Installing ERP software not only aids compliance with the Bioterrorism Act but also can help increase efficiency and profitability
Food companies are currently scrambling to comply with the FDA’s record-keeping and lot-tracking requirements of Section 306 of the Bioterrorism Act of 2002. By the end of 2006 all food manufacturers, even very small ones (10 employees or fewer) must be prepared to rapidly identify and track every single ingredient from receipt through processing, packaging, and shipping, to the exact customer location.
While it might appear onerous and costly at first glance, integrated Enterprise Resource Planning (ERP) software for food manufacturers can effortlessly track lot properties while optimizing and improving other business processes such as:
• Batch production
• Sales functions
• Inventory control
• Purchasing
• Quality assurance
• Accounting and financials
• Regulatory reporting
The basis for all regulatory standards, whether it is Sarbanes-Oxley, Section 306 or CFR 21 for pharmaceutical companies, is the same. You must be able to show where you are, where you were, how you got there and prove that there are controls in place so that the process repeats. At the outset, implementing these control systems appears to raise the cost of doing business. The reality is that if properly done, these controls allow your business to operate more efficiently, predictably and most importantly, more profitably.
Implementing an industry-compatible ERP system will not only meet the traceability requirements of Section 306, but also seamlessly link all departments, resulting in streamlined operations, maximized productivity, and increased profitability. In choosing a system you should consider both its ability to track every ingredient from receipt through finished product delivery, and its adaptability to your unique manufacturing process. A single system should be able to oversee every area of your business without the necessity for separate software packages or expensive customization.
Standard functions
Batch recipe management
In order to comprehensively track ingredients and raw materials, it is essential that an ERP system be able to handle batch recipes and all the related data—descriptive information, technical properties, quantities in user-definable units, costing information, notes, and history. For Section 306 compliance, it is especially important to be able to track the lot numbers and identifying information for each ingredient in each batch, as well as whatever other data is important to the process—QC data such as specific gravity, particle size, pH, chemical composition, specifications from supplier spec sheets, and certificates of analysis. In this way, every ingredient lot is linked to a particular batch (and particular customer shipments), and the information can be retrieved instantaneously.
A modern ERP system should allow you to change recipes as production needs change, without any limitation on formula definitions. You should be able to enter your own batch information and make changes at will, defining each field and specifying the units. When a batch ticket is printed for a recipe, intermingling of instructions with ingredients is crucial for operators to efficiently and properly run the batch.
Electronic document management
A state-of-the-art feature that is of immense help in documenting and tracking materials is an electronic document management system. This can resolve paper handling challenges by allowing any electronic file— jpg, Word, Excel, pdf, etc.—to be attached to any sales order, item master, customer, vendor, purchase order, or accounting transaction file within an ERP system.
Two advantages of this capability are instant access to supporting data, and permanently secure electronic storage. A document can be viewed merely by clicking on it, eliminating the possibility of lost or misplaced paper records. Digital files are safely kept in one central location in a SQL server database.
A few examples of the almost infinite uses for this feature include:
• Certificates of analysis attached to ingredients
• Formula or engineering information attached to the batch recipe
• Delivery confirmation signatures attached to shipping orders
• Scanned delivery tickets attached to purchase orders
Inventory optimization
The inventory tracking required by Section 306 is automatic with an advanced ERP system. This capability can also streamline Material Requirements Planning (MRP), resulting in higher profits through the maintenance of optimum inventory levels and the avoidance of delays caused by lack of raw materials.
An ERP system should show a summary of all raw materials, flagging those that have fallen below internally set re-order points, and listing open purchase orders placed for raw materials and materials that have been issued to a job but not yet used. The purchasing agent should only have to review the materials that have fallen below re-order points to generate purchase orders. The purchasing component may be set to default to a certain vendor. The user should also be able to set up standard quantities for reorder. The ease of purchasing often means that a single employee can handle multiple jobs, including evaluating vendor performance in filling orders in a timely manner. Greater efficiencies are achieved by combining orders and avoiding last-minute ordering, with which generally leads to premium pricing and expedited shipping costs.
Some ERP systems permit negative inventory to allow for inaccurate bills of material and give paperwork time to “catch up” with deliveries. But this is not necessarily the most efficient way to conduct business. If your business philosophy frowns on negative inventories, your ERP system should have the option to refuse to allow such transactions. As a general rule, negative inventory and true lot control cannot co-exist.
Sales
For Section 306 compliance, a company-wide ERP system gives immediate information on the final destination of every batch. You should be able to drill down into each sales order to see both the raw material lots used in its production and the exact batches that went into each shipment.
In addition, the ease of sales functions will free salespersons to spend more time selling and less time on documentation. Entry of sales orders should be almost completely automated once customers are entered into the system. Although many tools for salespersons are on the market, a company-wide ERP system will allow an easy entry of orders into the system and ultimately post information automatically to the general ledger and accounts receivable system. You should be able to instantly print packing lists, bills of lading, pick lists, invoices, customer statements, and other reports, as well as sales analysis reports.
Customers often negotiate special pricing, and may require customized forms for their shipments, and specialized markings on their products. The ERP system should integrate dedicated customer requirements into the customer records so that it need not be entered again for additional orders. Pricing should be automatically calculated based on different factors for different customers, without intervention by the salesperson or accounting department.
The best ERP systems have an integrated contact management module that readily synchronizes with tools, such as Microsoft Word for word processing and Outlook for e-mail, contacts and calendar. The contact manager should have all the capabilities of the stand-alone software, including call history, follow-up reminders, templates for letters, and forms. With a contact manager, you can readily synchronize a BlackBerry® or other PDA to Outlook so all your information will be right in your pocket, even on the road. The ability to tie individual contacts to a customer will allow you to jump right to the sales order summary or order history with just a click of the mouse.
Accounting
click the image to enlarge ERP for Food & Beverage |
The major advantage of ERP software designed for manufacturing is the integration of production and accounting modules, rather than a loose connection of two separate software packages as so many facilities have done. Where two or more systems are in use, there are almost always points of disconnect, where extra steps by accounting personnel are required to keep information consistent and up to date. The short response time required by Section 306 means all information must always be current, without intervention by accounting personnel.
Once an ERP system is fully implemented and in use by all departments, most of the errors and many of the bookkeeping tasks performed by the accounting department will disappear. Improvements to the business process will occur as accounting personnel have more time to analyze and improve budgeting, income projections, expense analysis, and procedures. Integrated systems can dramatically change the operations of the accounting department. Properly implemented ERP systems change the accounting role from a data entry position to a true audit and control function.
Reports
To assure rapid tracking in accordance with Section 306, software should be designed for ease of finding information and viewing it in an appropriate format. ERP software for food manufacturing should already contain most of the printed documents necessary, such as batch tickets, inventory reports, purchase orders, sales orders, order summaries, customer packing lists, etc. It should also generate a full range of user-specific financial reports, including invoices, receivables, payables, balance sheets, and income statements, and have check-writing capabilities. And where unique custom reporting is required, the system should provide easy access to a data dictionary that lists every table and every field within the system to permit interfacing with an outside report writer.
Implementation
Because of the complexity of ERP systems, implementation must be done in a careful, pre-planned manner, with clear goals and milestones by which to measure progress. The ERP vendor should be prepared to work with you in configuring the system to mimic the way the business functions, rather than forcing your procedures to change, except where a procedural change will benefit the company. Expect implementation to take at least 90 to 180 days and possibly longer for large-scale enterprises.
The proper ERP system is an investment that will not only ease the pain of Section 306 compliance, but will also pay out in terms of significant improvements to your business process and profitability.