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ManagingSoftware: Identify requirements before purchasing or modifying ERP

April 11, 2003
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Knowing your requirements will bring greater financial returns.

Most software vendors and analysts consider the food industry to be part of the process industry that also includes chemicals, pharmaceuticals, and others that are not involved in manufacturing durable goods.

According to John Moore, vice president e-business & supply chain solutions of ARC Advisory Group, “There are a wide range of ERP suppliers currently providing solutions for the food industry, from the larger players such as Baan, JD Edwards, Oracle and SAP to smaller more focused or regional suppliers such as Intentia, Navision, QAD, Ross, and SCT. This has created a buyer’s market for users, but users should tread carefully. Not all suppliers are focused on the operational needs of the food industry.”

All of the vendors mentioned by Moore market Enterprise Resource Planning or ERP software. The ERP system manages “forecast-to-make,” “purchase-to-use,” and “order-to-cash” business transactions. It may be plant specific, but often it is an enterprise-wide software application, or collection of applications.

Some ERP vendors initially built their systems specifically for the process industries while others were built for discrete production operations—those that assemble uniform pieces and parts for durable goods like washing machines, cars and airplanes. In contrast to discrete manufacturing, many food companies use variable raw material ingredients that impact the quality of the final product. Additionally, food production lines have constraints based on cook times, tank capacities, and packaging line speeds. And finally, production line constraints vary depending on which formulation is being produced.

The ERP or application software you choose must be able to handle food issues specific to your business. For example, in a meat processing plant, this means tracking the disassembly process through an “inverted” bill of materials. It might include tracking the characteristics and sources of raw materials, capturing the weight or volume of production at any point, and/or maintaining lot tracking as ingredients flow into finished goods. These needs are not only food issues, but issues that may be unique to your specific food category. In the meat industry, each finished good package has a different “catch” weight and ERP software is required to capture the variable weight of each package from production, through costing and order management.

Some food plants, especially those that deal with taking raw materials from the earth and making value-added products, need to track changes in product characteristics as they move through the plant. Other food plants more closely resemble a discrete operation. At McCain Foods Appetizer Products Group, IT Director Bob Cramer observes, “A work order-based production system functions well where we assemble and package food products. If we had to take into account the processing of raw ingredients before we assembled the appetizers, our IT requirements would be much different.”

In the food industry, ERP requirements fall into a continuum that moves from the nearly discrete operation Cramer describes to extremely complex process functionality. At the complex end the ERP system may have to deal with one or all of the following problems:

  • Manage push supply chains where raw materials arrive at a receiving dock and must be processed quickly
  • Weigh product as it moves through the processing cycle to determine process losses
  • Determine optimum mix of co-products based on production capability, storage capacity, shelf life, demand, and profit
  • Optimize formulas by managing the blending of products that have variable quality
  • Optimize raw material purchases based on variability and seasonality
  • Recommend optimum mix of co- and by-products from a given base of raw materials
  • Manage the volume-based capacity (tanks, silos, pipeline) to maximize production.

Your production operations will have unique requirements that will fall along the discrete-process continuum. It is important to know your requirements before you purchase or modify your plant ERP system. Knowing your requirements will bring greater financial returns.

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