Solving the software procurement puzzle

Selecting the applicable software is particularly difficult, as procurement specialists often lack access to the expert engineering knowledge and “benchmarkable” facts that drive the true cost of software development, McKinsey states, adding that “these gaps inevitably hamper procurement’s ability to evaluate whether the proposed cost of new software initiatives is too high or too unrealistically low.”

In addition, siloed procurement functions prevent the flow of information necessary for thorough assessment and ranking of supplier performance, McKinsey states. “That, in turn, reduces buyers’ negotiation leverage, leaving vendors unaccountable for delivering competitive productivity levels,” the consulting firm notes.

“In the fast-paced, rapidly expanding world of software, ensuring low-risk, cost-effective access to the best enabling technology and services continues to be a challenge,” McKinsey reports. “Companies that underinvest in state-of-the-art procurement processes, tools and expertise risk missing out on the bottom-line value that industry leaders have demonstrated is possible.”

Yet, with a wide range of options and a host of price points, identifying and implementing the most favorable systems can be daunting.

“Software sourcing requires critical investments in capabilities and technologies, as well as significant financial resources,” states McKinsey & Co., a New York-based global management consulting firm. “Those players that can procure software and related services at minimum cost and risk have a distinct competitive advantage.”

Leveraging the appropriate software is vital for an efficient dairy processing operation.

The technologies are critical for supporting such functions as order management and planning, process control, weighing and labeling, performance monitoring, logistics, traceability and integration. Potent systems enable processors to effectively manage activities from production to delivery by also analyzing such elements as costs, product life cycles, profit margins and product quality.

In addition, the appropriate platform can help mitigate risks and recalls, accurately forecast product demand and supply chain issues, and achieve regulatory compliance, states Software Advice, an Austin, Texas-based provider of services that are intended to help processors pinpoint the optimal software for their operations.

Indeed, fulfilling regulatory compliance by tracing ingredients and industrial waste also is pivotal, Software Advice states, noting that solutions can identify and track each product lot; produce current good manufacturing practice compliance reports that many regulatory agencies at the state and federal levels require for insurance purposes; and convert units of measurement as necessary for inventory management, order management, order processing, receiving and batch production.

Expiration tracking functions, meanwhile, can monitor ingredients and products that have limited shelf lives to identify expired and close-to-end-of-life inventory, while highly functional systems also can track actual yield versus expected yield for each batch. “The system should report excessive variance based on user-defined thresholds and indicate if variances are so large that regulating agencies should be notified,” Software Advice notes.

Solicit a wide mix of feedback

To access the most functional tools, processors should receive input from all stakeholders when listing the software capabilities they are seeking and have the stakeholders assist in evaluating the suitability and capability of viable solutions, Software Advice notes. Effective solutions, for instance, can help match the dairy product batch size to the available quantities of ingredients on hand; the batch size to the finished amount that can be packaged with materials on hand; and the batch size to the maximum capacity that the floor can produce.

Effectual systems also can match orders of ingredients to the time when they are required, particularly if the process has stages with delays in between, such as for fermenting, Software Advice states. “This can save money in initial production costs by delaying purchases until required, but runs the risk of losing a batch if a required ingredient is not available in time,” Software Advice notes.

“Dairy processors have highly specialized processes and considerations that are unique to the vertical, so it is unlikely that the ‘cookie-cutter’ approach of a one-size-fits-all solution would fit their needs,” Payne explains. “Processors need industry-specific ERP systems with purpose-built features for the challenges they face.”

Operators, he states, should identify their critical processes and establish a vision for implementation, which includes making clear communication with employees a priority and involving individuals from across a range of operational areas in the analysis, “so everyone is engaged and accountable for a successful deployment. In the end, if you’ve chosen the right software, it should make everyone’s jobs easier, so emphasize that point and the value of digital transformation.”

Once the raw milk is received, the most efficient software can make precise calculations of the component breakdown and document continuous changes as the milk moves through the different processing stages, Payne says. “ERPs that give real-time visibility into the performance of processes and end results can yield actionable insights that drive better results,” he notes.

In seeking the optimal software for specific circumstances, operators “must realize that not all business software is created equally.”

Review the range of functionality

Such technologies can enable dairy processors to “deal with unique challenges due to the nature of their products and the properties of raw milk,” says Jack Payne, solution consulting director, food & beverage and process manufacturing, for Aptean, an Alpharetta, Ga.-based software supplier. He notes, for instance, that each lot of raw milk that processors receive from suppliers will have a different breakdown of milk components, including solids, butterfat, protein and non-fat that determine its value.

An enterprise resource planning (ERP) solution that can track the individual milk components of each receipt and “calculate the weight and value of each along with the combined value is the starting point for a successful setup,” Payne explains. “The bidirectional traceability of a purpose-built ERP facilitates tracking lots back to their source, which is important in case of contamination or other food safety-related emergency.”

Because many dairy processors produce multiple end products, such as liquid milk, cheese, yogurt, butter and cream, it is important to have an ERP system that offers robust recipe and formula controls and can track the amount of raw milk used in each product class, he says. “It’s also vital to track the expiration dates of the finished products as each will have a different range of viability,” Payne states. “Advanced ERP systems make this easier by automatically deploying alerts when the window of freshness is closing. That extra proactive measure can be key, considering that dairy processors want to deliver only the freshest and best-tasting products to market.”

Indeed, software suppliers that have relevant industry involvement is an important consideration when choosing a vendor, states Ultra Consultants, a Chicago-based research and enterprise solutions consulting firm.

“An ERP vendor may have broad distribution experience but may not have deep knowledge of the unique needs of your segment,” Ultra Consultants states. “Ask potential vendors to tell you how they plan to be a leading solution in your marketspace. Evaluate features and functions to see how well they align with the industry’s challenges.”

Payne advises operators to consider leveraging a software as a service (SaaS) model solution in which processors receive applications over the internet instead of having to install and maintain their own software systems. “It unlocks additional flexibility and can save money on upfront costs since no additional hardware is needed,” he notes.

Indeed, it is “critically important to do everything that can be done to shave costs, increase revenue and boost profitability,” Ultra Consultants concludes. “The challenge is identifying the processes and functions where new efficiencies, a couple of pennies and a tenth of a percentage point of improvement can be found.” DF

Make simplicity an objective

Implementing the most suitable software technologies, however, can be challenging when multiple departments each have their own solutions, which causes information to get caught in siloes and limits collaboration and visibility, Payne says.

“Trying to leverage many disparate systems for very specific purposes can turn into a sort of ‘spaghetti code’ that makes finding the data you need much more difficult and leads to miscommunication while often creating inaccuracies, especially when multiple individuals have different versions of the truth,” he notes.

Software that creates a cumbersome and unintuitive user interface, meanwhile, can complicate the training process and routine tasks that staffers will need to perform during normal operations, Payne says. “Without a simple and intuitive user experience, it can be a chore to navigate the system,” he notes. “Searching for the right information can be time-consuming and frustrating without the right filter options and automatic prompts.”

In response, processors should evaluate the user experience of software packages under consideration to determine the ease for employees in navigating systems, Payne says. Operators, however, should avoid customizations that complicates the updating of solutions and doesn’t always carry over between different software versions, he states.

“Look for an ERP to act as the ‘single source of truth’ and the foundation for digital transformation,” Payne says. “By acting as a single central database for all information, from supply chain movement and production-related figures to sales and financials, the right ERP solution can facilitate better decision-making by making important business data highly visible and accessible.”

In addition, processors should select a software provider that has a deep understanding of the dairy industry and modern “best practices,” Payne notes. This is particularly important since dairy manufacturers are bound to need the critical support of a reliable, knowledgeable vendor.