The basic features and functions common to enterprise resource planning (ERP) and supply chain management (SCM) software will only be briefly discussed herein. It is assumed that the reader already has a good understanding of these capabilities relative to process manufacturing. However, if this is not the case and you want more information in this regard, please see my article entitled, Process Manufacturing Software: A Primer.
This article will concentrate on those features and functions that present considerable challenges to traditional software vendors trying to gain a foothold in the food and beverage industries.
Specifically, this article provides an overview of the requirements for software offerings catering to food and beverage by discussing the following aspects:
* ERP Functions and Features
* SCM Functions and Features
* Additional Considerations
ERP Functions and Features
The software should offer the standard functionality expected from ERP software to support manufacturing and back office activities. The modules to support these activities include financial management, specifically general ledger (GL), accounts payable (AP), accounts receivable (AR), and fixed assets; financial control, specifically budgeting, cash flow, and standard and actual cost accounting; human resource (HR), specifically payroll and time and attendance; production and manufacturing; order taking; and customer service.
However, there may be additional and integrated modules not normally found in ERP packages. These modules may be worth investigating to determine if a vendor can supply this functionality later, when and if needed. This functionality can encompass warehouse management systems (WMS), maintenance management and control (computer maintenance management system [CMMS], enterprise asset management [EAM]), performance management and reporting (enterprise performance management [EPM]), logistic management (third-party logistics [3PL]), financial reporting and consolidations, and material safety data sheet (MSDS) management. Having the flexibility to incorporate this added functionality from a single vendor can eliminate many of the interface issues when similar modules are purchased from third party vendors. Let's look at the maintenance function to illustrate this point.
When you purchase a third-party maintenance management system, you would most likely get only an interface with your inventory and purchasing systems so that you could procure needed but out-of-stock repair parts. With an effective and more encompassing software offering, additional interfaces to payroll (such as using hourly rates to calculate labor costs of repairs); human resource (such as matching an employee's skills with equipment being repaired); warehouse management (such as homogeneously slotting repair parts); and supply chain planning (SCP) (such as providing visibility to planned equipment downtime) now become available. Furthermore, this type of integration can facilitate the cost justification of acquiring and utilizing these optional modules.
As one would expect from software tailored generally to process manufacturing but specifically to food and beverage, an ERP package should ably support the subtleties needed by food and beverage producers. Formulas should be scalable so that production batches can be sized based on the minimum quantity of on-hand ingredients. For example, if you are making a car and you only have two of the required four tires, you cannot make half of a car. Conversely, in the beverage industry, what if you want to make 1,000 gallons of soda but you only have 500 gallons of the required 1,000 gallons of carbonated water? You have the option of making half of the 1,000 gallons of soda. You should expect the software not only provide this type of re-formulization but automatically suggest such alternatives to keep your customers, at least, partially satisfied.
By maintaining the formulas and packaging recipes separately, the software should be able to accommodate "brite" stock and make-to-order (MTO) production runs, typical requirements in the food and beverage industries.
The term, "brite" stock, is common for private label food processors. For example, large grocery chains sell products, such as soups, soda, and meats, under their own brand names, hence private labels. Don't think, however, that these chains have their own manufacturing plants. Chains contract for these products to be produced. In the case of soups, food processors create and warehouse non-descript, non-labeled aluminum cans of soup, hence the term, "brite" stock. Once a confirmed order is received, the private labels are then applied in a separate packaging run. A similar analogy can be made for a MTO scenario. Namely, you wait until the order is confirmed before you complete the manufacturing process.
As you would expect from packages serving the food industry, the software should offer "catch weight" functionality. By definition, catch weight is the recording of the actual weight of a product. For example, whereas a 50-pound case of meat lists for $100, in actuality the case is sold at $2 a pound based on the actual weight of the meat less the packaging material. Accordingly, capturing of this actual weight, which can be used for pricing, is known as the catch weight of the product. The software should take the process one step further by using catch weight to calculate the actual cost of manufacturing the product. Use of catch weight in costing is important because it provides a more accurate picture of the true production costs based on actual yields. The lack of incorporating catch weight in the costing calculation is tantamount to buying shoes without soles. They may look good but their lack of functionally will hurt your performance and ability to walk.
This article will concentrate on those features and functions that present considerable challenges to traditional software vendors trying to gain a foothold in the food and beverage industries.
Specifically, this article provides an overview of the requirements for software offerings catering to food and beverage by discussing the following aspects:
* ERP Functions and Features
* SCM Functions and Features
* Additional Considerations
ERP Functions and Features
The software should offer the standard functionality expected from ERP software to support manufacturing and back office activities. The modules to support these activities include financial management, specifically general ledger (GL), accounts payable (AP), accounts receivable (AR), and fixed assets; financial control, specifically budgeting, cash flow, and standard and actual cost accounting; human resource (HR), specifically payroll and time and attendance; production and manufacturing; order taking; and customer service.
However, there may be additional and integrated modules not normally found in ERP packages. These modules may be worth investigating to determine if a vendor can supply this functionality later, when and if needed. This functionality can encompass warehouse management systems (WMS), maintenance management and control (computer maintenance management system [CMMS], enterprise asset management [EAM]), performance management and reporting (enterprise performance management [EPM]), logistic management (third-party logistics [3PL]), financial reporting and consolidations, and material safety data sheet (MSDS) management. Having the flexibility to incorporate this added functionality from a single vendor can eliminate many of the interface issues when similar modules are purchased from third party vendors. Let's look at the maintenance function to illustrate this point.
When you purchase a third-party maintenance management system, you would most likely get only an interface with your inventory and purchasing systems so that you could procure needed but out-of-stock repair parts. With an effective and more encompassing software offering, additional interfaces to payroll (such as using hourly rates to calculate labor costs of repairs); human resource (such as matching an employee's skills with equipment being repaired); warehouse management (such as homogeneously slotting repair parts); and supply chain planning (SCP) (such as providing visibility to planned equipment downtime) now become available. Furthermore, this type of integration can facilitate the cost justification of acquiring and utilizing these optional modules.
As one would expect from software tailored generally to process manufacturing but specifically to food and beverage, an ERP package should ably support the subtleties needed by food and beverage producers. Formulas should be scalable so that production batches can be sized based on the minimum quantity of on-hand ingredients. For example, if you are making a car and you only have two of the required four tires, you cannot make half of a car. Conversely, in the beverage industry, what if you want to make 1,000 gallons of soda but you only have 500 gallons of the required 1,000 gallons of carbonated water? You have the option of making half of the 1,000 gallons of soda. You should expect the software not only provide this type of re-formulization but automatically suggest such alternatives to keep your customers, at least, partially satisfied.
By maintaining the formulas and packaging recipes separately, the software should be able to accommodate "brite" stock and make-to-order (MTO) production runs, typical requirements in the food and beverage industries.
The term, "brite" stock, is common for private label food processors. For example, large grocery chains sell products, such as soups, soda, and meats, under their own brand names, hence private labels. Don't think, however, that these chains have their own manufacturing plants. Chains contract for these products to be produced. In the case of soups, food processors create and warehouse non-descript, non-labeled aluminum cans of soup, hence the term, "brite" stock. Once a confirmed order is received, the private labels are then applied in a separate packaging run. A similar analogy can be made for a MTO scenario. Namely, you wait until the order is confirmed before you complete the manufacturing process.
As you would expect from packages serving the food industry, the software should offer "catch weight" functionality. By definition, catch weight is the recording of the actual weight of a product. For example, whereas a 50-pound case of meat lists for $100, in actuality the case is sold at $2 a pound based on the actual weight of the meat less the packaging material. Accordingly, capturing of this actual weight, which can be used for pricing, is known as the catch weight of the product. The software should take the process one step further by using catch weight to calculate the actual cost of manufacturing the product. Use of catch weight in costing is important because it provides a more accurate picture of the true production costs based on actual yields. The lack of incorporating catch weight in the costing calculation is tantamount to buying shoes without soles. They may look good but their lack of functionally will hurt your performance and ability to walk.
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