Food & Beverage Overview
Food and beverage manufacturers are held to a higher standard than manufacturers in many other industries. Government regulations define labeling and standards for purity and freshness. Consumers are quick to turn their backs on favorites when they hear about adulteration or product problems leading to illness and recalls. Ingredients spoil. Shelf lives are short. Local tastes vary. Private label foods are cheaper and are increasingly competitive in terms of flavor and quality. Only those with flexible, adaptable supply networks have survived; only those whose systems are designed to keep pace with these rapid changes have thrived.
Food & Beverage Key Processes
All manufacturers are being pressed to introduce new products faster than ever before, but nowhere else are the stakes as high and the pace as quick as in food and beverage manufacturing. Customers tastes change for no apparent reason; “fat-free” evolves to “low carb” and is replaced by “trans fat free” and then “organic” – all in the blink of an eye. Customers want convenience packaging – but at low cost. Warehouse clubs want larger packs, so in addition to new products, the packaging of every product is increasingly varied. Global products have given way to local and regional formulations. Government labeling requirements change with the geography – as do the laws regarding safety and purity. The global economic crisis caused consumers to switch to private label brands, and they are in no hurry to switch back to higher priced branded products now that they recognize the value in house brands. All this has put pressure on manufacturers to utilize product design talent wherever they find it – at suppliers, at customers or at outsourced design firms. The need for collaborative tools has skyrocketed – traditional methods of new product introduction are too slow, too costly and don’t provide the visibility needed in today’s fast paced environments. Food and beverage manufacturers are grappling with:
Food & Beverage Design Issues
- Rapid new product introductions and reformulation of old products are required to remain competitive
- Government mandates for food safety and purity have required stringent new manufacturing methods
- Varied geographic formulations are required to appeal to local and regional tastes
- Timing marketing campaigns and trade promotions to product introductions is crucial to ensure availability of new product inventory when demand peaks
- The consumer has a new-found interest in quality and freshness, but is unwilling to pay a premium for it
- Consumers no longer perceive much difference between branded and un-branded products, so providing something new or superior is key to market share
Food & Beverage Design Metrics
You can’t improve what you don’t measure, and analytics and process measurements are basic to modern manufacturing methodologies such as six sigma or lean. Many people say the design process can’t be measured – it’s too creative. But effective design processes show up in many common business metrics:
- Market share reflects the consumer’s acceptance of your product and the encroachment of competitors into your space. Making rapid product changes in response to market shifts is crucial to profitability.
- Reduced spoilage due to more effective phase in and phase –out processes for new products
- Forecast accuracy can mean the difference between stock outs or sales. When the consumer sees empty shelf space, you run the risk of losing that customer for good.
If you don’t know where you’re going, how do you know when you get there? Planning provides the roadmap to success. From high level sales and operations planning to ensure that the company’s strategic objectives can be met, right down to production schedules for each day at each work center or cell, planning is the heart of food and beverage manufacturing.
Food & Beverage Plan Issues
The one thing you can count on is that the real world rarely matches up to the plan. Consumer taste is notoriously fickle – steady demand can instantly slow to a trickle when a competitor introduces a new product or in the face of bad publicity. Surprises in the manufacturing process like spoiled ingredients or late harvests can shut down a line. It’s important that you start with the best possible plan, and that you have visibility to react quickly when things unexpectedly go wrong. Ingredients are late; packaging equipment breaks down, workers call in sick, labeling rules change – the list of potential pitfalls is nearly endless.
- Inaccurate forecasts may lead to excess inventory – or worse yet, unhappy customers who see empty shelves where your product should be
- Poor planning can result in excessive unnecessary costs due to unplanned overtime or special freight charges to bring ingredients in sooner or rush shipments to stores to prevent stock outs
- Not taking demand seasonality or sales promotions into account can leave you without inventory to meet orders
- Inaccurate inventory records can cause line stoppages due to packaging shortages or stock outs at key store accounts
Food & Beverage Plan Metrics
The results of poor planning can show up in virtually every performance measure:
- Excess inventory from finished goods stocked to meet demand that never materializes
- Large caches in queue at work centers can result in excessive spoilage
- Poor “delivered in full on time” (DIFOT) records can cost you market share , shelf space or even permanently close off a valuable channel for future sales
- High freight bills and expediting fees
- Frequent unplanned overtime, high cost variances
- Quick decisions on packing lines may be necessary to meet unplanned demand
It’s well understood that industry leading companies have the most effective supply chains. In these companies, ingredients are intelligently sourced and many suppliers are treated like partners – integral parts of the process. Suppliers are chosen based on a myriad of criteria, possibly including their proximity to the manufacturing facilities, the price of the ingredient, trade terms, organic ingredients or not organic, and of course, their delivery and quality reliability. Each supplier’s performance is continuously measured and often shared with the supplier.
Food & Beverage Source Issues
Effective sourcing is a complex balancing act that involves weighing the relative merits of a host of complex details that may not always be quantifiable up-front. Wind, rain and weather can affect the timing and quantity of ingredient deliveries. With limited time for analysis and an infinite number of variables, buyers use their “best guesses” to estimate the impact of a particular factor in a sourcing decision. Coupled with the mandate on limiting the number of suppliers that so many companies enforce, it’s no wonder many buyers skip the analysis and place orders with their tried and true suppliers.
- Trade terms, charge-backs and prices can have a major impact on product profitability
- Late deliveries, high spoilage or poor quality can affect your ability to adhere to your own quality standards or to meet government mandates
- The cost and difficulty of transporting delicate foodstuffs may force you to buy from local sources despite high prices or low quality
- Higher finished goods safety stocks or expedited freight charges may be needed to respond to fluctuating demand; conversely, high safety stocks can become a liability when consumer tastes shift unexpectedly or labeling regulations change
Food & Beverage Source Metrics
Not so long ago, the only metric applied to the purchasing department was purchase price variance (PPV). Today, manufacturers better understand the effect that sourcing decisions can have on every aspect of their business. For example:
- Supplier performance ratings can help determine if a supplier should be replaced or if contracts should be reallocated to multiple suppliers. Low prices may be more than offset by poor quality or yields
- Government mandates for safety and quality must be enforced throughout the supply chain
- Poor quality ingredients may require additional additives or processing time, resulting in high spoilage and rework charges as a percentage of sales
- Purchase price variance is part of the story – but quality, reliability and handling practices of suppliers impacts your bottom line
Numerous studies have shown that better performing companies have almost universally adopted a “modern” manufacturing methodology. The surprise is that it makes no difference whether it’s Lean, Six Sigma, TQM or something else; what matters is the commitment to a methodology for continuous improvement. But when faced with the demands of day-to-day production, where you may not know what you’ll be making until the trucks roll in from the suppliers, very often this commitment becomes secondary. Effective enterprise applications can help you to maintain this commitment by giving you the supply chain visibility and controls you need to manage your manufacturing processes.
Food & Beverage Make Issues
If everything went according to plan, manufacturing would be easy, even in food and beverages. Unfortunately, there are a nearly infinite number of things that can go wrong. Harvests are late. A new diet book is published. A store unexpectedly runs a promotion. The weather is unseasonably hot – or cold – leading to unusual consumption patterns at the consumer level. Besides these uncontrollable variables, almost every decision made in your organization affects your production. How you respond to unforeseen events can make or break the company’s profitability – and possibly your career.
- Inaccurate inventory records result in shortages – and poor DIFOT scores
- Regional demand shifts based on weather or local events. You may need to shift packaging or production to another facility or line to prevent stock-outs
- You want to utilize lean manufacturing techniques like kanban and back-flushing to streamline reporting from the plant
- Government labeling or safety requirements change unexpectedly
- You need specialized process capabilities or additional capacity that require you to out-source some or all of your manufacturing process
- Ramping up for new products may have steep learning curves affecting efficiency and utilization rates – and costs
- Unexpected equipment breakdowns require unplanned schedule changes or shifting production to another facility or line
Food & Beverage Make Metrics
Almost everything that happens in an organization affects what eventually happens in production. The trick is in understanding the cumulative effects of all these decisions and achieving your goals despite unplanned events.
- Ingredient supplies and expiration dates affect cost to manufacture and quality of the final product
- Inventory management decisions in finished goods affect the ability to maintain desired DIFOT levels; ingredients must be processed into products quickly to prevent spoilage
- Forecast errors result in excess finished goods or stock outs; consumer demand shifts as a result of events outside your control
- Equipment breakdowns or packaging shortages can result in late orders and escalating WIP levels, scrap and spoilage
Every time you interact with your customers, it’s an opportunity to cement your relationship – or not. And in food and beverage, you have two levels of customers to please – the stores, institutions or distributors who stock your products and the people who actually buy and consume them. Your business processes and the enterprise systems that support them can make or break any customer engagement by making it seem effortlessly easy by enabling quick response to changes in demand or consumer issues.
Food & Beverage Engage Issues
- Poor business processes or inadequate systems contribute to loss of market share by frustrating or annoying customers.
- Customers want your product on the shelf as planned – stock outs hurt their business as well as yours. Consumers may switch brand allegiance due to frustration with finding your product conveniently.
- Customers want packaging that fits their display shelving and that is in line with their retail model. Consumers want packaging that fits their lifestyle and their home storage equipment. Governments mandate labeling at the local or regional level. You have to make it easy for them to find, purchase, stock and confirm compliance of all your products.
- If things go wrong after purchase, customers expect a rapid and equitable response. If the unthinkable happens and your product is the subject of a recall, how effectively you manage that can affect your brand reputation for years to come.
- Customers want to know where to find your products. They want quick response from your call centers, or they may want to check nutritional information, product comparisons or promotional offers using the web.
Food & Beverage Engage Metrics
With most products, if you treat customers well, and provide good value for good money, you’ll be rewarded with repeat orders and word of mouth referrals. In food and beverage, you also have to hit the mark of shifting customer tastes and local consumption patterns. If you miss the mark on any of these issues, stand back and watch your market share melt away. Beyond measuring calls to the complaint line, how can you be sure your systems and processes are not sending your customers straight to your competitors?
- Monitoring POS information provided by your customers and distributors can show that customers are enjoying your products as is, or that they may need updating or re-formulation
- Low repeat order rates may show that your product is not meeting local or regional preferences. Measuring repeat order results may also help you understand what you’re doing right.
- Customers understand that sometimes things go wrong. If you are able to quickly and efficiently respond to quality issues or recalls, customers will continue to reward you with loyalty. Testing and measuring your preparedness for these events in advance of the need can help ensure that your reputation will remain intact if a real need arises.
- Sometimes a customer just needs the answer now – they want to check their order status or place an order by themselves. Sometimes they want to talk to a CSR in your call center. Measuring call volume and self-service visits can help you satisfy your customers varied needs by providing the right tool and the right service levels.
Even if you do everything right – you’ve got a great product, high quality, the price is on target – you may not achieve the market share you deserve if you consistently miss promised delivery dates or if you short ship items or ship the wrong items. Fast, efficient, consistent and accurate are the hallmarks of great companies’ delivery systems. It sounds so simple, yet it can be very hard achieve.
Food & Beverage Deliver Issues
When a seasonal or promotional crunch hits, your team wants to perform. They try their best to fill all orders quickly and perfectly, but system errors or cumbersome processes can get in their way. Drop shipments and direct store deliveries are challenges in themselves. Customers increasingly demand special packing or pallets, special labeling or even bar codes and RFID chips. Government regulations regarding freshness and storage must be met. DIFOT is not as simple as it sounds.
Food & Beverage Deliver Metrics
Even beyond the obvious – are complete orders going out on time without errors – there are clues that can help you streamline your business processes and improve profitability while delighting your customers with perfect orders. You need to measure your performance and then dig in to the underlying causes if you miss the mark.
- Perfect orders make customers happy. Late deliveries or short shipments point to problems in inventory or maybe poor forecasting techniques.
- Shipping the wrong items or the wrong pack may point to finished goods stored in the wrong locations or mismarked inventory. Bar-coding or RFID can help solve this problem and improve performance by identifying materials correctly at picking and at put away.
- When your inventory record shows an item is in stock but the bin is empty or the count is off, short shipments happen, followed by unhappy customers. Inaccuracies in finished goods inventory is a good predictor of future customer satisfaction issues.
- Freight charges can be better controlled when you have visibility into all of a customer’s orders so you can minimize special charges. Delivering on time helps to minimize rush freight charges. High rush charges may indicate problems in your inventory.
- Pick lists generated to maximize picking efficiency can make your team more productive without adding more steps to the delivery process – and increase your throughput without adding headcount.
When the inevitable happens and your product needs maintenance, it’s a perfect opportunity to make your customer glad they chose to buy from you. From the time the customer places the service call until the time the technician leaves their premises with the product back up and running, the clock is ticking. Most of us hate when things break down because of all the annoyances associated with service calls - even besides the fact that our equipment isn’t working. Give your CSRs easy information access to your customers installed records so they can speak intelligently as soon as they answer. Dispatch the nearest technician with the right parts and the right skill set the first time, every time. Provide accurate estimates of arrival times. Then leave your competition in the dust.
Food & Beverage Service Issues
It’s costly to provide excellent service to products and equipment at customer sites, but it’s REALLY costly to provide bad service. When the CSR has to annoy the customer by asking for information that should already be in your system, you’re slowing down your call turnover time. That costs money through increased headcount. When you send out a technician who doesn’t know how to fix the product the customer has, so you have to send another tech out for a repeat visit; it costs you time and money. If the tech brings the parts for an older or newer revision than the customer has, it costs you money. When the tech brings the wrong part, it costs you money. Even worse than the out-of-pocket costs is the gamble you take with losing that customer forever.
Food & Beverage Service Metrics
By treating your customers’ goodwill like the valuable resource it is, you can cement that relationship and save money in the process. Good service can win you that customer for life. But how do you know you’re needlessly spending money and squandering customer goodwill?
- Measuring the elapsed time from when the customer first logs the call to its final resolution can show you the effectiveness of your service organization
- Recall response planning and quick ship metrics can indicate whether you are meeting the customers concerns.
- Returns costs can show you not only how enjoyable your product is, but provide important clues about the efficacy of your storage and shipment methods if spoilage and scrap are high.
Modern manufacturing methods put as much stress on the financial systems as they do on the manufacturing side of traditional restrictive enterprise applications. Traditional cost accounting with its emphasis on work order variances and detailed material tracking and operation reporting doesn’t cut it when you’re back-flushing ingredients from open storage locations and planning production based on ingredient availability. Electronic payments have largely replaced traditional paper checks. Mergers, acquisitions and intra-company supply and demand mean finance needs flexibility like never before. Consolidations and eliminations, multi-currency, and automatic allocations are just a few of the items on your accounting team’s wish list.
Food & Beverage Finance Issues
Government compliance mandates have put strict new controls on the finance team, but the business requires streamlined processes to remain competitive. Finance teams struggle to find the right balance between controls and the business’s emerging needs. New ideas like vendor managed inventory render traditional payables processes obsolete when the supplier processes both the receipts and the invoices. The global economy means international business is the new normal while frequent mergers and acquisitions make chart of accounts and general ledger flexibility mandatory. Varying compliance regulations require localizations; multi-currency transactions affect profitability; cash management is crucial; and reporting has to be quick and easy.
Food & Beverage Finance Metrics
The finance team is used to metrics - much of accounting is designed to measure and report the business’s performance. But compliance regulations means new measures, new reports and new controls need to be put in place or the company and its officers can be at risk. Finance often struggles to put the right checks and balances in place to allow the smooth running of the business and still ensure traceability and confidence in the numbers.
- Measuring inventory and COGS can be tricky if inventory is consigned at the customer’s site, if a supplier drop ships goods or if part or all of production is outsourced.
- Managing and accounting for returns, scrap and spoilage affect the bottom line
- Intra-company shipments and orders require careful reporting to ensure profits and revenue are not over-stated
- Cash flow projections can show whether DSO is on target and that out-going payments are in line with actual inventory levels
When shopping for new enterprise applications, savvy buyers don’t just focus on long lists of detailed functionality. It’s more important now than ever that the infrastructure and architecture of the system is flexible and adaptable so that the business can react to changes quickly.
Food & Beverage Enable Issues
Companies today run a mix of applications from multiple vendors and their ERP system is usually the core or backbone of it all. The infrastructure and architecture of the ERP system are crucial. Master Data Management capabilities are key to ensuring consistency of data among disparate systems. Quick implementations are required because the lean and mean manufacturers of today don’t have the resources to do long involved implementation projects and lots of training. That means the systems have to be intuitive and easy to use. And since business processes are the real key differentiators among competitors in the age of rapid product introductions and short product life-cycles, the ability to hone these processes through cost-effective simple customization is essential.
Analytics and business intelligence are also important to enable all the measurements you need to run your business well.
Food & Beverage Solution
||Formula & Recipe Management Support for
Product Change Control (PCC)
Master Data Synchronization
Time-phased planning, costing and execution of capital project
Costing using Enterprise Edition
|Product Lifecycle Management (PLM)
||Formula & Process
By-Products Co Products
Process Cell Capacity Planning
Sales and Operations Planning
Rough-cut Capacity Planning
Product Line Planning
Distribution Network Design
Materials Requirement Planning
Master Production Scheduling
Capacity Requirements Planning
Supplier Collaboration Portal
Purchase Order management
|Supply Chain Portal
||Formula and Recipe-based production
By-products and Co-products
Mixed Mode Manufacturing Manufacturing Execution Workbench
Production Scheduling Workbench
Lot Serial Traceability
WIP Lot Trace
Shop Floor Control
Process visualization with full Kanban support
||Manufacturing Execution System
Automated Data Collection
||Customer Relationship Management (CRM)
Customer Self-Service (CSS)
Customer Schedules APM
Lot/serial allocation at order time
Buying groups Questionnaire for configured items
Features and options
||Direct shipping to retail stores
PO to third party to drop ship to customer or distributor
Standard shipping from the warehouse
Inventory Control (min/max)
QAD Consignment Inventory
QAD Supply Chain Portal (SCP)
Returns process including RMA, warehouse, and accounting orders
||Direct Store Delivery (DSD)
||Service and Support Management (SSM)
Vertex Sales and Use Tax Interface
||Support for Sox, GAAP, IFRS, CFR Part , , ISO 9000, RoHS
QAD Business Intelligence (BI)
QAD Quality Management EDI eCommerce
Enterprise Asset Management (EAM)
QAD Trade Management System (TMS)
Customers and Supplier Schedules