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.