For food and beverage companies, operating in today's tough business environment is one more challenge in a long list that already includes difficult-to-manage processes, a complex supply chain, volatile raw materials prices, perishable ingredients and products, and strict (and constantly changing) regulatory requirements.
To meet these challenges, forward-looking food and beverage organizations are looking at today's advanced ERP solutions to help them manage more effectively, streamline key functions and accelerate core processes.
What do they want? Software that offers more sophisticated capabilities than their current technology. A solution that improves business performance, boosts efficiency, offers more control and provides an accurate view of their operations. An ERP that enables innovation and growth. More than anything, they want a solution wellsuited to their business. Which is another challenge.
Food and beverage organizations have unique requirements for their ERP and connected technologies. This ebrief outlines key considerations that food and beverage companies must keep in mind when evaluating and selecting a new ERP software solution.
The focus is on finding the best fit – a solution that delivers strong product lifecycle management, inventory control, warehouse management, quality, planning, scheduling, demand forecasting, reporting and cost-control capabilities – and offers the ability to integrate with the many other systems that support their operations.
In our work we see many food and beverage companies that rely on siloed systems and outdated, standalone solutions. Worse, we see organizations that depend on manual spreadsheets to manage critical areas of operations.
Ultra Consultants guides top processors as they navigate the complex technology selection process, helping them identify the software solutions that will meet the unique requirements of the industry and their organizations.
We asked our expert food and beverage consultants to offer their insight on the key functional areas for food and beverage companies. And these are the software capabilities they highlighted:
Product Lifecycle Management
An important area of focus for food and beverage ERP is product lifecycle management. All manufacturing companies are defined by the products they produce, but food and beverage companies face a more stringent expectation in this area. Each recipe ingredient not only impacts the taste of the product, but also the nutritional value, a metric monitored strictly by numerous governmental regulatory agencies. Food and beverage ERP solutions must offer the following feature functions to aid in recipe management and change control:
Version control of items such as batch sheets and Alternate routings provide a means to pre-define recipes/formulas, which will allow the processor multiple ways of manufacturing an item. These to strictly manage which version is to be used in alternatives could be driven by factors such as production. batch size or overcapacity of a work center.
New product Introductions and obsolescence Unit of measure (UOM) conversions (e.g., pounds is guided by the ERP by providing visibility into to kilograms) assist in accurately managing changes in production procedures, warehouse different units of measure for items. Examples of operations and supply chains. this include selling in a specific unit of measure (in pounds) versus purchasing (in kilograms) versus Alternate and reverse bills of materials (BOMs) warehousing (in cases). assist the manufacturer in quickly and efficiently identifying other raw materials that can be Formulation helps manage which ingredients are substituted if an out-of-stock is encountered. being used to create the product, meeting any requirement to calculate nutritional values that result from the formulation.
Looking closer, a unique feature that processors need from their ERP system is the ability to identify specific nutritional values that result from the composition of a recipe. Think of this in terms of the nutritional label required on all food products.
For some processors, this is a matter of composing a formula and determining the nutritional values based on the ingredients in the formula. For others further downstream, companies must develop a formula based on target nutritional levels provided by their customers. This is a significantly more complicated exercise since different raw materials have different nutritional potencies, they may react differently with various raw materials, and costs can fluctuate significantly. An ERP system must be able to easily handle this level of recipe and formula management – and must do it in compliance with domestic and international regulatory mandates.
Inventory Control and Warehouse Management
Warehouse management enables the inventory control schema and enforces materials flow rules by allowing collection and recognition of transactional data at origin in real time.
From start to finish, it is extremely important for a food and beverage ERP solution to monitor the storage of raw materials, finished goods and packaging to meet quality and regulatory standards. Among the specific functions that need to be monitored are:
- Expiration date
- Lot control management (FEFO)
- Shelf life
- Barcoding and use of
- Allergens and certification technology like RFID requirements for control to increase accuracy of and product segregation information
Quality Management
With any manufactured product, quality is essential for customer satisfaction. When food and beverage ERP solutions are capable of quality control in these areas, manufacturers thrive:
- Management of allergens, colors,
- Product quarantine and QA hold gluten-free, kosher, halal, etc. management
- Standardized testing by item,
- Generate certificates of analysis customer and vendor and adhere to customer quality standards
- Incoming and in-process inspections and quality standards verification
Planning and Scheduling
ERP planning functionality must be able to accommodate statements of demand from multiple sources, and combine them with planning parameters to formulate a production and procurement plan.
Food and beverage manufacturers must consider multiple tasks when planning and scheduling manufacturing runs. They need to have the ability to manage runs based on constraints such as allergen segregation, changeovers and available capacity.
And finally, an enterprise solution must be nimble enough to perform robust planning, properly manage scheduling and quickly respond to changes in demand.
Business Analytics
Sophisticated business analytics capabilities are an absolute requirement. Each operational area is going to generate data streams that must be compiled and analyzed to produce critical insight and metrics. What's more, a robust modern reporting tool will allow operational areas to identify, collect and visualize relevant data – without the help of IT staff and lengthy development cycles – to evaluate performance directly and enable informed decision-making.
Demand Planning and Forecasting
Accurate forecasting is critically important, and must take into consideration these variables:
- Seasonality – The demand for certain products changes with the seasons, and food and beverage processors need to account for this fluctuation.
- Customer forecasts – Processors need to be aware of the historical behavior of their customers to know how much product to produce. A right-fit ERP must integrate customer forecasts and demand plans.
- Sales and marketing programs – Processors must be able to align production planning with marketing and sales plans that will affect demand. And, of course, all forecasting must be linked to financial, purchasing and production planning.
Cost Control
A food and beverage solution needs to be able to manage and roll up landed costs, labor costs, overhead and sub-components. Good systems enable an unlimited number of cost elements, which affects the ability to accurately determine the cost of goods and calculate profit.
Paradoxically, this requires both flexibility to structure costs and cost elements to suit unique requirements, and strict cost management protocols.
Additionally, food manufacturers may need an ERP solution that can manage the cost and related value of natural products, which often is tied to age. In modern ERPs, inventory is tied to lot, making changes to inventory value and associated cost easier to adjust.
A strong food and beverage solution will offer manufacturers the flexibility to choose the off-the-shelf costing methodology – standard, lot-specific, LIFO/FIFO, actual, average, last PO, etc. – that suits their operation.
As a final consideration, processors must be able to keep costs streamlined to protect margins. That's why an ERP solution must track ROI metrics for a reduction in operational costs, improved utilization of resources, reduction in waste and other key metrics. ROI must look beyond hard savings like reduced inventories, cycle times, etc., and recognize those benefits achieved from more accurate planning, integrated databases, streamlined information reporting, dashboard reporting and other uses of real-time data.
Additional Functionality
There are a number of additional important capabilities – available in native toolsets or integrated solutions – that many food and beverage organizations may need, including:
- Advanced forecasting
- Customer relationship management (CRM)
- Ecommerce tools
- Lean manufacturing
- Manufacturing Execution Systems (MES)
- Mixed-mode manufacturing
- Order Processing Available-to-Promise (ATP) and Capable-to-Promise (CTP)
- Plant equipment optimization
- Warehouse management
Final Thoughts
The food and beverage processing sector continues to be challenged when it comes to selecting and implementing enterprise solutions that meet the key considerations outlined here. For example, we see many food and beverage manufacturers lacking integrated tools to streamline lot trace management, quality management, warehousing functionality, and manufacturing planning and execution.
Changing market demands create further challenges. Food and beverage manufacturing is investing more in product development to deal with rapidly changing food habits and the dynamic tastes of ever-changing populations and generations. This has led to the acquisition of Product Lifecycle Management (PLM) and R&D development tools, and the payback for mid-sized food and beverage manufacturers has been significant.
Ultimately, for today's top processors the considerations must go beyond technology selection to include business process improvement.
Ultra offers business process improvement (BPI) services tailored to the food and beverage industry – services that focus on food and beverage industry-specific processes and business requirements, and identifying areas of improvement based on best practices and opportunities to optimize efficiency and business process performance.
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