Role of ERP in the Digital Transformation of Food Companies

Enterprise Resource Planning systems have been a critical element of the technology landscape of food firms for decades.

FREMONT, CA: Enterprise Resource Planning (ERP) is a term that refers to a business management software system. A food company's ERP system enables them to manage and optimize their business processes—from purchasing to accounting, finance, human resources, production, and logistics. In a nutshell, ERP software is what keeps an organization functioning. Purchasing raw supplies, processing orders, managing and optimizing recipes, billing, and production planning are just a few responsibilities.

The ERP system is the essential data processing software. It has always been and has never been more critical than today. The digitization megatrend has resulted in a shift in the importance of ERP—what was formerly merely a tool for operational business support has evolved into a critical strategic building block:

As a data and process hub, the ERP system is involved in every digitalization endeavor. When dairies want to use RFID to track their batches, when food companies want to build a B2B online store for their customers, or when sausage manufacturers want to improve the control of their filling machines, ERP data is typically used to sustain improvements in their supply chain, administration, production, or sales. If food companies wish to incorporate blockchain and AI into their digitalization strategy or construct an intelligent food factory, the same is true. None of this would be possible without the ERP software in the background.

Effective data management via ERP provides the appropriate foundation for a process of continuous improvement. Data-driven companies, such as California manufacturer Courage Production, are paving the way. They use ERP for everyday duties and rationalize their daily operations based on digital production data, such as determining which product goes into which smoking chamber, utilizing advanced planning and scheduling, or eliminating operational losses. By integrating ERP data with data from other systems, choices can be automated, as with machine learning.

Not to mention expense savings. A look at the margins in this area demonstrates the critical nature of this subject—according to CSIMarket, the gross profit margin for the food-processing business was 22.05 percent in 2019, much lower than the whole market average of 49.4 percent. If food companies do not take advantage of all digitalization prospects and do not comprehend the ERP system as a cost-cutting tool, they will face difficult times. Many businesses are just getting started when it comes to value-adding procedures in the industry. Around 68 percent of companies continue to utilize paper when interacting with their ERP system—a condition that regularly digitalized businesses abandoned years ago.

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