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Organics Raising the Steaks for Food Manufacturing

Consumer appetites for organic foods are at an all-time high. As grocery shoppers buy more goods labeled as organic, pesticide-free, non-GMO and other attributes of healthier foods, food manufacturers need to adapt to the complex challenges of the organic products supply chain.

Organics Raising the Steaks for Food Manufacturing

For instance, farm-to-fork traceability of multiple ingredients is essential. Limited shelf life of foods without preservatives mandates greater speed and collaboration across the supply chain. Pricing needs to balance the higher cost and volatile supply of organic raw materials against consumer willingness to pay premium prices for organic products.

Moreover, attaining coveted organic certification from an organization such as the U.S. Department of Agriculture, and similar agencies across the world, is a rigorous and complex data-management exercise for farmers, food manufacturers and groceries — with a high risk of brand damage if certification is lost because of a violation.

Organic foods are raising the steaks, if you will, of the traditional food safety challenge. Food supply chain stakeholders have invested heavily in meeting mandates such as the Food Safety Modernization Act and the Foodservice GS1 US Standards Initiative, an industry effort to improve product information and safety.

Compliance with food safety regulations is already the food industry’s top challenge, cited by 48 percent of respondents in a study by the analyst firm Aberdeen Group. In the fast-growing organics space, food needs not only be safe — it needs to be demonstrably organic.

A Huge Market Opportunity

In the U.S., organic product sales leapt 11 percent in 2015 to a record high of $43.3bn, far outpacing 3 percent growth in the food industry at large, according to the Organic Trade Association. Expectations for continued double-digit growth have made organics a boiling-point priority across the highly competitive industry, affecting players large and small.

Multinational consumer packaged goods (CPG) suppliers such as Nestlé, General Mills, Kellogg, Kraft Heinz and others continue expanding organic portfolios, in many cases acquiring smaller organic outfits. Walmart’s 2016 introduction of organic products in its in-house Great Value line adds to a growing list of supermarket chains on the organics bandwagon, challenging Whole Foods Market.

Still, the vast majority of the more than 31,000 companies to have attained USDA organic certification are small and mid-market companies, ranging from family produce, dairy and livestock farms to regional food processors. For these firms, lacking the resources of a multibillion-dollar CPG or supermarket chain, improved visibility, control and agility is needed to capitalize on organic foods opportunity.

As it is, many small and mid-market food manufacturers rely on disconnected and inflexible applications for financials, inventory control, demand planning, supplier management, product and ingredient tracking, and logistics. Some continue to use spreadsheets and paper-based processes, introducing delays and guesswork into planning and production.

Visibility and Standards

Innovative companies in the organics space are reaping the rewards of modernizing their technological foundations with an integrated enterprise resource planning (ERP) suite. Aberdeen, in its report on food safety, views integrated ERP as a decided competitive advantage for food processors, particularly in visibility and enforcing standards.

“By implementing an integrated ERP solution, top performing food and beverage manufacturers can proactively manage compliance while keeping costs low and delivering high-quality, consistent products,” Aberdeen said. “The benefit of a technology foundation that supports a single source of truth is that best practice standards, recipes and requirements can be communicated and enforced.”

PROBAR, a Utah-based maker of USDA-certified organic, non-GMO energy and snack foods, is among the organic food makers thriving after adopting integrated ERP, using a cloud-based suite that eliminates the need for on-premise servers and software. PROBAR has experienced tremendous growth, with products sold in more than 3,000 independent retail stores in the U.S. and Canada, as well as on the PROBAR e-commerce site, Amazon and other online merchants.

For PROBAR, cloud ERP supports financials, CRM, e-commerce, inventory management, demand planning, production and the traceability that’s so important for organic foods and food safety in general.

“We use cloud ERP for all our certifications — non-GMO, organic and kosher,” said Brandon Jenness, PROBAR director of operations. “We use cloud ERP explicitly for traceability. The ability to do mock recalls, the ability to trace ingredients from over 30 countries we source from all the way through the thousands of distributors we sell to, is all done in cloud ERP.”

Regardless of what technology and processes are in place, food manufacturers are challenged to elevate performance in several key areas to better compete in the organics arena:

Traceability. Farm-to-fork traceability of multiple ingredients strengthens compliance with food safety and organic certification requirements, translating into positive brand image and consumer confidence. Real-time alerts and exception reporting are valuable in detecting and addressing anomalies.

Demand planning. Sound processes to cost-effectively manage supply, minimize waste and adapt to consumer demand that varies seasonally, geographically and demographically is all the more important given volatile supplies of organic raw materials.

Speed to market. With shelf-life constraints for non-preservative foods and their ingredients, stakeholders are challenged to accelerate production and distribution, often to comply with supermarket thresholds for minimum shelf life.

Supplier and raw material flexibility. Given erratic supply and frequent shortages of organic ingredients, processors need the flexibility to switch suppliers or substitute ingredients without compromising quality or production schedules.

Stakeholder collaboration. Manufacturers, suppliers, distributors, logistics providers and markets benefit when they can digitally collaborate to meet consumer demand for organic goods.  Cloud technology clears the path to new digital channels that aid all parties.

For instance, business-to-business (B2B) e-commerce can provide real-time information on products in production and transit, as well as convenient reordering for retail partners. Electronic data interchange (EDI) streamlines large-scale recurring transactions, especially valuable when selling to big-box stores.

Navitas Naturals, a northern California seller of organic, non-GMO nuts, fruits, seeds and other “superfoods,” uses cloud ERP and EDI in concert to fulfill orders from Whole Foods Market, Wegmans and other large retailers. The company also uses cloud ERP to track about 235 types of raw materials and finished goods, gaining important traceability.

Without the limitations of its previous entry-level systems, Navitas has logged yearly double-digit revenue growth, scaling to grow its number of retail partners to more than 5,000.

"The dependability, speed, responsiveness and flexibility of cloud ERP is enabling us to run the business more efficiently and gives us the scalability to grow,” said Ira Haber, Navitas Naturals COO.

Food and beverage industry observers characterize organic products as more than just a passing fad, and strong revenue growth tracked by the Organic Trade Association over the past decade backs that up. With the right technology and innovations, food manufacturers are positioned to write the recipe for success in the organics sector.

Source: NetSuite

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