With an increased emphasis on managing obesity from the UK Government in recent weeks, a focus on healthy eating options and potential changes likely to emerge, the need to adapt our food products may come sooner than we think.
It’s not just about generating creative ideas - it’s also about managing the approach to new product development (NPD) through collaboration, control, and data to improve the chances of product success. Let’s see how the right ERP solution can support this process and bring products to market as quickly and as efficiently as possible by focusing on these key areas:
- Formulating and managing new products
- Managing pricing and costs
- Controlling the pre-production supply
Formulating and managing new products
In simple terms, the right ERP solution can provide a ‘non-live’ environment for the creation and experimentation of new recipes without impacting existing products. But it’s much more than that.
- Support the formulation of new products and recipes to meet evolving customer requirements and trends
- Provide control through recipe management
- Align batch size creation to preferred units of measure
- Support the development of works instructions for methods of preparation and other values
All of these can be held in one single ERP solution.
In addition, ERP can also aid the design process by allowing for the production and costing of any associated co-products and by-products generated by the process, and any optimisation of material procurement through the recipes created together with any revisions.
This helps minimise waste in the resulting final product.
Managing pricing and costs
Pressure on margins and costs within food provides an additional challenge. This needs addressing during the NPD process to ensure all costs are fully realised and taken under consideration to ensure any new products meet profitability expectations when they are released.
Factors such as increases in freight costs, regulatory costs and recognising the true landed cost of raw materials earlier in the supply chain process is becoming increasingly critical.
The right ERP tool can build in any additional charges and recognise the impact on costs during the product introduction process. By ensuring full costs can be assessed, allocated and recorded correctly, the item's expected cost can be updated to enable revised profit margins to be calculated quickly and the necessary steps taken to address any erosion of margin prior to full production.
Similarly, an ERP solution can hold multiple versions of the same product, and build-in items such as yield factors. This, together with fluctuations in raw ingredient prices, enables the solution to easily update and recalculate profit margin ratios via the relevant current ingredient costs and recipe revisions - all of which are retained within the solution itself.
In the same way that costs can be modelled, various pricing models can be established which, again, can impact the anticipated profitability of any new product.
The right ERP solution can help simplify the management of different pricing schemes to mirror the types of customer you may do business with including retailers, wholesalers and direct to consumer. In addition to being able to create, manage and publish pricing, the right solution can help validate that your pricing model meets profitability expectations.
With the right solution, you not only have the capability to track changes to pricing but also have the means to determine how those prices are determined, what the margin expectations are, and any contractual limits that may impact this.
In this way, the relevant departments can access key information early on in the development process, and take the necessary actions needed, given the model being used will reflect the latest market developments.
Controlling the pre-production supply
During the development process, an ERP solution can help manage:
- Procurement and storage of sample materials avoiding an offline approach
- Product or ingredient status which can control the use of an item before purchasing larger quantities to meet full production
The right system can define an item’s status, such as ready to purchase, approved for production, pricing to be confirmed or approved for sale. This status not only provides control but can also trigger a next step such as documenting approval or take other action.
Until an item status is set correctly as ready for sale following the completion of all necessary process steps, it cannot be sold or included in a work order. This effectively ensures materials can be ordered and controlled through the system, but not sold - up until the point that they’re approved for production following completion of all the relevant quality checks and documentation.
So, what do we conclude from all this?
The underlying advantage of using an ERP system to support new product development and launch processes is that it provides visibility to the entire organisation.
Costs, pricing and profitability can be assessed continually. Recipe updates and scheduling sample or trial ingredients can be managed. And, the flow of trial materials and products can be controlled so that they’re not sold until all the relevant approvals have been achieved.
By enabling relevant status changes on your ERP system to mirror the product development process means that by the time full approval is achieved, the system is set-up accordingly to match expected costs and prices. It also means the supply chain is primed for full production.
Doing this manually with the potential updates would be a huge task, so being able to use the system strengths can effectively ensure a more rapid process from inception to full approval. This means businesses can respond quicker to changing demands, but in a more controlled way, ensuring all the relevant finance calculations are in place to make any new product a success.
How can you get started?
ColumbusFood is an industry-specific ERP solution embedded within Microsoft Dynamics Business Central which is designed to help you keep up with changes in consumer demand, and government legislation, whilst maintaining the quality that your customers demand.
Food is at the core of what we do — providing the right ingredients for a healthy ERP system.
There are more industry challenges - here's where to learn more
Consumer tastes are constantly changing and there’s a continual focus on what goes into our food products. This means the need to create new ideas and innovate to release new products faster to the market to retain or increase share has never been more important.
However, keeping up with changing market and consumer trends and properly managing product development processes are just two of the most common issues faced by the food industry. Want to discover more, plus a deeper dive into how technology can help you overcome them?
Check out our comprehensive guide to challenges in the food industry below.