ERP SYSTEMS: From Factory to Fork

Regulatory demands. Consumer satisfaction. Efficient product distribution. Building and safe-guarding brands. Exercising total control over the entire supply chain. The food industry these days is not just about flavor.

Doing business in a globalized world often means that critical supply chain management has become as essential as fi ne-tuning in-house recipes, and traceability as crucial as tastes. While a global trading environment opens up new markets and business opportunities, the risks and threats of a hiccup anywhere on the supply chain have also become more real.

Longer, more complicated manufacturing lines, where raw materials and ingredients are sourced from all over and finished products sent across markets, are not the only challenges food manufacturers have to contend with. Consumer demands are likewise keeping companies on their toes. “Consumers these days want access to total product information, and place high demands on food safety and quality,” says Rob Wiersma, director of industry strategy at enterprise software and solutions company Lawson. Market trends like the growing popularity of organic foods create new complexities in areas like certification and standards.

While recognizing that information technology can address specific and localized issues, manufacturers, processors, distributors and retailers fi nd that they now have to deal with increasingly complex operations and massive amounts of data. Information that streams in from various channels has to be well integrated, easily accessible, accurate and reliable. The hallmarks of a good Enterprise Resource Planning or ERP system is one that fulfils these demands, in addition to being flexible and cost-effective, with return on investment a reality in the near term.

Keeping track
Traceability compliance is one of the reasons why food companies have adopted ERP software systems. The International Organization for Standardization defines traceability as the “ability to trace the history, application, or location of that which is under consideration.” This is vague at best. To which part of the entire value chain must the food in question be traced? If systems allow, bad quality meat can even be traced back to mould in the animal feed used. Because of the complexities of the food business, traceability systems are seldom all-inclusive.

Even within a single company, traceability often means different things to different people, notes Wiersma. CEOs who run the business look at any benefits in terms of dollars and cents. The operations manager’s key concerns are quality control and optimizing process flows. From a sales and marketing perspective, protecting the brand name, through product reputation and standards labels, is the crux of the matter.

With such differing views in a single company alone, it is easy to see how needs can differ greatly among companies within the same industry. Which is why custom made solutions are necessary for truly workable and effective ERP systems, says Wiersma, who helped build Lawson’s Trace Engine software for the food business. Conceived together with agri-giant Nutreco and Wageningan University in the Netherlands, Trace Engine’s applications are specifically engineered for “high-risk parts” of the food supply, which Wiersma identifies as meat and seafood, fruits and vegetables, and dairy. The software, completed in 2002-03, has been officially launched worldwide and used in eight countries around the world.

Reducing down-time
Times of recall can be detrimental to a company in more ways than one. The inability to pinpoint the problematic batch can result in lengthy and messy total product recalls. This can give rise to negative media coverage and bring untold damage to the brand.

By integrating all facets of the business, ERP solutions help companies protect their interests and respond proactively in such dire situations. The downside, however, is that ERP systems can give businesses a false sense of security. Wiersma, who has over 20 years of experience in applications software with a focus on the food and beverage sector, notes that having the right software in place but without proper policies leads to complacency.

“The biggest misunderstanding is that having an ERP system alone is enough,” he shares. “Some view ERP installations as a sort of insurance in the event of product recalls.” Using this line of reasoning, some companies are hesitant to install ERP systems as they view such "insurance" unnecessary. What is important, he stresses, is the health of the internal system—standard operating procedures or SOPs—that provide employees with clear guidelines on how to act in unique situations.

Workflow processes can make or break the ERP system. The real quality test lies in how quickly ERPs, together with the right SOPs, can facilitate response times on the ground. Well-planned ERP systems are not just about traceability or food safety alone, although these often make up the primary objectives in the food world. An effective system can eliminate the need for paper audits for example, by cutting down drastically the human hours and days needed for ample notice. Tangible cost savings are a definite benefit.

Traceability and food safety are hardly new buzzwords for the industry. Because food scares are so newsworthy, traceability systems, which can act as a yardstick for the safety-worthiness of a company, are investment worthy.

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Lawson's director of industry strategy, Rob Wiersma, on:

China
“The market is still fragmented. A lot of consolidation will take place over the next 10 years.

We are seeing national and international companies now competing alongside each other. Foreign companies have to bear in mind that they are in a price sensitive market. For local companies looking to export to markets like the EU and US, they need to show that they are different from their competitors, and have quality systems in place in order to prove themselves competitive Chinese suppliers.”

Food scares
“Pets and children—safety issues involving either of these have proven to be especially damaging.”

Technology acceptance
“The impetus for integrated business information systems is definitely there. Companies are concerned about how the right system can help make data more transparent, and how it can open up new markets for them.”

Brands
“The brand is a powerful thing. Some view track and trace systems like an insurance for their brand. But it’s more about how you can empower your brand and quality, and establish trust with your suppliers and customers.”