The Food and Drink manufacturing industry is typically an arena of tight margins. Attempting to gain market share simply by lowering prices is not a viable option, as it will not be long before the business becomes unprofitable as a result. This means that companies have to put as much effort into building relationships as they do into managing costs. Integrated systems must be put in place in order to drive this commitment, while enabling communication between supplier and customer.
With a limited in-house salesforce and a small number of direct customers, investments in Customer Relationship Management (CRM) systems within the industry have been low - both in priority and size. A strong relationship with independent brokers is critical when selling to grocery chains as these brokers influence product placement and promotion at store level.
Selling into the food service channel is even more challenging as a small number of food service distributors maintain the direct relationship with the businesses that purchase the product. Food and drink manufacturers are increasingly seeing that expanding their investments in CRM leads to higher market share; crucially, without having to accept the lower margins associated with price reductions.
Leveraging CRM investments through back office integration
With a strong CRM system in place, the food and drink manufacturer will have the ability to develop a forward looking view of demand that anticipates future promotions and new customer/product additions. This ‘opportunity based forecast’ - that is the hallmark of a strong CRM system - can be married to the more traditional, statistically calculated forecast coming from a demand planning solution.
Armed with a more accurate view of future demand, faster and improved finished goods and raw material sourcing decisions may be made when that demand plan is integrated directly with the firm’s Enterprise Resource Planning (ERP) system. With seamless integration of the CRM and ERP systems, the entire supply chain will have access to information in order to understand the nuances of each relationship. This will enable Manufacturing and Distribution functions to work more efficiently, providing the right products at the right time, and at a lower cost.
The challenges of non-integration
With a CRM system in place, centralised ‘front-office’ information, such as; marketing, sales pipeline, and customer service is available to sales management. More precise forecasts will be in place and all customer interactions, especially praise for products and complaints, will be captured. The ERP system automates and manages the ‘back-office’ functions, including: accounting, purchasing, planning and scheduling, as well as distribution.
Each system stores key data about the customer and the fulfillment function that could provide valuable insight to different departments, if the systems are integrated. Without integration, not all departments have access to the same information and the complete picture is lost. Sales might not know when a product on promotion is set to run. Operations may not know that a critical customer has backed off on the need for a product normally purchased before a significant holiday. In these cases, a promotional opportunity may be left unfilled and the wrong products made, leading to higher than needed inventory levels of finished goods.
Enjoying the benefits of integration
With an integrated CRM and ERP system, the needs of indirect customers (restaurants) that buy their product from distributors (a manufacturer’s direct customer) would be visible to both Sales and Operations. Sales will capture interactions with restaurant operators and use this information to build the ‘opportunity based forecast’. Operations will immediately know when the customer is backing off of a product normally purchased in advance of a holiday and can adjust the production schedule accordingly.
In addition, providing Sales with a direct view into the Operation Plan will allow them to set realistic expectations with their customers in regard to product availability, ensuring that commitments will be fulfilled on-time. Finally, having an integrated CRM/ERP system available throughout the organisation will bridge the information gap that currently exists when dealing with both direct and indirect customers.
Integrate for an all-round view
Food and Drink manufacturers are constantly looking to maintain a strong brand in order to differentiate products that customers often view simply as a commodity. Having a robust ERP system that provides an intuitive, easy-to-use traceability solution - that tracks products and ingredients from suppliers, through manufacturing, to end-users - is critical to providing brand protection and differentiation.
Integrating this ERP system to an equally strong CRM system provides Sales with the same visibility of product detail and the lots that are sold and delivered. Sales in turn will provide Operations with an immediate and invaluable forward view into Customer Demand - both direct and indirect - leading to more informed production and sourcing decisions.
Management will finally have that 360⁰ view of their customers; their supply chain; and their fulfillment process. One that is lacking when the CRM system is either not in place, or disconnected from the ERP system. Firms that make the investment today in an integrated ERP/CRM system will quickly see increased productivity, simplified business processes, higher revenues and increased profitability.
By Jack Payne, Vice President of Product Management and Solution Consulting at Aptean