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Even before the pandemic disrupted the supply chain and increased the cost of both ingredients and labor, food and beverage (F&B) manufacturers faced operational hurdles. Consumer demands are changing quickly, and new sales and distribution channels continue to emerge. At the same time, patchworked data management prevents visibility into the supply chain, causing inefficiency, reactive decision-making, and lost sales.
In today’s competitive environment, successful companies drive supply chain efficiency and business insight with well-tuned enterprise resource management (ERP) systems. Indeed, the right ERP solution can be the difference between fact-based decision-making and constant firefighting.
Yet even the most advanced ERP system won’t solve operational challenges if the foundational work isn’t done in advance. Before you think about an ERP solution, assess your customer needs, businesses processes, interdependencies, and goals across internal functions and with third-party vendors. If you get it right, your ERP can provide greater business intelligence, ensure confidence in operations, and make you more efficient. You’ll get better information, enabling better decisions. If you get it wrong, you’ll invest a lot of time and money tracking poor data, questioning its accuracy, and making poor decisions, which will put the company’s future at risk.
Based on Integrated Project Management Company’s (IPM’s) experience with ERP assessments and implementations with F&B and other manufacturers, we outline the symptoms that indicate a system isn’t working as it should and what it will look like when the processes and ERP foundations are in place.
We often see companies that put in a new ERP only to find some of their functional teams work around the system. It’s not uncommon for people to continue to do things the way they’ve always done them, even if the new system is meant to make their jobs easier. It’s a sign, however, that you didn’t understand core processes or resolve bad practices before you implemented the new system.
Too many executives think they can solve poor processes or inefficient practices by buying a bigger, better, more-modern system. And the software vendors aren’t always eager to dissuade them. But the fact is, new systems can’t solve bad practices. They can actually make them worse.
A new system can bring process efficiencies and tie your other systems together if you take the time to assess and improve processes before you set the requirements. Consider the building-block workflows such as procure to pay, order to cash, and forecast to fulfillment. Identifying the handoffs and interdependencies that connect the process, data, and system interactions across all the functions will allow more accurate sales and operations planning and even integrated business planning. Doing so will not only drive efficiency, but it will also provide better business intelligence, enabling better decision-making.
IPM recently worked with a manufacturer that had purchased a new ERP package with modules covering all its core functions. Despite the ERP’s advanced capabilities, the company didn’t improve efficiency. One problem was that the company didn’t understand how to synchronize data between functions or integrate different processes. For example, they couldn’t accurately tie refunds to returns. Their customer service team was issuing refunds without truly knowing if the warehouse received the returns. They were working long hours and weekends each month just to reconcile the discrepancies. The problem played havoc with their available inventory levels and consequently impacted sales. The company didn’t first capture how their processes were tied together, so the system requirements and configuration were incomplete. Even the most state-of-the-art ERP system can’t solve that.
When you get it right at the outset, you can automate processes and data validation so your valuable staff can spend their time on more important work and less time firefighting.
One of the symptoms that your ERP isn’t living up to its potential is the lack of operational control and visibility into key performance measures. Key people are overloaded, critical tasks are delayed or completed incorrectly, and there is uncertainty about roles and responsibilities. The organization doesn’t trust the system or the data, so multiple people work to double-check everything.
A good indicator is how long it takes to close the books at the end of a quarter. If you have teams working late nights and weekends, or over the course of several weeks, the data is inaccurate, incomplete, or unreliable. We’ve heard horror stories where the company took more than 90 days to reconcile its financials after implementing a new ERP system. Another indicator is how often you take inventory. Companies that take monthly inventory likely don’t trust the data.
Getting your ERP implementation right means systems and processes are in place, and people know their roles and responsibilities. Communication and data flow through and among the functional teams, breaking down silos. Functions trust each other’s input, so there is little duplication of efforts or double-checking. And, again, resources can devote their time to more valuable efforts. Importantly, a well-defined ERP provides visibility into key performance measures and better operational control.
The visibility and control derived from taking advantage of your ERP in turn enable better business intelligence and insightful decision-making.
If you haven’t done it right, you don’t trust the data. And when you don’t trust the data, you make decisions based on “gut instinct” or “feel.” That might work sometimes, but it’s unreliable and impossible to validate. That lack of trust also causes you to hedge your bets, resulting in excess raw materials and finished goods inventory.
When you set up and use the ERP properly, you can integrate data from various points of different processes into a sound business intelligence framework. And there are many ways that properly mapped data and a BI framework can improve decision-making. For example, consider what you might learn from accurately knowing costs and their variations, sales trends, and real-time inventory.
It’s worth noting that you don’t necessarily need a new ERP system to gain business benefits. You may be able to make the most of the system(s) you have. But either way, it pays to start with the foundation: Assess and improve your business processes and supporting systems; don’t rely on the ERP to do that.
When you get the inputs right, the ERP can become the foundation for process excellence, informed decision-making, and increased visibility into and control of your operations. These are the building blocks that will support your company’s growth and financial success.
Authors:
Jason Bonnet, Managing Director, Consumer Products
Drew Hazlett, Senior Director, Business Process & Technology Optimization Services
Integrated Project Management Company, Inc.
Services: System Selection and Implementation, NetSuite ERP Implementation
Industry: Consumer Products