The food and beverage industry has grown exponentially over the last few years, thanks to technology, improved machinery, and overall demand. However, with the ever-changing landscape of food and beverage production, manufacturers must be lean and intentional with their processes and decisions.
Maintaining profitability is a leading issue most manufacturing companies face. From juggling inventory and product quality to managing finances and forecasting trends, keeping track of everything while staying profitable can be a challenge.
Let’s take a look at a few best practices food manufacturers can implement now to increase profitability across the board.
1. Maintain FSMA Compliance
The Food Safety Modernization Act (FSMA) is one of the most extensive food safety bills in recent history. The goal of these laws is to reduce the opportunity for foodborne illness, recall, and product contamination. This complicated bill is completely changing the way food products are handled in the United States, which means the practices companies adhere to need to change as well.
So what does this mean for food and beverage manufacturers?
The Food and Drug Administration (FDA) understands that compliance isn’t a one-size-fits-all solution. Depending on the size of a company, compliance training and practices may vary. However, the bottom line rings true for all companies: compliance is a necessity.
Companies that are not FSMA compliant face a trove of risks such as illness, recall, and FDA inspection. Compliance issues can be costly in fees, wasted products that are not up to code, lawsuits, and irrepealable damage to the company name—each of which may have a profound impact on profitability.
Companies must assess employee competence regularly to not only monitor compliance aptitude but to make sure any new regulations are incorporated into training as well. FSMA compliance is not a one-and-done change—it’s something that food manufacturers will have to continue to work towards. Taking the necessary steps to comply with this new bill is a step towards profitability.
2. Streamline Inventory Management Practices
There are many moving parts in any given food production facility, and as a result, a few challenges may arise. Inventory management is one area of production that directly impacts profitability.
Keeping a pulse on essential inventory and production measurements like quantities, catchweight products, supplier lot numbers, and shelf life dates is vital for maintaining a profitable business.
Managing those variables is complicated, but food manufacturers have a few options when determining the best way to streamline that management process. Implementing enterprise resource planning (ERP) software that helps managers more easily monitor dual inventory quantities and complete units of measure for each processed transaction alleviates stress and chance for error.
A food-specific ERP solution provides food manufacturers with a comprehensive view of shop floor operations from inventory to financial data because of its real-time visibility capabilities. For example, say a global beverage packaging company’s existing ERP and MES systems are disjointed. This disconnection means manual logging of inventory and quality information by employees. As a result, forecasting is done per whatever cadence employees work at, which may not provide the most transparent view of operations as a whole.
It’s essential to adjust the ERP system to track necessary measurements—like picks and put-aways, lot tracking, and bin management—to both identify areas of production that need improvement and areas that are profitable.
Once companies have a full view of their current inventory situations, they can then make the necessary changes to increase profitability. Not only is this a significant part of seamless operations, but it’s required to be FSMA compliant.
3. Strengthen The Bottom Line Through Improved Profitability Management
The food and beverage industry is highly competitive with traditionally low margins. Therefore it’s vital for manufacturers to have a complete understanding of their company’s financial picture to maintain—or improve—profitability.
Cost and revenue leak management, as well as analyzing product and customer viability, are important variables ton which to focus when strengthening the bottom line.
So how should manufacturers leverage their current systems to track these cost variables better?
A food-specific ERP system that communicates with other existing systems can not only bring clarity to the current financial health of a company, but it can also monitor trends, predict future costs and revenue, and provide solutions for unique markets.
Take a cheese manufacturer, for example. It’s crucial for a company that produces something as variant as cheese to be able to see the profitability of each product—like string cheese versus shredded cheese. With detailed product information, the company is able to see what products are increasing their revenue and which products aren’t all that profitable.
By better understanding the financial health of their companies, manufacturers can make more informed decisions with the data they have, which saves money and improves efficiencies across the board.
Keep A Competitive Edge By Increasing Transparency and Efficiency
Improving these areas of business will undoubtedly boost profitability.
At the bare minimum, staying compliant with current food safety standards ensures a company can operate in the first place. Manufacturers that aren’t compliant run the risk of paying hefty fines and setting themselves back from a cost-efficiency standpoint.
Along with being food safety compliant, increasing transparency across all facets of the business—from production and packaging to sales and forecasting—with technology like an ERP will help strengthen productivity and the bottom line. Using software designed with the food and beverage industry at the forefront means clear and constant communication with other integral systems. This way, nothing is missed or unaccounted for.
Looking for an ERP to help improve your compliance practices and increase efficiencies? Our team is standing by and ready to help you get started.