Real time, real profits

A lack of real-time production and supply chain information is leading food processing companies to chase revenue without any certainty of making a profit says Solarsoft

Top line revenue figures may indicate that the majority of the food processing industry is having a good recession, with many companies posting significant revenue growth in recent months. However, with the growing supermarket focus on basic and essential ranges, margins are being squeezed ever tighter and many companies are only now beginning to realise that much of this increased revenue is not generating any additional profit - and may indeed be incurring a loss.

Organisations are struggling to attain the depth of information required throughout the production process to rapidly and accurately assess the profitability of new or changing contracts.

Yet it is by improving real-time information throughout the supply chain that food processors can tune their operations to drive down costs, reduce wastage, minimise packaging inventory and improve supplier management.

For example, in-depth shop floor information can be used to drive real-time reporting. A simple red, amber, green dashboard displayed on a screen can be used to demonstrate how each production line is performing and give early warning of over- or under-production or of a problem with the ingredients mix.

One area of the food processing industry that is struggling to remain profitable during the recession is the dairy market - with the retail price of milk now less than the cost of production. By adopting ERP throughout the supply chain, dairy processors are looking to reduce wastage and maximise productivity to drive costs down by 1-1.5 pence per pint, a move that will take the business back into profit.

With the exception of the dairy industry, the food processing market is benefiting strongly from the supermarket's growing adoption of lower cost own-label goods, with revenues up significantly. But to truly maximise this opportunity, these organisations need to make far better decisions on the profitability of new deals in real-time. Too many organisations are happily embracing big revenue contracts that turn out to be loss leaders as the supermarkets pass margin squeeze down the supply chain.