Hungry for realtime solutions

Real-time data capture and monitoring is key to creating a flexible business and accelerating the supply chain, as Steven Hargreaves, group product director for Solarsoft Business Systems, explains

Over the past 20 years there has been a transformation in the food industry.

The growth in fresh and chilled food, at the expense of tinned and frozen, and the acceleration of product life cycles in the quest for diversity and consumer choice are creating massive challenges for retailers and food producers alike. But there are also huge opportunities for those organisations that can combine product innovation with an agile and responsive supply chain.

Many companies have invested heavily in state-of-the-art production technology and Enterprise Resource Planning (ERP) systems, yet still use clipboards and paper to collect critical production information - and hence have no insight into the true costs of responding to fast changing supplier demands.

Forecasting failure The shift towards fresh and chilled food and niche products has opened up the market to smaller producers and provided new opportunities for local suppliers and farmers.

However, it has also created intense supply chain pressure to maximise the far shorter product lifespan of these goods.

To put this into context, 25 years ago, typical supermarket lead times were between seven and 14 days, with companies holding upwards of two weeks stock. Today, lead times can be a matter of hours with supermarkets amending order quantities as late as 12 noon and expecting goods to be shipped by 4pm. Stock holding is minimal - and the retailers will impose significant fines if the supplier fails to meet its order, even if that order is 30% higher than the day before.

Underpinning this challenging supply chain is the inability of even the most sophisticated forecasting tools to manage the variables that affect the daily sales of chilled and fresh goods - most notably the weather.

For traditional, slower moving, longer life goods, forecasting can be extremely accurate, reflecting predictable seasonal variation and established purchase histories to provide suppliers with capacity planning data well into the future.

This model simply does not work in the chilled and fresh sectors where purchasing decisions are more frequent and short shelf life means inventory cannot be kept to ride out fluctuations in demand. Add in the complication of accelerating product life cycles - which means there is limited history on which to base a forecast - and retailers are left with no choice but to require very short lead times and demand extraordinary agility from suppliers.

Retailers increasingly are willing to offer suppliers direct access to Electronic Point of Sale (EPOS) data to undertake their own forecasting. It's a step in the right direction, but one that leaves the supplier with full responsibility for trying to optimise a dynamic value chain while minimising waste.

The risk for suppliers is that switching rapidly between product lines to meet demand can rapidly undermine profitability.

The overhead of repeated wash downs and resets in shorter production runs drives up unit costs and is often not apparent until too late. Money can be lost very quickly without tight control, but failure to meet the retailers' demands means the manufacturer may face significant fines or lose the account.

Improving yield In a bid to increase peak capacity and become more responsive, manufacturers have invested heavily in both new equipment and ERP software. Yet too many still rely on paper-based information and manual processes to bridge the gap between factory floor and their operational systems. This creates a bottleneck in the flow of critical management information. No company can respond to changes in demand effectively without detailed, real-time insight into production costs and efficiency. And acting without valid data puts the bottom line at risk.

An agile business must understand its costs, not on a monthly basis but batch by batch. The key to creating a highly responsive business is to bridge this automation gap between plant and ERP systems. Integration will allow the recording mechanism to collect data much more intensively throughout the process and monitor yields more closely to attain a precise measure of raw materials consumption, waste and good production.

Touch screen information gathering terminals, real-time monitoring of weighing scales and production lines can all be integrated directly with the ERP system to give managers immediate insight into their manufacturing efficiency. From raw materials to energy consumption, overweighs and wastage rates, performance can be monitored by the second, enabling companies to gain unprecedented insight into profitability and the factors that might undermine it. Armed with this data, management can coolly assess the true cost of adjusting production to satisfy fast changing retail demand.