The UK food and drink sector has responded well to the challenges of recent years – not least by recovering from the ‘brutal’ losses of 2020, with Export 2021 higher than 2020 and forecast for 2022 positive. Investments in staff training, automation and technology, as well as investments in R&D, have created a sector that is the largest in UK manufacturing, bigger than car and space travel combined.
Yet too many SMBs in the food and beverage (F&B) industry are still lagging behind in end-to-end automation and technology adoption. Most have achieved innovations, both in the workplace and within administrative functions such as finance and sales. Yet there is an ongoing disconnect between business sectors that compromises flexibility and responsiveness as inflationary pressures and global supply chain disruption take their toll.
Investing in ERP is an obvious step, providing a single, end-to-end solution that can transform productivity, cost control and competitiveness – but how can SMB F&B manufacturers get ERP quickly, effectively and at an affordable price? Don Valentine, Commercial Director of Absoft and ERP lead of ADIMA explains why a pre-configured ERP solution tailored to the specific functionality requirements and cost-effectiveness needs of F&B SMEs is changing the game.
Business Critical Challenges
Rising commodity prices and global supply chain disruptions are putting enormous pressure on a food and beverage sector already reeling from Covid-19 lockdowns and an unexpected labor force depletion. Indeed, global food commodity prices were up 23% in the past year, fertilizer prices were up 164% and shipping costs were up 226%. Food companies conduct much-discussed negotiations – even disputes – with retailers, who are under consumer pressure due to the rising cost of living. So which part of these additional costs can be passed on to the retailer/customer? How will supply chain delays affect the production process – and will that lead to penalties from customers if products arrive after the promised date? How will delays and price increases affect customer and consumer demand?
Traditional business decision-making based on accepted trends in commodity pricing and customer demand has been thrown into utter disarray. Companies can’t rely on last year’s data to make this year’s decisions – that will be a fast track to profit erosion and business loss. But without complete, end-to-end visibility across the business, companies are unable to make the right decisions at the right time.
And far too many operate blindly, with a mixture of different solutions, in different departments; one for finance, one for eg sales and marketing, another for operations and supply chain. The only way to align business processes and decision-making is to accurately feed sales demand into manufacturing, sourcing, purchasing, and distribution processes—something few companies have the time or resources to do.
Fast Tracking ERP Implementation
This current set of financial and operational challenges is just one more reason to take the leap to a single, end-to-end, ERP solution that provides complete, accurate, and real-time visibility of the entire operation. To be fair, most F&B companies recognize the value of ERP systems, such as SAP S/4HANA, which provide a single source of business information, support process automation and transform efficiency.
However, SMB F&B manufacturers are understandably concerned about the costs and disruptions associated with traditional ERP implementation. Designed to support every type of organization, from banking to defense, logistics to public sector, traditional ERP solutions need to be so feature-rich and offer so many options that they can ultimately be everything to everyone – making the initial process of determining the functionality and the workflows are daunting to say the least.
That’s where the turnkey, pre-configured solution specifically designed to meet the needs of the food and beverage industry changes the game. With this approach, the ERP solution is pre-configured, delivering the core features and functions that manufacturers require, while eliminating the time-consuming and expensive configuration process. As a result, implementation times can be radically shortened – instead of a 12-month project, the entire ERP solution can be ready within a period of 12-16 weeks. The option of cloud-based deployment allows F&B manufacturers to move away from the complexity and resource demand associated with on-premise systems, freeing up both cash and internal resources.
Transforming Competitive Position
With a single ERP solution, a manufacturer can gain immediate control over the entire business process and focus on the core areas of the business pain. When just-in-time inventory management is the priority, purchasing decisions can be automatically driven by real-time sales demand, reducing the risk of excessive, expensive inventory levels and raw material inventories. If the goal is to reduce the risk of a commodity spiral, combining sales demand with information on material costs and lead times will enable informed, timely purchasing decisions.
And of course, with full visibility of the whole process, supplier/supplier management will improve. Finance will not inadvertently pay for delayed deliveries, and any potential impact on production caused by supply chain issues can be assessed and immediately shared with customers. Indeed, the entire customer interaction is transformed. By providing the sales team with real-time information on desktop, tablets or mobile phones, you get instant access to customer history, what’s on order, when it’s due, inventory levels at customer distribution centers, credit status and invoice position. Sales personnel are able to make intelligent, achievable offers for customers without the risk of discounts that could compromise profits – a position that provides a tangible competitive advantage.
By linking the operational production systems to the ERP, the entire production process is optimized. Sales orders are automatically converted into production orders, which then drive just-in-time inventory management on the shop floor. All this is visible to staff at a glance – on a mobile device or on a workstation. This reduces the frustration of chasing instructions and increases time spent on expert activities, from taking care of contingency sourcing of raw materials, recipe management across multiple factories/production sites, sampling elements and quality control, boosting morale throughout the company.
Despite an overall £4 billion industrial investment in 2021, up 8% from 2020After the pandemic, many F&B companies still rely on outdated legacy systems and spreadsheets to perform tasks, believing that this inflexible, often outdated, disconnected data is enough to support business decision-making.
But as workforce shortages and massive economic inflationary pressures add to the challenges facing SME food and beverage manufacturers, the pressure is now on to take control – and that means better information to support critical decisions, more efficient processes and a way to optimize staff time and satisfaction. ERP is no longer out of reach for companies of all sizes. With minimal upfront costs, an investment model of Opex rather than Capex, a cloud-based, pre-configured ERP solution provides rapid access to the automation and business intelligence manufacturers need.
Don is Commercial Director at Absoft, responsible for the Sales & Marketing function and Absoft ADIMA ERP for Manufacturing product. As an ex-SAP Supply Chain Consultant, Don is proud to have maintained a focus on delivery and a passion for ensuring that our services result in excellent customer outcomes, whether Absoft is implementing, optimizing or supporting SAP.