Seven Trends That Will Most Impact the Food Industry in 2011 and Why They Matter for Microsoft Dynamics ERP
Everyone has an opinion on industry trends for 2011, and for the food industry I'm no different.
The food industry is very much in the news these days-over regulation, commodity prices, and marketing tactics-and with such intense change come increasing pressures for formulating new business strategies.
In my view, key 2011 decisions for food companies are not based on compliance or regulatory-based rationale, but rather business transparency. Food companies are getting very tech savvy.Our customers are the companies that want to be the innovators at meeting safety compliance and government regulation.
With those issues in mind, I have identified seven important trends I see affecting the food industry.
- Feature Rich Access Available from Anywhere
This isn't your grandma's internet. Microsoft is working on some interesting new technology and is ready to deploy it in a context needed by food companies. We are talking about thin deployment of a full feature-rich ERP client, web services that extend new user interfaces that are simplified for lay users, and new offerings like credit card processing. All of this hot new stuff makes the product feature rich but also lowers customers' costs in deploying technology to employees, vendors, and customers. Imagine running your business from the beach, or from your iPhone or Windows Phone. We're there.
- Microsoft Dynamics CRM integration
Microsoft's new built-in integration of Dynamics NAV with Microsoft Dynamics CRM will change the way food companies interact with their customers and consumers alike. Imagine going to a trade show and having all of your new leads automatically captured and assigned to your sales force. Even better, imagine tracking the interaction with these new leads and determining which turn into business so that you are able to justify these marketing costs for next year.
Beyond lead tracking, CRM integrated with your Dynamics ERP system will allow your sales force to have up-to-the-minute information on the sales history with their customers. Sales invoices, sales orders, credits, pricing, products; all of it available from within Outlook, or over the web. Offline or online!
Imagine being able to track interactions with your consumers. CRM will do that too. Track coupon requests, sunshine letters, or even complaints.
With CRM integrated into your ERP system, you can track the lot numbers of products associated to the complaint and look up details of that lot from within the ERP system right down to the production order, or receipt of raw materials associated to that finished good.
In addition to consumer affairs, you can integrate with your social media presence on Twitter, or Facebook. Find out who is talking about you and where. Overlay geographic hotspots to recent trade promotions you have run with your customers.
- Food Safety
Food Safety is a hot topic capturing much media attention, with new Federal Food Safety legislation having just been passed by Congress and signed into law by the President at the start of this year. The new law gives the U.S. Food and Drug Administration expanded powers to order recalls, as well as imposing food safety standards for imported goods. In reality, most food companies we have dealt with already have more stringent food safety programs and requirements that have been pushed down to them by their largest big box customers. Those with sophisticated Dynamics-based ERP solutions are already heavily involved in programs like GFSI, or SQF requiring third party audits. These new standards for food safety extend well beyond the traditional approach of "record and respond", basically the one up and one down recall.
GFSI and SQF audits require a holistic approach to food safety focusing on prevention methods and proof, or reinforcement that procedures are being followed. This makes inventory management principles such as perpetual inventory and stock rotation heavily integrated into the quality process. Try doing that with a spreadsheet. We see a strong correlation here time and again - lagging technology investments in the right ERP tools makes it that much harder to be compliant with the highest standards and compete for the most lucrative business.
- Commodity Costs
Corn and wheat commodities are likely to see price increases. This pricing variance impacts sub-segments that include large purchases of these raw materials, but in reality, a move on corn prices will push up all commodity prices as the agriculture industry reprioritizes crop growing to these commodities. This will have an impact on all food manufacturers and distributors. It may not be as disruptive as a few years ago, but the smart food company will have to be diligent in setting its prices. One thing for sure - commodity costs are going to be an important topic all year long. Food companies need to be able to not only track commodity cost spikes, but immediately determine their impact on margins.
- Social Media
We have seen a lot of adoption in 2010 with mid-sized food companies looking to create loyalty with their consumers. Twitter, Facebook, Groupon, and other initiatives to connect consumer to producers and distributors. This media and communication transition will remain strong in the coming years, even stronger as there is more evidence and experience with these new marketing strategies. Food companies and food distributors that create loyalties to their products will start seeing some results.
- Ingredient Awareness: HFCS & Sodium
These ingredients are the new targets as consumers focus on healthy eating. High fructose corn syrup (HFCS) has been a reliable substitute for sugar for a long time; a reliable and locally produced ingredient. Its use has stabilized a lot of local farm production for years. It may not have much future as consumers begin to link it to obesity and like conditions. Sodium is the culprit for high blood pressure. Consumers may be willing to choose between two products based on the ingredient declaration and nutritional fact statements. This will force reformulation using Product Lifecycle Management (PLM) in a big way amongst food producers.
Before a product hits the market, its recipe (made of up Bill of Materials and Routings) may go through dozens and dozens of iterations, passing through three major stage/gate hurdles; cost, nutritionals, and taste. Tracking these versions can be a real nightmare without an ERP system in place. It would be hard enough to manage in your own kitchen, let alone in a production facility making hundreds of other similar products moving at 24/7. An ERP system will ensure that sales is quoting against the right costing, that purchasing is buying the right ingredients, and that production is making the right recipe.
- Watch out for the Brand Names
The big guys were slapped around a bit in the early part of the recession. As consumers focused their retail purchasing on value or extreme value based products, the big brands were not able to react as quickly. Consumers fell in love with private label products...generally a good thing for the segment of companies with whom my company, JustFoodERP, does business with. But watch out, the Big Guys are back with aggressive promotion programs, generally lowering price points right across the board.
All these trends will help further the key strategic requirement of greater transparency in food company management planning and decision making.