The Beginners Guide to ERP for Food Processors Technically, ERP stands for Enterprise Resource Planning software, but really it could stand for Everything Right & Profitable or Easier Realized Profits. Here s a good definition we found floating around the internet (we couldn t find the source):
When Does a Food Company need an ERP? Of course it would be easy to say always. But ERP software isn t really a necessary tool for a company at every stage of its growth. In the early stages of executing and managing a business, getting and keeping customers and delivering orders on time are the priorities and take most of a young or small company s resources. Transactions can be handled manually and with a basic accounting system in place. However, once the business starts or is planned to grow in size and/or complexity, management starts needing to measure everything related to sales, purchasing, inventory, production and quality. The various spreadsheets or disconnected sidecar applications that the company has been making do with to manage data falls short of accurate, timely metrics. Only an integrated software system, such as ERP, offers a single version of accurate data visible to all employees, so that key performance indicators and benchmarks can be set to measure performance. With an ERP system in place, a business can move into the stages of Measurement, Control and Improvement that are the signs of a mature, thriving company. (See our maturity graph below.) Technology roll-outs during these later stages could be called ERP+, wherein the software extends its transactional reach into data management and analysis for all movements, such as warehouse management, real-time production KPIs, and business intelligence. Only an integrated software system, such as ERP, offers a single version of accurate data visible to all employees What Functionality Can An ERP Help My Food Processor With? There are a lot of moving parts in a Food Processing Plant whether you are focused on manufacturing or are doing both manufacturing and distribution. An ERP software system, which has been built for the food industry, can handle all the vital functionality required. It can do way more than this, but as this is a beginner s guide, we will focus on the basics: Accounting ERP software digitizes the following functionality, therefore dramatically reducing user time and error: Cost Accounting Gain greater visibility and insight into how your business is performing by monitoring budgeted and actual operating costs, departments, products, and projects. Synchronize cost information with the general ledger and allocate costs to different cost centers and objects. Spot budget variances as soon as they occur and take appropriate action. 1
Cash Flow Forecasting Understand your current cash position, forecast short-term cash flow, and monitor cash receipts and disbursements. Create multiple cash flow forecasts for different time periods. Deliver role-appropriate cash flow information via tailored screens. Analyze cash flow and take action quickly. Costing Ability to automatically allocate costs from production cost centers to work centers and products for ingredients, direct labor, and overhead. Setup as many cost drivers as needed and link them with the supply chain. Allocate cost from work centers to products with a number of methods like quantity, time, or weight. After the execution of the product costing, you can analyze the cost of products to their cost components, which are defined according to your needs. Standard cost updates, item budgets, jobs management, resource management, and more. General Ledger Set up a company and post to the GL including setup of charts of accounts, general journals, recurring journals, etc. Full data export to Word or Excel using style sheets and adding links to external documents. Allocations, budgeting, account schedules, consolidations, responsibility centers and financial reporting standards, change log, intercompany transactions, dimension, bank reconciliation, and multi-currency support. Accounts Payables and Accounts Receivable are integrated with GL and Inventory. Track fixed assets such as buildings, machinery and equipment including acquisitions, depreciation, write-downs, appreciation, etc. Reporting Support for tactical and operational reporting. Customizable and detailed reporting in real-time via Excel reduces user s learning curve and removes the dependence on IT departments for report writing. Schedule reports for automatic distribution via email. Full Analytical and Business Intelligence capabilities through Excel or Web-based user interface. Sales& Marketing Sales order management processing and EDI. Pricing rules built into ERP. Sales commissions are highly configurable. Management of sales rebates and trade promotions. Sales forecasting for optimized inventory. CRM for full sales force automation; opportunity management; campaign management and marketing lists. 2
Purchasing Order management and EDI. Vendor performance management. Purchase planning: MRP based on demand or re-order points. Automatic creation of purchase orders. Management of complex pricing by vendor, customer and item combinations. Inventory Inventory visibility: track at location, zone, bin, container levels. Access this information from anywhere in ERP system. Logistics: run planning, and shipment load consolidation. Shipping & Receiving: link paperwork electronically to receipt; receive by case, track by pallet; quality audits on receipt. Warehouse management: receiving and warehouse putaway; picks and shipments, physical counts and more - by hand or via mobile devices. Lot tracking and recall functionality. Production/Shop Floor Production Scheduling: graphical interface; identify production steps, relate to machine/ work center; etc. Production Planning: Create/manage production orders, automatically calculate net requirements. Break down finished goods into BOMs, then used to describe products sold together. Support for multi-plant production environments. Key performance metrics visualized in real time; tailored for each customer. Record consumption and output in a variety of ways, including integration to MES or PLCs on shop floor, and barcode scanning integration in ERP. Work orders, MRO purchasing, fixed asset management, production scheduling fully integrated in Preventative Maintenance. 3
What Are The Benefits Of ERP To You? While ERP software is no small undertaking at a company, it does bring many benefits to your business, just a few of which are: ERP boosts efficiency and reduces errors in all departments by automating data entry and processes. Because most mistakes are made by people. ERP supports decision making by management since vital information about any part of the company can be viewed immediately. This means real-time visibility! ERP improves data security, and keeps the company s precious jewel - its knowledge - from walking out the door when key personnel leave. ERP makes companies agile - more flexible and quicker to change to business demands - and therefore more competitive. Faster and more accurate outputs ultimately lead to happier customers. And we find happy customers lead to profits! ERP fosters collaboration of knowledge, within and between departments, as all employees can create and share information easily and quickly. 4
So You Think You Are Ready For ERP? Not all ERP software is created equal, so here are some points to help guide you in your selection process. What you ask ERP vendors will help make everything go easier. HINT: Software these days is pretty much apples to apples when compared. It s the implementation and the support that really will impact your business. 1. Which industry does the functionality within the ERP software best suit? If, for example, Process Manufacturing - is the software built for the food industry specifically? 2. Does the vendor have up-to-date IT certification as validation of specialized knowledge in ERP? 3. What is involved in the upgrade process of the ERP software? 4. What is the long-term product road map of the software, i.e. what kind of R&D investment is being made to the ERP? 5. Which customers may we speak to about the ERP and how it serves their companies? Are they food companies that you consider having similar business strains? 6. Will you use our actual business data to do a software demonstration? 7. What does after-sales support of the ERP product involve? What you want to find out here is does the love stop as soon as you pay the check. SUMMARY In an industry that has tight profit margins, fierce competition and strict compliance requirements, having the right business management software is critical to maintaining and growing market share and profitability. ERP software is the right tool for food companies with the maturity and complexity to require measurement, control, and continuous improvement of their operations. ERP software that is built specifically for the food industry can lead to significance cost savings and revenue enhancements. 5