Oracle, Sage and SAP offer best-of-breed systems in this market. Their inclusion in your selection group fulfills an important function for benchmarking purposes.
In today’s competitive business environment, where change is the common characteristic, simply keeping up to those changes has become a primary challenge. For food and beverage companies, this challenge has been particularly acute because of the very significant need to balance changes that affect cost effectiveness and product safety. But such concerns are not new to this industry.
What’s new is the speed at which a successful food and beverage company must process and respond to the ongoing stream of marketplace demands that impact this industry. Into this environment, operational technologies have provided food and beverage businesses the most efficient and robust level of support to their ongoing operational tasks as well as to those challenges that present themselves on a fairly regular basis. Running a business in this industry tests even the most competent managers to the maximum.
Having reasonable control over the many functional areas that are involved in running a food and beverage company is a demanding and onerous task. Without an integrated ERP software system in place, the task is less efficient, more costly and has a higher probability of failing to achieve both your business strategies and long term goals. An investment now in an ERP system can provide your business with the support structure it needs for weathering the challenges and helping you reap the rewards.