The UK’s food and beverage sector has reacted well to the challenges of the last few years – not least by bouncing back from the ‘brutal’ losses of 2020, with 2021 exports up on 2020 levels and the forecast for 2022 positive. Investment in staff training, automation and technology, as well as investment in R&D, have created a sector that is the largest within UK manufacturing, larger than automotive and aerospace combined.
However, too many of the country’s SME food and beverage (F&B) businesses are still behind when it comes to end-to-end automation and technology adoption. Most have achieved pockets of innovation, both on the shop floor and within administrative functions such as finance and sales. As inflationary pressures and global supply chain disruptions take their toll, there is a continued disconnect between business areas, compromising agility and responsiveness.
ERP provides an end-to-end solution that can transform productivity, cost control, and competitive position – but how can SME manufacturers achieve ERP quickly, effectively, and at an affordable price? Don Valentine, Absoft’s Commercial Director and ADIMA ERP Lead explains why a pre-configured ERP solution tailored to meet the specific functionality requirements and cost-effectiveness needs of F&B SMEs is changing the game.
Soaring raw materials costs and global supply chain disruption are creating mounting pressures for a food and drink sector already reeling from Covid-19 lockdowns and an unexpected reduction of the labour force. Indeed, global food commodity prices increased 23% over the past year, fertiliser prices were up 164% and shipping costs rose 226%. Food companies are in widely-reported negotiations – even disputes – with retailers, who are under consumer pressure over the rising cost of living. What proportion of these rising costs can be passed on to the retailer / customer, therefore? How will disruptions in the supply chain affect the production process – and will that create issues from customers if products arrive after the proposed date? How will both delay and cost rises affect customer and consumer demand?
Traditional business decision making based on accepted trends in raw materials pricing and customer demand have been thrown into total disarray. Companies cannot rely on last year’s data to make this year’s decisions – that will be a fast track to profit erosion and business loss. Nonetheless, companies cannot make the right decisions at the right time without complete, end-to-end visibility across the entire business.
And far too many are operating blind, with a mix of different solutions, in different departments; one for finance, one for sales and marketing, for example, another for operations and supply chain. Only few companies have the time or resources to integrate production, replenishment, procurement and distribution processes by painstakingly feeding sales demand into the processes.
Fast ERP Deployment
This current set of operational and financial challenges is another reason to invest in a single, end-to-end, ERP solution that provides complete, accurate and real-time visibility across the organisation. To be fair, most F&B companies recognise the value of ERP systems, such as SAP S/4HANA, which provide a single source of business information, support process automation and transform efficiency.
SME F&B manufacturers are, however, understandably concerned about the cost and disruption associated with traditional ERP deployment. It is because traditional ERP solutions are designed to support all types of organisations, from banks to defence companies, logistics companies to public sector agencies, that they can end up being all things to all men, which makes identifying the functionality and workflows daunting in the very beginning.
Which is where the out-of-the-box, preconfigured solution designed specifically to meet the needs of the food and drink sector changes the game. With this approach the ERP solution is preconfigured up front, delivering the core features and functions required by manufacturers while eradicating the time consuming and expensive configuration process. As a result, implementation timeframes can be radically reduced – rather than a 12 month project, the full ERP solution can be in place within a 12-16 week period. In addition to releasing both cash and in-house resources, F&B manufacturers can use cloud-based systems to avoid the complexity and resource demands of on-premise systems.
Reshaping 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 business pain. If just-in-time stock management is the priority, purchase decisions can be automatically driven by real-time sales demand, reducing the risk of excessive, expensive inventory levels and raw material stockpiles. If the goal is to mitigate the risk of spiralling raw materials, combining sales demand with information about materials costs and delivery timescales will enable informed, timely purchasing decisions.
Plus, of course, with complete visibility of the entire process, vendor / supplier management will improve. Finance will not inadvertently pay for delayed deliveries, and any potential impact on manufacture caused by supply chain problems can be assessed and immediately shared with customers. Indeed the entire customer interaction is transformed. Sales teams can access real-time information on desktop, tablets, and mobile phones to access customer history, what is on order, when it will arrive, inventory levels at customer distribution centres, and the status of their invoices. Sales staff are empowered to make intelligent, achievable customer offers, without the risk of discounts that could compromise the bottom line – a position that delivers a tangible competitive advantage.
Linking the operational production systems with the ERP optimises the entire manufacturing process. Sales orders are automatically converted into production orders, which then drives just-in-time stock management on the shop floor. All of which is visible at a glance by staff – either on a mobile device or workstation. In order to boost morale throughout the organisation, this reduces the frustration of chasing instructions and allows time to be spent on expert activities, such as contingency planning on raw material procurement and recipe management across multiple factories and production sites.
Despite an overall industry investment of £4bn in 2021, an 8% increase on 2020, many F&B businesses post-pandemic are still relying on ageing legacy systems and spreadsheets to get tasks done, believing this inflexible, often out-of-date, disconnected data is sufficient to support corporate decision making.
Despite labour shortages and mass economic inflationary pressures, SME food and drink manufacturers are now under constant pressure to gain control – and that means better information to support vital decisions, more efficient processes and a way to optimise staff time and satisfaction. ERP is no longer out of reach for businesses of any size. Cloud-based, preconfigured ERP solutions provide rapid access to automation and business information manufacturers require with minimal upfront costs and an Opex investment model rather than a Capex model.