Effective inventory management is crucial to reducing costs in any manufacturing business. This is particularly true in the food manufacturing industry, which characteristically has a high volume of products stored, and an urgent need to fill existing client orders to match ongoing consumer demand.
Cost reductions in food manufacturing can be achieved by using food manufacturing software that improves ordering processes and minimises overstocking of expensive raw ingredients. The right software will also improve operational processes, boost warehouse efficiency and reduce waste.
Good food manufacturing software provides a means to track inventory in real-time, through every step of the supply chain. This allows food manufacturers to maintain control of their products, while also ensuring adherence to food safety standards and legislation. The capability to track both origin and channel supply of individual ingredients can also facilitate rapid response, should some misfortune necessitate a product recall.
In this article we take an in-depth look at what food manufacturing software should do – how those features drives profit gains and productivity – and visit two food businesses using SaaS solutions in food production.
Why your food inventory management system is going stale
Chances are that your current inventory management system is getting you nowhere fast — you’re facing growing inventory struggles and you don’t know why. Here are some reasons why you need to upgrade to better food inventory software.
Working with fresh food
High levels of fresh and fast-moving consumer goods are common in the food manufacturing industry and inventory levels of raw material, in-progress and finished goods need to be effectively managed to reduce the holding costs of the inventory.
By working with fresh produce and raw ingredients, food manufacturers run a high risk of spoilage and waste. Even pre-cooked, processed and vacuum-packed products are perishable items with a limited shelf life, presenting operational, planning and inventory management challenges.
The right food manufacturing software can help food manufacturers monitor and manage inventory in order to cut down on product waste. Improved efficiencies can also be realised through cohesive supply chain cooperation, online collaboration and the ease of real-time data transfer between departments and across locations.
Food manufacturing software must help businesses manage fresh ingredients.
Calculating accurate operational costs in the food industry
Food manufacturing generally takes on multiple processes and operations. Using food inventory management software will help the operations team measure spillage and waste against input materials and identify areas for process improvement and efficiency.
Digitising processes provides transparency of these operational processes and will deliver reliable data, allowing manufacturers to make more effective business decisions to maximise productivity and drive operational excellence.
Unleashed Software’s Business Intelligence tools are a case in point. Unleashed is trusted by hundreds of food manufacturers globally for their core food manufacturing software needs – and it now comes free with the BI Foundation tool.
Foundation gives manufacturers full visibility of their core KPIs across inventory, customers and sales. While BI Vision – an additional full-service business intelligence module – gives access to endlessly customisable variables over any period. Critically these include KPIs such as Average Days to Sale and Stock Age, which can be interrogated in real-time, across multiple dimensions.
The ability to track core KPIs easily can be a game changer in the food industry.
For example Stock Age by Stock Keeping Unit (SKU) can be cross-referenced with warehouse location to see which ingredients are sitting on the shelf and need to be moved (perhaps with a local promotion or price change). While Average Days to Sale vs Product Type can be queried at a click to see which brands are popular – and by delving deeper you can easily find out where they’re popular, and what margin they are bringing in.
How businesses need to think about food manufacturing software
To survive and thrive in a competitive market, a business needs capital. A business cannot operate without sufficient cash flow to fund purchasing, drive marketing and sales, invest in new equipment and cover operation costs.
One of the leading causes of business failure is poor inventory control. Despite this, many business owners continue to regard inventory management software as an unnecessary expense rather than an essential investment.
Controlling inventory effectively and efficiently is important to all businesses — poorly managed inventory causes loss on multiple fronts. Left undetected, it can cause escalating operating costs and drain vital cash flow.
Control is everything when it comes to managing the flow of inventory to, within and from your business. Any business that hopes to operate optimally must be able to meet its customer service targets, capitalise on opportunities, manage risk effectively, forecast demand with precision and scale successfully in a dynamic and highly competitive marketplace. In order to do this, a business must have the ability to track, trace and account for every item of inventory in its supply chain in real-time.
A business operating an effective inventory system should always have enough inventory to fulfil customer orders and carry it through unexpected fluctuations in demand without over-compensating and holding too much inventory, or too much of the wrong inventory.
Failing to carry enough inventory and safety stock can mean loss of revenue through missed sales and lost customer loyalty. On the other hand, carrying too much inventory can cripple the business with soaring operating costs, rising incidences of obsolescence and a potentially fatal stranglehold being placed on cash flow.
Any business that hopes to compete must be able to meet its customer service targets, and capitalise on opportunities.
It all comes down to the data
Data is what drives all decisions attributed to inventory. How much do you have? Where is it stored? How much is on order? How much is dedicated to current customer orders? How much needs to be ordered to meet future demand? The answers to each of these questions lies in the data. If that data is out of sync with the real-time situation on the ground, the decisions on what to buy, when to buy and how much to buy will be relegated to the realm of guess work.
Easy and instant access to food inventory data is also essential for analysing inventory flow and patterns in previous seasons, which in turn influences the accuracy of sales forecasting.
Attempting to do so based off spreadsheets is unnecessarily time-consuming, error-prone and often inaccurate. Unfortunately, the use of manual spreadsheets is still an approach that many new businesses adopt
Food inventory software – a costly expense or lucrative investment?
For many businesses, particularly those which consider themselves too small or cash-strapped to warrant an integrated food inventory management software solution, the decision to use a manual spreadsheet-based system like Excel is an all-too-easy and enticing one to make. It is easy to understand why so many new and small businesses fall for the short sighted approach rather than deploying a proper food inventory management solution.
Firstly, medium businesses often don’t consider their inventory demands large enough to warrant an investment in sophisticated and “expensive” inventory management software solution. Manual data entry into an Excel spreadsheet combined with routine seasonal or periodical physical stock takes are considered sufficient to keep a handle on inventory.
Secondly, most businesses who opt for a manual food inventory control system do so because it does not require a sizeable commitment of working capital up front.
The misconception that costs you money
There is a perception among many businesses that food inventory management systems are hugely expensive and are really only warranted for companies operating complex and sizeable supply chains. As a result, many steer clear of developing an inventory management strategy that involves using dedicated software, until it’s too late. They fall into the all-too-familiar trap of short-term planning, only to fail in the long-term. This highlights one of the largest misconceptions surrounding inventory control solutions and how it is putting businesses on the back foot from the get-go.
Closing the gap with Software as a Service (SaaS)
The gap between the so called ‘haves’ and ‘have-nots’ in the business world, (when it comes to utilising powerful inventory management software), has now been largely closed.
Software as a Service, cloud-based inventory management software solutions, are now enabling businesses to afford a sophisticated, yet simple-to-use, powerful inventory management solution.
The goal for any business is to succeed. For businesses operating a supply chain, the control of inventory will play a crucial role in whether that business is successful or not. Inventory management software provides businesses the ability to track, trace and account for inventory in real-time.
It also gives the ability to organise and interact with that data across all departments, from anywhere, at any time. This optimises efficiency, significantly lowers operation costs and boosts profitability – the hallmarks of a successful business.
Ultimately, the business that approaches its inventory management system as an investment, rather than an expense, will be the one most likely to bypass the 80 per cent of businesses who fall by the wayside on the road to business growth and success.
Software as a Service gives the ability to organise and interact across departments, from anywhere, at any time.
8 Features to look for in food manufacturing software
1. Inventory management
The food industry is one of the most challenging for manufacturers when it comes to optimising their inventory control. The sheer complexity of having to manage such a variety of perishable components and ensure that customer service targets are consistently met means that powerful inventory management is essential.
Many large food and beverage organisations rely on overly sophisticated, resource-sapping and expensive Enterprise Resource Planning (ERP) systems to meet their requirements. However, medium-sized food manufacturers are under no obligation to make the same sizeable investment of working capital and resources in setting up an integrated inventory management software solution for their business.
The right inventory management system is key to fostering greater efficiency, productivity and profitability for businesses. Food manufacturers in particular can limit or eradicate unnecessary losses as a result of inventory mismanagement. It can also promote faster, more efficient growth that is geared to helping the business scale.
2. Batch tracking
When dealing with short shelf-life produce, it is vital that food manufacturers have the ability to track, trace and account for each item of inventory at any time. Visibility of the whole supply chain is exactly what an effective food inventory management software solution is tasked to achieve.
Total visibility into the movement of each item through the supply chain creates a ripple effect which generates greater efficiency and efficacy along every node — from demand forecasting, through to purchasing, manufacturing, distribution and sales.
A batch tracking feature allows food manufacturers to track a batch of products through all the stages of manufacturing; from processing right through to distribution. Batch tracking provides manufacturers the freedom and flexibility to trace all of their products quickly and easily. This is especially relevant for food manufacturers as it reduces losses if there was a compromised batch. They will be able to easily identify and locate the batch.
Being able to locate each item of inventory in real-time leads to a significant reduction in loss as a result of mismanaged, misplaced and mishandled inventory. Inventory can be more accurately kept at optimal levels thereby insulating the business against the risk of over and understocking. Some of these issues include obsolescence, tied-up cash flow, missed sales due to stock-outs and off-target forecasting and purchasing.
Batch tracking is a critical feature of food manufacturing software.
A smart food manufacturing software solution is able to leverage the power of automation to further enhance the efficiency of procurement, production, distribution and sales. Without
the capability to track, trace and account for stock from source to sale, process managers have no dependable and accurate way to enforce inventory protocol.
Food manufacturers in particular need to ensure that loss as a result of spoilage is either eliminated altogether or kept within the lowest manageable margin. The best way to achieve this is to control the flow of inventory from purchasing, storage, production and distribution in such a way that goods most susceptible to spoilage are used up first.
This is where the customisable nature of food inventory software becomes a major plus to the business. The task of automating which items are used first is easily achieved, as is the ability to set up automated re-order points that alert purchasing managers when inventory is above or below optimal levels.
A final advantage for food manufacturers is the ability to mitigate against the likelihood of a product recall, and in the event that a recall does become necessary, the ability to execute the recall as effectively and efficiently as possible.
Total visibility into the supply chain means that the team tasked with carrying out the product recall can quickly and easily identify which product is in need of recall, where it is in the supply chain, and to whom the products have been sold to.
The ramifications of a poorly managed product recall can be devastating to a food manufacturer. The ability to track, trace and account for inventory in real-time affords businesses the advantage of containing the threat quickly and planning and acting strategically.
4. Data access
Another key feature to look for in food manufacturing software is convenient access to data.
Cloud storage means data can be accessed anywhere and any time by someone with an internet connection. This allows users within your operation to keep up-to-date with changes. Products can be moved between storage locations and on to the next step in the supply chain – all while keeping everyone in the loop.
5. The ability to scale and evolve for growth
Greater operational efficiency and productivity leads to business growth and success. And while it seems counter-intuitive, success can cripple a business that is unprepared.
One of the greatest challenges new and emerging businesses face is the ability to scale up effectively. Forward-thinking businesses understand this and know that one of the most vital components of their food manufacturing software must be the ability to adapt and evolve ahead of the needs and requirements of the business as it scales.
New start-ups in the food industry often focus on producing a limited number of items, but usually this isn’t the case for long. When the business expands, managers ideally want their systems to adapt seamlessly, but some systems cannot keep up.
Systems built on the need to store data in separate spreadsheets or that require manual updates by staff do not tend to scale well as businesses get larger. Food inventory management software can handle large increases in size without becoming significantly more complex or costly.
At a certain point the ability to scale for growth becomes critical.
One of the most significant advantages of implementing a cloud-based SaaS solution is the flexible nature of the software. The ability to refine and modify critical components of food manufacturing software to better integrate and align with the business’ own unique supply chain is advantageous in a multitude of ways.
With the right software at their disposal, procurement managers are better able to integrate their data with their suppliers. This ensures that lead times are kept to a minimum and the lines of communication are open, clear and free of misinterpretation. This leads to a marked decrease in the under- or oversupply of inventory. When dealing with perishables, this can lead to significant savings as a result of less wastage or delays in production due to inventory being out of stock.
At the other end of the business, being able to efficiently manage sales – for example with a B2B eCommerce store, or via an integration with a B2C shopfront such as Shopify – confers flexibility, which is a key requirement for modern food sector business. Unleashed software integrates with dozens of popular business apps – from CRMs to accounting packages to Point of Sales solutions – that can dramatically extend the scope of the tool.
7. Smooth integration of updates and improvements
In many food businesses, staying at the top requires frequent re-thinking of systems and processes to ensure efficiency is where it needs to be. This frequent change is positive from a competitive perspective, but in inventory management, the goal is for as little disruption as possible. If things have to slow or shut down for even a short time, this begins to erode any advantage of the new change. Some software systems may be better than others in this regard, so taking time to find what is best for your business is important.
8. Reporting and planning
When margins are tight, being able to collect and review data from your business is critical. The right food manufacturing software provides managers with a range of reporting and analysis tools so they can be on top of the numbers. The software allows unit or concept sales, purchases, profit and loss to be viewed in real-time. Past sales data can be processed in user-defined formulas to create a basis for planning, and managers can forecast for a range of days, weeks or months.
CASE STUDY 1: Gourmet Organic Herbs
Fourteen years ago, Gourmet Organic Herbs were operating from the kitchen table at home. Now they send their herbs and spices all over Australia. Owner Anibal Zarate aims for big business delivery, with that same kitchen-table approach to customers, sustainability and quality.
When Anibal was still involved with the production side of the business, he knew everything that was happening on the floor, such as how much stock was on hand and what needed ordering.
However, since removing himself from production, he has had to keep an eye on stock levels in other ways. Anibal soon realised they needed a more automated way of doing things.
Since adopting Unleashed, Gourmet Organic Herbs have improved the efficiency of their business – the company now sets appropriate budget and goals based on accurate data, and their sales rep has a more efficient way of handling their sales process.
Unleashed has had positive impacts not only on the company, but also for the staff. As the software is cloud-based, it allows Anibal to remotely access Unleashed. This allows him to have more time to work on the business, which greatly helped his work/life balance.
CASE STUDY 2: Brandini Toffee
Brandon Weimer and his best friend, Leah Post first started selling toffee to raise money for a class trip. From these modest beginnings, they have grown and created a gourmet toffee brand.
Having started with paper records and handwritten logs, the duo wanted an inventory management software that would provide the data visibility and organisation that was missing from their business. As a food manufacturing company, Brandini Toffee needs fail-safes in case of a product recall; they needed inventory management software that had tracking and tracing features.
When it came to choosing a food inventory system, Unleashed was a clear winner for Brandon. Unleashed ticked all the boxes – a cloud-based inventory management system for tracking products, that was easy to implement with comprehensive training and support.
As their business continues to grow, they now have a software that will grow with them.
Unleashed has provided the certainty of batch tracking so they no longer worry about the traceability of a product. Brandon and Leah now have a food manufacturing software system they can rely on for product visibility and inventory management.
Article by Greg Roughan in collaboration with our team of inventory management and business specialists. Greg has been writing, publishing and working with content for more than 20 years. His writing motto is ‘don’t be boring’. His outdoors motto is ”I wish I hadn’t brought my headtorch’, said nobody, ever’. He lives in Auckland, New Zealand, with his family.