Ten key signs that new systems are needed for food companies

Integrated business systems should be as much a fundamental part of a modern food company’s operations as quality manufacturing equipment or well-trained personnel.

However, food industry software specialist Graycorp said there has been reluctance by some companies to make the required investment in quality software up until the past couple of years.

“While many of the food industry businesses we have spoken with are very focused on production and plant innovation, there tends to be a view that IT is somewhat of a ‘necessary evil’, rather than the valuable asset that it can be,” said Graycorp Managing Director Lachlan Gray.

“Expenditure on IT is often seen as a cost by business owners, rather than an investment in the efficiency of the business. We talk a lot with clients and potential clients about how their IT systems can be an important part of the business growth strategy.

“Pleasingly, in recent years there has been a growing recognition of the value well-planned, integrated software solutions can add as part of the investment in IT.”

If a business has grown consistently in recent years, or there hasn’t been any significant investment in software in the past five years, Gray suggests it is highly probable that the systems being used are outdated and not keeping pace with the needs of the business.

Graycorp suggests there are 10 signs that a business has outgrown its existing systems:

1. Lack of integration and visibility across the business.

“It is not necessarily functions that some food businesses are lacking, but rather the efficiency of the functions,” Gray said. “Our experience with numerous food industry companies (ranging in turnover from $1 million to more than $100 million) is that the main need is to increase real-time visibility across the business.

“There tends to be a lack of integration between the various business functions, which leads to silos of information forming and making it difficult to obtain a holistic and up-to-date view of the business.”

Furthermore, due to the fact that it generally requires considerable manual effort to duplicate and consolidate information, there is also the added risk of data handling errors.

2. Decision-making is reactive rather than proactive.

Because it can take days or even weeks to access up-to-date information about what’s happening in the business, decision-making by the business owners and management tends to be reactive rather than proactive, putting a great deal of pressure on the whole organisation.

“Entering data today so you know what you did yesterday is like trying to drive forward by looking in the rear-view mirror,” Gray said.

3. Critical business information sits with personnel.

Many businesses have their critical business information and intellectual property - such as recipes or procedures - sitting in the heads of one or a few key personnel. This is highly dangerous should something happen to these people or they leave the business. This critical information needs to be contained within the systems of the business so that they can be adequately backed up and accessed, as required, by others.

4. There is a lack of understanding of the business’s true costs.

In an increasingly competitive marketplace where margins are being squeezed, it’s imperative that users have a complete understanding of the true costs of running their business. Furthermore, it is imperative that they can easily determine the true gross margin by product and by customer.

“This is even more important for companies that export their product overseas and are finding their profits being eroded as a result of the high Australian dollar,” Gray said.

5. The company doesn’t have the capacity to interact with suppliers and customers electronically.

One way food companies can achieve real operational efficiencies is by considering having their software systems integrated with those of their key trading partners.

“If you can have visibility over what your trading partner is doing and they can have visibility over what your demand or needs are, it’s going to provide efficiencies for all,” Gray said.

6. Additional administrative staff are required to handle the workloads.

With a growing business comes an increased administrative burden. If there aren’t integrated, business-wide systems in place, this can often result in the need to hire additional administrative staff to handle the associated workloads.

7. The business is growing but isn’t any more profitable.

“If your business has grown significantly but the bottom line has not increased proportionately, the chances are your systems are not working for you,” Gray said.

“So despite the extra work and risks associated with running a larger business, the rewards might not justify the extra effort.

“Appropriate software systems should be able to handle the increased production of the business and allow the optimal use of existing resources without associated additional costs.”

8. Large amounts of stock are regularly written off.

Manual systems which don’t provide the scope to efficiently track production and provide batch control often result in large amounts of stock being written off because sell-by or expiry dates have been passed, particularly those products with a short shelf life.

9. The company regularly has short supply or is out of stock on products.

Without a clear picture of the forward requirements for production and purchasing, manual systems may result in the business being unable to supply product to meet customer demand, undermining your sales opportunity and supply reputation.

10. Opportunities for growth or expansion are not being pursued.

“In addition to inefficiencies, one of the consequences of not having integrated systems is lost opportunities for profitable growth and expansion,” Gray said.

“Without access to core information about their business, business owners and managers are often scrambling to manage the day-to-day operations. As a result, there’s little or no time for the planning of new products, additional market opportunities or expanded distribution channels.

“Having access to an integrated system that provides real-time reporting across the whole business, and therefore complete transparency, is essential for food businesses to ensure they can supply their customers in a timely manner, meet stringent quality control requirements and capitalise on opportunities for growth,” Gray said.