Implementing ERP Systems: What Food Makers Need To Know

By Isaac Fletcher, contributing writer, Food Online

An ERP system is an important element for many food-making businesses, but whether the firm is large or small, there are some important factors to consider when making a first-time purchase or upgrading to a new system.

With the proliferation of internet technology, businesses are discovering a myriad of benefits to be held by leveraging software tools to improve various aspects of processes. However, when a food maker is experiencing a period of rapid or prolonged growth, they may soon find their current information technology (IT) infrastructure is no longer capable of handling the scope of their operations. When this occurs, one of the most effective first moves for the business to make is an overhaul of its current enterprise resource planning (ERP) system.

ERP systems are used to monitor all aspects of a firm’s operations, including sales, accounting, supply chain management, human resources, customer relationship management (CRM), etc. Since ERP has such essential and broad functionality, according to a study by Software Advice, choosing the right system can often be a challenging decision — initial investment in solutions can be expensive, and lifetime costs for a medium to large organization can reach into the millions. Furthermore, full implementation — from data migration to employee training — can take months to years to complete.

Another important consideration is how much customization is required to get an ERP system to fit the food maker’s specific needs. Not surprisingly, the more customization, the higher the cost and more time consuming the implementation. A high degree of customization can also create hurdles down the road when it comes time to upgrade the system.

Purchasing Or Upgrading An ERP System

For businesses that are already using an ERP system, the process involved in purchasing or upgrading to a new system can be costly, in terms of both dollars and time. Data migration, customization, and employee training may make it more difficult for a company that currently has an ERP system in place to upgrade than it would be for a company without an ERP system to make a first-time purchase and implementation. In this sense, first-time purchasers of ERP systems may find it to be an easier transition compared to those businesses that are switching from one ERP solution to another.

Implementation does present its challenges, and implementation failure can be downright disastrous for the reputation and profitability of a food-making business. It is important for a company to consult with experts during the implementation process to not only protect against failures, but also to keep expectations realistic. In many instances, businesses may overestimate the abilities of its future ERP system and create budgets and timelines that it simply will not be able to meet. While ERP solutions can provide incredible benefits, it is important to know exactly what can be expected from the new system as to not end up in a poor position.

Improving Integration

Many businesses interested in ERP solutions are currently using multiple disparate systems to handle various ERP needs, generally a combination of QuickBooks, Excel, and project management software. Using disparate systems is hardly efficient and can result in duplicate data entry, unnecessary communication between departments, and potential loss of important information. Improved integration between business processes is one of the fundamental purposes of ERP, so there is good reason for prospective buyers to be interested in a new system.

Traditionally, the key elements of ERP were accounting, sales, manufacturing, and supply chain management. However, in recent years, CRM has become an increasingly important facet of these platforms. Many businesses seek out ERP solutions specifically for improved integration with an existing CRM database.

Costs and Availability of Support

For some food makers currently using an ERP system, the motivation for switching to a new platform has less to do with software capabilities and more to do with the costs associated with their current system. Although ERP systems generally include a one-time perpetual license fee which allows the company to use the software in perpetuity, licensing fees do not include support and maintenance fees, which are billed separately. As support and maintenance fees increase, businesses are faced with the decision to either pay more each year for the same level of support or risk the entire system if something goes wrong.

Some support costs are unavoidable, but business can help guard against unnecessary costs by making sure they do not have a system that is too complex for their specific needs. Paying for support for a robust system that is being only partially utilized diminishes ROI and overall system effectiveness.

Additionally, more and more ERP vendors have begun offering subscription-based “Software-as-a-Service” (SaaS) contracts wherein users pay a monthly/annual fee for access to software instead of purchasing a perpetual license. In this format, the ERP software is typically hosted on a vendor’s servers and accessed by users through the Internet. The SaaS model will likely become more prevalent in the market, as it lowers the financial hurdle for smaller companies looking to implement ERP solutions. Although the subscription-based model means there will be ongoing usage costs for as long as the company needs the software, these costs include critical areas such as upgrades and maintenance.

Systems For Smaller Food Makers

Historically, ERP systems have been engineered with large enterprises and organizations in mind. With the high cost of initial investment and ongoing fees, ERP solutions were often out of reach for small to mid-size businesses (SMBs). With the growing importance of IT within business operations, smaller food firms are seeking ERP solutions and looking for ways to afford their implementation. The aforementioned shift in revenue model from perpetual license to subscription-based has allowed many SMBs to consider ERP systems as a viable solution for their operational needs.

Since an ERP system has a life cycle that is often 10 years or greater, vendors will likely see an opportunity in influencing small, growing businesses to implement affordable systems that can be scaled to meet their growing needs. As these food-making businesses grow and their needs become more complex, software vendors will be ready to accommodate their evolving demands.