Tech Update: ERP now ready for prime time
Today there are many ERP software vendors who have developed packages or modules specifically for the food industry. In addition, vendors are building new layers to their ERP applications that allow companies to leverage their business processes across enterprises.
Despite the improvements in ERP functionality, the food industry continues to pose unique challenges to the software community. According to John Moore, vice president and general manager of enterprise advisory services at ARC Advisory Group, food companies can find suppliers who provide applications that tackle more generic business needs such as financials, human resources and, to some extent, supply chain. “Our research has found, however, that as one moves closer to the actual production processes, it becomes increasingly difficult to chose a vendor to meet their needs. This is a direct result of the complexity of food production processes wherein a dairy production process will be quite different from a meat production process, which will be different from a bakery,” Moore stated. “Unlike many other industries, this is a market where one-size does not fit all.”
Selection successThe characteristics of a food manufacturer’s operations drive the requirements for its ERP system. Before Y2K, many food companies installed ERP systems in an effort to comply with the century date issue. Initially, the implementations were focused on the financial and order management processes. Today, companies that have requirements ranging from basic packaging to disassembly and biological reactions have had success with ERP implementations based on matching the complexity of their manufacturing operations with the capability of the ERP software.
Pepperidge Farm, Inc., part of the Campbell Soup Co., which falls between basic and moderate on the Functionality Requirements Scale on page 71, has installed SAP R/3, a component of mySAP.com, to provide a common infrastructure that links the company with its independent distributors, customers and eight manufacturing plants. “SAP R/3 provides a complete order-to-cash solution for Pepperidge Farm,” says Mick Auslander, director of information technology. “It takes us all the way from putting in an order at the store and getting that order to our plant systems, to moving inventory to our distributors and billing and collecting the cash.”
Grupo Minsa, the world’s second-largest producer of corn flour falls in the moderate section on the Functionality Requirements Scale. The company selected Protean from Invensys as the backbone for its production system. The Protean system links the administrative process of six production plants and provides Grupo Minsa with a unified infrastructure for material management and a common set of production models across all of the company’s plants. Alvaro Caballero, IT manager at Grupo Minsa was impressed by the speed of implementation that included six plants in nine months. “Faster implementation was definitely an important factor in our selection,” Caballero said.
Stonewall Kitchen, a Maine-based specialty food producer of jams and jellies, which falls between basic and moderate on the Functionality Requirements Scale, recently installed Microsoft Navision Attain software to manage the full spectrum of its operations. Lori King, chief operating officer at Stonewall Kitchen, thinks back to the days before Microsoft Navision Attain was installed and realizes how far they have come.
“Before we had Navision, nothing was tied together,” says King. “We were running tiny pieces of different software to handle everything and it was proving to be impossible. We had no inventory control and no item tracking, so it was very difficult to identify the source of any problems. We couldn’t see any detail at item level, no reporting was available, and we couldn’t tell which of our products were more profitable than others.”
Shaw’s Frozen Seafood, a company that falls in between moderate and complex on the Functionality Requirements Scale, is using BatchMasterPFW from Best Software to track profitability of recipes, schedule batch runs to different machines, keep track of ingredient availability, calculate ingredient levels more accurately, and set up “dummy” product lines to test new products. Additionally, production data from these functions integrates into the accounting application, giving Shaw’s a real-time view of how production is affecting or will affect financials. As a result, Shaw’s has lowered its overhead, kept their business running smoothly and increased customer satisfaction.
Weyl Beef implemented an integrated ERP solution just before mad cow disease (MCD) put European beef processors into turmoil. Its operations are moderate to complex on the Functionality Requirements Scale. The company operates plants in the Netherlands and Germany. A critical business requirement was to have watertight traceability of their product. Regulations enforced as a result of MCD required every beef company to track and trace their product and report on this tracking or face shutdown. Each of the 1,000 cows that go through the facilities in a day is given an ear tag with a unique number. Throughout the slaughtering process the cow and its quarters are tracked through the system. Weyl was able to integrate its weighing scales, scanning devices and barcode labels with Oracle Process Manufacturing to track the inventory as it goes from slaughter, quartering, deboning and sale to the customer. “Without the guaranteed traceability provided by our integrated business solution, we would have been unable to meet the new industry regulations and requirements,” said Weyl CIO Max Balk.
Another meat processor, Lopez Foods, Inc., based in Oklahoma City, also faces moderate to complex functionality requirements. Lopez buys meat trimmings in various lean percentages and blends the meat to the desired lean point. For example, Lopez may purchase both 90% lean beef and 65% lean beef and mix it to the desired leanness. The permutation of possible formulas is immense, which is why the meat processor needed an ERP system flexible enough to handle formula manipulation.
Because Lopez serves customers like McDonald’s and WalMart, stock recovery and quality control are a high concern. According to Aaron Beasecker, Lopez director of IT, “Stock recovery is so important to our business that it is the least common denominator for most of our business critical issues. If we cannot handle stock recovery, then we cannot tell you what lots or sub-lots went into a set of finished goods, or what the actual cost by weight would be for a particular customer.” Advanced quality control and lot tracking is critical, continues Beasecker. “We cannot afford to use a raw material or ship finished product until it passes quality specifications.”
Lopez is using Agilisys ERP to handle its tough quality control and formula management issues. “We have definitely gained better visibility into raw material and finished goods inventory,” says Beasecker. “With catch-weight data being fed from the shop floor into our ERP solution at rates of over a case per second, we are really asking a lot from the system.”
The match gameOne common characteristic of the companies featured here is that they have had successful ERP implementations. The critical issue in selecting ERP software for food manufacturing has always been matching the capabilities of the software with the requirements of the manufacturer and the issues a company is trying to solve. Food manufacturers represent a very wide spectrum of manufacturing complexity. On one end of the scale are companies that package bulk products into consumer foodservice sizes. While they may have the same issues in lot coding, ingredient traceability, or weight control, they do not have the complexity in their manufacturing operations that we find on the other end of the scale (for example, protein processing plants or operations that involve biological reactions).
In today’s market, ERP packages have matured to the point that food companies can find vendors that will provide enough basic functionality to run their operations and provide adequate back office automation. That doesn’t mean that every ERP vendor has software capable of running your specific manufacturing operations.
The task of selecting ERP software can be daunting, but food companies looking to move toward managing their manufacturing operations with new or existing ERP software face a more difficult time than those looking to just improve their order processing/ financial operations. Most ERP vendors have reliable financial and order processing solutions. The market place differentiator among the vendors continues to be their ability to manage the spectrum of basic to complex functional requirements.
One way of looking at food ERP software is the way you look at a Swiss Army Knife. For relatively simple tasks, a small knife will work fine. To complete more complex tasks, your knife has to have more complex components and more blades. As your needs become increasingly complex, you may be better off going to your Craftsman tool box and getting a tool built exactly for the job rather than struggling with the Swiss Army Knife.