When it comes to your business, are you looking to streamline all of your management systems into one place? If so, you may want to consider an ERP system. Enterprise Resource Planning (ERP) is an integrated management system that takes everything you need to run a company – from purchasing and sales information to things like inventory, distribution, finance, and even quality management – and puts them all in one system.
Here to talk more about ERPs is Jennifer Spanos, Vice President of Product and Vertical Strategy at NexTec Group and FoodBusiness ERP. In this special episode, Jennifer walks us through the ins and outs of ERPs why they are ultimately a single source of truth that allow you to manage the entire business from one place. We talk through the benefits of an ERP system and how it differs from something like QuickBooks as well as talking specifically about the FoodBusiness ERP product and how it can help with supply chain issues and risk mitigation.
Erin: Welcome to this special bonus episode of the Food For Thought podcast, let's jump right in. Can you explain what an ERP system is and how food and beverage processors use them in their businesses?
With more than 25 years serving the food and beverage industry, FoodBusiness ERP by NexTec can provide advice in operations, distribution, accounting, business intelligence and customer relationship management to help you grow your food and beverage business. Learn more by visiting www.foodbusinesserp.com
Jennifer: I've been working with ERP specifically in the food industry for the better part of 15 years, and a lot of people don't actually know what ERP is or what it means. And I can tell you, when I first got into it, I didn't know that either. ERP stands for Enterprise Resource Planning, and really, what that means is that it is managing all parts of your business. It's an integrated management system that takes everything from purchasing, sales, manufacturing, inventory, distribution, finance, and in the case of food, ERP, you have things like quality management as well. Really, it takes them and brings them all into one system, which is a single source of truth and allows you to manage your entire business.
Erin: Why is a system like this so important for food and beverage manufacturers? In other words, what are the benefits of an ERP system?
Jennifer: There are a lot of benefits when it comes to ERP, specifically an ERP for food and beverage. Before I got into the software side of things, I worked in the food industry as well. And it's definitely a unique industry. There are certain things that set it apart from other industries that you run into. There are benefits that come from having an ERP that is actually tailored to the food and beverage industry.
One of the biggest things that it does is it ties everything back to finance. What you want to have is that single source of truth; real, accurate information for all parts of your business, and you want it to tie back into finance in a meaningful way. I can't tell you how many times or how many companies I've worked with that actually don't have a clear understanding of their finances. And when it comes to managing a business, finances are very important, right? If you don't have a clear view of your finances, you don't know how profitable you are, it makes it difficult to make decisions as to where you're going in the future, how to expand or contract, as the case may be, and also you don't understand profitability or things like cash flow.
Having a clear view into what your actual costs are, and into what impacts those costs becomes really important. A lot of people don't have that before they get an ERP. When we look at that, it gives you clear visibility into how your business is actually running. When you have a lot of systems that are not talking to each other, it becomes difficult to see that big picture.
You may have one system for purchasing or you may have another part in Excel, or somebody else may be doing something on paper, and it becomes really difficult to see that bigger picture and how everything ties together. You want to have that visibility into how your business is actually running because then you can see where you might be able to become more efficient, where you may be able to change your mix of products so that you're more profitable or you're not making things that are causing you to lose money, or that are overly disruptive to production or things like that, right?
One of the key things when it comes to food and beverage is inventory management. That's something that is definitely unique to this industry. We are dealing with things that are alive, or were once alive.
I say that because I started out with a degree in food science. And that's one of the things that we deal with a lot is how things change over time because we're dealing with a lot of things here that are living, or were living. Because of that, you've got things like expiration, you've got best before, you've got quality changes when things are sitting over a period of time, you've got changes in your inventory when you're moving it from one place to another or from one temperature to another, or some of your systems go down and things are not kept at the right equilibrium. When you don't have a handle on that, there's a lot of impact when it comes to things like waste.
You have either a lot of things that go bad or are expired, that you have to get rid of, throw in the garbage, or you have to liquidate them. Or you have to change what you're making to accommodate ingredients that are not at their best. If you have things that aren't at their best, it's very disruptive to production. Ultimately, we want to minimize downtime, and we want to minimize the loss of efficiency when it comes to production.
Having a handle on your inventory makes so much easier. You can plan better, you can make sure that you're not going to run out of something, or that you're not going to make too much of something or have too much of an ingredient sitting around that you have to change everything in order to accommodate. And then furthermore, when it comes to inventory, you're looking at the cost associated with that.
When we say it all ties back into finance, there's definitely a cost associated with everything to do with your inventory, whether it be that extra waste, or storage costs, or less output, because of the way that your ingredients or your finished goods are changing in their quality profile, then you end up with a lot of costs associated with that. A lot of times when people come into an ERP implementation, or they're just getting into an ERP system, they don't have clear visibility of their inventory, whether it be their cost, or how it's managed, or where it is.
The other piece that goes along with that, specifically for the food industry, is the importance of lot tracking and recall. We need to have things that are tracked, we need to know full traceability, we need to know where our product is, and our ingredients are and our packaging is at any given point in time. In the event that there is a recall, or there's issues, we need to be able to quickly get a hold of that.
Having a system like FoodBusiness ERP really allows you to have that visibility, but then take it a step further, and be able to draw all that inventory back. I've gone through a recall that did not have an ERP associated with it. Prior to getting into the software space, I went through a recall that was handled in a more manual way. We handled it through Excel and a lot of paperwork, and it takes a long time.
It's really difficult to be accurate and to get all the information that you need. There's a huge benefit to be able to minimize the risk of a recall by limiting your window that you have to recall in and also being able to do that in a timely fashion and in an accurate fashion. I think we all know in the food industry that the impact of a product recall can be really significant from not only a trust perspective and a food safety perspective, but from a financial perspective.
Ultimately, when we're looking at this, I think when we're coming down to the benefit of the single source of truth, we're looking at also less potential for error. When you have a bunch of systems that don't talk to each other, you end up copying information back and forth, or making adjustments back and forth, or translating things back and forth. You never really have that big picture, but also you have steps or potential for error every time you're doing those things.
If I'm taking something from the shop floor, and I'm then transposing that into another system, which is then going to feed that or transpose that into something else, which then translates into a calculation for financials somewhere else, all of those steps along the way are a potential for error or potential for inaccuracy. And when it comes, especially to food and beverage, you know, we can't afford to have things that are inaccurate, both from food safety and quality perspective, and from a financial perspective.
There's a real benefit to having everything tied together, to having visibility, to having accuracy when it comes to things like inventory management. And also being able to overlay that with things like quality management, traceability, and recall, that are really specific to food and beverage, so being able to manage your business in a more efficient, profitable, and accurate way.
Erin: What's the difference between an ERP system and, say, QuickBooks?
Jennifer: An ERP system is really a fuller solution because it incorporates all of your major business processes. We often see people that come from QuickBooks—maybe when they're starting out, or they're a smaller company—and really, they need something that is more of a bookkeeping type of solution.
Something like that can be fine when you're starting out, but oftentimes, as your business grows, and matures and starts to scale, and you get more volume, and you get bigger customers, that type of a system just can't manage it. Because A, it's not really managing all the aspects of your business, and B, there's a level of audibility or an audit trail that goes along with an ERP that you don't necessarily find in a smaller solution like a QuickBooks.
Once you enter into a phase of your business where you need to have clear audit capabilities and be able to manage all of those aspects, oftentimes, because the customers that you have demand that level of accountability and that standard, something that's a smaller kind of piecemeal solution doesn't do that job anymore. An ERP is a much fuller solution, and it really is not only things like inventory management and production management, but it's also financial management. And that's really a step up from a QuickBooks type of solution.
Erin: Can you tell me more about FoodBusiness ERP? What makes it a good solution?
Jennifer: There's a number of things that make FoodBusiness ERP a good solution. We talked about it being a full ERP; all of those benefits that go along with an ERP are definitely inherent in this solution. We've built it for the food industry and all of those challenges that go along with it.
We've worked with food and beverage companies for many years now, we have a lot of customers in this space. That's led us to really work extensively with those customers, understand the challenges that they have, and learn from them as much as they can learn from us. It is the whole business solution, but for the food industry; it incorporates all of the food features you need to manage that side of the business as well. Those things like quality management, production sequencing, recall, and traceability and the compliance factors that are unique to this industry are built into the product.
We're continuously improving, so we do actively invest in our product, we have regular releases with improvements and new features. I want to emphasize when we talk about the solution, part of the solution is also our people. We invest in our people as well. We have people, like myself, that come directly from the food industry and have experience doing various roles.
When you're going forward with an ERP—it is a partnership. It's important who you partner with because it is a long-term partnership. Partnering with somebody understands the industry and has experience with it is really important as well. All of those things together, not only the software, but also the experience and the people behind it, create the total solution, and that's really important when it comes to a long-term partnership.
Erin: Can FoodBusiness ERP help with supply chain issues?
Jennifer: Of course, it can. Absolutely. We see a lot of supply chain issues today, it's something that has been, especially over the last couple of years, right, and continues to be a critical issue for this industry. We've seen how our customers have had to really change some of the ways that they do business and manage risk. We've seen companies that have had to change the products they're making, the packaging they're using, the suppliers that they're using, the distribution that they might be using.
You need to have a lot of information, a lot of risk mitigation to weather some of those changes that are happening right now. There's a lot of things that will help that. Having access to clear financial information and cost analysis, lets you make good decisions much more quickly, and you can plan out the future better.
You can deal with things like predicting cash flow, or seeing what your most profitable items are, seeing what the impact is going to be if you switch from one type of packaging to another, or one type of product line to another, or sizing, or whatever it may be. Having all that information, you can actually make some really good decisions. Knowing what your inventory is at any given time, and being able to adjust for those kind of shortages or increased lead times, or have alternate suppliers is really important.
One of the things that I think came out of this is that companies needed to have a better pool of alternate suppliers when it came to some of the things they were getting from different parts of the world, or that incorporated different materials, for example. One of the things that we see companies learning from all of this is that they need to source things like packaging, or even things like maintenance companies or parts from multiple sources, and have that ready and available and know what that impact is going to be ahead of time.
A little bit earlier, we talked about the impact that changing things at the last minute have on production. Anybody that's worked in the food industry and has seen a line go down or has seen quick changes on a line know that that is huge impact, because every minute of downtime or change over time costs money. We want to minimize that and we want to minimize any time that is spent that is non-productive time or non-efficient time, or creates more waste. Having that information, being able to adjust quickly, and knowing the impact, because you have all the information, and it's tied together, becomes really important and really beneficial to those customers when we look at changes in supply or shortages, or that kind of thing.
Ultimately, what we're looking at is risk mitigation, planning ahead, having visibility to what you need in order to run your business, and making decisions quickly because there's a lot more changes going on today than there has been historically. We're probably going to see those changes continue for some time to come, and so it's important to understand your business and how you can weather those changes and be prepared for when they happen because it's much better for your business and easier and more cost-effective to prevent something happening than to have to react to it later on.
Erin: If our listeners wanted to learn more about FoodBusiness ERP, how should they go about getting in touch?
Jennifer: I would say your best bet is to go through our website. And you can find that at foodbusinesserp.com. And of course, I'm always happy to talk to anybody about the food industry and some of the challenges going on. I'd be happy to connect with folks as well.