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SAP ERP for the Food Industry

Challenges, Strategies, and Benefits The Solution

Challenges, Strategies, and Benefits The Solution

The Food Business Ecosystem

Government Regulations
(Taxes, Compliance, Trade Restrictions, Import/Export Rules)

Distribution Center Raw/Packaging Material Supplier


(Commodities, Intermediate Materials)

Hotel, Restaurant, Food Service

CP Food Company

Co-Packer
(Can Be Outsourced; Packaging, Product Finishing)

Third-Party Logistics
(Logistics Service Providers)

Consumer Retailer
(Retailers, Mass Merchandisers)

Services Supplier
(Packaging Design, Research, Service Partners)

Wholesaler
(Typically for Smaller Food Companies)

SAP AG 2005, ERP 2004, SAP Best Practices for Consumer Products

Food Companies Often Have the Right Focus and the Right Strategies

Protect and enhance revenue YOUR FOCUS Improve margins Increase Shareholder Value Drive for lower costs Increase Revenue and Profit Margins Get closer to the consumer Improve time-to-market Operational Excellence Product Leadership Enhance operational efficiency Improve Customer Satisfaction

Business STRATEGY

YOUR FOCUS Increase Shareholder Value Increase Revenue and Profit Margins Cost Leadership Product Leadership Improve Customer Satisfaction

SAP AG 2005, ERP 2004, SAP Best Practices for Consumer Products

But Mostly Not Enough Ability to Execute


Often employees cannot execute on the companys business strategy because the business platform is
COMPLICATED TO OPERATE
Complex and broken process flows Incomplete or hidden information

Business STRATEGY

DIFFICULT TO CONTROL
Lack of visibility Lack of traceability

Business Enabler
Ability to EXECUTE

CHALLENGING TO CHANGE
Multiple costly integration points Redundant and inconsistent data

A business enabler is required to help the organization refocus on business strategies!


SAP AG 2005, ERP 2004, SAP Best Practices for Consumer Products

Market Forces and Business Needs


Market Forces

Retailer power (Wal-Mart effect) Consumer concerns about food safety; media attention Increased legislation and regulations around food safety by FDA and other authorities (e.g., EU Dir. 178/2002, The U.S. Bioterrorism Act of 2002) Changing consumer demands due to demographics and trends Decreasing consumer loyalty to products and brands Shorter product life cycles Global commodity price fluctuations Price pressure and margin erosion Restrictive consumer spending pattern Market consolidation (globalization, M&As) Increasing competition Emerging private labels New technologies reshaping the industry

Resulting Key Challenges


Improve Sales Efficiency Enhance Customer Retention and Loyalty Ensure Food Safety and Regulatory Compliance Optimize Supply Chain Optimize Efficiency in Procurement and Manufacturing Create Visibility to All Internal and External Processes and Operations

SAP AG 2005, ERP 2004, SAP Best Practices for Consumer Products

Improve Sales Efficiency


Challenges
Protect market share Meet retailer requirements Improve sales force

Strategies
Obtain first-hand information

about the market


Optimize process settlement

productivity
Get visibility in the sales

in sales
Increase customer service

process
Get closer to the customer

offerings
Increase customer

satisfaction

SAP can help you


Plan, track, control, and

Benefits
Higher sales volume Better account retention Closer customer relationship Optimal sales force operation Higher customer satisfaction

optimize sales performance


Expand service processes Strengthen collaboration with

partners and key customers


Track indirect sales and

customers
Ensure correct handling of

rebates

SAP AG 2005, ERP 2004, SAP Best Practices for Consumer Products

Enhance Customer Retention and Loyalty


Challenges
Increase brand loyalty Ensure market share Get closer to the customer Reach a high service level for

Strategies
Enhance relationships between

manufacturer, wholesalers, customers, and consumers


Improve customer service Make account management

customers
Compete for shelf space

more efficient
Use effective trade promotion

activities for specific demographics, channels, and retailers

SAP can help you


Strengthen collaboration with

Benefits
Higher sales volume Better account retention Higher customer satisfaction

business partners
Optimize customer retention

through rebate management


Manage and control trade

promotions efficiently
Expand service processes Manage key customers

SAP AG 2005, ERP 2004, SAP Best Practices for Consumer Products

Ensure Food Safety and Regulatory Compliance


Challenges
Align with governmental

Strategies
Support mid- and long-term

regulations (EU 178/2002, The U.S. Bioterrorism Act of 2002, import/export)


Enable fast, effective product

company success by ensuring regulatory compliance


Set efficient processes in

place to enable traceability


Allow targeted product recalls

recalls
Track and trace from farm to

to minimize costs

fork

SAP can help you


Track, monitor, and trace

Benefits
Reduced penalty risk Decreased risk of food-safety

batches and inventory


Streamline procurement,

compensation payments
Reduced risk of bad

production, and sales


Manage sales returns Enable targeted product

reputation
Lower operating costs

recalls

SAP AG 2005, ERP 2004, SAP Best Practices for Consumer Products

Optimize Supply Chain


Challenges
Decrease process costs Create operational efficiencies

Strategies
Reduce costs Streamline supply chain

and supply chain transparency


Ensure comprehensive

processes
Improve supply chain control Gain more supply chain

product availability in multiple channels


Ensure accurate and timely

visibility

shipments
Avoid out-of-stocks

SAP can help you


Optimize distribution

Benefits
Improved operations

processes
Optimize end-to-end planning Improve asset utilization Fully integrate logistics

excellence
Lower capital commitment Reduced operating costs Higher customer satisfaction

management, including transportation and warehouse and inventory management


Shorten order-to-delivery

cycles
SAP AG 2005, ERP 2004, SAP Best Practices for Consumer Products

Optimize Efficiency in Procurement and Manufacturing


Challenges
Decrease process costs Create operational efficiencies

Strategies
Reduce costs Streamline processes Gain more visibility and

and transparency
Use efficient procurement

transparency
Improve relationship with

processes
Optimize production Respond to last-minute

suppliers

changes in the demand situation

SAP can help you


Set up integrated and flexible

Benefits
Decreased costs Consistent monitoring of

processes for manufacturing and procurement


Monitor production costs Ensure integrated quality

product quality
Integrated processes

management
Track batches

SAP AG 2005, ERP 2004, SAP Best Practices for Consumer Products

Create Visibility to Internal and External Processes


Challenges
Create operational efficiencies

Strategies
Improve end-to-end

to reduce costs and time


Create supply chain

operations efficiency
Improve asset utilization

transparency and batch traceability

through better production planning

SAP can help you


Integrate procure-to-stock

Benefits
Improved operations

processes
Streamline production and

excellence
Access to actionable

distribution processes
Ensure failsafe batch

information to manage the business


Lower operating costs Greater process transparency

management process
Optimize end-to-end planning Optimize inventory levels

SAP AG 2005, ERP 2004, SAP Best Practices for Consumer Products

Challenges, Strategies, and Benefits The Solution

SAP ERP Packaged Solution for the Food Industry


Description
Focuses on key business processes that create a baseline for future growth Delivers immediate benefits by solving the problem of system heterogeneity Enables significant business process automation

Analyze, Plan, and Develop

Procure

Manufacture

Market and Sell


Improve marketing effectiveness Increase sales effectiveness

Deliver and Service


Establish closer contact with customer Enhance control over delivery process

Business Objectives

Define business strategy and goals Understand company performance and profitability

Realize savings in aggregate purchasing Improve purchasing efficiency Ensure tracking and traceability

Improve manufacturing efficiency Ensure quality management in manufacturing process

Complete logistical and financial integration

Key Performance Indicators


Gross Profit/Total Net Sales Net Case Growth Inventory Turns

Purchased Raw Materials Volume Production Adherence Warehousing/Distribution Costs

SAP AG 2005, ERP 2004, SAP Best Practices for Consumer Products

SAP ERP Packaged Solution for the Food Industry


Suppliers & Partners Analyze, Plan & Develop Procure Manufacture Market & Sell Deliver & Service Customers (e.g. Retailers) & Channel Partners

Sourcing & Procurement Procure to Stock Third Party Procurement


Manufacturing

Production Planning Production Sell & Deliver Sales Order Processing Direct Store Delivery (DSD) Indirect Sales Returns Operational End-to-End Scenarios Traceability & Food Safety Quality Management Inventory Management Cross Company Transactions

Enterprise Management & Support


Financials Financial Accounting Standard Cost & Profit Center Accounting Cash Management Controlling CO-PA for Consumer Product Cost Planning Products Asset Management

Cost Object Controlling

SAP AG 2005, ERP 2004, SAP Best Practices for Consumer Products

Procurement
Efficient purchasing is on the top task list of food companies today. The SAP ERP packaged solution supports price comparison of vendors offers, incorporating flexible pricing processes for the actual value of the raw ingredients delivered. It provides tools to gain greater spend visibility in procurement and automate operational tasks. It also helps to manage quotations, contracts, batch handling, and quality.

Industry Pain Points


Improving purchasing activities efficiency Realizing savings in purchased value Allowing visibility on vendors conditions and

Solution
Procurement of Stock Materials
Issue request for quotation Compare prices Issue purchase requisition Process purchase order Receive goods Inspect goods receipt Automatic batch number creation Update stock

Procurement Contracts
Create contract: quantity contracts, value contracts, and delivery schedule Create purchase requisition Assign vendor to contract

Third Party Procurement


Order Purchase Order Processing Vendor Invoice Verification Billing Documents Controlling

services Ensuring tracking and traceability Ensuring quality of all materials and components used in manufacturing food

Business Benefits
Automate operational tasks Improve vendors selection and prices comparison

through quotation handling Formalize agreements by introducing contract management and relating it to quotations Introduce batch management for raw materials tracking and traceability Guarantee quality check through goods receipt inspections
SAP AG 2005, ERP 2004, SAP Best Practices for Consumer Products

Manufacturing
The SAP ERP packaged solution gives the flexibility to manage multi-step manufacturing processes. It incorporates in-process and post-process quality management and performs automatic batch determination based on expiration date during production order processing. The solution also includes cost-object controlling, such as preliminary costing, simultaneous costing, and period end closing.

Industry Pain Points


Reducing time-to-market in food

Solution
Production Planning
rough-cut planning long-term planning generation of planned orders

manufacturing Ensuring quality checks over the entire manufacturing process Managing expiration dates Improving manufacturing efficiency

Production
Production order creation Bill of material management Production order processing Batch management Quality management Cost object controlling Inventory update GMP compliance

Business Benefits
Create and modify bill of materials and

receipts easily and quickly Identify quality-noncompliant lots by defining product inspection lots and related usage rules Manage expiration dates through automatic batch-number generation Calculate and monitor production costs
SAP AG 2005, ERP 2004, SAP Best Practices for Consumer Products

Sales Order Processing


The SAP ERP packaged solution can effectively manage the entire customer order process variable pricing, delivery, invoicing, and payment. Capabilities such as electronic data interchange (EDI), handling consignment sales, and foreign trade are provided as standard. You can focus on shortening order cycle times, make on-time and in-full deliveries, and provide customers with optimal payment methods.

Industry Pain Points


Managing variable pricing conditions by

Solution
Extended Sales Order Processing
Sales order creation Delivery creation Picking Goods issues posting Billing creation Display billing documents Availability checks and batch determination are included

different customer/product combinations Shortening order cycle times Meeting customers requests for improved services (e.g., order fulfillment, invoicing, and payments methods)

Customer Consignment Processing


Consignment Fillup Consignment Issue Consignment Pick-up

EDI
Inbound sales order via EDI Outbound billing document via EDI

Business Benefits
Define standard and ad hoc price lists easily and

quickly Improve sales execution timeline by implementing a seamless process and the timely availability of key information Improve order fulfillment through stock availability checks Provide the customer with alternative services and methods for invoicing and payments
SAP AG 2005, ERP 2004, SAP Best Practices for Consumer Products

Direct Store Delivery (DSD)


The SAP ERP packaged solution features a powerful route-management function that you can use to load, dispatch, and track any number of deliveries efficiently. Route planning tools optimize your entire approach to deliveries, helping eliminate redundant trips and allowing you to match the appropriate vehicles and drivers to your customers for each delivery.

Industry Pain Points


Succeeding in the face of intense

Solution
Visit Control and Scheduling
Group customers in visit plans Assign visit calendar and routes Schedule deliveries Optimize shipments daily Create visit list

competition between brands Establishing direct contact with customers, such as retailers, restaurants, and pubs Improving operational efficiencies in a complex system

Picking, Packing, and Loading


Calculate workload estimates Complete goods issue process

Route Accounting
Check-in/check-out Balance materials and payments Perform settlement process incl. post goods issue receipts Credit or debit customer and driver accounts

Business Benefits
Improve customer service through better

service levels and multiple points of access Increase revenue by improving order fill rate and reducing shrinkage Reduce operating costs and increase efficiency by reducing administrative functions Lower working capital by reducing inventory carrying costs
SAP AG 2005, ERP 2004, SAP Best Practices for Consumer Products

Indirect Sales and Returns


Obtaining customer information through a third-party wholesaler can be a challenge for many food companies. The SAP ERP packaged solution enables food companies to gain a more complete understanding of their business performance by allowing them to track their sell-through in different channels and to specific accounts.

Industry Pain Points


Obtaining usable and relevant data about

Solution
Indirect Sales Data Management
Maintain information about wholesalers customers Create template for data requirements Create requests for sales reports Receive indirect sales data (volume, quantity, and value) from wholesalers Confirm and validate received data for rebates calculation Analyze indirect sales data Perform periodic partial settlement

customers through third-party wholesalers Allocating promotional spend efficiently Securing correct rebate processing across a complex supply chain Managing sales returns cost effectively

Rebate Agreements
Define rebate agreements Track rebate obligations for both direct and indirect sales Take contractual agreements into consideration Set up reserves based on planned sales Settle indirect agreements

Returns & Complaints


processing of credit memos in case of complaints returned goods go through a quality evaluation Centralized processing of subsequent inventory and billing activities based on multiple analysis results Generation of settlement documents in background processing

Business Benefits
Understand better those customers that are

serviced by a third-party wholesaler due to improved data quality and availability Allocate promotional spend more efficiently by collecting and analyzing valuable customer information Process rebates and commissions correctly due to improved data quality and availability Increase efficiencies by using a centralized tool to manage the returns process
SAP AG 2005, ERP 2004, SAP Best Practices for Consumer Products

Traceability and Food Safety, Quality Management


Food safety requirements are becoming more stringent across the food industry, which means that food companies must have track-and-trace capability for all products, as well as the ability to recall a defective batch. The SAP ERP solution allows companies to meet the industry requirements for food safety and traceability and to reduce operational risk significantly.

Industry Pain Points


Being fully compliant with food regulations, such as EU (Article 18 of Regulation 178/2002), U.S. (The Bioterrorism Act of 2002), HACCP (Hazard Analysis and Critical Control Points) Addressing growing food-safety concerns from consumers

Solution
Quality Management
Plan for quality Inspect for quality Record laboratory analyses Create reports on quality Improve quality Monitor procurement, production, distribution processes

Batch Management
Manage automatic batch creation, determination, status, and batchwhere-used-list Track defects Recall batches and create follow-up activities Manage batch specific return processing Manage batches based on shelf-life expiration and other usability differences

Handling Unit Management


Manage production processes with HUM Handle Serial Shipping Container Code (SSCC) numbers Integration with quality management and batch management

Business Benefits
Minimize risk of losing customer trust by professionally managing a possible recall of a defective batch Minimize risk of noncompliance with food regulations Enable effective batch-specific returns processing Monitor materials planning, sales and distribution, procurement and production
SAP AG 2005, ERP 2004, SAP Best Practices for Consumer Products

Inventory Management
Managing inventory levels efficiently, that is, maintaining low inventory levels while avoiding out-of-stock situations, is a high priority for food companies. The SAP ERP packaged solution enables food companies to optimize both inventory levels and storage space based on inventory planning and turnover. At the same time, quality checks can be performed in combination with warehouse management and transportation management.

Industry Pain Points


Maintaining low inventory levels Avoiding out-of-stock situations at

Solution
Inventory Management
Achieve full integration with accounting Receive and issue goods Manage different stock categories (available, blocked, in QA) Valuate inventory

retailer shelves Establishing visibility to inventory levels throughout the entire supply chain

Warehouse Management
Manage goods receipt, storage, goods issue Manage and inspect for quality Manage return of goods Perform picking Manage materials in batches

Transportation Management
Plan transports Monitor execution Calculate costs Manage transportation settlement

Business Benefits
Reduce working capital by keeping

inventory levels low Increase sales by reducing out-of-stock situations Improve consumer retention due to product availability

SAP AG 2005, ERP 2004, SAP Best Practices for Consumer Products

Financials and Controlling


All food companies need to manage financial requirements and enterprise profitability. The SAP ERP packaged solution helps to get an insight into all aspects related to accounting and controlling and provides streamlined functionalities that allow visibility, increase productivity, and help food companies regain control of their business processes.

Industry Pain Points


Meeting local legal and fiscal requirements Improving administrative activities

Solution
Financials
Use general ledger accounting Use accounts payable and receivable accounting Use bank accounting Perform closing activities Monitor payment flows and safeguard liquidity with cash management Manage and process assets incl. depreciations

Controlling
Use standard cost and profit center accounting Perform profitability analysis incl. reporting on contribution margins and sales figures Perform product cost planning Perform Cost Object Controlling by period or by order

efficiency Maintaining focus on most profitable customers and brands

Business Benefits
Implement an enterprise resource planning (ERP)

solution fully compliant and continuously updated with local legal and fiscal requirements Improve efficiency in accounting activities due to a seamless process integration across the business that eliminates double-checks and redundancies Enhance company profitability analysis through profit and loss calculation by customer and brand
SAP AG 2005, ERP 2004, SAP Best Practices for Consumer Products

SAP ERP for the Food Industry Provides Increased Shareholder Value for Your Business
Business Objectives Business Areas
Improve customer satisfaction Revenue Growth Increase sales

Business Opportunities
Improve order fulfillment Enable correct rebate processing Improve customer understanding Optimize trade promotion spend Reduce out-of-stocks Reduce number of routes Optimize truck utilization Reduce size of fleet Improve route settlement time Reduce operating costs and increase efficiency Improve efficiencies in accounting activities Increase efficiency for sales returns Lower materials costs

SAP Scenarios
(SAP ERP for the Food Industry)

Sales Order Processing Indirect Sales

Direct Store Delivery

Distribution Shareholder Value Reduce Cost Procurement Finance Customer service

Financials and Controlling Sales Returns Sourcing and Procurement

Increase demand planning accuracy Optimize production planning

Planning and Manufacturing Manufacturing Inventory Management Food Safety

Production Reduce Working Capital Reduce Risk Inventory Comply with food regulations

Optimize and streamline the production process Optimize inventory usage Utilize full track-and-trace capability

SAP AG 2005, ERP 2004, SAP Best Practices for Consumer Products

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SAP AG 2005, ERP 2004, SAP Best Practices for Consumer Products