User Recommendations for the Food and Beverage Industry
Written By: Predrag Jakovljevic
Published On: November 9 2006
How can you get help as a prospective enterprise applications user? Well, other companies in your category which have been through an application software implementation have scars that can be valuable. Consultants that have real experience in your specific category should know the issues. Ask the vendors, "What makes your product good in our category?" Ask enough vendors, and you should gain valuable insight into what the vendor community thinks are the fatal flaws. If a vendor understands your category, and has a product that works in the category, it will know the issues—and really focused vendors will have a document that spells out these issues for you. If a vendor participates in key industry associations such as the American Meat Institute (AMI), the American Beverage Association (ABA) and others, it is a good indication that it better understands the evolving needs of your industries, and is capable of translating those needs into the current and future capabilities of its enterprise solutions.
Part Eight of the series Food and Beverage "Delights."
Enterprise systems have proven to bring many benefits to food and beverage environments, but gaining these benefits requires a solution that can deal with the unique needs of these businesses. Although only a handful of vendors claim they can support these needs, some first-class options do exist. Only by focusing on the requirements that will make or break the project will the food operation select the right solution and gain these benefits. When looking for a vendor, there are some particularly relevant aspects to consider:
- Can the vendor provide a list of relevant food category references?
- Does the vendor provide for the unique requirements of the food and beverage category? (If the model does not fully define the realities of the user-specific processes and practices processes, it cannot possibly manage these realities.)
- Was the solution built specifically for the food and beverage industry (good), or does it use a generic solution employing templates (OK but not necessarily excellent), or is it just a generic product (bad)?
- Is the solution a single, integrated application with one common model, or is it a bunch of interfaced modules?
After painstakingly identifying the fatal flaws, prospective users should request a long list of vendors to complete the fatal flaw check list or request for information (RFI) documents. Then, user enterprises should demand that shortlisted vendors demonstrate the fatal flaws, bearing in mind that the devil is in the details—in other words, that the "small" things do matter. After asking a very short list of finalist vendors to show their entire products, the decision should be much easier.
For more information, see Fatal Flaws in ERP Software Create Opportunity for Niche Software in CPG Companies and Find the Software's Fatal Flaws to Avoid Failure.
Make the vendors prove they understand the issues; walk through the details of your requirements with knowledgeable people from the vendor. If the vendor understands and can satisfy your needs, it will come out during the discussions. However, if its staffers do not fully understand the issues, they can never provide a solution that works. You need to actually see what you are buying. This is common sense, but going into the details of a full package is impossible: go into detail on the fatal flaws and actually see the product doing the things that are required. If a vendor tells you it is the next release, a red flag should go up. Is the vendor close enough to your category? Get comfortable with the vendor's claim—ask to talk to the product designers, and ask to see written materials that explain both the requirement and how it will be implemented in that next release.
Selecting software is not easy. What about getting outside help for your implementation? If you go that route, find a service organization that has experience in your category. Just because an organization has worked in bottling does not mean it will understand the sugar beets business. Software systems must be able to handle your business basics, and a focus on the details is thus essential. Look meticulously for the fatal flaws, and spend more time on the 5 percent of capabilities that make the difference, rather than on the other 95 percent—which are important, but not a determinant of success. Select a system that meets your detailed needs, or it can be fatal.
For prior notes on the food and beverage industry, see Food and Beverage "Delights", Food and Beverage Industry Trends and Issues, Margin Squeeze and Globalization in the Food and Beverage Industry, Food Safety, Government Regulations, and Brand Protection, Dealing with Industry Pressures,
Competing Globally—Predicting Demand and Delivering Optimally, and Food and Beverage Industry: Technology Choices
What Can the Little Guy Do?
Many food distribution companies are experiencing difficult times when confronted with low profit margins, global supply lines, increased government regulation, and fierce competition. The food and beverage industry is in a constant state of change as suppliers and major retailers compete for market share and innovation. Food distribution is a rapid-turnover, high-volume business that places a heavy burden on the operational and logistics resources of any company. Industry-specific regulations and business practices in forecasting, procurement, warehousing, dispatch, and customer service all require specialized treatment.
The pressure is indeed on every food and beverage company worldwide, but larger companies often enjoy some advantages. For example, they have more power with major retailers, and with food service distributors and operators. Their broader product lines, greater geographic coverage, and typically stronger brands result in customers finding it easier and more effective to deal with them than with their midsized counterparts. The small to medium food company faces the same pressures as the large companies, but has fewer resources to address them. However, the midsized manufacturer must proactively address these pressures to maintain or grow market share.
An important part of the strategy must be systems. Enterprise solutions that can keep pace with product movement—from growers to consumers—in days, if not hours, are of vital importance if information is to be meaningful, accurate, and useful. As companies consolidate and expand through mergers, acquisitions, and alliances, it becomes increasingly critical to have information technology (IT) systems that are easy to maintain and integrate across multiple facilities, locations, platforms, regions, and languages. Exceptionally powerful software is required to handle the extremely large transaction volumes and inventory velocity in day-to-day business. The increasing use of electronic data interchange (EDI), extensible markup language (XML), and the Internet to communicate with business partners and exchange information has created fresh opportunities and challenges for those that have the vision and drive to harness IT. These are important factors for any food distributor to consider when looking for a software solution that will provide a competitive advantage. The solution must provide the ability to meet expectations and service levels for individual customers while protecting and optimizing profits for food manufacturers and distributors.
Can the midsized food manufacturer keep up without an industry-leading enterprise resource planning (ERP) system? A manual system, or a system that is a mix of manual and spreadsheets, or an ERP system that has been installed for a number of years, does not give the midsized manufacturer a competitive platform to address these pressures. The lack of a competitive platform means expensive and time-consuming efforts to meet retailer demands, consumer demands, and the growing weight of regulations. The lack of a competitive platform limits a company's ability to benefit from or protect its markets against globalization.
Larger companies are leveraging large investments in ERP and supply chain management (SCM) systems to meet the needs of major retailers, increase customer service, cut costs, and grow market share. With the large retailers and food service companies demanding specific business process and technology investments, the larger company has the advantage of being able to write off these investments over a larger volume. Industry data tells us that these large companies are succeeding, and that small to medium food and beverage manufacturers are falling behind. Competing and defending your position means lots of things, but a key strategy is operational excellence, and that means leveraging ERP investments. Can the midsized food manufacturer find an ERP system that meets both its business requirements and its budget? The answer is clearly yes.
Suppliers that focus on the midsized food manufacturers provide the business processes required, but with a full understanding of the constraints of these companies. For more information, see Looking For Software—The Expectations of Small and Medium Enterprises, Cookie-cutter Solutions Won't Cut It with the Mid-Market, and Catering to Small and Medium-size Enterprises.
Many vendors, by and large, can cater well to certain food and beverage categories, but again, users should doggedly check the support for fatal flaws and vendors' global presence. Also, some solutions might be overkill for smaller enterprises, or conversely, with not enough support for very large and global corporations. In any case, in addition to the warehousing and distribution leaders (see Competing Globally—Predicting Demand and Delivering Optimally), the broader list of ERP vendors focusing on food includes Infor Process Group (including recently acquired SSA Global and Geac), SAP, Oracle, CDC Software (formerly Ross Systems), 3i-Infotech, SSI-World, Lawson M3 (formerly Intentia Movex), Technology Group International (TGI), EMR Innovations' ProcessPro, Sage Adonix and Sage PFW, Batchmaster, and Microsoft Dynamics AX, NAV, and GP (enhanced by several partner bolt-on solutions like NAVImeat, VerticalSoft, Vicinity Manufacturing, and eWinery).
This concludes the series Food and Beverage "Delights."
About the Authors
Predrag Jakovljevic is a principal analyst with Technology Evaluation Centers (TEC), with a focus on the enterprise applications market. He has nearly twenty years of manufacturing industry experience, including several years as a power user of IT/ERP and related applications, as well as being a consultant/implementer and market analyst. He holds a bachelor's degree in mechanical engineering from the University of Belgrade (Serbia [the former Yugoslavia]), and has also been certified in production and inventory management (CPIM) and integrated resources management (CIRM) by APICS.
Olin Thompson is Lawson's vice-president of industry strategy. He has over twenty-five years of experience as an executive in the software industry, and has been called the "father of process ERP." Thompson is a frequent author and award-winning speaker on such topics as gaining value from ERP, supply chain planning (SCP), e-commerce, and the impact of technology on industry. He can be reached at firstname.lastname@example.org.