Broad strategy

According to Jeremy Hammant, food manufacturers need a strong operational ERP backbone to take advantage of digital solutions

Food and beverage manufacturers face a variety of demand-side supply chain challenges, such as the ever-increasing service requirements of their retail customers and growing interest from consumers about traceability and provenance. In addition, food and beverage manufacturers need to deal with packaging and labelling requirements, recipe management, lot tracking, regulatory compliance, food safety and recall issues, and a host of other day-to-day operational challenges, all while ensuring a focus on cost control and the overall profitability of the company. An Enterprise Resource Planning (ERP) system designed for food and beverage manufacturers provides the framework needed to effectively manage every aspect of the business.

New digital technologies are increasingly changing the food and drink manufacturing landscape. Social, mobile, analytics, cloud, Internet of Things, autonomous vehicles, artificial intelligence, blockchain and a host of other technologies are introducing previously unimagined levels of connectivity, data access, and automation across the supply chain. These capabilities are providing greater transparency and eliminating bottlenecks in the exchange of information. In doing so, they are undoubtedly accelerating the pace of business and uncovering opportunities across an extended connected supply chain.

In order to take advantage of these digital opportunities businesses must have a have a strong operational ERP backbone. If you hope to be part of a connected supply chain, you must have accurate, accessible customer and product data, and disciplined end-to-end transaction processes. In addition, your ERP solution must be 23capable of evolving to take advantage of digital technologies and supporting a data-driven decision-making culture – one that values data and is comfortable with hypothesising, gathering data, and interpreting that data to make better decisions. This isn’t about just having a couple of data scientists – the culture must be at the heart of the company. The benefit will be accelerated decision-making and responsiveness to the opportunities that dynamic supply chain optimisation can deliver. Unfortunately, many legacy ERP solutions are now constraining business opportunities and undermining digital initiatives.

To get the full value of the digital revolution and become a data-driven, connected supply chain enterprise, food and beverage manufacturers must have an ERP system that can fully integrate the operational technology needed. Unfortunately, a key problem with legacy ERP solutions is that with the changes in technology demanded by Industry 4.0, the requirements of businesses have changed considerably. Technology is continuously evolving, and legacy ERP applications are finding it increasingly difficult to cope. In addition, new entrants to the workforce, who have grown up with user-friendly mobile applications, often find ERP systems unwieldy and complicated to use. If the ERP system is particularly unfriendly, employees won’t use it, particularly if it means more work than avoiding it altogether.

When you add to these problems the ever-increasing costs of maintaining legacy ERP solutions and the dwindling pool of skilled legacy software resources (anyone know of any good RPG programmers?) the question becomes why haven’t businesses acted sooner? The majority of organisations made their ERP choices in the last century and think conservatively about ERP modernisation because they have made significant financial investments and worry about business disruption, or the possible failure of a business wide technology project. If your existing ERP system cannot evolve to enable digital opportunities then this places the future success of the business in jeopardy.

In many businesses ERP decisions are still the responsibility of IT departments that often let emotional and political factors get in the way of thinking clearly about business benefits. Many CIOs worry about asking for the budget and resources for a major ERP overhaul. The sunk costs of ERP solutions implemented in (and designed for) the last century are spent. The business case for future investment must be built around the factors that matter for a 21st century digital business: agility and customer experience. Make sure that the focus is on business ROI, not technology ROI.

So, if you think that your legacy ERP system is holding your business back don’t wait for the CIO to address the issue. Consider your ERP requirements as part of a broader digital strategy. Ask yourself whether there is an understanding of the existing digital capabilities of the business, including the legacy ERP solution. Define what digital capabilities, including ERP capabilities, are required to enable your future business objectives and what is the roadmap to get there. If this requires ditching your existing ERP solution then do it!

Your legacy ERP system may have been cutting edge back in the 20th century but think of it like a car – would you spend money on a new paint job if the engine had reached the end of its life? Similarly, small investments in your existing ERP system may also mean that you’re still driving an old diesel car while your competition is winning the race with a plug-in hybrid.

Jeremy Hammant is a Senior Business Adviser at BearingPoint, an independent management and technology consultancy. The company operates in three units: Consulting, Solutions and Ventures. BearingPoint’s clients include many of the world’s leading companies. The firm has a global consulting network with more than 10,000 people and supports clients in over 75 countries, engaging with them to achieve measurable and sustainable success.