If you are selecting a new ERP system, dont make assumptions that they all work the way you do. This article looks at some of the differentiating features of CPG manufacturing, and identifies some of the features that an ERP system must have to support CPG manufacturing.
There are scores of ERP systems available. The economics of developing software packages means that features are included to appeal to the widest market. But manufacturing companies operate differently in different sectors, and manufacturers of consumer packaged goods (CPG) will run their businesses very differently from engineering companies or batch manufacturers of assembled products.
Manufacturers supplying the major supermarket retailers, whether the product is food, drink, personal care, cleaning productsor any other product stocked and sold by supermarketsall share common business challenges. The customer wants products manufactured to order, with lead times often measured in hours rather than days or weeks; often with highly variable forecasts; cost are constantly being driven downwards; and consistent high quality is a prerequisite. On top of that, increasing regulatory requirements means more and more control and reporting. Failure to meet the retailers demands means the business goes to a competitor. These challenges are typical of the sector, and the business processes, and the systems that support them, must work in the way the manufacturers of consumer packaged goods operate.
1. Demand-driven manufacturing
Lets start at the end, because that is where CPG manufacturers measure the most important metric of allorders delivered on-time, in-full. Because supermarkets have no warehouses, all goods, whether perishable or not are collected from the manufacturer and routed to the supermarket shelves within hours. If a vehicle is to collect 10,000 chilled cottage pies at to meet a delivery slot at the distribution centre, then everything in the manufacturing process is geared to meeting that deadline. And because there is no finished goods stock, the end of the production process is the loading bay. Many conventional ERP systems expect to sell from stockcheck how it will support despatching in a CPG environment.
2. Manufacturing planning
Working back from the despatch time, manufacturing needs to be planned in the way CPG products are made. Much of this is repetitive, sequential processes as large batches move continuously through the various process stages. Many ERP systems assume that products are made in batchescheck how they deal with continuous processes and high volume, rate-based manufacture.
3. Order-less manufacturing
Do you raise works orders for every order, every batch, and every pre-processed ingredient? You probably dont, and most ERP systems expect that you will. If you manufacture pies, the final pie-manufacturing process may be order controlled but it is highly likely that the manufacture of pastry is done in bulk to satisfy the requirements of several manufacturing batches. Raising works orders and completing them for every feeder mix is impractical, so an ERP system designed for CPG manufacture will support order-less manufacturing and still retain full traceability.
4. Managing Ingredients
CPG manufacturing is typically fast moving, high volume and fairly simple manufacturing, with relatively low-cost ingredients. Nevertheless, full control and traceability is essential, so it must be possible to use ingredients without the overhead of constantly recording stock issues. Many ingredients will be fed from bulk tanks or silos, so the ERP system must support vendor managed inventory, bulk stock handling, line-side stock locations and back-flushingand all the time maintaining full product traceability with minimum clerical intervention.
5. Order management
Well finish at the start of the manufacturing process. Orders for CPG come in a number of waysEDI still accounts for the highest volume but many customers are setting up XML links, and the sales office fax and telephone are still very busy. Most CPG manufacturers have a few, very important customers that account for much of their output, and these customers will usually provide some form of demand projection or forecast. Because of the tight timescales involved, many CPG manufacturers have to rely on interpreting forecasts so production processes can get under way. CPG order entry has to be very closely coupled with forecasting, demand management and manufacturing planning. As every company has its own way of managing sales order entry, check that the ERP system is sufficiently flexible to support your own particular way of managing customer orders.
There are many more features for CPG manufactures than this short article can cover. Perhaps more important are the skills and relevant experience with your ERP supplier. A supplier whose project managers and consultants have personally implemented many ERP systems in CPG manufacturers is worth more than moneyit will make a real difference to your business.
Neville Merritt is Sales & Marketing Director at SSI, whose ERP system TROPOS is used by many CPG manufacturers in the