a ‘white paper’ publication from enabling

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improving efficiency for fresh food manufacturing

authors & contributors

Enabliser Kim

Enabliser Frank

Enabliser Jaco

Enabliser Howard

Enabling hopes you gain a key insights from our suggestions and views on choosing an Integrated Solution for the Food and Beverage Industry to serve you.

Please contact us directly for more information on how Enabling are able to streamline your IT solutions to optimise your business – people, process and technology.

food & beverage industry

When it comes to industry specific solutions it’s important to understand all the benefits of those that

are geared to your industry before beginning your selection process. That’s why we created this paper –

to provide you with the essential information you need to make the best decision possible, and to help

you build a business case for a new integrated solution. A solution that meets the unique requirements

of the manufacturing industry, specifically for the Fresh Food and Beverage sector. We suggest you form

an effective project team, ask the right questions, and identify the challenges involved and much more.

Australia – 1800 ENABLING (1800 362 254) • NZ – 0800 ENABLING (0800 362 254) • www.enabling.net

© 2014 Enabling Pty Ltd. All rights reserved

improving efficiency for fresh food manufacturing PAGE 2

PROPRIETARY INFORMATION AND CONFIDENTIALITY

The information contained in this document represents the current view of Enabling on the topics discussed as of the date of publication.

This document is for informational purposes only. Without limiting the rights under copyright, no part of this document may be reproduced, stored in or introduced into a retrieval system, or transmitted in any form, by any means (electronic, mechanical, photocopying, recording, or otherwise), or for any purpose, without the express written permission of Enabling Pty Ltd. Enabling may have patents, patent applications, trademarks, copyrights, or other intellectual property rights covering subject matter in this document. Any product names herein are acknowledged as the copyright of their copyright owners.

The example companies, organisations, products, people, and events depicted herein are fictitious. No association with any real company, organisation, product, person, or event is intended or should be inferred.

Enabling and the Enabling logo are registered trademarks of Enabling. All other marks are trademarks or registered trademarks of their respective companies.

Process Manufacturers – especially those in the food and beverage industry – often face a high stakes situation when it comes to information. In your industry, a lack of visibility can translate directly to a public health risk – every food and beverage manufacturers worst nightmare.

Having an integrated Enterprise Resource Planning (ERP) solution limits risk, and there are many that are common for manufacturers of all types – the costly effects of downtime, the need for measures to ensure safety and Quality Assurance. With the added pressure of managing factors such as limited inventory shelf life, proper sequencing and recipe management, assessing raw material potency – the list quickly gets more complex for businesses in the food and beverage processing environment.

It is not simply a question of which two or three Enterprise Resource Planning (ERP)/Manufacturing Resource Planning (MRP) systems to put at the top of one’s short list, as the selection process is typically much more complicated. In particular, there are parallel challenges of developing one’s own ERP/MRP paradigm and whether to accept long term strategies regarding cloud or traditional on-premise roadmaps, as well as many lower priority issues.

With all of these factors to take into account, selecting an ERP/MRP solution for your industry sector becomes a question of choosing a way of business evolution for the years to come. We know how important it is to have good information before making smart decisions. We’re confident that the more you know about the benefits of a modern, fully integrated solution geared to the requirements of the food industry, the more likely you are to see the benefits of, and ultimately choose, Enabling’s suggested solutions. Our solutions are built for the Food and Beverage industry. We have years of experience assisting many companies in this sector.

Our paper outlines fresh ideas, strategies and tactics that will assist you in choosing an integrated solution.

We hope you benefit from our insight into choosing the right integrated solution.

welcome

improving efficiency for fresh food manufacturing PAGE 3

Australia has earned an enviable reputation world-wide for high manufacturing standards and the quality of its freshly produced food. The food and beverage manufacturing industry is a vital component of the Australian economy with over 225,000 people being employed in 2012/13. Representing around 24% of total manufacturing employment, many communities particularly in regional areas benefit significantly through employment and other business related opportunities.

The Australian manufacturing industry is incredibly diverse – ranging from businesses that process food to those that produce pharmaceutical products, aerospace components and high value-add electronics devices. Adding over $100 billion to Australian GDP, the sector employs around 950,000 Australians and contributes almost 25% of business expenditure on research and development.

A recent Austrade and Australia Unlimited market report reveals Australia exports around 30 per cent of its goods to China. One of the biggest performers was the Food and Beverage sector where processed food exports have almost doubled in value since 2007 from $794 million to $1.5 billion. Austrade commented “There are primary agricultural opportunities into all of Asia, but red meat is performing well in China, Indonesia and the Philippines, wine is selling well, and we have an opportunity with the perceived quality and safety of our seafood.” Add to this that we can’t produce enough dairy products to satisfy Chinese demand and the Food and Beverage Industry sector is looking pretty good.

Food manufacturing faces many challenges ranging from reducing wastage and maximising shelf life of products to obtaining accurate product costings. Many complexities arise with perishable products and combined with increased market pressures, businesses that keep up with technology trends are better prepared to stay ahead of their competition.

The future of fresh food manufacturing in Australia looks incredibly promising, however businesses will need to respond quickly and positively to any challenges and opportunities that arise. The ability to adapt and reposition strategies using up to date information will allow businesses to capitalise on opportunities and ensure their business remains competitive in global markets.

This white paper highlights some of the challenges faced by manufacturers in the Fresh Food and Beverage industry and how they can be resolved using technology. Enabling’s many years of experience working in this sector have provided significant insight into the issues faced and the best solutions available right now to address them. Moving forward in this market can easily be achieved with technology solutions including fully integrated ERP, MRP and Inventory solutions. By providing immediate access to real-time information, and with the right tools, you can better manage the business and have the right information to make important business decisions and stay profitable in this competitive market.

introduction

improving efficiency for fresh food manufacturing PAGE 4

improving your business performance

What are the most common system requirements for Food and Beverage Manufacturers?

Over the course of 2012-2013, the Technology Evaluation Centre evaluated more than 1,500 submissions for process manufacturing solutions. The following graph shows the top 20 high-level functional requirements chosen most frequently by users performing evaluations on these projects.

According to TEC data, the most requested high-level process ERP functional area is financials and accounting, with more than two-thirds (66%) of the selection projects for process ERP requiring this core back-office functionality. Purchasing management is needed by 53% of the projects. Inventory management, Advanced Planning and Scheduling (APS), and quality management each is selected more than 40% of the time.

What stands out in these higher tiers of requested functionality is that over the course of 2011 and 2012, business platform capabilities – for example, business intelligence, a workflow manager, and analytics – were selected as a required functionality more than process manufacturing management. This means that business users continue to look for not just core transactional ERP functionality in their software, but also expect more sophisticated technology from their ERP system provider.

Another interesting choice stands out in the chart: even during a process ERP selection project, 23% of the respondents are also looking for discrete manufacturing management capabilities to be delivered by their ERP system.

source: TEC 2013 ERP Buyer Guide for Process Manufacturing

improving efficiency for fresh food manufacturing PAGE 5

why have a software solution geared for the food industry?

Medium-sized manufacturers in general face a whole range of challenges with business software.

For such organisations, whether to MRP or not to MRP is not a relevant question anymore – an MRP system is

essential if you want to compete with other manufacturers and sustain your business. But where do you start when

looking to select a new solution? Let’s start with why have a software solution geared for the Fresh Food and Beverage

Industry. We outline below, some of the issues organisations in this industry sector face daily and how they can be

resolved with an integrated solution.

SCHEDULING

pressure point:

Scheduling is critical to any manufacturing operation. Real time information removes guesswork and allows you to run in a more productive and cost-effective manner. Many businesses use multiple spreadsheets to handle scheduling, which is extremely time consuming and labour intensive. As companies grow, the risk of error increases, in balancing production resources and customer demands. Mistakes can prove costly and manual processing provides greater margin for error. The schedule is the driving force behind manufacturing operations and its accuracy will have a dramatic effect on profitability.

solution:

Implement a solution which links all required information to scheduling manufacturing including work orders, machine capacity, staffing levels and inventory. By gaining access to a central source of data with real time information, the connection between scheduling and work orders is streamlined and runs more efficiently and effectively. Having the ability to view schedules in flexible ways allows for straightforward resource planning and highlights areas of concern. A central viewpoint allows analysis of bottleneck areas to ensure resource and staffing requirements are addressed throughout all manufacturing and operational areas.

CUSTOMER ORDER TURNAROUNDpressure point:

An inability to maintain high customer order fulfilment rates and efficient turnaround times loses business to the opposition. Without full visibility of production capacity and raw material stockholding, shortfall issues will occur. One solution can be increasing stock levels, however this increases overheads. Other solutions may achieve the same result without causing shortages.

solution:

A fully integrated inventory and production system will provide exception reporting and alerts so any shortfall issues can be addressed allowing them to be rectified in a timely manner. The ability to enter “what if” scenarios and sales forecasts will ensure production processes are optimised to manage the most critical customer orders and fulfil required turnaround times. In the pressure points below, we discuss other ways of improving inventory usage efficiency.

OVER STOCKING OF RAW MATERIALS AND FINISHED GOODSpressure point:

The use of spreadsheets and experience to maintain a manual purchasing and production system risks over stocking of both raw materials and finished goods. Business cash flow is negatively impacted and profit margins reduce due to product wastage and lost sales. This can be workable for a smaller organisation, but as you grow, the juggling effort and the risks are not necessary.

solution:

A fully integrated perpetual “live” inventory system gives the ability to plan efficiently for raw material purchases and production. Manufacturing finished goods on a “Just in Time” basis greatly improves order fulfilment, increases customer satisfaction, maximises shelf life of products and keeps your operation lean and efficient.

WASTAGEpressure point:

Wastage is something that all manufacturing operations encounter, however it is especially critical in the fresh food industry: overstocking of raw materials through inefficient manual purchasing, and finished products that have expired shelf life/use-by dates are key areas to address. Managing the purchasing and production process to gain maximum product shelf life for customers is essential to reducing wastage and maintaining a profitable and efficient business operation.

solution:

A fully integrated inventory system that includes Batch Tracking or Lot Tracking provides significant control over raw material use-by dates and achieves maximum customer shelf life on finished products. Combined with an efficient production system with inventory planning, wastage will greatly reduce and thereby improve gross margin and return to the company.

improving efficiency for fresh food manufacturing PAGE 6

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MANUFACTURING RESOURCE PLANNING pressure point:

Ensuring the correct raw materials are available for production at the exact time they are needed is critical to achieve the optimum profitable manufacturing operations. Developing a Material Requirements Plan that maintains minimum raw material stock levels while taking into account outstanding and anticipated orders combined with purchasing lead times is essential. Use-by expiry dates also need to be incorporated into the plan to ensure minimal wastage at all times.

solution:

The problems with too much and too little stock as well as wastage can be minimised with the right planning tools. Maintenance of a perpetual inventory system is fundamental to achieve an accurate and effective Material Requirements Plan. This live inventory system needs to maintain information including minimum stock levels, maximum stock levels, reorder quantities, reorder points and purchasing lead times. Using this information, the system can develop a plan for manufacturing activities, purchasing activities and delivery schedules accordingly. An accurate MRP will significantly reduce raw material stockholding costs, raw material wastages and result in much smoother production processing. No longer is it necessary to rely on experience or multiple spreadsheets which are separate from your sales and inventory system for this juggling of commitments; with an integrated, food focused solution, technology automates the detailed work, allowing you to manage the results.

QUALITY ASSURANCEpressure point:

Following Quality Assurance procedures may be a very manual process that causes delays in manufacturing and increases wastage of raw materials when things go wrong.

solution:

A fully integrated inventory and manufacturing system with quality control functionality provides a number of tools to manage the quality of the inventory, both inbound and outbound. Defining the quality control criteria for each product, whether it’s every receipt and shipment or only a sample, allows the system to manage the quality control function for you. Technical or quality sheets can be defined to further enhance the quality control process. These allow you to define the specific information that needs to be recorded during the quality check, for example to measure the fat content of milk or the pH level of an item. A configurable Quality Control system ensures that products are produced consistently at the highest quality and suppliers provide material of expected quality standards.

TRACKING AND TRACEABILITY OF RAW MATERIALS AND FINISHED GOODSpressure point:

Industry regulations in the food industry demand full traceability of all materials in order to recall products from the shelf if a quality issue is identified. Particularly important if the fresh food is perishable, raw material batch tracking and tracing is a core requirement for fresh food manufacturers. The use of manual spreadsheets to manage raw material and finished goods batch/lot tracking is extremely time consuming and has a high margin of error.

solution:

Using a robust and integrated inventory solution, stock can be traced in Lots/Batches from purchase order receipt through the entire manufacturing process to the shelf. Should a product need to be recalled, exact locations of stock can be identified quickly and easily thereby significantly reducing the impact on business operations. The inclusion of Bar Coding for Item/Lot Tracking also greatly reduces the handling of stock items and increases accuracy considerably.

MANAGEMENT OF SHELF LIFE / EXPIRY DATEpressure point:

All products have a need for a maximum shelf life when supplied to the customer, which requires tracking of raw materials from receipt to finished product. Manual processing to achieve this is difficult and adds significant cost which often cannot be recovered in sales prices.

solution:

A fully automated MRP and production system that incorporates Lot Tracking with Bar Coding, ensuring that the oldest inventory is used first, will maximise shelf life of finished goods. Combined with efficient ordering processes, this will also maximise freshness, greatly reduce a customer’s shelf re-stocking activity and facilitate preferred supplier status for your Company.

improving efficiency for fresh food manufacturing PAGE 7

PRODUCTION COSTINGpressure point:

Maintaining product costings through spreadsheets that have to be checked and updated manually is time consuming and often inaccurate by its nature. Significant changes in key raw materials can impact multiple Bills of Material and selling prices need to be adjusted accordingly. With no accurate visibility of gross margins on individual products, it is difficult to know what action needs to be taken to increase profitability. Often Sales Reps are remunerated with commissions on gross profit of products sold and incorrect costing leads to incorrect commission payments.

solution:

The ability to update all costs in real time through a fully integrated solution with all data in the same system gives a single view of the truth: an accurate overview of product costing with all changes automatically updated in the Bill of Materials and finished goods costs. Sales analysis and commission calculations will be more accurate, and timely decisions can be made on products that should be discontinued or revised to keep gross margins at a maximum. It is not hard to justify the need for accurate information on costs; if this is in real-time it gives added confidence.

ON-TIME REPORTING / OUT OF DATE REPORTINGpressure point:

Reports need to be timely in order to provide an accurate overview of business operations and assist with decision making. If reports take weeks to produce, there is little that can be done to rectify any problems that are identified. Meaningful reports need to cover all areas of the business from sales revenue to accurate product costing and gross profit information. If spreadsheets are your key reporting tool, there is a better way.

solution:

Live information with a fully integrated system will provide exception reporting and business dashboards with up to the minute information so problems can be identified and fixed immediately in real time. Business Intelligence tools enable access to critical information on screen, thereby reducing the need for reports and cutting down green waste. Users are able to add and remove dimensions to see detailed or high level views via drag and drop. It is self-service reporting without being tied down to multiple spreadsheets or needing computer programming expertise.

INTEGRATION WITH OTHER APPLICATIONS

Integration of sophisticated software solutions, such as ERP software for manufacturing and CRM software, has always been one of the major pressure points for manufacturing businesses that have to use two or more different systems in parallel. Integration and interfacing errors and data transfer issues are the most common and critical issues for help desks to resolve. This is no longer the case, as best of breed MRP solutions have taken into account that every organisation has ‘customers, suppliers and partners’ and therefore requires any type communication from sales force automation to customer service management, marketing to social media links to the LinkedIn, Twitter and so on.

With the globalisation in the buyers’ market and the speed to market that customers come to expect, the Fresh Food and Beverage Industry also needs to ensure the solution has B2B e-commerce capabilities to integrate the organisation’s website.

WEB-BASED AND CLOUD SOLUTIONSWhen evaluating a solution, how it is deployed – web based, on-premise or cloud – must be considered. ERP/MRP software for manufacturing that is web based is increasingly more common, in addition to the traditional client/server approach. The web solution is accessed via browser, so the user has great freedom of access. The software solution itself may be on-premise or in the cloud.

There are two key differentiators with cloud offerings – public cloud or private cloud. Whilst the net effect to the users is the same, there are considerations to make with regards to the right option for your business. Public Cloud offerings group customers into a common infrastructure, platform and application with strict guidelines around the maintenance and access to the solution and data (often described as Software as a Service – SaaS). Private Cloud solutions are deployed in a hosted environment, often with more tailored services and options regarding access and management.

For most end users, whether the solution is installed locally (on-premise), or cloud-based, it makes little difference. It is a customer decision taken for financial and technical reasons, with the cloud increasingly preferred. Generally, a web based MRP/ERP system will be more recently developed and modern, with a smaller footprint, and lower technical requirements for end user access devices; it organically permits mobile device usage, with access virtually anywhere – adequate bandwidth being essential. When a solution is installed on-premise, access can also be made remotely, but slightly more complicated to set up. On-premise also requires considerations of IT infrastructure, servers, backup and support and network connections.

improving efficiency for fresh food manufacturing PAGE 8

INFRASTRUCTUREAvailability of cloud-based MRP/ERP software is fully dependent on the existence of a 100% reliable Internet connection channel that has sufficient bandwidth to provide the necessary MRP/ERP data transfer speed. As no single provider can guarantee a 100% reliable Internet connection, a good practice for companies that want to fully exploit the benefits of cloud based MRP/ERP software is to obtain a redundant Internet connection (or multiple connections) that uses an alternative communication channel, to use it in parallel, and to keep it as a mandatory backup measure – and thereby ensure access to vital MRP/ERP information at all times and without any interruptions. The channel’s required bandwidth is also a critical characteristic in the performance of the cloud MRP/ERP system. The channel’s capacity should be high enough to accommodate the constantly increasing needs of the system. As the volume of data generated by an MRP/ERP system is ever increasing, a company that uses cloud MRP/ERP should be ready to constantly improve the characteristics of its Internet access channels. Although on-premise MRP/ERP solutions may also be highly reliant on the quality of the Internet connection, this dependency never reaches 100%.

VENDORS – BEST OF BREEDWhen selecting your solution, you also need to ‘interview’ the Vendors to make sure they are not only leaders in the market place, but also have knowledge of your industry. This will ensure some of the industry specific processes required for your industry may be pre-packaged. They should have a proven history of successfully developing, releasing and supporting their products in your local market, whilst maintaining a solid reputation and a focus on end user satisfaction. Look to see they tick the following boxes:

1. Global presence with local support2. Installed base in your local region3. No. of sites/similarity to your business4. A Software Assurance Maintenance Plan - regular updates and

new versions5. A product roadmap6. Using industry-leading technology7. $ spent on R&D8. A Solid Partner Ecosystem9. A global company, that can weather regional economies

For more helpful information for vendor selection, please see Enabling how to series of booklets on our website: www.enabling.net/resources/howtoguides.

SOFTWARE LICENSING MODELSAlong with software delivery and hosting propositions, many manufacturing ERP software vendors have started offering a variety of purchasing options. These include defined monthly payments (subscription), various software leasing options and others that can be adapted to both on-premise and/or hosted solutions. These models are often confused with SaaS (software as a service) and cloud computing options – and potential buyers should be aware of the differences. Software access pricing is indeed a matter of mutual agreement between the buyer and the vendor, regardless of the deployment delivery. Cloud ERP vendors are certainly expected to provide pay-as-you-go pricing models, but it’s important to realise that more flexible and financially attractive options are available with traditional on-premise or subscription solutions.

BUSINESS INTELLIGENCE (BI) AND ANALYTICS – IN MEMORY DATABI and other data analysis tools have become increasingly important in providing company-wide analytics. Consequently, more and more manufacturing ERP applications are offering business intelligence dashboards and key performance indicator tools as a standard embedded feature or as a separate option that has been tailored to the needs of customers in this industry. Gone are the days when you need to rely on IT to provide real time information and analysis – today’s leading ERP/MRP and analytics tools allow the user flexibility and direct access to the information they require, empowering decision making throughout the business.

MOBILITYThe rapid expansion and global acceptance of various mobile devices that complement or replace tradition access methods has altered the way ERP vendors are able to deliver access to their systems. Today, all of the leading vendors have mobile-friendly features and functions, from security and user-interface design to reporting and analysis. Different users like to enter and access data in different ways, and any new ERP solution should offer choice and flexibility – within the technology and security framework of your organisation.

improving efficiency for fresh food manufacturing PAGE 9

We have discussed some of the challenges faced when dealing with fresh food Production. Many issues can be resolved using spreadsheets and manual processes but we have seen that this is inefficient, also with a potential for error. Information has to be entered additional times, which takes time and needs to be checked, with different people using different spreadsheets and perhaps reaching different answers.

There is a better way. A fully integrated MRP solution geared to the requirements of the Fresh Food and Beverage industry, with tools to pinpoint problems and point to solutions will increase productivity and streamline operations – from the shop floor to the customer shelf.

Linking all key sectors of your business, a complete overview is available to highlight action areas and ensure all industry requirements are met. Comprehensive scheduling and MRP functionality will give you the confidence needed to make timely business and operational decisions. Combined with real

time reporting, the right manufacturing and MRP solution will maximise your business efficiency, assist your customer service and satisfaction with a flow on to sales and optimised profitability.

We also touch on the technology and Vendor selection, these items should be key in your decision making process. But the final software selection decision should always be based on the specific real-life business requirements and plans for future growth.

We have provided a raft of information in this whitepaper for you to review and consider. While some of this information seems simple in theory, in practice achieving a balance can prove difficult.

The risk-return trade-off, inherent in all aspects of life but especially pronounced in the area of productivity (people, process and technology), tells us that increasing returns in these areas goes hand in hand with increased risk. However, through strategic planning and management, businesses do not have to sacrifice profits for immediate results on improved productivity.

summary

For additional copies of this booklet or for more information regarding Financial Management, Enterprise Resource Planning (ERP), Customer Relationship Management (CRM) and Business Intelligence solutions, contact your local Enabling office.

Australia – 1800 ENABLING (1800 362 254)New Zealand – 0800 ENABLING (0800 362 254)

www.enabling.net

references

Enabling

Sage

Microsoft Dynamics

TEC (Technology Evaluation Center)

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