Executives Guide to ERP Software for Food & Beverage Manufacturers
All process manufacturers face similar challenges such as managing inventory, customer demands, compliance regulations, or safety. Specific to the food and beverage industry, there are several concerns that require close attention. Food and beverage manufacturers deal with not only food safety and recall issues, but also packaging and labeling requirements, recipe or formula management, lot tracking, weights, and measurement; all while ensuring taste and quality of their products and overall profitability of the company.
An ERP business system designed for food and beverage manufacturers provides the framework needed to effectively manage every aspect of the food and beverage manufacturing business. When chosen and implemented correctly, the right food and beverage manufacturing ERP system can address some of your biggest industry and operational concerns. In this white paper we touch on ten of those top concerns and how exactly ERP can help you address them.
According to the Panorama Consulting Solutions 2014 Manufacturing ERP Report, system integration and standardized operations are the two most common motives that influence organizations to implement Enterprise Resource Planning (ERP) Software. Of those organizations surveyed, the top reasons for ERP implementation are listed below:
- To better integrate systems across multiple locations (22.3%)
- To standardize global business organizations (21.9%)
- To replace an aging ERP or legacy system (17.9%)
- To make employees’ jobs easier (11.2%)
- To ensure reporting/regulatory compliance (10.4%)
- To position the company for growth (9.2%)
- To improve working capital (7.2%)
Those organizations who choose to implement ERP reported the following results:
- Availability of information/faster information response time (33.3%)
- Increased interaction across the enterprise, integration of business operations/processes (23.1%)
- Improved interaction with customers (12.8%)
- Reduced direct operating and/or laboring costs (7.7%)
- Reduced IT maintenance costs (7.7%)
- Improved lead-time and improved inventory levels (5.1%)
- Improved interaction with suppliers (5.1%)
- No achieved benefit (5.1%)
No matter what kind of products you manufacture, you certainly face issues and concerns on a daily basis such as increased competition, customer demands for lower prices, shorter lead times, improved product quality, customer self-service, access to data via new web and mobile technologies, and other challenges facing all businesses and the manufacturing sector as a whole. It doesn’t matter whether you bottle beverages, process vegetables, can frozen goods, bake pies, or even if you cut cheese – there are many challenges that can be resolved, managed, and controlled through an effective food and beverage ERP software. For instance, food and beverage ERP systems are designed to support the dynamics of process manufacturing so you have the operational processes and controls you need on top of an integrated financial system to manage every aspect of your business. An ERP software will also improve your ability to satisfy growing customer and supplier demands. Let’s break down 10 common concerns for the food and beverage industry, and how ERP software can be the solution!
The number one concern of producers within the food and beverage industry is food safety. Several factors are involved in food safety such as ingredients, allergens, and expiration dates (to name just a few). Therefore, manufacturers rely on technology to control these aspects of their business as well as manage and organize their operations. According to the National Institutes of Health (NIH), 6%-8% of children and about 2% of adults in America suffer from food-related allergic reactions. The side effects range from mild itching to (in rare cases) fatalities.
As a result, the Food Allergen Labeling and Consumer Protection Act (FALCPA) addressed this matter by recommending the use of the advisory label “May Contain” by manufacturers for consumer uses of product labeling. Hence, it is extremely important to keep track of even the smallest details within the production process. Food and beverage ERP systems can be the primary system to ensure carriers, shippers, and receivers who transport food or beverages meet and uphold compliance requirements. Food safety management through an ERP system can help achieve and maintain high food safety standards by streamlining food processing with accrurate reporting and business intelligence to ensure continued compliance with ever-changing regulations and requirements. Additionally, ERP allows you to trace the product back to the original ingredient lots used in food production or to trace a material lot from a supplier all the way up to the manufacturing plant and the distribution center to the customer. ERP systems provide the control you need effectively track expiration dates, ingredient attributes, and other vital information.
Food production is complicated. Without an ERP system, it difficult (if not impossible) for food and beverage manufacturers to track raw materials through the production process to the packaged finished goods shipped to customers. In the event of a recall due regulations, questionable ingredients, or spoilage concerns, utilizing an ERP software will allow you to leverage the information you need in minutes.
Manual paper-based processes or spreadsheets are not as fast and can take hours or days sorting through hundreds of paper-based records to find out which finished good batches contained the questionable ingredients.
With an ERP system, you can also isolate questionable ingredients and contain them so that they are not made available for production until they pass a full quality assurance inspection. The quarantine hold also prevents the products from being sold to customers until it is clear if they are safe.
ERP systems designed for food and beverage manufacturers include specialized reports and workflow to streamline the recall process facilitating prompt notification to government agencies, customers, and vendors. Otherwise, failure to handle a recall productively can result in legal and economic repercussions as well as negative publicity, lost sales, and lost customers. It is important to be ready to handle a recall by implementing the proper recall management process.
In summary, an ERP system automates and streamlines the recall process, which will provide you with the documentation and proof that your organization followed all FDA recall procedures. Overall, it will allow you to perform effectively on product recalls and prevent further damages with end-to-end recall management functionality solutions.
Compliance and Regulation
Compliance can be an extremely expensive and time consuming area for any business, but you can manage government regulations with ERP effectively. According to the U.S. Food and Drug Administration (FDA), about 48 million Americas become ill, 128,000 are hospitalized, and 3,000 die each year from foodborne diseases. As a result, a law was signed in 2015 to strengthen the food safety system in order to better protect public health. Similarly, it important for the food and beverage industry, because the FDA will have access to the industry’s food safety plans and records that all organizations are required to documentat. The Food Safety Modernization Act (FSMA) declares that the mandated inspections for food facilities based on risk must occur more frequently. This law provides the FDA with new enforcement authorities which will accomplish higher rates of compliance with prevention and risk-based food safety standards. It will allow for enhanced response to problems and contain them when they do occur.
ERP plays a huge role in compliance, because the software enforces workflows and controls that guarantee the proper business procedures are followed in accordance to all of the following:
- The Global Food Safety Initiative (GFSI)
- U.S. Food and Drug Administration (FDA)
- The Safe Quality Food Institute (SQF)
- Bioterrorism Act
- Hazard Analysis & Critical Points (HACCP) and other standards and regulations
The cost of managing government regulations can be reduced by automating much of the compliance process resulting in significant reductions in time delays, improved accuracy, and cost reductions by eliminating many manual operations. An ERP system that promotes compliance will also give you solutions for lot traceability and quality control, which are also common concerns within the industry.
Manufacturing Cost Control
Is your company concerned with cost? Of course, aren’t we all? There are several features in food and beverage ERP systems that help you manage and control production costs related to inventory, work in process, and finished goods. ERP software enables manufacturers to implement lean manufacturing for justi-in-time purchasing and just-in-time manufacturing with built-in processes to capture and track all costs – material, labor, overhead, and other costs so you know exactly how much it costs to manufacturer your products. ERP systems also include recipe and formula management systems alongside production routings so you have a clearly-defined method of manufacturing to improve operations with controls to monitor quality control throughout the entire production cycle.
An ERP software allows you to manage your fixed, variable, average, and marginal costs, promote building multi-level cost categories, routinely develop forecasts and budgets, predict the influence of different organizational decisions on costs, and perform what-if analysis to see how cost changes affect inventory valuation, pricing, and your overall bottom line. Cost control also allows you to measure actual cost variances against standard costs, and can allocate costs based on number if hours, quantity produced, or other factors For instance, if there is a difference between the standard and the actual cost, ERP allows you to analyze the variance with multiple tools to better understand how the costs differ, in order to make an executive decision. Some ERP systems also allow you to utilize first-in-first-out (FIFO) or last-in-last-out (LIFO) costing methods which may be preferred due to financial strategies implemented in your business.
According to an Aberdeen Group report, some of the many benefits of cost management include:
Overall, one of the most immediate benefits from the implementation of an ERP software is a reduction in operating costs. ERP will result in cost reductions by decreasing inventory control costs, production costs, administrative and marketing costs. It avoids duplication of information and provides opportunities for value added tasks that help you limit price changes while improving product margins.
Since food manufacturers are responsible for developing their nutritional labels, they are required to meet ever-changing food labeling requirements. The FDA’s policy assigns the manufacturer the responsibility for assuring the validity of a product label’s stated nutrient values. The manufacturer can choose whether or not to disclose the source of the data used to calculate nutrition label values; however, the FDA’s policy recommends that the labels for nutritional values be created on product composition, that are determined through laboratory examination of each nutrient. Additionally, the label is necessary for shipping and tracking. Incomplete or inaccurate labeling can be costly. According to Loftware, the average cost of production downtime due to mislabeling errors is $100,000 an hour. In fact, one major manufacturer spent more than $300,000 in a year to cover mislabeling fines.
Avoid mislabeling fines, errors, inefficient recalls, and negative publicity by implementing a food and beverage ERP software specific to your manufacturing business. ERP will quickly deliver the required labels you need while complying with the regulations.
Some of the major labeling featurs common in many food and beverage ERP systems include:
- Generate labels for specific customers with individualized bar codes
- Manage over multiple label types such as containers, products, shipping and mix-load labels
- Print different colors and sizes for easy identification
- Reduce the repacking of pallets due to mismatched items
- Arrange label sequencing and assembly line control for accurate and automatic labeling for products being produced
- Accomplish full compliance with lot tracking from the initial setup to the completed product
- Print the correct label automatically for each work order
- Increase control for serialized and non-serialized inventory
- Increase efficiency and accuracy
- Improve supply chain visibility
- Enhance recall capabilities
- Expedite regulatory changes
ERP can give you flexible label printing operations, with options such as label alterations and creation, operation scaling, and support for multiple printers. By implementing these into your automated operations, you gain significant advantage in respect to quality control and assurance ensuring that you remain in compliance with regulations while reducing labor costs.
Food and beverage packaging plays a primary role in keeping the U.S. food and beverage supply safe. The major roles of packaging are 1) protect food and beverage products from all outside influences and damages, and 2) provide consumers with all nutritional information and included ingredients. Packaging connects to accessibility, tamper indications, and traceability concerns as well. Further, packaging is often lot tracked to ensure that there are no issues with the materials that could cause a recall. So, how can you be successful when there are so many concerns like product characteristic, waste management issues, marketing concepts, environmental considerations, and cost concerns? With an enterprise resource planning software for food and beverage manufacturers, you can control and monitor packaging-related issues as well as:
- Managing the properties of the packaging material
- Controlling the preferred shelf-life and end use
- Maintaining the proper environmental conditions during storage and distribution
- Controlling the disposal of the packaging
- Managing the costs associated to the package during the production and distribution process
If you and your suppliers are looking to streamline your organizations and shift from manual systems to automatic information management systems, then ERP is your solution. You will receive the benefits of inventory control functionality, customizable interfaces, rapid real-time data sharing, and precise job tracking.
Catch Weight Management
Some food and beverage manufacturers have the added challenge of managing catch weights for meat, seafood , and other products that are typically not handled very well in generic ERP systems. For example, what’s the price for a lobster tail? It depends greatly on the size (weight) and quality. Catch weight support in the ERP system is vital for purchasing, processing, and sales. The implementation and application of weights and measurements must be consistent as variations can cause frustrations for retailers, packagers, and manufacturers. Deviations can disrupt your operations, increase your costs, and muddle your efforts to follow with government requirements. ERP systems designed for food and beverage manufacturers support catch weight and other special unit of measure conversion requirements such as:
- Accurate invoice details with catch weight and unit of measure details for products sold.
- Unit of measure conversion for different proportions (liters, pounds, gallons, etc.).
- Landed cost distribution for catch weight products
- Actual catch weight visibility by product in financial and inventory transactions.
- Supports multiple packaging variations for each product.
- Recorded weight captured at the time of purchase or shipment.
- Flexible and scalable pricing by catch weight.
- Product lot tracking with integrated quality control processes from receipt through production and shipping.
Recipe management is a major concern for food and beverage companies. It is critical for manufacturers to have tight control over recipes or formulas to ensure that they aren’t tampered with or changed inadvertently to ensure product consistency, quality, and traceability. It is also important to manage multiple versions of a recipe to allow for constant improvements to cater to altering conditions or customer-specific requirements. ERP for food and beverage increases productivity, cuts costs, and decreases time spent managing recipes and formulas manually or through external systems or spreadsheets.
It is significant to recognize which type of system is best for recipe management. As a process manufacturer, it is crucial to select the right ERP system in order to best support the formulation in respect to amounts (in gallons, liters, pounds, grams, ounces, etc.) required to make the end product and many food and beverage manufacturers need an ERP system that supports formula and recipe scalability where the quantity of ingredients required changes based on the desired characteristics of the finished good quantity produced. By comparison, ERP software designed for discrete manufacturers using a bill of materials simply cannot provide the same functionality as the two processes are entirely different. ERP, specific for process manufacturers, supports all of the numerous aspects involved in recipe, formula, and batch management.
- Supports scalable batches.
- Enables accurate tracking and costing of co-products and by-products.
- Enables quick access and change to all finished goods using specific ingredients.
- Easily update/duplicate formulas and recipes.
- Supports hazardous material tracking.
- Supports lot tracking and shelf-life management.
- Formulas can be pulled into work orders or batches for tracking/recording of actual ingredients.
- Supports online review of recipes.
- Supports recipes through the integration of formulas with complex calculations.
- Ensures proportions of ingredients to be accurate for all sizes of finished goods.
- Supports ingredient traceability.
- Recipe flexibility with batch processing capabilities.
- Enables tracking and comparing actual yields to standard yields.
- Tracing and tracking materials from supplier receipts to the customer shipments.
- Supports and controls yield, waste, shrinkage, and rework.
With ERP, recipes can be altered simply by copying them from older recipes and making small changes in order to create entirely new products. Version control features provide a historical view of the specific recipe or formula used to produce each finished good lot so you have a complete audit trail to the original ingredient lots used at a specific date and time by batch in case of an unforeseen recall or quality issue. Recipe-based ERP systems allow the manufacturer to define the production processes with integrated manufacturing costing to account for all production costs within the system. Further, data can be stored or archived for decades with built-in alerts and notifications concerning allergen issues and recalls. All in all, the amount of data is extensive, which is why ERP for recipe management is extremely effective, useful, and vital for food and beverage manufacturers.
Food and beverage companies are required to identify and respond to the food safety policies to ensure all appropriate actions are taking place. As a result, ERP systems have become one of the most powerful tools for quality control. For process manufacturers, it is important to know the quality characteristics of the finished goods during all phases in the production cycle. The enterprise resource planning software for food and beverage manufacturers allows for complete quality control with the ability to create and capture test results for incoming receipts from suppliers (based on the quantity received or pre-defined sample sizes). Quality control can also be initiated and managed for stock inventory to ensure that product characteristics haven’t changed or perishable inventory has spoiled. Quality control continues throughout the production process with quality tests available (and optionally enforced) at each phase of the production process so you can make adjustments as needed to ensure the highest quality finished goods possible. Test results are documented and organized within your production history so you can use this information for reports and analysis, and alerts.
Quality control is a cornerstone for producing high quality products to meet or exceed customer expectations. Since quality control is central to food and beverage ERP, it’s not an afterthought or bolt-on module with limited capabilities. Rather, it is integrated throughout the ERP system providing visibility into every facet of your quality control process with automation to streamline otherwise manual and labor-intensive tasks.
With an integrated quality management system inside your food and beverage ERP, you are guaranteed to have all of the features you need to manage each of the four main aspects of quality:
1. Quality Control
2. Quality Assurance
3. Quality Planning
4. Quality Improvement
With the enactment of the Food Safety Modernization Act, manufacturers and producers have placed more emphasis on accountability, avoidance, and obligation at each step and process throughout the entire supply chain. The FDA, as mentioned earlier, is inspecting and monitoring organizations’ processes for preventing food contamination more frequently.
The ability to track and trace “from farm to fork” and back (or cradle to grave and back) has become the principal of almost all global regulations. Process manufacturers have the responsibility to maintain detailed lot-related information and to also trace its use, which is why ERP systems have become a necessity for any food or beverage manufacturer.
Time is of the essence when getting the information you need for FDA inspections. Take too long and you’re probably in for a lengthy and costly audit but produce accurate and timely information and your compliance costs are sure to go down.
Further, the U.S. Department of Health and Human Services requires you to pull all necessary information within a narrow four-hour window. You do not want to be the organization still operating manually and scrambling to get the information they need –especially if you’re busy or working otherwise unavailable. A study recently led by the Office of Inspector General (OIG) posted on Food Quality and Safety discovered the following:
Only 5 of 40 products purchased could be traced through each step of the food supply chain back to the farm or border where they entered the country.
31 of the 40 products purchased could not be traced through each phase of the food supply chain back to the facilities that were likely to have handled the products.
The remaining 4 of those 40 products and facilities were completely unknown.
Leading food manufacturers have implemented ERP solving this challenge to automate and incorporate traceability through all the stages in their supply chains.
There are so many challenges facing food and beverage manufacturers today. Like any business, food and beverage companies must manage budgets, have the insight they need to make decisions, produce financial reports, and control costs while increasing profits – all through increased global competition and ever-changing federal and industry regulations and more frequent customer and supplier requirements. If you’re not using an ERP system designed for your business then you are likely wasting a of time and money through manual processes trying to make sense of data stored across multiple disconnected systems. ERP for food and beverage manufacturers is designed to provide everything you need in a single business application to streamline data entry, enforce quality compliance, automate labor-intensive tasks, and connect every aspect of your business including accounting, purchasing, sales, inventory and warehouse management, production, quality, human resources, and information technology.
Overcoming the many challenges facing food and beverage manufacturers today may seem like a daunting task without the right ERP software and an experience partner to help you understand how to use it for your unique business. Let e2b teknologies show you how to harness ERP to gain new efficiencies throughout your business so you can remain in compliance, improve quality, and increase profits with new insights into your business.