What is an ERP system, and why do you need it in the food production industry?
The simplest way to define ERP is to think about all the core business processes needed to run a company: finance, HR, manufacturing, supply chain, services, procurement, etc. At its foundation, ERP software helps to efficiently manage all these processes in an integrated system. It is often referred to as the system of record of the organization. Forms of ERP have been utilized by companies for decades, with some of the earliest versions being seen in the 1960s1.
Today’s ERP systems are anything but basic and have transformed dramatically from the ERP of decades ago. They are now typically delivered via the cloud and use the latest technologies – such as artificial intelligence (AI) and machine learning – to provide intelligent automation, greater efficiency, and instant insight across the business. Modern ERP software also connects internal operations with business partners and networks around the world, giving companies the collaboration, agility, and speed required to be competitive today2.
Benefits of an ERP system
1. Reduce management cost
By digitizing the many business processes and centralizing data management, your company will increase efficiency by spending less time and resources on these tasks. Utilizing ERP software will highlight additional inefficiencies and waste, allowing the company to identify other cost savings.
2. Maximize company operations
ERP software dramatically increases efficiency. This frees up company staff and resources to be used in other areas, allowing the company to expand and improve.
3. Increase flexibility
The versatility of the ERP system means food and beverage companies can use a specialized ERP that works best for their individual needs, products, and goals. The ideal ERP is a system that can scale and evolve with a growing, thriving company.
How does ERP apply to the digitalization of food companies?
According to Gartner3, digitalization is defined as the use of digital technologies to change a business model and provide new revenue and value-producing opportunities; it is the process of moving to a digital business. The ERP system is the hub for data processing and it has never been more important than today.
Digitalization has emerged as a megatrend in our society, in that it has shown to be both a widespread and long-term change on a global scale. This megatrend entails a shift in the importance of ERP: what used to be a tool for operational business support has now become an important strategic building block.
As the center of data and process optimization, the ERP system is present in many digitalization projects. Whether you’re tracking your goods with RFID, utilizing eCommerce, or managing your production machinery, your ERP system can bring efficiency and cost savings. Your supply chain, inventory, administration, production, or sales benefit from a single system of record. By linking the ERP data with data from other systems, decisions could even be automated, as is the case with machine learning.
The cost savings an ERP system could potentially provide should not be overlooked. According to CSIMarket4, the gross profit margin in 2019 for the food-processing industry was 22.05%. This is noticeably lower than the total market average of 49.4%. Perhaps unsurprisingly, almost 70% of food-processing companies are still predominantly paper-based.
The argument could be made that utilizing all digitalization opportunities in the ERP system would boost profitability of the company closer to or perhaps surpassing the market average. Implementing an ERP as a food-processing company will whip your processes into shape, expand your business model, or simply make your production more agile – and profitable.
Functions of an ERP Required for a Food-Processing Company
When shopping for ERP software that’s best for you as a food-processing company, there is certainly functionality you should expect the system to do.
1. End-to-end management
2. Reporting and dashboards
3. Attractive and intuitive user interface
4. Security and backups
5. Robust inventory management system
6. Cost/yield management
7. Product aging and traceability
8. Batch and lot tracking
10. Scaling features
12. Seamless integration
What do food companies need to consider in their ERP software selection?
A food-specific ERP is designed to streamline processes unique to food and beverage manufacturers and bridge gaps in areas that traditional methods cannot. As industry expansion continues, small to mid-size food and beverage producers who once used spreadsheets and individual solutions are now requiring something more integrated and automated to better efficiency, decrease human errors and boost profits.
Food and beverage companies handle shelf-life, quality ingredients, consistency, product safety and labeling/packaging needs, and must handle recipes, product quality, safety measures and product recall response. Traditional methods can’t keep up with the need/growth and ERP software is the best way to stay organized and competitive.
Food and beverage manufacturers have responsibilities unique to perishable products, like shelf-life, safe ingredients, consistency, and product safety. Also, food and beverage production companies must adhere to labeling and packaging requirements, manage recipes, maintain product quality, implement safety precautions and be able to respond quickly to a product recall5.
That’s a lot of moving parts to juggle, and traditional methods simply cannot keep up with the demand and growth. ERP software designed for those purposes helps companies stay organized and competitive.
Essential Steps in ERP Implementation
1. Discovery & Planning
Before pulling the trigger on purchasing an ERP system, identifying needs, establishing a budget, and extensively researching possible solutions are essential steps to take.
It’s recommended that you put together a project team of individuals that will run point on seeing this process through. This team will take on a number of roles for the implementation, including laying out the plan and target dates, allocating the necessary resources, making decisions on which product to go with and how it’s designed, and overall managing the day-to-day tasks of the project.
One of the first goals your team should strive for is to put together a thorough understanding of current issues the company experiences, including process inefficiencies and requirements for the ERP system. One major decision is whether to use an ERP system that runs on-premises or in the cloud.
For an on-premises system, you buy and install hardware and software with your organization’s systems. The alternative is a cloud-based ERP, which is traditionally offered as a subscription service accessed via the internet. Cloud-based ERP systems are often faster to implement and doesn’t need as many in-house IT resources.
The design phase works from detailed requirements and an understanding of current workflows to develop a detailed design for the new ERP system. This includes designing new, more efficient workflows and other business processes that take advantage of the system. It’s important to involve users in the design phase. Users will have the most intimate understanding of current business processes. Involving them in the design also will aid in their ability to welcome the new system and take full advantage of all its benefits.
The project team should run analyses to identify unique aspects to the company’s workflows and processes. They may require a particular configuration of the ERP software or changes to workflow or processes to more closely align with the ERP system itself. The ERP solution provider will work with you to identify solutions for your unique issues/needs.
Once the requirements have been laid out for the design, developing the system can start. This involves configuring and, where necessary, customizing the software to support the redesigned processes. It may also include developing integration with any of the organization’s other existing business applications that won’t be replaced by the ERP system. If you’re using an on-premises ERP system, the organization will need to install the necessary hardware and software.
Alongside the development of the ERP software, the team should generate training materials to help users learn to the new system. Another item that needs to be tackled is the prep for data migration. Data migration is a significant undertaking. It often involves extracting, transforming, and loading data from multiple systems, each of which may use different formats and may hold duplicate or inconsistent information. The implementation team needs to decide which data to migrate in this phase. They should take steps to avoid blanket migration of all historical data because a lot of that data is likely unnecessary.
The testing phase often occurs while the previous stage, development, is still in process. This is because it’s vital that you test various modules and designs as they’re created to ensure stability, identify bugs, and make fixes, before you get too far along. This is also beneficial in that you can move on to another section to develop while one part of the ERP is in testing.
Testing can be done in stages, beginning with testing of the basic functions of the ERP system, followed by more intense testing of the full capabilities of the software. It would be wise to allow some users to test the system in their specific roles, to give a real-world feel for how the implementation is going.
Most ERP vendors will provide tools for user training, both while still in development and after the software has been fully implemented. On top of vendor support, the company should make good use of the training materials produced in the development stage. These materials will undoubtedly be customized to your organization and the employees’ specific day-to-day responsibilities, all of which is invaluable.
The moment you’ve been working so hard towards — the day the ERP system goes live. You will potentially face issues, considering the vast number of moving parts and possibly team members still struggling to learn ERP tools and features. The project team, along with your ERP consultants, should be readily available to answer questions, help users understand the system, and attempt to fix any issues. Your implementation partner should be able to help with troubleshooting if necessary. Be patient as it’ll take time for users to adapt to the system and to see the productivity gains you’re expecting.
While most of your data should be migrated prior to this stage, the remainder of your data, such as current transactions, should be migrated immediately before going live.
Some organizations aim to deploy all the modules of the ERP system concurrently, while others focus first on specific high-priority modules or processes and add others later in stages. To minimize risk, some organizations also continue to run older systems in parallel with the new ERP implementation for a time, although this can add to the overall project cost and reduce user productivity.
6. Support & Updates
The work doesn’t end once you’ve successfully implemented your ERP system. Ongoing support after deployment helps keep users content and confident, and ensures that the business realizes the desired benefits of the ERP. The focus of the project team should shift from deployment to user feedback and needs. It’s almost inevitable that some additional development and configuration will be needed as users begin using the system in a real-world setting. Additional needs may be identified which will require new features to be added to the system. As the food company hires new staff, they will need to be trained as well.
Regular software updates will require installation if you have an on-premises ERP system. If you’re using a cloud-based ERP system, you should expect your vendor to update the software automatically. Hardware will need to be updated over time as well.
The food processing industry is known to have tight profits, extremely rigorous compliance requirements, and seemingly infinite competition. If these factors aren’t being managed continually, business growth could stall or falter. The right ERP system will let you optimize the food business processes and overcome the challenges. Don’t delay in implementing ERP or re-evaluating your current ERP. CAI offers various ERP software solutions specifically designed for the food industry. No matter the type of food processing your company handles, CAI can provide a system that will significantly improve your business and streamline your processes. Our ERP solutions for food production companies boast the functionality you need, from reporting and inventory management to security and automation. Learn more about CAI ERP today by scheduling a call with a member of our team. Click here to get started!