Keeping Track for Competitive Advantage

New requirements to track and trace all materials used in food and animal feed manufacturing can be costly and time consuming for food and beverage manufacturers. When faced with such demands, the first questions many food industry executives ask is why tracking and tracing must be done. There are several reasons:

  • Supply chain responsiveness to meet the demands of the retailers for on-time delivery and accurate information on deliveries.

  • Improved inventory management: reduction of inventory, waste and overproduction associated with safety stock.

  • Improved quality and consistency.

  • Protecting brand equity.

All of these reasons mean that an intelligently implemented tracking and tracing system can translate to a competitive advantage for a manufacturer.

Implementing systems

Food and beverage manufacturers can implement tracking and tracing in one of two basic ways. The first is to spend the minimum amount necessary to comply with government regulations. This path will provide little or no improvement to quality and consistency and no reduction in costs. This path can also result in substantial additional expense when government regulations become more stringent or when supplier requirements change.

The second path is to install a tracking and tracing system that does more than just meet government requirements. Food and beverage manufacturers can install tracking and tracing systems that meet existing and anticipated demands from suppliers and government agencies, reduce inventory, reduce final product costs and improve quality and consistency.
Regulations affecting the food and beverage industry continue to evolve in the direction of regulations in the pharmaceutical industry, which require pharmaceutical companies to generate a complete batch record and meet the requirements of 21 CFR Part 11. Implementation of a well-designed tracking and tracing application positions food and beverage companies to meet potential regulations.

Food and beverage manufacturers are now investigating tracking and tracing applications and how they need to respond to the governmental regulations for traceability. Smart companies are looking at ways to leverage these applications to improve operations and achieve a quantifiable return on the investment.

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  1. To comply with regulations and mandates

  2. To increase supply chain responsiveness

  3. To improve inventory management

  4. To improve quality and consistency

  5. To protect brand equity

Advantages

Manufacturers striving to improve the responsiveness of their supply chains can meet the demands of the retailers for on-time delivery and accurate information on deliveries (RFID on pallets). Failure to respond to these demands will result in lost contracts with retailers and wholesalers.

Tracking material usage at the manufacturing plant enables food and beverage companies to manage inventory more accurately at the plant level. At many plants, inventory usage is determined based on standards. Actual inventory is reconciled to the business system every week or month by taking a physical inventory. To ensure that there is adequate inventory on hand, food manufacturing companies need to carry additional inventory as a safety stock.
A tracking and tracing solution enables the company to track actual usage, so the safety stock can be reduced, freeing capital and reducing operating expense.

When it comes to quality and consistency, the challenge for the manufacturing company is to have enough correlated data to allow it to analyze operations and make improvements. The tracking and tracing applications collect all the key data for each process step, including raw material used, operating conditions, personnel and quality of the product. Batches or products that had excellent yield and quality can be reviewed to understand optimal conditions.
Similarly when a bad batch or product is produced, the operation can be reviewed and compared to excellent batches to understand the key reason for the difference. Based on these analyses, companies can alter their standard operating procedures to optimize production.

Better cost analysis

Manufacturing companies seek to understand the cost of manufacturing each product. Because of the lack of data, they use standard costs developed using data over an extended period of operating history. The companies are challenged to be the low-cost producer and must compare the cost of manufacturing at each of their manufacturing facilities and the cost of a co-manufacturer.

Tracking and tracing applications can provide much of the raw data to give a more complete view of the actual cost of manufacturing the product. The application collects data on actual usage, waste/scrap, the amount of labor deployed and operating conditions. Based on this data, companies can more clearly understand their costs and make better decisions to reduce manufacturing costs.

- Debashish Ghosh