The Growing Role of Technology in Food Distribution

Transcription

1 JustFoodERP.com > Resources > White Papers The Growing Role of Technology in Food Distribution Top 4 Areas of Functionality in Integrated ERP/WMS to Drive Profitability

2 The Growing Role of Technology in Food Distribution 2 Table of Contents Introduction Inventory Management... 3 Visibility 3 Replenishment 4 Shipping & Receiving 4 Container Build 4 Container Pick 4 Logistics 5 Shipment Load Consolidation 5 Logistics Run Planning 5 Warehouse Management 5 Mobile Warehousing 5 WMS Best Practices 6 2. Sales... 7 Order Management 7 Order Fulfillment 7 Manual Spot Orders 7 Quick Orders 7 Web- Based Real- Time Order Taking 7 EDI 7 ASN 8 Pricing Management 8 Forecasting 8 3. Purchasing... 8 Accurate Costing 8 Vendor Performance 8 4. Food Safety & Quality... 9 Traceability & Recalls 9 Quality Management 9 Summary... 10

3 The Growing Role of Technology in Food Distribution 3 ERP allows our purchasers to stay on top of the inventory that we need to continue generating sales - Mark Oltman, CFO, Benjamin Foods, broadline distributor in PA Introduction Whether your company is a broadline distributor serving the foodservice industry, an importer of specialty foods for national retailers, or a food broker who manages inventory, the business of moving food is complicated, with razor-thin margins. Your cash flow and profitability depends on satisfactory answers to questions like: How accurate is my costing? How accurate is my inventory, and how timely are my inventory turns? Am I leaving revenue on table because of less than optimal order fulfillment due to lack of inventory? Is all our vital information available in real time? How fast and well can I respond to food safety issues such as a product recall? Can I handle the communication and shipping requirements of my bigger customers? How integrated is my warehouse management system (WMS) with my ERP system? While your business variables are complex, your choice around technology doesn t have to be. This white paper covers the basic principles and best practices you need to see fulfilled by any food distribution software in which you invest. In the best designed software, a key principle is something known as repeatability which means the same robust, scalable code is built upon over the years, versus having to be rewritten every time a new function or process unfolds (as it does, in every line of business). This same principle applies to your food distribution business: repeat orders are key to your success, and only by having the most efficient, automated business processes, will you ensure that customers come back! Today, there is such powerful WMS software built into some ERP systems that you very well may not need a standalone WMS system. If your ERP system is more than five years old, you should be looking at upgrading anyway, so why not start your search for a fully integrated ERP/WMS solution? Choosing the right integrated ERP/WMS system - one that is built for food distributors - will cover off your requirements (today and longer term) out of the box. This whitepaper will discuss the Top 4 areas of food distribution software functionality that you must have present in an effective ERP/WMS solution to help your business grow. 1. Inventory Management Since inventory is your largest cost, you need to manage it tightly. Effective inventory management centers on real-time updating of inventory for full visibility, accuracy, and control, and it takes technology to make sure this happens consistently, such as bin level inventory visibility aided with handheld transactions for real-time processing. Visibility Technology proves invaluable when it comes to know exactly where every piece of inventory is located, by any employee working anywhere within the ERP system, such as on the sales order, in the item card, etc. Your ERP system should be able to track inventory at the levels of: location, zone, bin (rack), and container (pallet, tote, tub). Access to Forecasted Availability - via inventory availability plus quantity on hand - is vital for your employees, as it aids in planning or committing inventory. Your ERP system should be using the First Expired, First Out (FEFO) principal for picking inventory based on expiration date; the impact of proper stock rotation on consumer safety cannot be overstated.

4 The Growing Role of Technology in Food Distribution 4 Using ERP and WMS functionality, including handheld interface, has resulted in improved inventory accuracy, visibility into inventory status, and management of quality holds in the system - Jamie Hornstein, Director Information Services, Ainsworth Pet Nutrition, distributor and manufacturer Replenishment Your ERP will need to address how to effectively set up effective Replenishment Parameters to meet or exceed customers expectations of product availability, while maximizing your profitability. For example, it should give you the ability to properly maintain: Minimum and maximum quantities Anticipated lead times Order/review cycles Safety stock quantities Economic order quantities As well, when you are investigating ERP systems, look for tools such as a Replenishment Calculator that can tell you what picking bins require replenishment, and where your oldest replacement inventory is located. Shipping & RECEIving The evolution of pallet management today includes extensive functionality for containers defined as a pallet, case, bin, shipping container or any other combination of lots and UOMs. Containerization for build, pick and consume functionalities, within some ERP systems, will allow for the flexibility to handle different types of transactions, in a way that traditional pallet management and straight UOM coud not do. Container Build The Container Build functionality means that warehouse workers can pick multiple products and build a collection of inventory with a single-scan barcode (aka license plating). As a food distributor, the Container Build functionality also helps when you have to provide SSCC (serial shipping container code) and ASN (advance ship notice) details. Your customers are demanding more information when a load arrives detailed packing slips on each pallet, etc. A user at your customer s shipping dock can scan the label with the container ID sitting in the inbound production bin and see immediately what is in that pallet. Container Pick Some food distributors must accommodate complex picking scenarios; traditionally, information would need to be scanned in and/or manually entered, with much room for error! As well, traditional scanning and tracking of labels would require a label for each item. Newer functionality allows for a unique identifier (barcode) to be created for the container, which becomes a collection of data an aggregator of the various items information. To minimize freight costs and maximize each load, complex pick-and-load strategies are needed. The Container functionality threads into the picking model mixing and matching various inventory items onto a pallet (such as ensuring heavier items are on the bottom, the first drop is at the back of the truck, etc.)

5 The Growing Role of Technology in Food Distribution 5 Traditional warehouses are being outfitted with WMS functionality to support the individual item handling requirements of e-commerce fulfillment - Clint Reiser, enterprise software analyst, principal author of ARC s Warehouse Management Systems Global Market Research Study LoGISTICS Also known as supply chain optimization, logistics management is all about getting your sales orders ready to ship to customers using the most efficient means of transportation, and the best routes, at the lowest possible costs. Shipment Load Consolidation This is the ability to combine sales orders that are ready to be shipped. Consolidation is based on criteria such as weight, cubage, etc. Logistics Run Planning This defines the transportation route that a shipment agent should follow for successful delivery. Logistic Run Planning, in some ERP systems, can take advantage of leading mapping services, such as Google or Bing Maps, as well as optional integration to freight rate shopping for FedEx and/or UPS, and integration to route planning tools such as RoadNet. Your ERP system gathers shipping information, pushes it to the RoadNet tool, which then spits a precise logistical route plan back into the ERP system. WAREHouse Management The importance of automating your warehouse operations cannot be overstated; the advantages will have a dramatic impact on your company s bottom line. If the warehousing functionality is up to par, an ERP system that includes a full WMS component is an ideal solution, versus trying to connect independent ERP and WMS systems. But be sure you are getting the full warehousing functionality you need now as well as in the future, within your new ERP system, such as support for RF handheld devices and barcode scanning. Mobile Warehousing Imagine your warehouse employees moving inventory from one bin to another, scanning the product into her handheld device resulting in your full ERP system being immediately updated, and the guy behind her, who is using his own handheld device, seeing right away where the product went! Or the same kind of warehouse management enabled via forklift-mounted tablets accessing a browser over a wireless network. The bottom-line benefits for your company include: Inventory accuracy: Pick, ship, receive, put-away, move and count inventory with a greater degree of precision all from out on the warehouse floor. Timely transactions: Receive raw materials, consume and output production, and print barcode labels when and where you need to. Traceability: The ability to do transactions from handheld devices improves the transaction accuracy, which contributes to the product recall process.

6 The Growing Role of Technology in Food Distribution 6 A full physical of the warehouse is critical before ERP go-live, otherwise you will have bin inventory issues right from the get-go significant investment in training is important to educate pickers on new disciplines related to inventory - Boris Harmic, It Manager, Ontario Natural Food Co-op, large distributor of organic and natural products WMS Best Practices The following are some of the best practices that food distributors can use to maximize the efficiency of warehouse management within their ERP system: Conduct a full physical of your warehouse before the ERP go-live, or you could have bin inventory issues right from the get-go. Make significant investment in warehouse employee training time to educate pickers on new disciplines related to inventory, in order to reduce the error rate. For example, pickers need to be made aware of the value of what they are handling, and how to get the most out of lot traceability. Consider the options for labeling, if you are using barcodes: forklift-mounted printers can hold approximately 150 labels. Bigger label runs can be done on larger thermal printers in the receiving area of the warehouse; and a mobile workstation, compromised of a handheld device and a small printer, can be moved easily to where it is needed in the warehouse. Avoid using labels smaller than 4 x 6 and consider investing in longer-range scanner guns, even if they cost slightly more. At the start of your ERP/WMS go-live, focus on the Receiving end to do it right, i.e. assigning lot codes, printing labels, etc. Consider assigning certain employees as cycle counters whose sole job is to find and correct bin inventory problems in a proactive fashion. Integrate the full ERP system into your warehousing operations with a physical location ( nerve center ) right in the warehouse, where supervisors can interact on desktop computers with all employees across the company. Make sure at least two star employees from your warehouse are part of your internal core team for the ERP implementation project. Ensure thorough documentation is done of how the ERP system will be used for your specific business processes, particularly those rainy day scenarios that are known to occur and should be planned for. No amount of planning or training can substitute for the volume of a real day s work, so the piloting phase, just prior to the ERP go-live, is very important, as are the first few weeks directly following the go-live.

7 The Growing Role of Technology in Food Distribution 7 The majority of our sales require EDI, and ASN is a growing side of our business We can do both, plus customer compliance labeling, all within our ERP system - Keith Kern, IT Director, Bruce Foods, manufacturer and distributor of sauces, canned vegetables 2. Sales Obviously the front end of your businesss - selling the food and beverage products you carry - is of vital importance to the success of your business, so your new ERP system s functionality must also be bang-on for your business processes on the sales and marketing side, such as : Order Management Order Fulfillment Distributors leave revenue on the table when they are unable to fill orders due to lack of inventory. Having the right automated, real-time inventory management system results in optimized order fulfillment, and happy customers. Steps in order fulfulment include product inquiry to make-to-stock - where the product is built against a sales forecast - through sourcing, order processing, and delivery of the finished product. Manual Spot Orders The functionality of manual spot orders provides quick reference to order history, copies from past orders, provides order statistics, item substitutions, and inventory management on the fly. Quick Orders Quick-order screens are a great functionality for high-volume environments, since they strip out advanced posting functions, and minimize tab or mouse clicks. As a result, customer service reps can processs thousands of orders per day! Web-Based Real-Time Order Taking Your sales team, which spends much of its time on the road visiting customers and prospects, needs to have easy access to web-based order taking for real time order taking, and it should be device-agnostic so it doesn t matter what type of smartphone, tablet or laptop he/she is using. EDI EDI is the mandated form of communication working with most large trade partners, such as Costco, Target, Walmart, and Walgreens. Having integrated EDI built into your ERP system means that receiving EDI orders, or order changes, will flow through an automated process. For example, any orders that are off-order rules should automatically be flagged. Common order rule infringements may include less than full-pallet orders, which may contradict agreed terms and may impact pricing. Manually processing these orders could create an unwarranted delay in order production or order fulfillment.

8 The Growing Role of Technology in Food Distribution 8 ASN One EDI transaction - known as Advanced Shipping Notices (ASN) - is also increasingly demanded by larger customers. You should be looking at an ERP/WMS system that has ASN functionality built-in - especially if you do a lot of picking - to avoid the cost and implementation time of adding a third-party technology. ASN is notorious for all the labels, forms and manpower required; it can be easy and costly to make a mistake using ASN, so proper training is vital. Done correctly, the adoption of ASN does provide better visibility into inventory management, margins, supplier score-carding by mass merchandisers and enhances the accuracy and efficiency of traceability. Pricing Management Includes contract and cost-plus pricing, as well as start and end dates, and quantity penalties. Functionality to support surcharges like freight or fuel surcharges, or even temporary commodity price fluctuations. Zones functionality so prices can be applied to specific zones of delivery. Delivery charges are itemized and easily reconciled against the incoming logistics or freight costs. Vendor rebate functionality to help manage complex requirements in distribution environments, including guaranteed cost and sales based rebates such as Manufacturer Chargebacks. Forecasting Your employees should be able to use the company s sales and buying history to create highly accurate forecasts, via forecast algorithms within the ERP system. 3. Purchasing Profit margin optimization often comes down to smart buying by your purchasing department, which is enabled through the inclusion of a Purchase Planning Engine within your ERP system. Accurate Costing Cost visibility to show actual costs, and overhead costs plus markup, and to tie landed costs plus buying costs back to individual products. Vendor Performance Functionality within the ERP system to help you manage your vendors performance should include lates, shorts, pricing discrepancies, and quality issues.

9 The Growing Role of Technology in Food Distribution 9 FDA holds back imported shipments to do random safety checks; this used to be stressful. When you flag it in your ERP system, you get a clear picture of where your inventory is -Frank Aulino, President, Aulcorp, importer/distributor of European specialty foods 4. Food Safety & Quality TRACEAbility & RECAlls Your responsiblity as a distributor to demonstrate quick, effective lot tracking and recall processes, with both your suppliers and your customers, means the business software system you choose will require top-of-the-line traceability and recall functionality, with built-in quality management, such as : Products can be assigned a lot algorithm that is then transferred to an item s label for barcode scanning. External lot numbers can also be tracked, in the case of vendors assigning lot numbers. Bi-directional traceability is available at the click of a button; any item/lot combination can be traced providing information related to purchase, shipping as well as any other items that may have been cross-contaminated. Traceability extends to product recalls; a list is provided of all customers impacted by a concerned item and lot combination. Recall letter can communicate impacted lots, and provide information related to the shipment number, date, quantity shipped prompting response from customers for next actions. Quality Management Your food safety requirements - lot tracking and recalls - need to be integrated with builtin quality procedures in your ERP system, with such features as: Setup unlimited Quality Procedures related to items, customers, assets, employees, or other entities in the business. Quality Procedures can mandate certain steps that need to be carried out, providing work instructions to employees. Quality Audits can be automatically triggered at certain material movements like receiving, pick, or shipping. Audits can be captured electronically and in real-time using barcode scanners, tablets, or computer carts. Quality holds can be created within the ERP system when a product is out of spec, contaminated, etc. so that it is blocked. A ledger is created to keep track of the history of that hold and any related information. Additional tests can be linked to the quality hold. Only those employees with security rights can release a hold, or move it between locations.

10 The Growing Role of Technology in Food Distribution 10 SuMMARY Successful food distribution is all about getting a real-time picture of what s going on in your warehouse(s), so having the most effective and accurate inventory management functionality is critical. Because profit margins can be so razor-thin for food distributors, having cost visibility, smart purchasing via a planning engine, and forecast accuracy are also important components of a food distribution software system. And of course, like any food business, having the ability to do fast, appropriate lot traceability forward and backward on the supply chain, conduct recalls, and manage quality issues, will be foremost in a distributor s mind when assessing new technology. Food distribution software today, ideally, is a combination of WMS and ERP functionality, tightly integrated in a single system, that can handles all those requirements, as well as logistics, shipping, and other needs of your workforce and products across the food supply chain. The business software system, of course, should also include full financials and reporting (including advanced Business Intelligence and KPIs) functionality for complete visibility by management across the company in real time. Putting today s software technology to work for distributors needs, your food business will keep moving towards a stronger and stronger bottom line. ADDITIonAl RESouRCES large organic Food Distributor: Q&A on Mobile-Enabled WMS The Shift to larger, More Demanding Customers Prevention and Proof: Traceability for Food Companies EDI Transactions at Cookie Manufacturer JustFoodERP Customer E-book An online resource detailing our customer success stories JustFoodERP 1275 Glenlivet Drive, Suite 100 Allentown, PA Toll-Free: info@justfooderp.com Follow Us: Blog Twitter Youtube LinkedIn Information on Microsoft Dynamics can be found at JustFoodERP is a registered trademark of IndustryBuilt Software