Rising raw material prices, pressure on margins, consumer-driven marketplaces –how the ERP system can help in challenging times.
The food business is not easy: manufacturers need to hold their ground in a global competition where increasingly complex supply chains go hand in hand with the growing demands of retailers on supply capability and quality. Rising material prices add to the pressure on profit margins. The businesses in this industry need to open up new sales channels while ensuring compliance with stringent legal requirements. At the same time, they need to advance the digitalization in their factories.
The good news is that the great variety of starting points for the digitalization of processes with ERP is matched by the value this creates for the businesses – if they set the right priorities.
The prerequisite for this is a process that addresses four goals: promoting further growth through digital technologies, enhancing competitiveness through smarter processes, mobilizing data for faster decision-making, and improving resilience and the ability to react.
1. Boost growth
The role of the consumers is increasingly relevant, as they are becoming major players who determine the new standards and rules of play in the food industry. This is a fertile ground for processors taking advantage of the growth potential in digitalization. On the one hand, they focus on their product range, which – with the support of the ERP – can be adapted to consumer trends like regionalism or organic products.
On the other hand, the coronavirus pandemic has fast-tracked the shift towards e-food by several years, making investments in online stores a priority. Direct selling is no longer only for the big players in the industry; it is also relevant for many SME. To those selling directly via their own digital channels, it offers a great opportunity for additional turnover and organic growth – beyond being listed for the shelves of food retailers.
Businesses that anticipate the customer demands early on and translate them into processes, products, and services will dominate the competition. This calls for flexible and scalable IT and production infrastructures that allow an effective integration and analysis of farm-to-fork data and enable a fast adaptation to changes in demand.
2. Build smarter processes
The strength of many food businesses is their product leadership. Today, however, product leadership implies more than just a product. It also means mastering the processes supporting the product. Ultimately, the acceleration of the processes aided by IT and the improved efficiency in data processing are decisive for the success.
That makes it all the more important to find productive solutions. One goal must be the communication between existing systems, equipment, and machines; for example, the transfer of data from production systems to the ERP as input for analysis and management tools. Besides the ERP in conjunction with MES and CIM, industrial imaging plays a major role in the automation of factories. Predictive maintenance and robotics are additional ways to make processes smarter. The intelligent organization of your operations opens up new optimization opportunities for your business. This step becomes even more relevant as the industry feels the pressure from rising costs, regulations, changing consumer behavior, and fierce competition.
3. Make faster decisions
Today’s food industry is all about data. In the daily endeavor to make the best decisions, using the right metrics will be your best weapon.
The ERP is vital to speed up the decision processes. It helps to accelerate the processes and workflows while providing quick access to information. Functions like smart production scheduling, reporting on defined KPIs, information from finance and controlling, or the optimization of inventory management are at the top of the list of most companies.
This entails a substantial reduction of manual work through automation and digitalization of production operations, leading to massive gains in the internal processes. Every digitized process supplies data from which decisions can be inferred. All of a sudden, you are able to clearly determine the contribution margins your products need to achieve, identify the suppliers with the best product quality, or uncover “blind spots” in traceability.
4. Enhance resilience and the ability to react
Efficient management processes, flexibility and seamless supply chain processes have tremendously gained importance during the pandemic. Solutions for more resilience and planning stability have become a must.
At first glance, this might appear to be operational issues resulting from the current situation. But if you look closely, you will see the inherent strategy: the ERP must play a significant part in addressing the huge challenges of future markets. Stable and efficient processes as well as scalable and flexible IT environments are generalized competences. In addition, they are key to remaining adaptable to unexpected events and market fluctuations. Intelligent sales planning helps to establish forecasts, taking into account available storage capacities and the shelf life of products. Software-aided inventory optimization facilitates the balancing of low stocks and optimum supply capability. In short, the full digital support of the value chain from processing to distribution ensures maximum flexibility of the production chain – and improves resilience.
Strategic projects for the years to come
Digitalization is about more than just incremental improvements: it is a strategic project for food production of the future. Today, the success of many food processing companies is based on the concept of permanent IT-aided optimization. Dealing with new technologies has the potential to further enhance this tried and true strategy and to neutralize rising process costs through efficiency improvements and automation - even if the cost pressure permits only small development steps.
How do we get there? Ideally, by starting at the end of the operation’s value chain instead of pushing forward with a technological mindset. Technologies are implemented where they do add value - for example, through financial gains or benefits for the customers.