Executive summary
Effective supply chain optimization in the food and beverage industry calls for e-commerce systems that exchange product requirements and manufacturing data with downstream customers.
That ability makes the manufacturer more attractive as a supplier, because, customers can better meet their market requirements, extend shelf life, and increase consumer satisfaction by providing a more consistent, safer product.
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At the same time, incoming data on raw materials quality and composition can aid in formulation planning and production planning, which leads to increased manufacturing agility. Manufacturing agility lets manufacturers respond to their customer’s supply chain demands, and serve premium, high-margin market niches.
The keys to food and beverage e-commerce are XML (Extensible Markup Language), and an e-commerce messaging system such as Microsoft‘s BizTalk. The most practical overall solutions are probably assembled using core software that connects existing plant systems with downstream customers, both external and internal.
Introduction
Today’s drive for supply chain optimization is also fueling e-commerce expansion. As companies push to simultaneously cut costs and increase customer service, it seems that every headline announces a key e-commerce application in another industry.
In the food and beverage industries, the key e-commerce applications may be systems that exchange manufacturing data – product requirements, safety and quality information – with customers. To explain that, we first need to talk a little about supply chain models and manufacturing data.
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By GlobalDataNew supply chain models includes manufacturing
Most supply chain optimization models that concentrate on source and delivery have a missing link for the manufacturing process. There’s a reason for that. Traditional manufacturing models deal with functional silos that don’t readily connect with integrated supply chain planning.
A more recent process model cuts across those functional silos and makes it easier to tie plant floor processes into supply chain models. The Supply Chain Operations Research (SCOR) model summarizes the highest business level of supply chains with four operations: Plan, Source, Make and Deliver. The SCOR model sees manufacturing as a continuous chain of supply operations: source – make – deliver – source.
Whatever you manufacture, you Source raw materials, you Make something with them -or provide some other added value – and you Deliver them to your customer, who in turn is Sourcing them. Planning makes it all happen efficiently and cost-effectively.
What’s different now?
Historically, plant floor systems haven’t been of great interest to IT departments, nor on the minds of supply chain executives. That’s changing.
As companies use Internet-based e-commerce systems to share information and collaborate with vendors and customers, they’re realizing the value of manufacturing data to supply chain decisions. Now, plant systems are becoming key components of IT strategies and supply chain optimization initiatives.
Basic e-commerce activities can link supplier and customer processes, whether the customer is a separate enterprise, an internal customer within your own organization, or even the end-consumer.
E-commerce can provide a linkage between the brand label and the supplier to make sure the product is being made correctly. The customer can pass requirements upstream to the contracting plant, and the plant can pass quality and food safety data back downstream, so the customer knows the product will meet their standards. This is particularly important in food and beverage manufacturing where ingredients are never completely consistent, product variability is a key concern, and finished goods have a finite – and often short – shelf life.
What data do you send to your customer?
Most companies are already comfortable with the concept of giving their customers data such as advance shipping notice. But key manufacturing data for a particular batch of product can cover much more.
To tailor information to your customer needs, you only need to ask these questions: What do they need to know to improve their operation? And when is it most useful to them – on demand, or in real-time?
You can transmit USDA-required pre-ship review information, and safety data such as pasteurization and lethal heating temperature profiles. You can also transmit key quality indicators such as color, weight and bite. These can help your customer hit their production and quality plans.
Product specification information can move along the supply chain, identifying problematic ingredients. Consumers allergic to peanuts, for example, care about the absence of peanut products. Product genealogy information also aids in tracking product batches made from each batch of raw ingredients.
Benefits to the manufacturer’s customer
E-commerce applications that communicate manufacturing data deliver many benefits to the manufacturer’s downstream customer – and that makes the manufacturer more attractive as a supplier.
Providing downstream benefits makes the manufacturer more competitive.
With advance quality information from manufacturers, customers can better meet their market requirements.
- Product genealogy and safety data helps meets regulatory requirements and allows faster response to consumer issues.
- Electronically transmitted statistics for food component batches let the customer’s manufacturing be more agile. Higher-grade components may convert into higher-margin end-products.
- Downstream manufacturing or packaging operations can adjust schedules to maximize shelf life if they know when a production activity – such as slaughter, grinding or batch completion – happened.
Automating pre-ship review data lets customers receive certified safety and quality data on a batch of product before the product hits their loading dock. Using pre-approved product immediately on arrival can extend the customer’s product shelf life. This is particularly critical with meat products, but the principle applies in any product where shelf life is a concern.
One poultry producer cut a shipping delay of 1 – 1 1/2 days down to zero by producing pre-ship review data electronically. Another major poultry supplier extends the enterprise by giving a key customer access to real time quality data on a secure extranet Web page. That allows their customer to manage their supply chain better.
Benefits to the manufacturer
Manufacturers can also pass requests for ingredients data back up the supply chain. Electronically passing composition data on incoming ingredients to manufacturing can improve formulation planning, ingredient optimization and materials management.
Electronically gathered raw materials information from upstream suppliers can help refine internal supply chain models for better decisions.
Advance data on incoming raw material allows more effective use of skilled quality and food safety personnel. They can focus on auditing quality and safety procedures of the upstream providers instead of performing inspections that are often redundant.
All of these factors help to increase manufacturing agility, which lets the manufacturer respond to the increased demands of their customer’s optimized supply chains.
New needs for manufacturing agility
When the food manufacturer’s customers tighten supply chains to cut costs, it puts increased demands on the agility of the manufacturing operation. Manufacturers who meet those demands will look good to their customers.
As customers squeeze the fat out of their supply chain, the upstream manufacturer is exposed to the variations in the demands of the customer’s market.
According to AMR, “The hallmark of today’s agile manufacturing strategies is the ability to adapt priorities to handle late-breaking customer orders…Supply chain planning strategies are doomed to fail if the plant can’t respond to unexpected changes in consumer demand within hours or days.”
Increased manufacturing agility can also let the manufacturer serve premium, high-margin market niches. In the 21st century, we will see the mass-production paradigm revert to put more emphasis on agile manufacturing in which end users can get what they want when they want it.
Dell Computer has already proven that concept with their build-to-order PC’s. This is a prototype for the involvement of the food manufacturing plant floor in the total supply chain.
How It’s Done
The new factors in e-commerce usability are XML (Extensible Markup Language) and e-commerce messaging systems such as Microsoft’s BizTalk. XML-based messaging using a published BizTalk standard makes business-to-business communication of manufacturing data practical.
XML provides the common language for business-to-business communications. XML – an extension of the HTML technology that underlies all Web transactions – is text-based, easy to manipulate, and the basic skills required to work with XML are widespread.
How about end-to-end compatibility with existing legacy systems? Trading partners – and even internal departments – are apt to have different operating systems and software. Getting applications to talk to each other is often a major technical hurdle that becomes more visible when you try to integrate e-commerce sites with back-end systems.
The BizTalk translation system, with published standards and small amounts of “glue” code, can ensure that your XML-enabled specification system can talk your customer’s XML-enabled acceptance system, even if the systems have different bases. That greatly increases agility and flexibility in transferring manufacturing data. BizTalk is widely accepted, and has the power of vendors and users including Microsoft, SAP, and Boeing behind it.
The BizTalk framework lets businesses easily exchange XML documents with online trading partners and internal systems regardless of the platform, operating system or the underlying technology of their existing systems.
“The biggest hurdle in business-to-business electronic commerce is the ability to trade with companies that have disparate systems and infrastructures,” says Andy Berti, chief technology officer at Intelisys Electronic Commerce Inc. “The BizTalk Framework is a remarkable step toward developing a more efficient information exchange platform that will facilitate the translation of information between extended purchasing communities. BizTalk truly capitalizes on the potential of Internet technologies by interpreting a broad spectrum of protocols.”
What do you really need to make this work?
To be successful, the e-commerce systems that communicate supply chain data have to be easy to implement. And, they must be quick to install (within a week) with a minimum of staff time.
The old EDI systems fail this test. They are time-consuming and expensive to set up, and it takes sophisticated programming skills to establish and maintain end-to-end compatibility among the participants.
Referring again to AMR, “If the choice is between working on a system implementation and getting product out the door, the latter always wins.”
The systems must also be scalable to help sustain competitive advantage over time. You must be able to roll the system out to additional, similar plants quickly, and you’ve got to be able to upgrade the system software without redoing your integration and implementation work.
Those are tough demands. The answer lies in solutions assembled around a core software suite that connects easily with existing plant floor systems and with downstream customers, both external and internal.
Selecting a vendor with the right combination of expertise and experience can call for some careful shopping, but the potential payoffs of using manufacturing data in your supply chain processes make it well worthwhile.
Find out more
This industry analysis has been prepared and distributed by Bradley Ward Systems, experts in food safety, quality and least-cost manufacturing.
For copies of this paper, or for more information on acquiring and using food manufacturing data for supply chain optimization, contact Bradley Ward Systems. Visit our Web site at www.bwsys.com, or email sales@bwsys.com. Telephone: 404-705-5155; fax 404-705-5170
