Enterprise Resource Planning (ERP) In The AgriFood Supply Chain
What You Need to Know For A Successful Implementation?
Welcome to the second monthly post of The Future of Agri-Food Supply Chain. This article is brought to you by 1Point5 Technologies and is co-authored with Jonathan Tole of Jonathan Tole Consulting Ltd.
In this article we will take a look at the implementation of the Enterprise Resource Planning (ERP) systems in agrifood supply chains.
“Agrifood chains are the linked events in the agricultural production of food – the process being a chain of events from production to processing, trading, distribution and consumption. Literally “from field to fork”. “
AgriFood supply chains are the most complex and non-standardised of all supply chains. The digitalisation in the agrifood sector has only just started. There are a number of actors in the supply chain performing different roles. For example, farmers or growers also called Primary Producers, agri-input manufacturers, suppliers, aggregators, intermediaries and traders, wholesalers, retailers and food processors, and finally the consumers.
Farmers are at the upstream end of the supply chain who produce the food and consumers are at the downstream end who consume the food either directly in a fresh form or in a processed form. The simplified version of the supply chain is as shown below:
Digital technologies have the potential to drive innovation in the agrifood sector and contribute towards a more efficient, productive, resilient, sustainable and transparent food system. There are a host of digital tools used in the agrifood supply chains like farm management and precision agriculture systems, software tools collecting data from farms using sensors (also called Internet of Things or IoT), satellite image processing tools, logistics planning, e-commerce and market places, financial technologies (Fintech) like trade financing, payment system, Distributed Ledger Technologies (DLT) like Blockchains and ERP systems.
This article is focussed on the implementation of ERP systems, its challenges, success factors and the benefits. Although the ERP systems are implemented by a processor, retailer or aggregator, farmers are benefited from this because they handle the purchasing, invoicing, inventory and the logistics planning of the supply chain.
What is ERP?
“ERP is a kind of software system that helps you run your entire business, including processes in finance, manufacturing, supply chain, services, procurement, and more.“
Image Source: Oracle Netsuite
The key benefits of the ERP system are: higher productivity, improved planning, better forecasting, automation through integration with other systems, access to analytics and reporting, better regulatory compliance, better customer service, increased reliability and robustness in the business processes.
We will take a look at the ERP implementation in the Fresh Produce companies as a use case within the agrifood sector. Fresh produce sector supplies the produce which you see in the Fruit and Veg aisles in the supermarket. The sector also supplies the produce needed for processing, for example, potatoes for crisping or chipping.
Commonly Used ERP Systems in the Fresh Produce Sector
Fresh Produce has some unique features that often a standard ERP system will not have, hence why several companies have developed produce specific systems. Some of these specific features are:
Taking whole crop and splitting it into different sizes, qualities at different prices;
Weight loss due to respiration of a product in store;
Varieties, quality, formats, grades;
Consignment profitability - the ability to add actual costs and income to a specific LOT and generate a profit statement; and
There are several Fresh Produce ERP software providers. Which one to implement is dependent on your company circumstances, your operations and what you want to achieve. Here are a few of the most widely used ones.
Implementation Challenges and Changes Needed in the Organisation
Implementing ERP is not about installing a piece of software, it is about working in a different way. It is as much about the culture as it is about the software. Success requires commitment and a willingness to use the ERP and leave the spreadsheets behind.
Following are the important considerations before embarking on the implementation journey:
Foundation: A successful implementation depends on putting in good foundations. These foundations in a business are clear understanding why a system is needed, understanding your operating practices, what things are essential and what can be changed and finally having a fully engaged leadership behind the project makes a big difference. Also, defining what success looks like and getting your vendor to agree to it.
Preparedness: Is your business ready for a system? Does it have defined ways of doing things? Are they followed? Whilst an ERP implementation can be used as a route to improving adherence to processes and practices it is always less risky and more successful if they are working well beforehand. If you currently have a spreadsheet and paper system in place, if paperwork is always completed on time and in full then you have good foundations, if not then spend time getting this working before adding technology. ERP will amplify good and bad practices.
Team: ERP is not a finance or an IT system, it is a business system used by all functions, ensuring that you have a cross functional team involved from the beginning. At this stage designate a project manager. This needs to be someone’s focus and not part of the day job. If internal resources are tight then bring in external support.
Operations: Take time to understand what you want and how you operate now. Things also to consider here are cloud deployment versus on premise installation. How good and reliable is your internet connection? What type of licensing structure are you looking for - per named individual or set number of users? Traceability at pallet level or case level? What are your must haves and your nice to haves? Often some external facilitation in these processes can help the team define more clearly what is needed.
Selection: Take your time with selection of the ERP provider, this is not a one time purchase but a long term partnership. Few important considerations here:
How do different proposals compare against your requirements? Have you mapped the features from each system against your “must haves”?
What are the levels of support different vendors provide? What does your business need?
How much does the system cost? What are the extras? How much is the running cost?
Reputation in the market? Do you have any references?
Levels of investment?
Does the system provide Application Programming Interface (API) access?
What skill sets do they need in the team? What is the level of training?
Implementation: The successful implementation of a system once known will be aided by:
Good communication internally and with external stakeholders;
Training and support;
At go live, stop using the old system and focus on the new. Be prepared for a few weeks of disruption. When it gets difficult don’t allow people to go back to how it was, give them the support to learn how to use the system;
Focus on getting stock right at the beginning, can you buy it, pack it, dispatch it and invoice it? Until this is correct then everything else will not be;
Ensure every user can get the information they need from the system to do their job well. Make sure the solution has the required level of reporting from day one;
Don’t assume that information out of the system is wrong. Investigate, you may only now be seeing the truth;
As business leaders, use the system yourselves, only accept reports and information that have come out of the system. Don’t accept anything from the old; and
Have in place good super users (admins) and good training resources so that all new starters can learn well.
Finally, the most important one, celebrate each success. Share milestones and wins with all stakeholders.
RoI and Benefits
The most important benefit of ERP is better management information throughout the business. Some examples:
Improved stock management;
Improved production scheduling;
Giveaway and pack out;
Stock Keeping Unit (SKU) profitability;
Supplier performance; and
Depending on your starting point, ERP will save on administrative costs. As the data capture is live at the point of task execution, there is no dual entry and no paperwork. Where work gets done does change and so some functions will see increased staffing whilst others will see big reductions.
The majority of RoI will be gained from better decision making based on better information. More the system is used, the better this information is and more gains can be made.
ERP in any manufacturing or packing business is one of the cornerstones of digital transformation. In an increasingly digital world, high quality data is essential to take advantage of Artificial Intelligence (AI), automation and will allow people to make better, more informed decisions faster than competitors.
In an increasingly volatile, uncertain, complex, ambiguous and digital world, business and its people need the tools and the information to meet customer demands, innovate and remain relevant.
ERP, like other technologies, is essential in this world. Successful ERP implementations are about working collaboratively across organisations and selecting the right tool for the job now and in the future.
This process of selection and implementation applies to all technologies. As technology becomes increasingly disruptive in the fresh produce sector, helping your people embrace it and learn how to select the right technologies for you to gain value becomes essential.
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We would love to hear your feedback.
A big shout out to Jonathan Tole for co-authoring this article with me this week.
About Jonathan Tole Consulting
Jonathan Tole Consulting is an Agrifood Consultancy. Jonathan’s mission is to help unlock the potential of the Agri-food industry through its people and helping companies use technology better.
With significant knowledge of the fresh produce sector, experience in change management and an understanding of technology, he provides a valuable resource for companies in the sector.
Recent projects include - customer strategy work, ERP selection and project management, remote / hybrid working, selection and implementation of technologies to support specific business goals.
For more information visit www.jonathantole.com or call +44 1223 616339.