By Marc DiGiorgio, VP, IndustryBuilt
has an opinion on industry trends for 2011, and for the food industry I'm no
food industry is very much in the news these days-over regulation, commodity
prices, and marketing tactics-and with such intense change come increasing
pressures for formulating new business strategies.
my view, key 2011 decisions for food companies are not based on compliance or
regulatory-based rationale, but rather business transparency. Food companies
are getting very tech savvy.Our customers are the companies that want to be the
innovators at meeting safety compliance and government regulation.
those issues in mind, I have identified seven important trends I see affecting
the food industry.
your grandma's internet. Microsoft is working on some interesting new
technology and is ready to deploy it in a context needed by food companies.
We are talking about thin deployment of a full feature-rich ERP client, web
services that extend new user interfaces that are simplified for lay users, and
new offerings like credit card processing. All of this hot new stuff
makes the product feature rich but also lowers customers' costs in deploying
technology to employees, vendors, and customers. Imagine running your
business from the beach, or from your iPhone or Windows Phone. We're
Microsoft's new built-in integration of Dynamics NAV with Microsoft Dynamics CRM will change the way food
companies interact with their customers and consumers alike. Imagine going to a trade show and having all
of your new leads automatically captured and assigned to your sales force. Even better, imagine tracking the interaction
with these new leads and determining which turn into business so that you are
able to justify these marketing costs for next year.
Beyond lead tracking, CRM integrated with your
Dynamics ERP system will allow your sales force to have up-to-the-minute
information on the sales history with their customers. Sales invoices, sales orders, credits,
pricing, products; all of it available from within Outlook, or over the
web. Offline or online!
Imagine being able to track interactions with
your consumers. CRM will do that
too. Track coupon requests, sunshine
letters, or even complaints.
With CRM integrated into your ERP system, you
can track the lot numbers of products associated to the complaint and look up
details of that lot from within the ERP system right down to the production
order, or receipt of raw materials associated to that finished good.
In addition to consumer affairs, you can
integrate with your social media presence on Twitter, or Facebook. Find out who is talking about you and
where. Overlay geographic hotspots to
recent trade promotions you have run with your customers.
Food Safety is a hot topic
capturing much media attention, with new Federal Food Safety legislation having
just been passed by Congress and signed into law by the President at the start
of this year. The new law gives the U.S. Food and Drug Administration expanded
powers to order recalls, as well as imposing food safety standards for imported
goods. In reality, most food companies we have dealt with already have more
stringent food safety programs and requirements that have been pushed down to
them by their largest big box customers.
Those with sophisticated Dynamics-based ERP solutions are already heavily
involved in programs
like GFSI, or SQF requiring third party audits.
These new standards for food safety extend well beyond the traditional
approach of "record and respond", basically the one up and one down
GFSI and SQF audits require a holistic
approach to food safety focusing on prevention methods and proof, or
reinforcement that procedures are being followed. This makes inventory management principles
such as perpetual inventory and stock rotation heavily integrated into the
quality process. Try doing that with a
spreadsheet. We see a strong correlation
here time and again - lagging technology investments in the right ERP tools
makes it that much harder to be compliant with the highest standards and
compete for the most lucrative business.
and wheat commodities are likely to see price increases. This pricing variance
impacts sub-segments that include large purchases of these raw materials, but
in reality, a move on corn prices will push up all commodity prices as the
agriculture industry reprioritizes crop growing to these commodities. This will
have an impact on all food manufacturers and distributors. It may not be as
disruptive as a few years ago, but the smart food company will have to be
diligent in setting its prices. One thing for sure - commodity costs are going
to be an important topic all year long. Food companies need to be able to not
only track commodity cost spikes, but immediately determine their impact on
have seen a lot of adoption in 2010 with mid-sized food companies looking to
create loyalty with their consumers. Twitter, Facebook, Groupon, and other
initiatives to connect consumer to producers and distributors. This media and
communication transition will remain strong in the coming years, even stronger
as there is more evidence and experience with these new marketing strategies.
Food companies and food distributors that create loyalties to their products
will start seeing some results.
ingredients are the new targets as consumers focus on healthy eating. High
fructose corn syrup (HFCS) has been a reliable substitute for sugar for a long
time; a reliable and locally produced ingredient. Its use has stabilized
a lot of local farm production for years. It may not have much future as
consumers begin to link it to obesity and like conditions. Sodium is the
culprit for high blood pressure. Consumers may be willing to choose between two
products based on the ingredient declaration and nutritional fact statements.
This will force reformulation using Product Lifecycle Management (PLM) in a big way amongst food producers.
a product hits the market, its recipe (made of up Bill of Materials and
Routings) may go through dozens and dozens of iterations, passing through three
major stage/gate hurdles; cost,
nutritionals, and taste. Tracking these
versions can be a real nightmare without an ERP system in place. It would be hard enough to manage in your own
kitchen, let alone in a production facility making hundreds of other similar
products moving at 24/7. An ERP system
will ensure that sales is quoting against the right costing, that purchasing is
buying the right ingredients, and that production is making the right
big guys were slapped around a bit in the early part of the recession. As
consumers focused their retail purchasing on value or extreme value based
products, the big brands were not able to react as quickly. Consumers fell in
love with private label products...generally a good thing for the segment of
companies with whom my company, JustFoodERP, does business with. But watch out,
the Big Guys are back with aggressive promotion programs, generally lowering
price points right across the board.
All these trends will help further the key strategic requirement
of greater transparency in food company management planning and decision
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