Comprehensive guide to key ERP functionalities in food and beverage

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Categories: ERP, Food and Beverage
August 14, 2018
Workers cutting beef.

Food production is subject to multiple regulatory and inventory management hurdles best addressed by enterprise resource planning software that ensures compliance and efficiency.

The food and beverage industry relies on accuracy and safety to ensure product consistency and consumer well-being.

The right tools are needed to ensure that inventory management, recipe control, regulatory compliance, and material requirements planning function properly. That’s why more companies rely on enterprise resource planning (ERP) solutions to integrate and automate key enterprise functions.

In this comprehensive guide to key ERP functionalities in foods and beverages, we take a closer look at why certain components are must-haves for companies looking to improve operations and efficiency.

Inventory Management

Shelf life is critical to ensuring food products are fresh and consumable. Raw ingredients have expiration dates that need to be tracked carefully. Ingredients need to be ordered, stored, and accessed in the most efficient ways possible to lower inventory costs, wastage, and inventory write-offs.

Inventory management capabilities allow companies to:

  • Decrease waste
  • Reduce complexity in the warehouse
  • Boost production capacity
  • Improve business performance outcomes

Inventory systems too often rely on spreadsheets and estimates to manage inventory issues. Relying on guesses and estimated levels results in massive waste issues and missed opportunities.

With a robust inventory management system, you can collect and use data to manage core functions. The inventory management component of your ERP system should provide:

  • Inventory turns management
  • Expiration monitoring
  • Perishable shelf life optimization
  • Warehouse location management
  • Sales forecasting
  • Overstock reduction
  • Spoilage cost reduction
  • Lowered cross-contamination risk

With a powerful inventory management solution in place, food and beverage companies can use a single source of truth for the data generated by warehouse operations and inventory control. A unified data source allows for companies to:

  • Ensure adequate stock levels
  • Improve sales forecasting and predictions
  • Track lots
  • Manage shelf life
  • Manage sales
  • Respond to supplier shortages
  • Coordinate currency variances

Inventory management tools have been enhanced in recent years to provide for additional functionality. Barcodes, point-of-sale scanning, and radio frequency ID (RFID) systems have allowed for better tracking by manufacturers and merchants alike.

Today, those tools are enhanced by ERP software that can be customized to reflect each company’s needs and accurately reflect production and ordering. Integrating data across these systems allows for a better understanding of supply chain partners and any roadblocks that may arise. Better data leads to better communication and integration with partners, and more accurate inventory levels.

Two woman working in a factory with white coats and blue protective gloves.

Too many companies still rely on pen and paper to track recipes, compliance standards, and inventory when digital solutions provide speed, functionality and accuracy.

Recipe Control

Food and beverage manufactures need tight controls over the formulas and recipes used in production. Recipe management ensures that products are consistently made and have the same quality levels in each batch.

Recipe management also ensures traceability during and after production, allowing the company to manage a recall event. Accurate recipe management tools ensure the company can trace back all affected product to its source and quickly report on the scope of an issue to stakeholders, customers, regulators, and the public.

Many manufacturers are managing different formulations of the same basic product, with slight recipe variations for similar end products. Having a system that ensures the accuracy of these products and allows for the easy reconfiguration of machines and production schedules allows companies to expand product offerings and take on new products and customers.

An ERP with strong recipe management capability also allows for ease of scalability for recipes as needed. Here are a few of the other key features to expect from a robust recipe management ERP component:

  • Costing of products, co-products and byproducts
  • Tracking of ingredients
  • Coordination with warehouse and inventory management
  • Duplicating and updating of formulas and recipes
  • Changing finished goods using available ingredients
  • Lot tracking
  • Allergen management and alerts
  • Shelf life management
  • Hazardous material tracking
  • Work order integration of formulas
  • Recipe review
  • Complex calculations to integrate formulas for recipes
  • Ingredient proportioning
  • Ingredient traceability.
  • Batch processing for recipe flexibility
  • Yield tracking comparison
  • Track and trace functionality from supplier to customer
  • Waste, shrinkage and rework monitoring and controls

Manufacturers often want to experiment with recipes to develop new products or to respond to customer requests. With ERP recipe management tools, companies can make small changes to create new products, supporting by version tracking tools that provide a historical view of modifications.

When used in tandem with costing functionality, recipe management tools can determine accurate and complete costs to determine price points.

Regulatory Compliance

Regulatory issues are at the forefront for food and beverage companies, driven in the United States by the recently adopted Food and Safety Modernization Act (FSMA). These guidelines require stringent controls and monitoring in order to ensure that food production is safe throughout the supply chain … from suppliers through warehousing and production and to end customers.

The FSMA requires companies to identify and plan against preventable controls for foods. The U.S. Food and Drug Administration (FDA) requires companies to submit a food safety plan that demonstrates the risks and planned controls, as well as details about how the company will monitor and track preventative measures.

Additional FSMA requirements mandate that suppliers – including foreign suppliers – comply with FSMA guidelines.

The FSMA is not the only regulatory guideline food makers face. They must also register facilities with the FDA, Those making processed foods or dietary supplements should follow current good manufacturing practices, which govern the facilities, methods, equipment and controls. Labeling and packaging specifics also need to be followed.

For food exporters, companies must also follow applicable U.S. laws and those of any countries into which they are selling products.

The Hazard Analysis & Critical Control Points (HACCP) protocols are safety guidelines meant to analyze and control biological, chemical and physical hazards.

Finally, state and local guidelines may govern certain regulatory requirements for various products or industries.

With so many specific, related, and overlapping guidelines, food manufacturers face a daunting challenge to track compliance and report as mandated by various programs and agencies.

Managing compliance becomes essential. With an ERP solution, companies can use an array of tools to address key compliance issues, including:

  • Processes and procedures. Your ERP can document and record the processes and procedures used to ensure compliance. When records are kept on paper, the ability to easily document and trace compliance and any issues that arise is more difficult. Auditors often require records to be retained for years, creating a logistical and space issue. Maintaining those records within your ERP allows for faster retrieval for reporting, audits, and recall management.
  • Sequencing. To avoid introducing allergens, batch sequencing is an important consideration. Companies need to establish what the sequences are, document them, and monitor to ensure compliance. When done properly, sequencing not only ensures regulatory compliance, but also improves the efficiency of clean-out procedures, equipment and personnel scheduling, and production runs. An ERP can project the amount of time each sequence will take, schedule resources, and schedule maintenance. Collectively, these processes can reduce run times and allow for more production capacity.
  • Training. Compliance often includes ensuring that employees have the right expertise and tools to work properly and maintain compliance. When your HR and training functions are integrated within your ERP, you can track and manage the training needs and demonstrate that training has been completed.

In the case of a recall event, the food ERP can help improve response times. By easily tracing the recipes and batches that used ingredients, the sources of those ingredients, and the customers who received those end products, companies can demonstrate prompt response. These tools not only reduce the time and cost of a recall event, but also help to preserve public health and company reputation.

Material Requirements Planning

Material requirement planning (MRP) helps you optimize the procurement of raw materials and inventory levels. When used fully MRP tools can reduce your carrying costs and waste.

For planners, MRP provides a clear picture of supply and demand and allows for better production planning.

With an ERP tool for MRP, companies can create purchase orders based on projected demand, open production batches, and monitor sales orders and forecasts.

With MRP capabilities, a company can enhance its production scheduling, procurement, and warehousing functions. Here are several ways to leverage the ERP tool:

  • Use accurate data regarding inventory levels to ensure better procurement practices and order management
  • Monitor raw material waste in the procurement, production, and sales channels to reduce this costly component of food and beverage manufacturing
  • Plan demand better using modeling and histories to account for seasonal, event and trend-based demand fluctuations
  • Track and audit vendors to ensure consistent quality, flavor, texture, smell, and taste. Assess response times and historical transactions to maximize the relationship
  • Understand capacity and internal pressures on scheduling people and machines, demand forecasts, and supply levels

Putting It All Together

Food and beverage companies use ERP solutions to improve operations, reduce costs, and deliver better products. Choosing the right ERP package requires a partner with a deep understanding of needs, capabilities, and pain points.

At NexTec, our skilled consultants work closely with each of our customers. We learn about your food or beverage manufacturer, your operations, and your suppliers and customers.

With a deep knowledge of the vendors, capabilities, and features, our consultants can help companies select and implement the right ERP for your organization. Contact us to see how NexTec can boost production and profits for your company.