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Food & Beverage Overview

Prepared for Winn Technology


October 24, 2008

Scott Pugmire
Sr. Vertical Industry Manager
Purpose of this Presentation

• To learn how to gather information from a food or beverage


(F&B) manufacturer, distributor, or service company in order
for the next step in the sales cycle to be well prepared (i.e.
Sage lead distribution, partner follow-up)
• Understand their pains for ROI
• Have them feel comfortable that you understand what they
do
A Little Industry
Background
Key Concepts
Process Manufacturing – blending of ingredients “goop” vs.
assembly of “widgets” (aka discrete manufacturing)
F&B manufacturing has complex requirements and they are
getting more complex every day.
Complex requirements require complex and flexible
solutions.
Very few ERP solutions for the SMB market fulfill the
requirements of F&B manufacturers. Many F&B
manufacturers are on “home-grown” applications.
Food & Beverage Sub-Verticals

Bakeries & Baked Goods Beverages, Non-Alcoholic Bread & Grain Products
(4.04%) (14.48%) (1.02%) (3.64%) (.22%) (.77%)

Candy & Confectionery Dairy


Coffee, Tea, & Spices
Products Milk, Cheese, Butter, Ice Cream
Manufacturing

(.51%) (1.83%)
Distribution

(.98%) (3.5%) (1.25%) (4.47%)

Fruits & Vegetables


Flavorings, Oils, & Extracts Meat, Poultry, & Seafood
Canned, Frozen and Preserved
(.66%) (2.36%) (3.39%) (12.17%)
(1.76%) (6.30%)
Prepared Foods & Food
Pet Foods
Preparation
(.29%) (1.04%)
(13.78%) (49.43%)
Food & Beverage Delivery Restaurants, Bars, & Food
Food Warehousing
Service and Automated Vending Service
(.39%)
(.75%) (70.97%)

(Market Share without Service)


Food & Beverage Issues

Regulatory / Food Safety


Bioterrorism Act
HACCP
ISO 22000
cGMP
Kosher / Halal standards
Food & Beverage Issues
• Process manufacturing capability is essential for
manufacturers where formulas and recipes replace bills of
materials and inconsistent raw products must be converted
into consistent quality output
– Recipe Management
– Quality Control
– Catch Weight Management - parallel inventory accounting of varying weights
from piece to piece, either due to biological variations or because of weight loss
during storage
• Strict federal regulatory requirements must be adhered to
by both manufacturers and distributors.
– Inventory Management.
– Vendor/ Raw Item Traceability.
– Product Labeling Requirements
– Bio-Terrorism Act Compliance
• Special inventory handling via refrigerated or other means
applied to warehousing and logistics to compensate for
inventory shelf life limitations
What do these products have in common?
What you may not have heard…

LiveSmart Weight Management Chicken and Brown Rice Recall


(April 20, 2007)
FDA Seizes All Medical Products From N.J. Device Manufacturer for
Significant Manufacturing Violations (April 17, 2007)
Harry & David Expands Its Nationwide Allergy Alert for Undeclared
Nut Allergens in Candies (April 13, 2007)
Menu Foods Voluntarily Recalls Additional Pet Food made with
ChemNutra Wheat Gluten (April 10, 2007)
ChemNutra Announces Nationwide Wheat Gluten Recall (April
3, 2007)
Food & Beverage Issues - General

Expiration/freshness dates of ingredients and finished goods


Dynamic / fast-paced manufacturing environments
Material handling can be very manual
Ingredients can have varying attributes from lot to lot in some
industries
Rebate and promotion programs for distributors
Quality control is very important
Production scheduling by attribute (i.e. allergen, color, etc)
Food & Beverage Opportunities

Expiration/freshness – Do you think F&B mfg is going overseas?


I doubt it
Dynamic / fast-paced – They need an ERP designed specifically
for them; work arounds in a discrete system don’t work.
Manual material handling – O2 Warehouse automation was
made with Smart- CodeTM Technology.
Varying attributes – O2 lot attribute functionality
Rebate and promotion – EVS and Nextec to deliver solution
soon
Quality control – O2 has a robust, integrated QC module
The Marketing “Silver Bullet”
• Unfortunately there isn’t one!
– Understand the industry:
– Needs by sub-vertical
– The solution that O2 provides
– Persistence – don’t quit
• EVS is working for you:
– Success stories
– Features / functionality
– Complimentary products
– “National View” of requirements
Must Read List
• http://www.praxiom.com/22000.htm - ISO 22000
• http://www.expeditors.com/Services/FDABio.asp -
Bioterrorism Act
• http://www.cfsan.fda.gov/~dms/alrgact.html - Food Allergen
Labeling and Consumer Protection Act
• http://www.foodquality.com/mag/03222005/fq_03222006_IL2.
html
Prospect
Questions
Key Concepts
• An ERP that works the way they do.
Round peg – Round hole
• Split Bill of Materials – Separating Goop from
packaging
• Fully integrating all departments – typically QC
(quality control) and formula management are left
out.
F & B: 5 Leading Questions
• How do you determine what to make and when to
make it?
• How do you manage recipes/formulas?
• Tell me about your manufacturing process
• Describe your quality control processes
• Describe your regulatory requirements
F&B: Question 1 Drill-Down
How do you determine what to make and when to make it?
• What to make = how is demand determined…
– sales forecast, open orders, transfers to other locations
• When to make = how do they plan production;
– MRP, infinite scheduling; finite scheduling, scheduling based on
attributes (allergen, color, type, etc.).
– Do they have to manage expiration dates
• When they make a batch, do they have multiple finished
goods? Co-products and by-products – explain the concept of
split BOM
– Schedule by the formula, multiple finished goods can be
produced
F&B: Question 2 Drill-Down
How do you manage recipes/formulas?
• Most SMB-sized companies keep formulas in Excel
– Issues:
• Security; loss, backup, and theft
• Costing – how do they know how much the formula will cost?
• What happens when they want to substitute an ingredient in all formulas

• How do you indicate what QC tests to take on the formula


• How do you keep revision history of changes
F&B: Question 3 Drill-Down
Tell me about your overall manufacturing processes that
you haven’t covered already
• Should uncover any specific or peculiar techniques that they
employ to transform raw goods into finished product.
– May uncover some potential pain points in their processes
– May be able to determine if there is something special that they do that
their competitors don’t. (These will be critical factors to include in the
partner’s final solution offering)
F&B: Question 4 Drill-Down
Describe your quality control processes
• Incoming materials
• Manufactured materials
– How to determine what to test
– What test to do
– Outside process (micro testing)

• HACCP Procedures (pronounced “hassip”)


– Metal detector

• ISO 22000
F&B: Question 5 Drill-Down
Describe your regulatory requirements
• Describe your procedures to be compliant with the
Bioterrorism Act
• Do you have to produce nutritional labels for your products? If
so, how do you currently do that?
• If they deal with allergens, how do they manage allergens and
avoid cross contamination of products?
Thank You
Q&A