The food and beverage industry is one of the most complex due to the risks involved in its activity, such as the demanding regulations they have to comply with, the handling of products with a short life cycle, contamination and product recalls. All these factors mean that these companies are on the precipice on a daily basis, and could at any moment fall into a reputation crisis or face harsh administrative and criminal sanctions.
The food industry, along with the health sector, is particularly vulnerable to the environment, so it is of utmost importance to have tools that help minimize risks. One such solution is Sage X3 ERP. This business management software allows to automate processes, control all the resources involved in production, the intelligent management of cash to ensure a margin to cope with any unforeseen event and the improvement in competitiveness through the online channel and marketing and advertising campaigns.
Risks of food and beverage companies
Contamination is one of the risks that put the reputation of food and beverage companies in crisis. Millennials are particularly demanding when it comes to the products they buy. They demand social responsibility and ethical behavior. This demand forces manufacturers to be transparent about the products they make and how they make them. In this regard, the importance of eliminating plastics is gaining more and more strength and many NGOs are denouncing these practices. For example, in March 2020, the NGO Tearfund denounced four beverage giants (Coca-Cola, PepsiCo, Nestlé and Unilever) for the emission of more than half a million tons of plastic pollution, which is equivalent to covering 83 soccer fields every day.
Along with contamination, the appearance of a bad batch is another risk in this sector. At the end of last year, the Spanish Agency for Food Safety and Nutrition (AESAN) warned about the presence of Listeria monocytogenes bacteria in goat cheese produced by the company JERMI and sold in the Lidl supermarket chain. Another example was the scandal that erupted in 2013 when the European Union warned that horsemeat was being sold as if it were beef in some twenty countries. An alarm of this magnitude puts the entire sector at risk, given the mistrust generated among consumers.
The impact of COVID on the food sector
The pandemic is another challenge facing the sector. The report presented in June 2020 by the Spanish Federation of Food and Beverage Industries predicted the loss of between 4,000 and 11,000 direct jobs and the closure of 800 companies, mostly SMEs. The closure of the HORECA channel and the paralysis of tourism is what has led many of these companies to bankruptcy, since around 30% of their supply is destined to the hotel and catering industry. The Federation foresees a recovery by 2022, but in the meantime it is essential that companies prepare themselves to be more competitive, through the digital transformation of the business.
According to a report by Panorama Consulting Solutions on ERP systems and enterprise software, only 12% of executives were “very satisfied” with their current ERP solution, and 59% of multinational companies found it a “burden”. Many companies find that the ERP solutions they implemented with great financial effort do not provide value because they are outdated and do not respond to new market needs. The positive side of all this is that we are at an ideal time to look for a technology partner to implement modern solutions that are faster to implement, simpler to use and, above all, up-to-date and scalable, designed for companies looking to grow.
What is traceability and why is it important?
To address the concept of traceability, we refer to a report prepared by the Spanish Agency for Food Safety and Nutrition, according to which traceability is “the ability to find and follow the trace, through all stages of production, processing and distribution, of a food, feed, food-producing animal or substance intended or likely to be incorporated into food or feed”.
According to the Codex Alimentarius: “Traceability is the ability to follow the movement of a food through specified stage(s) of production, processing and distribution”.
This term implies the need to identify any product within the company, from the acquisition of raw materials or incoming goods, through the various stages of production, processing and/or distribution, to the point of delivery to the next link in the chain.
Traceability brings benefits for companies, consumers and the administration.
Benefits of traceability for companies
- A high level of protection of human life and health is achieved. And consequently, the company guarantees the quality of the product and its certification.
- It provides information within the company to facilitate process control and management, e.g. stock control.
- When a food problem arises, it facilitates the localization, immobilization and, if necessary, the effective and selective removal of food.
- Contributes to decision making regarding the destination of batches of affected products.
- It enables the origin of a problem to be demonstrated, an aspect that is particularly important when it comes to pointing the finger at a responsible party. In this way, it is possible to prove innocence or guilt in the case of a crime against public health, product quality infringements or the loyalty of a company with respect to commercial transactions.
- It helps to deal with customer complaints by being able to extract information from any point in the chain, from production to delivery to the customer. Once the problem is located, the appropriate measures will be taken with maximum efficiency, speed and coordination.
- Traceability promotes the commercial safety of food and therefore contributes to building consumer confidence.
Traceability also has benefits for the consumer: transparency of information throughout the agri-food chain, from producer to consumer, generates confidence. Finally, for the government, the establishment of traceability systems allows greater confidence to be placed in food companies by facilitating official control activities along the entire chain.
Why it is important to have up-to-date software
As we have already mentioned, it is important to have an updated ERP software for the food and beverage industry because its implementation represents a significant investment for the company. If the company does not grow, it cannot be because of an ERP whose infrastructure has become obsolete and is incapable of integrating new functionalities necessary for the business.
To ensure quality control
ERP has to be able to quickly predict possible deviations or out-of-tolerance conditions at the equipment or product level to avoid quality problems. This is achieved through system integration of all business applications.
Maintaining the composition and flavor of the products
In this sector, it is important to always maintain the same composition and flavor of the products, as this is what consumers expect and what is required of manufacturers. This is achieved by standardizing processes.
Visibility of data and automatic updating of records
As in other industries, working with real-time data is vital for decision making. ERP systems need to keep records in a central database that can update and automate data collection quickly and easily. Dynamic documentation makes it possible to update records automatically in the event, for example, of a change in a supplier or ingredient.
Integrating the manufacturing process with product design
In this sector, it is essential to have an ERP solution that allows the integration of manufacturing processes with product design. This means a reduction in the number of processes, which are often costly, as they require customized equipment and controls to maintain consistent quality levels.
As mentioned above, these companies are subject to strict regulatory controls, which requires them to be up to date with current regulations. Sanctions imposed by public authorities are severe and include embargoes, withdrawal or destruction of products from the market, fines and even criminal charges.
To avoid compliance problems, companies can:
Integrar el cumplimiento y la trazabilidad en sus procesos.
- Implement a central repository of relevant laws and regulations in force, accessible to employers, regulators and partners, to keep abreast of regulatory changes.
- Digitize document management processes to keep pace with regulations and provide timely and unified information to decision-makers.
- Implement business systems that lay the foundations for process control and automation, and ensure their integration and interoperability to avoid data silos.
- Maintain up-to-date software tools to manage regulatory reporting requirements and ensure compliance.
How Sage X3 helps with traceability and risk mitigation
To minimize the risk of product recalls and other supply chain issues as much as possible, food and beverage companies have the perfect solution in Sage X3. This software provides accurate and up-to-date data in real time.
With Sage X3, business management is improved in a number of ways:
- Quickly implement and comply with new regulatory requirements and ensure that all equipment continues to perform in compliance with regulations.
- Obtain reports with useful data that can be used within the company – and also for suppliers, customers and regulatory bodies – from a single centralized data source that includes information from the entire supply chain.
- Identify the root cause of product defects and the extent of contamination in the supply chain as early as possible.
- Communicate effectively with stakeholders and the rest of the supply chain during product recalls.
- Systematize other tasks to avoid product recalls and mitigate their consequences.
- Maintain and execute crisis management plans.
Source: Sage Food and Beverage Industry Traceability Report.