ERP Systems and the Food and Beverage Industry
The Food and Beverage industry (also known as the F&B industry) is generally defined as all companies that are involved in processing raw food materials, packaging, and or distributing them. This includes any fresh, prepared foods as well as pre-packaged foods. It includes alcoholic and non-alcoholic beverages. In essence, any product meant for human consumption, aside from pharmaceuticals, falls into the F&B industry. ERP systems (Enterprise Resource Planning Systems) can play a major positive role in this varied industry chain.
The Food and beverage industry is complex. There are many different product lines and manufacturing processes, but all producers face similar challenges. Constant adjustments to product, packaging, and pricing and a lack of uniformity in the supply chain (fresh ingredients and basic ingredients varying) mean food and beverage manufacturers must excel at inventory and Supply Chain Management. Expiry dates and stock spoiling are key issues. At the same time, the F&B industry must comply with ever-evolving environmental and safety regulations. ERP software and solutions help companies to achieve critical control and efficiencies- and an automated process assists in adapting to ever-changing formulations and seasonality. Exactly how can an ERP system help the F&B industry?
Product and Raw Material Traceability
As consumers become increasingly more aware of food and its origins, and more aware of their choices over genetically modified organisms (GMO), non-GMO, organic, free-range, feedlot, frozen or fresh- it becomes critical for F&B businesses to track and monitor the sources of their raw material and manufacturing process to ensure they can correctly label and sell products. Furthermore, as food regulations (and labelling laws) become stricter and tighter, it is critical that companies can prove that their labelling and claims are correct. In order to do this, they need to be able to track and trace exactly what products and raw materials go into their products to ensure that they are compliant at any point in time. ERP systems use batch numbers (supplied to you from the supplier, or created yourself) and allocate these to any ingredients being used in a current production run- such that when the finished goods batch is ready (with its own specific batch number) you are able to call up the necessary information to know exactly which set of ingredients (Bill of Materials), from where and when went into that batch of the finished product. This allows for full traceability from farm to fork.
Food Safety Regulations
E.Coli, salmonella, mad cow disease, and listeria are just some of the fear-inducing food bacteria that are not only dangerous but create panic in the market and in consumers. One of the cornerstones of food safety is the ability to efficiently and timeously execute a food recall should the need arise. An ERP system plays an invaluable role in this. Should a specific finished goods batch (also known as a ‘lot’) be shown to be contaminated or dangerous, it is essential to know exactly where that finished product batch has been distributed and sold. The batch numbers and distribution points are stored in the ERP system and are quickly accessible. This allows the manufacturer to contact the retailer or customers quickly and set about a food recall. In the case of a contaminated ingredient batch, your ERP system accurately tracks any and all cases where that batch of ingredients was used, again enabling a company to recall the affected products and batches quickly and efficiently.
Forecasting and Planning
The disconnect between sales, production, and distribution on what should be produced, when, and where it is needed, is a common challenge for the food and beverage industry. Besides the fact that holding stock is expensive, high stock holding levels are also often not possible because of the expiry date issue on F&B products- making supply even more tricky in F&B. It is key to make each aspect of the business as efficient and as interconnected as possible. This is where a good ERP system is essential. The very interconnected nature of an ERP system allows each department to be notified immediately on sales forecasts, production schedules, out of stocks, raw material cost changes- and then plan accordingly.
‘Last in First out’ (LIFO) is a critical motto in the F&B industry. Given that the products are for human consumption and nutrition- the raw ingredients and end products are not everlasting and naturally have expiry dates that need to be accurately managed- from both a safety aspect and a write-off cost aspect. A powerful ERP system’s ability to actively and effectively manage a company’s inventory is even more important in the perishable world of the F&B industry. Ensuring that batches have expiry dates that are actively monitored by the ERP system and that management are timeously alerted to any stock in danger of expiring, means that contingency plans can be made in good time. A good ERP system’s distribution module will also ensure that the oldest stock is allocated to orders first, and ‘younger’ stock after that.
Food and beverage manufacturing is a repetitive and uniform production process- but often very complex. The manufacturing process is subject to strict quality control and is done at high volumes. Each end product must be exactly the same as batches before that and so a strict process and bill of materials must be followed- much like the recipe for a good cake must be followed to the letter to ensure a good outcome each time! An ERP’s Bill of Materials (BOM or product structure or recipe) is paramount to the quality and accuracy of F&B production.
The Food and Beverage is a challenging environment with seasonality, food control, stock management, and raw material sourcing all being factors that make it essential to have a strong ERP system. It helps companies juggle all the balls, and ensure that safe and high-quality product reaches the consumer.