Budgeting for food and drink ERP projects

John Donagher, principal consultant at Lumenia discusses the key challenges for food and beverage companies when planning ERP projects.

John Donagher, Principal Consultant, Lumenia
John Donagher, Principal Consultant, Lumenia

Budgeting for an ERP project can be a complicated task. Without a proper understanding of the project scope and a host of other considerations it is difficult to make a sensible estimate of cost. A realistic budget can only be prepared once the project scope is clear. For food and beverage companies there are generally lots of decisions to be made around functional scope.

One of the challenges when considering an ERP implementation is that many of the functional requirements of the sector are poorly supported by the larger ERP vendors; consequently it’s often necessary to consider niche or best-of-breed solutions as part of the overall solution.

 Let’s look at five of those challenging areas for food and beverage companies:

  • MANAGING FARMERS/GROWERS

Many companies source raw materials directly from farmers or growers. Spot prices or contracts are both used, with payments often linked to the quality of the material provided. Functional requirements across different food sectors have similarities, but industry-specific complexities and regulatory requirements also need to be accommodated. Many ERP systems have good solutions for financials, manufacturing and distribution, but this area is less well served.

  • MIXING & BLENDING

This is a feature for products where batches are blended together to meet a desired set of characteristics. In many industries this is virtually an art, with seemingly subjective characteristics such as taste and smell coming into play. Systems are required to support the blender’s decision-making and ensuring batch traceability is maintained. ERP systems designed for process manufacturing often provide batch traceability, but blending solutions are much less common.

  • DISASSEMBLY (INVERTED BILL OF MATERIALS (BOM))

Most people are familiar with BOMs, but meat and poultry processors have to work in reverse; inverted bills of materials are used to represent how the carcass is broken down into the individual consumer products which you find on the supermarket shelf. Figuring out the optimum way to do this to meet customer requirements and minimise waste is very complex and poorly supported by many ERP systems.

  • RECIPE MANAGEMENT AND NEW PRODUCT DEVELOPMENT

New products are constantly being developed and introduced. Functional requirements to support this activity include the ability to manage trial production runs; approval of stages of development; nutritional analysis; evolving BOMs, recipes and product costing. Some ERP systems are very strong in this area, while others will struggle.

  • SALES FORECASTING

Most ERP systems provide basic forecasting solutions that deal effectively with basic forecasting requirements. Often that’s sufficient, but some companies may need to go a step further, with the ability to have multiple collaborators, inputs from customers’ EPOS systems, forecast accuracy measurement and management of multiple interdependent product lines and brands.

A single system from one supplier often fails to meet all of the functional requirements for a food and beverage business. The only reliable way to accurately estimate ERP project cost is to carry out a detailed project scoping exercise, led by someone with extensive ERP strategy and implementation experience, to ensure that project cost assumptions are both complete and realistic.