An ERP for the food and beverage industry can help make both your costs and revenues more predictable. One of the biggest challenges in the food and beverage industry is predicting financials—especially costs. With the help of a good enterprise resource planning system, food and beverage industry executives can make better predictions based on the data available from the system.
To improve profits, clear, accurate data is essential. Direct costs for ingredients and packaging may be easier to manage than indirect costs. Administrative and operational costs lumped together as overhead may be incorrectly tracked or allocated, leading to incorrect pricing or poor earnings estimates.
The best way to improve your ability to predict profits is to better manage and track both direct and indirect costs. To do this, an ERP for the food and beverage industry is your best ally.
Hidden Costs of Production
Although production might seem like an area where expense tracking is clear, there can be hidden costs associated with it. These costs are rarely allocated and may be artificially inflating production costs.
- Overtime: Overtime costs may be associated with payroll, but would it be more accurate to associate them with production? If you haven’t met your quota for the day and extra product is needed to meet an order, overtime may be approved, which could be directly associated with the cost of production.
- Rework: Defects call for reruns of production, and this rework adds to the costs. How are you accounting for this?
- Scrap: Equipment failure, misalignment of packaging on the press, poor-quality ingredients that make it through a production run are all situations that require batches to be scrapped. How do you account for scrapped products?
- Lack of automation: Manual processes often introduce human error into the system. A lack of automation may be adding to your product costs, driving them higher than you can imagine. How many errors could have been prevented through workflow or task automation?
Quality Control Costs
Another area that may be driving up the cost of production is ingredient quality. It’s extremely important not only for taste and enjoyment, but also to meet guidelines and requirements of government bodies such as the CFIA and the FDA.
Measuring quality and monitoring ingredients requires tracking data across multiple suppliers and product lines. To do this effectively, you need ERP for the food and beverage industry. Through an ERP system, you’ll be able to track suppliers, monitor the quality and provide reports on demand. It’s a level of data and reporting that’s costly without an ERP for the food and beverage industry. Quality control costs may be driving up the cost of production if you’re still handling data and reporting through spreadsheets.
Lastly, another hidden cost may be in the lack of a recall tracing system. If receipts and purchase orders are stored in a file cabinet, it can be very difficult to track them down in the unfortunate event you have to recall a product. With an ERP system, you can search through the computer in seconds to match batch numbers with orders. Tracking materials is faster and more efficient.
ERP Supports Your Growing Manufacturing Business
Food and beverage manufacturers face a great deal of uncertainty. Worldwide, the cost of many ingredients continues to rise, and supply can be uncertain. But one thing remains sure: the more efficiently you can run your business, the better you’ll be at keeping indirect costs low. The right ERP for the food and beverage industry can improve your ability to track, monitor, and manage indirect costs for improved profitability.
Emerald TC provides software and consulting for manufacturing companies. We can help you choose the right accounting software, ERP system, payroll, or other software for your needs. Contact us or call 678-456-6919 for more information.