As the organic industry expands, ERP technology helps alleviate the growing pains.
As organic foods make their way into the mainstream and onto the tables of the everyday consumer, the demand of this one time niche market is growing rapidly. Unfortunately this growth comes with a cost to the producer and distributor. The explosion of organic food demand places more and more pressure on the companies producing and transporting these goods.
Concern is no longer about the longevity of the organic market. Concern now focuses on the industry itself and if this fast growth rate can be managed with the existing infrastructure.
Food companies themselves have a number of compliance issues to deal with in every day production. Producing an organic product line only intensifies these challenges. From commingling issues to difficulties with sourcing high demand organic ingredients, producers are becoming more and more conscious of the effects supply and demand constraints play on their products and overall bottom line.
Thankfully, today’s technology helps alleviate many of these issues. Today’s food and beverage based computer systems are designed for compliance issues. They are designed to accommodate regulatory compliance requirements such as detailed traceability and record keeping, as well as helping to automate the shortened supply cycle for organic based ingredients. They are designed to help facilitate the expansion of the organic market.
The organic paradox
Organic food production and distribution is certainly not for everyone. Moving to organic-based food production brings on additional operational requirements and governmental regulations. That being said, the organic market is seeing double digit growth and with new powerhouse sellers like Wal-mart entering the picture, the increased scrutiny may be well worth the effort.
The organic industry is not new, but it is “emerging” and going through its share of growing pains. The organic marketplace has an entrepreneurial spirit of its own that fosters know-how and ingenuity. It is, in its own way, a paradox that is full of contradiction. At its core, organics return a grower to the basics. Organics return the grower to nature’s fundamentals, a time without unnecessary additives and chemicals. Yet in our current world of Wal-mart and worldwide sourcing, managing an organic product line forces a cutting edge mentality that will inspire creativity, expansion, and yes – an embracement of technology.
Knowing & living organics
Going organic is more than just food production. It requires knowing the regulations, staying in compliance, and having the means of generating adequate documentation concerning crops, production, and overall operations.
With the explosion in market demand, these requirements necessitate more than a pencil, pad of paper, and a spreadsheet. They require a detailed plan for execution, an ongoing plan for self monitoring and adherence, and a method of reporting activity to necessary agents.
Problems that plague producers
Food producers and manufacturers are farmers and chefs by nature. They are not accountants or information technology wizards. Their focus is on producing high quality products and in many cases delivering these perishable products to consumers before the shelf life expires.
Natural tendencies aside, food production begets regulation. Organic food production increases this regulation even further. Organic food growers and processors are emerging as a powerful new market segment with massive growth potential. This potential comes with cautionary tales from the front of struggling organic producers who stumble in meeting regulatory requirements. The failures are common and frequent, with the possible outcome of losing accreditation or failing to properly manage a recall much too harsh to imagine.
Producers struggle not with just the basics of lot control, but with more unique issues such as tight supply of organic ingredients, detailed tracking of incoming receipts, and commingling of organics with non-organics. Add in reporting requirements to customers and governmental agencies and the operational management of organics seems endless.
There is hope. Enterprise-based business software is becoming more mainstream with food producers. The food and beverage industry as a whole is beginning to adopt more and more technology and the ERP industry is adapting to quickly meet their requirements. Software suppliers are offering solutions for the food and beverage industry with special emphasis on managing regulatory compliance. The additional requirements of the organic industry fall easily in line and the best software packages have additional functionality specific to the organic producers.
One of the most common mistakes of organic producers is commingling organic and non-organic products. This may seem easy to manage, but if you operate a farm or production facility with both types of products, it is easy to contaminate products. In this situation, an ERP system focused on food and beverage based products can quickly provide relief. Typical ERP functionality will allow the user to flag both products and locations as organic versus non-organic, thus eliminating a worker’s ability to move an organic and non-organic product into the same physical location. It is a quick fix, but a powerful one that effectively eliminates the possibility of commingling.
Another common problem is lot tracking of incoming ingredients or of outgoing product. Quality ERP systems have a simple product specific flag that will turn on lot tracking at the ingredient level, intermediate level, or final product level. Using an ERP system with inherent lot control capabilities will force workers into not only recording incoming lot numbers, it will also force workers into recording usage of lot controlled ingredients or shipments of a lot controlled product. The best systems can also record individual lot properties with detail nutritional information so that it can be available for reporting purposes or to print product labels and UPC barcodes.
In addition to basic commingling and lot tracking concerns, overall record keeping and reporting is vital, although many times overlooked until an inspector or agent appears. Leaving an inspector unattended while a worker shifts through mounds of paperwork to find information on seeds or ingredients is not an ideal situation. What is an ideal situation is the ability to promptly produce a system-generated report detailing all activity associated with a given production run or shipment. Today’s ERP systems can and will produce fast, accurate reporting at a moment’s notice.
Where are my ingredients?
As demand grows, grocery store shelf space opens, and long lead-times and flexible delivery schedules disappear. Top selling supermarkets and retailers require a constant stream of goods to meet the ever growing popularity of organics. Managing this market shift is difficult for the small farm or manufacturing plant. This is especially true if secondary organic ingredients are needed for production.
Handling the production of organic foods with a short supply of organic ingredients can be daunting. Finding hard to procure goods from certified vendors may feel impossible at times. Once again, the ERP industry is trying to rush to the support of the organic market and provide relief.
Integrated forecasting and planning modules offer sophisticated functionality to help even smaller producers manage both tight incoming supply chains and difficult to manage suppliers. Such systems can quickly calculate purchase requirements based on what is needed, when it is needed, which suppliers are certified, and when they can delivery the product in question. These systems not only reduce the processing time of sourcing ingredients, but also help validate the entire organic process flow and provide a detailed record trail along the way.
What about selling to Wal-Mart?
From Horizon milk to Kellogg’s cereal, Wal-Mart is embracing organics. What does this mean to food suppliers? It means even stricter sourcing guidelines from Wal-mart. If an organic supplier has not yet sold to Wal-mart, they need to be prepared for tight supplier requirements. Wal-mart is the benchmark in establishing firm procedures for supplier management.
Focused on consistent product quality and lead-times, Wal-mart requires additional supplier standards such as EDI transmissions, compliance labeling, and RFID. Managing such requirements can seem overwhelming if a supplier is unprepared. Managing such requirements without a solid computer system is virtually impossible.
From farm to table, Wal-mart pledges to provide certified organic products at the “every day low prices” for which Wal-mart is known. For produce, packaged goods, and everything in between, Wal-mart is advertising low cost organics. This means even tougher operational constraints for the supply base as they struggle to meet Wal-mart’s expectations for low cost, high quality products.
With the consumer reach of Wal-mart, they are destined to become a powerhouse of organic sales. Organic producers, of all sizes, must become operationally lean enough and technologically savvy enough to support the requirements of Wal-mart and other large retailers. Consumer packaged good manufacturers are well versed on the demands of Wal-mart and the ERP industry is as well. Much work has been completed already and out-of-box software functionality is readily available to deal with EDI purchase orders, compliance labeling output, and RFID.
Organic producers take note - consumer demand and awareness of certified organic products is growing and will only continue to grow until such products become more of the norm than the exception. The once niche industry is wide open for further expansion and growth. If organic producers don’t already have a solid plan in place for managing the increased consumer demand and retailer requirements, they’d better start planning soon. America loves organics and this love is spreading quickly from coast to coast.