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DELIVERINGFOOD FOR THOUGHT A supply chain management whitepaper

Executive summarySupply chains in the food and drink industry are complex, challenging and ever-changing. The growing demand for broader ranges is balanced against the pressure on production. Customers are being served via multiple channels in differing scales. If your visibility, control and communication are inadequate you will create expense and inexcusable waste.

With modern supply chain and manufacturing solutions, such as those supplied by Access, you can go a long way to tackling both profitability and waste at all levels in a supply chain in a manner that can reach and benefit players at all levels of sophistication - from artisan suppliers to multiple retailers. Greater visibility and ability to track along with improved forecasting, traceability and stock control are just some of the ingredients to successful supply chain management in the food and drink sector.

As a result, the trend of the past few decades for consolidation of a handful of major retailers and manufacturing conglomerates seems to have gone as far as it can and supply chains must cater for growing numbers of smaller scale producers, retailers and commercial customers who lack the sophisticated IT and business systems of the majors.

The major retailers are locked into a series of attritional price wars that slash margins for themselves and their suppliers. They also need to serve a proliferation of channels from hypermarkets to convenience store formats and of course, increasingly, Internet shopping. This in turn prompts a proliferation of

SKUs as manufacturers and retailers have to develop both premium and budget ranges to meet diverse customer and channel demands.

Meanwhile, customer and media focus, prompted by recurring food chain scandals, and reinforced by regulation, makes imperative the need to demonstrate answers to the questions of where food comes from and how it has reached the table.Partly as a result of these pressures, the issue of food being wasted in the supply chain, and typically sent to landfill, is assuming greater importance. WRAP, the waste and recycling organisation, estimates that in the UK in 2011 some 10.7 Mtonnes of pre-consumer food, drink and packaging waste was generated in the UK, the majority lost to human consumption. That level of waste is rightly of general political, economic and environmental concern, but it also represents a massive loss of profit to the industry at all levels, and may serve as an index of the scope for improvement in supply chain systems and practices.

Waste cannot be eliminated entirely – there will always be unsaleable trimmings and by-products; some

level of spoilage and transit damage is inevitable, and there will always be wilting lettuces left unsold after an unexpected wet Bank Holiday. But even here the correct use of modern supply chain systems can offer considerable amelioration, and in attacking other causes of waste such as poor forecasting, over-ordering, mis-packing, and failure to ship products sufficiently far in advance of sell-by dates, supply chain solutions can be transformative. The key elements bring visibility, control, and communication.

Full visibility throughout your operationModern supply chain solutions can help you identify your most profitable product lines, enabling you to focus on valuable products and consider dropping unprofitable lines, across the piece or with reference to specific distribution channels.

Make supply chain managementyour vital ingredient All supply chains come under stress in difficult economic times, but the food and drink industries face particularly acute challenges. Although Western consumers feel economically squeezed, demand for novel and exotic ingredients and cuisines continues unabated.

WRAP, the waste and recycling organisation, estimates that in the UK in 2011

some 10.7 Mtonnes of pre-consumer food, drink and packaging waste was generated in the UK, the majority lost to human consumption

They give you complete visibility into all material and production costs (including indirect costs or recoverable value resulting from co-products or by-products). They also provide full end-to-end visibility across purchasing, inventory management, manufacturing, sales and distribution.

Production yield & wastage trackingA good supply chain solution will have built-in advanced production planning and tracking capabilities. It identifies areas where improvements are required and ensures errors are avoided. Once implemented, you can easily monitor the efficiency and the effectiveness of any changes made.

Yield planning and analysis capabilities allow you to establish standard benchmarks and identify out-of-tolerance conditions. When thresholds are exceeded, you

receive early notification and problems can be corrected quickly and the impact minimised. Parameters such as process temperatures can be monitored via direct machine links so any trend towards out-of-tolerance can be corrected before a batch is spoiled.

The system should also allow you to easily track the yield and wastage at various levels of ingredient and at the different stages of production.

Sales & production forecastingForecasting is key to most food industry manufactures. Many food products need to be manufactured and available by specific tight deadlines dictated by the customer or consumer (for example, seasonal demands or fresh food production).

This often means starting the manufacturing process before you receive firm orders from your customer.

Forecasts can have several different components, for example:

• Forecasts at basic product, channel and/or customer levels

• Future forecasts based on past historical actual sales with option to ‘flex’ the usage

• Forecast based on different timelines (for example, daily for next 3 days, weekly for next 3 weeks and then monthly from there on)

It is important to be able to combine different sources of information – for example, a forecast of sales for Easter may use historical data, adjusted for the changing date, and fine-tuned by weather forecasts.

Expiry/best before date trackingThe supply chain system should allow you to attach expiry or best before dates to every batch of ingredient that makes up the finished product and to the finished products themselves. It will also give you the ability to introduce ingredients into production in an ‘oldest first’ sequence to provide the most efficient stock rotation.

In addition, the solution can suggest which batches should be despatched to customers on an ‘oldest first’ basis, to minimise wastage. This allows you to easily identify product batches that are nearing expiry and act accordingly.

Tracking can continue so that slow-moving products, for instance from a less than successful promotion, can be recalled, the product repacked or reused (and the packaging reclaimed) while there is still useful shelf life left.

Product and ingredient traceabilityLarge multiples now demand the most stringent levels of product and ingredient traceability: full end-to-end traceability from ingredient receipt, through production and out to customers as finished product.

You should be able to search by any piece of information including; finished product batch number, supplier’s delivery note number for ingredients, product number, customer, date of despatch etc. Each batch of ingredient or product can also have attributes attached to them detailing test results, nutritional information and other specific characteristics.

Electronic tradingA supply chain system should of course support proven electronic ordering and trading methods adopted by most multiple retailers and major manufacturers, allowing the receipt of forecasts and confirmation of orders electronically using EDI and other electronic means.

This type of electronic trading allows you to send delivery notifications and invoices electronically to your customers, providing faster order to invoice cycles and reducing manual effort and scope for errors.

Equally, the system can send prompts to suppliers, at levels of sophistication ranging from simple e-mails to full EDI, seeking confirmation of delivery times and quantities and resolving issues before they happen. Suppliers can automatically be made aware of impending demand changes from major customers who would normally be several links away on the supply chain.

As noted above, important and vibrant elements of the food and drink supply chain are not geared to the requirements of EDI – the ability to achieve a similar result by simple tools such as e-mail is critical in keeping all partners in the chain, big and small, synchronised.

By-products & co-productsMany food manufactures require the ability to produce several products from a single set of ingredients, or to support the recipe for a single product using multiple sources. Others depend on controlling ‘blends’ from different sources.

A manufacturing solution should allow you to produce differing quantities of several products from a single ingredient or use differing sources to make the same product, while retaining full traceability.

It is important to be able to combine different sources of information;

for example, a forecast of sales for Easter may use historical data, adjusted for the changing date, and fine-tuned by weather forecasts.

With co-product and by-product tracking you can account for all down-stream costs and link benefits back to primary products. Often, some market can be found for by-products that would otherwise become waste, if they can be identified and tracked. (For example, ‘waste’ by-products may have value in the animal feed chain, but are still subject to onerous provenance and traceability requirements).

Bonded warehousingMany manufacturers and distributors handle or forward alcohol and other dutiable ingredients. Systems such as those offered by Access can offer specialised routines that manage deferment of payable duties and the generation of all the duty payment paperwork required by HMRC, in styles virtually identical to HMRC’s own approved forms.

Credit controlMany food manufacturers sell to large numbers of small companies (cafes, restaurants, corner shops) to whom sophisticated financial procedures are alien. Direct debit systems can be set up pulling information from supply chain records of dispatches and deliveries to a third party BACS debiting system – improving your cash flow and reducing the administrative burden for all parties.

Delivery roundsInternet ordering by end-consumers for delivery direct from the vendor is an unstoppable trend, and the more traditional door-to-door round is by no means extinct. Using modern supply chain solutions and simple hand-held devices, roundsmen can

instantly report future orders, extra requirements on current deliveries and so on, feeding directly into stock monitoring and production planning. Roundsmen also can have access to customer historical data, improving possibilities for trading up and making extra sale on the doorstep.

Stock controlPhysical stock-takes of perishable goods are not only expensive: every manual intervention raises the risk of damaging or contaminating products and ingredients. Real time perpetual inventory reconciliation eliminates most or all of this cost and risk.

Environmental controlRequirements for auditable trails attached to temperature, humidity and other environmental parameters during transport, manufacture and storage are increasingly onerous, but must be readily monitored and reported, to customers or regulators.

Physical stock-takes of perishable goods are not only expensive:

every manual intervention raises the risk of damaging or contaminating products and ingredients Real time perpetual inventory reconciliation eliminates most or all of this cost and risk.

In conclusionModern supply chain and manufacturing solutions - such as those supplied by Access – are the vital ingredients to streamline, synchronise and integrate the complex and fluid supply chains that characterise the food and drink industry in a manner that can reach and benefit players at all levels of sophistication - from artisan suppliers to multiple retailers. In the process, the shaming 10 Mtonne food waste mountain may be in large measure prevented or mitigated to the benefit of producers, consumers, general society and not least, the economics of the food industry itself.

0845 345 3300 tellmemore@theaccessgroup.com www.theaccessgroup.com

Customer case studyRead how leading food manufacturer Burts Potato Crisps estimates a saving of 12K per year as inventory is now reconciled in real time with Access solutions.

www.theaccessgroup.com/burts

About AccessWe are a leading author of fully integrated business management software. One of the UK’s top five fastest-growing software developers (Sunday Times Buyout Track 100), over 10,000 businesses and not-for-profit organisations use Access to unlock their potential. Offering solutions for ERP, finance, HR, payroll, warehousing, business intelligence, PSA and manufacturing, our vertical expertise and template solutions allow for rapid and easy deployment, whatever your industry or sector.

0845 345 3300 tellmemore@theaccessgroup.com www.theaccessgroup.com