5 Reasons Why Canadian Frozen Food Manufacturers Require Deeper ERP Capabilities
If you are new to Canada’s consumer packaged goods (CPG) manufacturing sector, you might think that frozen food must be the most straightforward business to run. Isn’t the frozen food business all about cutting vegetables, throwing them in the freezer, and making tons of money? Well, while that is somewhat true, the perspective of ERP process complexity sees it as one of the trickier business operations.
This article will help you understand five reasons why a frozen food business requires deeper ERP capabilities and what you need to know prior to interviewing your consultant once you are ready for a new ERP.
Reason #1: Formulation and Recipe Management
Unlike most industrial discrete manufacturers that use a bill of materials (BOM) to manufacture their products, a food business requires formulation or recipe.
The significant difference between a formulation and a BOM is that a formulation is like a mathematical formula where some materials’ quantities may depend on the other. For example, the amount of water you might use in a recipe may depend on the amount of milk or oil used.
The formulations also require complex auto-UoM conversions to ensure that the ratio of raw materials or nutrients is compliant as per the packaging labels or pre-identified recipes.
Finally, as a food manufacturer, you might be required to maintain multiple versions of the recipe, and depending upon the availability of raw materials, you might release an appropriate version to the production floor.
Since most popular ERP packages primarily support discrete-centric industries, they don’t cater to food manufacturers’ unique needs. If your consultant doesn’t have experience implementing an ERP for a food manufacturer, they might implement it from a discrete manufacturer’s perspective. Consequently, you might end up managing your formulas on spreadsheets, defeating the purpose of an ERP project with significant challenges in planning and forecasting.
Reason #2: Unique Processes of a Frozen Business
Unlike traditional food manufacturing processes, frozen food manufacturing processes contain process steps that may be significantly slower than the most. As a result, you might have unique scheduling and lot traceability requirements. For example, your blast freezer may be slower than the thawing process, or the thawing process could be slower than the chopping or packaging process.
If the ERP package doesn’t support pre-assigned lots, you may end up tracing the lots manually on the production line, or the lots are likely to be mixed. This mixing of lots may have further consequences of failing your HACCP compliance or recall management needs. At a minimum, you need to ensure that the ERP package you buy must support pre-assigned lots out-of-the-box if you plan to pursue HACCP compliance certification.
Reason #3: D2C With Owned Logistics
Most logistics vendors don’t support the last-mile delivery needs of manufacturers. As a frozen food manufacturer, you have further challenges. You require temperature-controlled delivery vehicles and have unique requirements to order your shipments by postal codes due to frozen shipments’ temperate-controlled requirements.
Also, with the rising trend of Direct to Consumer (D2C) and the lead time expectations of consumers, you may want to control your logistics.
The logistics requirements of a frozen food manufacturer are unique to their business. If your consultant doesn’t have experience implementing an ERP for a frozen food manufacturer, you might have issues fulfilling your orders post-go-live on a new ERP.
Reason #4: Compliance With HACCP and Recall Management
As a food manufacturer, you need to attain HACCP certification for your products. As part of this certification, you need to maintain a comprehensive plan to trace the origins of raw materials, end-to-end traceability of their production and handling, and finished goods consumption. As a result, you need extensive quality management processes embedded in your procurement, production, and fulfillment processes.
Most popular ERP packages, including their robust quality management modules, will not have out-of-the-box support for HACCP compliance’s demanding needs. The experience of your ERP consultant is critical in attaining HACCP certification and meeting its ongoing requirements to maintain compliance.
Reason #5: US Entity Consolidation and NAFTA Processes
Most Canadian manufacturers aim for the US market in the hope of targeting the much larger consumer base. Unless you have a niche product, most US distributors and big-box retailers prefer to work with a US business, as that simplifies processes from their end. For this reason, you likely have a US entity that maintains its books and with its separate legal entity. Also, since you are crossing the international border, you would be required to produce NAFTA related documentation for your shipments.
The NAFTA processes are also unique to businesses involved with the cross-border trade. If your ERP package doesn’t support US entity consolidation, you might be spending a significant amount of time with manual paperwork and tracking.
While running a frozen food business may appear easy on the surface, Canadian frozen food manufacturers face added challenges due to their target market and process complexity.
When you are ready to explore a new ERP, this article will help understand how your business processes differ, prior to interviewing an ERP consultant so that you could find a suitable ERP product for your business and a consultant experienced in the Canadian frozen food manufacturing industry.
Author: Sam Gupta has been a thought leader in the digital transformation space for nearly two decades, with the primary focus on financial systems and ERP. He has been part of large transformation initiatives for fortune-500 corporations but now spends his time consulting with SMEs as a Principal Consultant at ElevatIQ. Sam regularly speaks at industry conferences and contributes his experiences through many popular blogs and publications. He is always open to chat about technology and digital transformation topics on LinkedIn or Twitter. Don’t hesitate to reach out to him.