Inefficiencies in a modern food company are a real scourge. What are the telltale signs that your systems in place are already outdated and unable to keep pace with your business needs and demands?
Integrated business systems can provide significant gains to a modern food company’s operations, profitability and competitiveness. In reality, however, they often get buried under a mound of other priorities, such as facility expansion, new plant and personnel training requirements.
How do you know if your information and reporting systems are outdated and in need of attention to support for future strategy?
Here are 10 telltale signs that your systems might not be working for you and you might need to consider an update.
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- Lack of visibility in the business – There is a lack of integration among your various business functions, resulting in silos of information and difficulty getting a holistic, up-to-date, real-time view of areas such as sales, supply and inventory management, and labour requirements. Typically as a business grows it relies upon spreadsheets as a source of data analysis and reporting. This strategy, while initially sound, has inherent limitations and you may rapidly find yourself “drowning” in spreadsheet hell.
- Mounting administrative burden – The absence of integrated systems in a growing business often results in a burgeoning data entry burden, which is typically directed to the administrative team. While with long hours you may initially cope with the demand, ultimately the only solution is to hire additional administrative staff, which leads to additional management burden and ongoing fixed costs.
- Data spread across disparate systems – As businesses grow they typically use a number of systems to manage each of the core functional areas. This leads to your operational data being spread across multiple disconnected systems, which takes large amounts of manual effort to perform basic business actions.
- Inability to electronically interact with customers and suppliers – Do you manually handle the data entry associated with all supplier purchase orders and customer sales orders? This is not only time consuming, but also introduces the potential for error.
- Decision-making is reactive, not proactive – If you have limited access to real time information about your business you may find that the decision-making process tends to be reactive than proactive, which puts great pressure on your organisation and affects critical aspects like sales, purchasing and production cycles.
- Important business information sits with personnel – Recipes, procedures, trading arrangements and other intellectual property may sit in the heads of one or a few key personnel. This is a dangerous practice as people come and go – and can take the information with them without the necessary knowledge transfer and backup in place. Good business practice is centered on well-documented processes and systems that can be readily scaled.
- Inefficient inventory/supply management and planning – Manual systems do not avert situations of overstocking, understocking, and minimising wastage – real day-to-day threats in an industry where shelf life and food safety are paramount. The ever-present threat of “out of stocks” often leads to overstocking, thus tying up working capital and increasing your likelihood of write-offs. Without a clear picture of your forward production and purchasing requirements, you may also often find yourself in short supply of critical materials, which results in adverse purchase costs – thereby further eroding your margin.
- Revenue growing, but profit margin decreasing – If you find yourself in the situation where your revenue is growing yet your profit margin is not keeping up, then you are most likely suffering from a decline in efficiency. This is a common scenario that occurs when you proceed with manual, labour intensive systems. Growing your business should deliver increasing rewards for your shareholders!
- Poor understanding of the business’ true costs – Margins get squeezed in an intensely competitive marketplace, making it imperative to know real, current costs and thus determine the true gross margin by product and customer. With outdated systems, however, there is probably a glassy view of supply, delivery, freight, and other ongoing costs. Additionally, manual systems inherently make it extremely difficult to monitor your actual costs in an ongoing capacity.
- Lost opportunities to grow and expand – Without access to core information about their business, owners and managers are often scrambling to manage daily operations and are left with little to no time for new product development, distribution expansion, and grabbing market opportunities.
to know if your systems need a health check now. Feel free to forward it to a friend or colleague who may be facing the same issues and challenges in their business.