With supermarkets and consumers becoming increasingly demanding, Brian Davis examines how close the two way dialogue between the retailer, the manufacturer and the supply chain really is, and the role IT is playing in facilitating this
The food business is fiercely competitive and has to react to widely varying supply chain conditions at source; from farms, dairies and other ingredient suppliers, and at the customer end. Supermarkets and smaller stores restock on a daily basis, working to tight margins with extremely demanding requirements, while the vagaries of weather, multi-sourcing from international markets and rapidly changing recipes impact production whether involved in supply of breakfast cereals, salads or ready-made meals.
“We run a vast database and have to react to volatile demand for new products and recipes faster than ever before,” says Nigel Nash, company secretary and financial controller of ingredient supplier Lycored. The firm blends and supplies vitamins and minerals for major food manufacturers like Kellogg. Increasingly it sources ingredients from China and India “as Europe material suppliers just can’t compete,” he says.
The key to success for production planning is accurate forecasting, while also ensuring the right quality to meet demanding customer requirements.
“We are continuously working on new recipes. For every dozen or so requests we work on, only one may go into final production, and there are many variables to consider.”
Advanced supply chain software plays a key role in getting the mix right. Formerly Lycored had a standalone system. “We used to take our recipes, label them with information from the system and physically key it in, which took about half an hour, and the time stacked up,” remarks Nash. Over the last two years the system was automated, working with Access Supply Chain to create an automatic link between the customer and the manufacturer. Today an authorised recipe can be downloaded at the touch of a button.
“The product specification database allows us to formulate finished products, with details of all our quotations, related legislation and safety data,” he says. The supply chain software analyses trends and shows them in a coloured grid which matches the information with current stocks held, and also gives a production and purchasing plan to meet that demand.
Information includes label requirements, pack sizes and ingredients, and percentage per kilo to roll. The savings amount to more than just time. “We have also eliminated errors from manual keying. The benefits of speed and accuracy were immediate.”
When an order comes in, it goes straight to customer service where it is entered on the system. This gives the planner a prompt that a new order has been entered. He checks when it can be produced and confirms that it matches the date requested by the customer. The planner then uses his own skill and experience to fine tune the process. OTIF (on time in full) delivery now stands at 95 per cent, “a huge improvement,” reflects Nash.
Information integration in the extended food manufacturing supply chain can be very challenging.
Ingredients are sourced worldwide, not only from farms and orchards, but major chemical manufacturers, other ingredient suppliers and packaging sources. Many of the ingredient suppliers are quite small and relatively isolated. So supply chain information has to be integrated from a number of formats, including EDI links with customers and some larger companies with more sophisticated systems, but a lot of the suppliers still rely on email, fax and phone.
“The level of integration in UK food manufacturers is quite variable – particularly among medium-sized turnover companies who still mostly rely on manual and basic business systems,” explains Craig Such, managing director of Access Supply Chain. Typically, smaller companies get contracts with large food multiples and struggle to keep up with demand unless they become smarter and adopt IT supply chain solutions to manage their growth.
Fast response is a priority as EPOS systems in major supermarket chains flow vast amounts of data and requests through the supply chain, to facilitate more accurate forecasting information than ever before. Till data and ‘reward schemes’ are collated by multiples like Sainsbury’s, Tesco and M&S, then put across as forecasts to suppliers as small as £3 million turnover to multi-millions. The forecasts are relayed via EDI, using EDI packages such as Kewill or Freeway Commerce, or via email. There are several supply chain solutions on the market which are favoured by the food market including Access, the Preactor APS engine, Ross Systems and IFS.
Better information visibility has benefits at all levels. Lycored’s Nash admits: “Debtor days went through the roof when credit control responsibility lay with head office. Now it’s halved to less than 60 days.” Production efficiency has also improved with better reporting and analytics. “We run monthly reports on expiry dates and run auto-allocation of materials. On the manual system we had to decide which batch of material to use next. Now it all runs automatically.”
Ideally, supply chain software should give a well integrated view across a variety of enterprises and departments. Good systems integrate with warehouse management systems for location control and voice picking systems like those from Delta WMS. For the most part, logistics is outsourced. But here again, good information exchange is vital. Specialist transport planning systems handle route optimisation and data on temperature and refrigeration, which is important for handling food related materials. A lot of companies use vehicle tracking systems such as Map Mechanics to monitor the progress of goods distribution, for example.
There are also many specialist software packages for specific purposes such as stock optimisation, safety stock trend analysis and farm management, of course. For the most part, sell-by information is handled by a food manufacturer’s ERP system.
Unlike other industry sectors, the food industry literally has to react to the vagaries of taste, not just of the public but highly demanding customers in the restaurant and hotel business. Take Kingfisher, which supplies fish to three star hotels and good quality restaurants. Here again, supply chain software plays a crucial role.
“Essentially the buyers don’t know what’s available until they attend the market. We don’t buy-to-order but to supply,” says systems administrator Toby Bennett. “Sourcing used to be very paper-based, dealing with agents here and abroad. Fish was booked in by species, size, quantity and source.” Now all this data goes in by touch screen using Formul8 from Sanderson.
Formul8 runs off stock, sales and purchase ledger and handles all sales orders as a perpetual stocking system. “We’ve seen considerable improvements in terms of managing the stock. Previously we sometimes oversold products, and information flow on the shopfloor has vastly streamlined. We now have full traceability, and actually far more features on the system than we need!” In parallel, Kingfisher also runs ProClarity software so information from Formul8 is dumped down on a daily basis to provide Kingfisher with information on customer spend, grouped by product, for better sales performance analysis.
But there are still big gaps compared with other industry sectors; as Bennett admits he has no direct links with logistics online. “But we are looking at barcoding and point of delivery electronic signature systems for our fleet of refrigerated vehicles. However, the transport manager does keep a careful eye on the fleet using the Fleetstar tracking system.
Keeping with the fishy theme, Young’s Seafood has implemented new forecasting and production planning from TXT e-solutions to optimise supply chain response and facilitate accurate planning across its entire business. In a £1 million overhaul of its IT systems, Young’s expects to halve longterm forecast error rates and improve service to a large network of retail customers.
‘The challenge for us is to maintain high levels of service by more effective stock management,” says supply chain manager Ian Ashbrook. “This can only be achieved by moving to a more integrated business-wide process. Previously we were limited in terms of actually evaluating demand for individual products. Now we have an integrated system replacing standalone systems which required time consuming manual data input.”
Today the company can align supplier plans with demand, stepping up production to meet seasonal peaks, as well as allowing rapid evaluation of the impact of retail promotions in a fast growing food business. A combination of TXTDemand and TXTPlan gives Young’s an end-to-end supply chain planning tool, which enables the management to generate optimised plans for quick reaction to fluctuations in demand.
Similarly the Cromer Crab Company, which serves Tesco, M&S and Waitrose, gained better control and full visibility of its stock inside 12 months, using a fully automated EDI system. The company moved from a traditional DOSbased accounting system with no integration, which was prone to error and increasingly out of date, to total visibility of stock, sales order and invoice processes with a solution from Access Supply Chain.
“The system now provides us with the compliance necessary to win new contracts from major retailers like M&S,” says financial controller Nigel Plant. The company has also become one of six preferred suppliers to Tesco due to the benefit of more accurate forecasting and planning. Plant reckons that elimination of waste in their supply chain operations, through improved labour efficiency and materials control, could save upwards of £800,000.
Information exchange is a two-way dialogue.
But the food industry still has a long way to go before it compares with other sectors like the auto industry in terms of detailed information exchange online, rather than a quick check by phone, fax or email on product availability. EPOS may be gathering inordinate levels of data about the consumer’s spending practices, but the sourcing of materials in the food sector from an astounding variety of locations around the world is still highly reliant on relatively non-automated information exchange.