The first half of this year had me attending as many as six food industry conferences. In hindsight, although the settings were different, one thing remained the same: issues of food safety, labor and rising energy costs dominated each meeting.
These challenges need to be efficiently managed because they’re not about to go away anytime soon. To do so, I’d recommend that you leverage your company’s enterprise resource planning (ERP) system.
Here’s a detailed look at how ERP applies to food safety, labor and rising energy costs.
Food safetyGiven today’s global agriculture and food distribution channels, there always will be a risk of fresh food contamination that could become a global health problem. In this instance, ERP systems help shield and protect companies.
I think of your system’s internal traceability program as the “shield,” which allows a processor to quickly manage any food crisis. If your ERP does not have a traceability feature, any hazardous event could put your organization’s future in jeopardy.
Your system’s plant maintenance program (involving a “Maintenance, Repair, Operations” or “Enterprise Asset Management” plan) also helps ensure that all production and test equipment is reliable and in good working order. Today, an ERP’s human resource system component allows you to check that associates have the proper food safety training and food preparation skill sets. HR components typically notify you when a particular person needs to be trained on a particular food prep topic.
Last but not least, a computerized Hazard Analysis Critical Control Point (HACCP) system feature lets you record all your pre-requisites and link all the tests (whether they are conducted internally or externally) to your lot numbers. This allows you to quickly react in case of any derivation from your standards.
Once you have an efficiently integrated enterprise system, you can manage processes at a faster pace and in a more transparent fashion. You’ll realize the difference when you easily can map your HACCP and quality management systems to any industry standard, such as ISO or IFS (International Food Standard).
LaborLabor management probably is one of the food industry’s most difficult challenges. Compared to other sectors, employee turnover typically is high because food processing work can be difficult, wages generally are low and many food plant workers don’t speak English as a first language.
It’s important to note that - just like an ERP itself - your computerized employee education and training systems may offer multi-lingual features. These help any company more accurately adhere to its proper procedures and policies. In today’s Web-based world, HR system components also may be seamlessly linked into “e-verify,” which helps ensure that all the people on your payroll have been properly processed. Although the e-verify system has its own challenges, I think these will be addressed in the near future. In the meantime, to prevent illegal employment, I would recommend that you link automatic work authorization validation into your ERP system’s HR package.
Your ERP system’s attendance data collection features also may help address any “donning and doffing” problems. The goal, of course, is that only a specific worker clocks himself in and out of work - rather than having others do it for him. Instead of addressing the issue with company policies, you can use data collection devices with biometric identification requirements such as thumbprints or iris scans.
No less important is the proper placement of time clocks. Certain dress time - such as an employee changing from street clothes to work clothes - does not necessarily need to be paid. On the other hand, putting on specific protection gear is part of work. Plant operators need to place clocks properly so that time collection starts when and where work time starts.
Energy costsWhile ERP helps shield an organization from food safety and labor liabilities, I’m convinced that this technology can serve as a sword as well - and actually helps you go on the offensive.
High energy costs are here to stay. Increasing globalization and demand in the BRIC countries (Brazil, Russia, India and China) means that growth will outpace energy supply for quite some time. Meanwhile, North American supply chains already are long and costly and - with the U.S. becoming a net importer of foods - these supply chains will become even longer.
We already have an example where a produce company in the Midwest or Northeast needs to transport a majority of the raw material supply across the continent. It’s already quite common to have transportation costs exceed the purchase value of the raw materials.
How can ERP systems support you in this instance? It depends on your situation. If customers arrange for product pick-up and transportation, it is up to them to deal with the related issues. If you need to transport product to your customers, there’s an important distinction involving whether you use your own fleet or external carriers.
Route optimization systems can provide a significant return by reducing mileage and driver overtime for private fleet operators. Like all optimization programs, the savings will only be as big as (1) how you collect and feed information into the system and (2) how you incorporate results back into operations.
To find and feed the proper optimization constraints, your ERP system needs to handle data for various criteria including appointments, inbound and outbound transportation orders, temperature constraints and volume and weight information of the materials and products transported. In turn, these optimization systems can show you opportunities for improved picking and loading - and even where production schedules can change. The more you do with these results, the more benefit you will gain.
Chances are that you also need to manage external carriers’ costs. The process begins by comparison shopping for carriers - the same way you might for ingredients, raw materials or other plant supplies. Here, too, your ERP system can support you by providing a place where you can combine and then compare your carriers’ pricing agreements. Then you can more clearly determine your low-cost carrier for a given route.
Warehouse management is another important area - especially when it involves frozen meat. Because so much of it is a commodity business, frozen meat processors often hedge for better commodity prices involving various meat cuts. Rising energy costs are bound to affect transportation to and from these warehouses, as well as external warehouse charges.
This, in turn, could significantly change meat industry economics. What’s important here is that your ERP system must show full cost absorption and cost changes that occur as you store product. In the future, inventory valuation and reconciliation of the external warehouse costs will have a larger impact on profits.