What You Need to Know About ERP Systems If Your Company Is In The Consumer Goods Industry

In ERP consultant lingo, the “Consumer Goods Industry” is a sub-vertical. This implies that there are multiple paths you could take to get to the “right” ERP vendor for your consumer goods industry company. At Ultra, we look at a few items:

• Are you a distribution company or manufacturer, i.e. do you create work orders to make things before shipping? Value-add is usually still considered distribution. If you are a distributor, stop here and look for distribution-based ERP.
• Are you a discrete or process based manufacturer, i.e. do you create a formula or recipe to make your product? If you use a BOM/Routing that is volumetric, then you are a process-based manufacturer. If this is the case, stop here and look for process manufacturing or “batch” manufacturing ERP systems.
• If you are a discrete manufacturer, do you make to stock your product, or do you make to order? If you are a company in the consumer goods industry, you probably use make to stock. If you are making to order, think about the Dell Computer model features and options selection. Therefore, stop here and look for either discrete make to stock, or discrete make to order ERP systems.

There are four major ERP verticals for manufacturers and distributors in the consumer goods industry:

• Distribution
• Process / Batch
• Discrete make to stock
• Discrete make to order

How the Consumer Goods Industry Fits In with Manufacturing and Distribution

A company in the consumer goods industry can function within any of the four verticals. Within this sub-vertical there are two groupings of needs and functions of ERP:

• Business to Business: Sell to Amazon, Target, Walmart, etc.
• Business to Consumer: Sell directly to the end customer via a website

Business to Business or “Big Box” Retail Functionality

Selling to “Big Box” retailers means the manufacturer and distributor need to comply with the procedures for customer orders / purchase orders, packaging, shipping and billing. When you do not comply, you are required to work with “charge backs” from the retailers. Charge backs are punitive credits the retailer takes off from their payments to the consumer goods industry manufacturer or distributor. Accounting for, tracking, and resolving these charge backs to get payment is a very specific functionality required by the vendors that typically requires EDI communication. Integration with partner E-Commerce sites is critical, but usually a technology fix, and not a feature of the ERP.

Business to Consumer Functionality

The key aspect of business to consumer functionality is integration to the manufacturer or distributor website. Typically, this website is custom and owned by the company, not by the ERP vendor. Multiple Integration Points include:

• PCI compliant Credit Card Processing of both authorization and settlement
• Fraud checking, which is typically an integration to the ecommerce site
• Pricing ownership: This could be ERP or the E-commerce web site, but not both. One needs to own it, and pass to the other
• The order taken by ecommerce needs to be passed to the ERP, and the ERP needs to create the customer and order
• The ERP should own the order through settlement, and then ultimately pass back to the ecommerce site. The ecommerce site will advise the customer of the shipment.

Both Channels (B to B and B to C):

When functioning within both channels, the following items are necessary:

• Warehouse management: Almost all ERP systems have the ability to perform directed pick and put away, and will offer integration to UPS or FedEx via a partner. More advanced ERPs offer the ability to create a custom process flow through the warehouse, including features like wave picking and license plates. The most advanced ERP vendors offer true labor and facility capacity management with integration to pick by voice or light capabilities.
• Forecasting: Critical to any make to stock organization is the ability to forecast inventories, especially given the seasonality of the consumer goods industry. Forecasting is to predict the future sale by customer by item to enable planning of inventories, which will improve inventory turns and reduce out of stocks.
• Vendor Portal: Many consumer goods companies purchase their raw materials or entire products from international suppliers. The change in time zones limits communications. A vendor portal greatly improves communication. Potential quotes for new projects, new purchase orders, pricing, delivery, and shipments are all communicated via the portal. The additional benefit is that the portal is the ERP, therefore, this information need not be retyped.
• Drop Ship PO’s: These are a special case, which can be handled via the vendor portal. However, the key function is that the ERP should know the item is not stocked, and must ship directly from the vendor to the customer. Therefore, a PO is created at the time of the customer order, by the ERP system, and should be automatically communicated to the vendor.

If you are a manufacturer or distributor in the consumer goods industry and would like to learn more, contact Ultra today.