Food Manufacturing: horizontal vs vertical ERP software
By Richard Montgomery, Sales Director of food ERP and software specialist, (SI) Systems Integration
Throughout the many years that I’ve worked within the food manufacturing industry, I have spent my time reviewing both business processes and how technology can be deployed to reduce cost or to increase productivity. I’ve also visited hundreds of food factories, both in the UK and overseas. I believe that in food manufacturing today, to provide the best quality products and customer service, whilst maximizing business profitability, deploying the right technology is fundamental.
Many food manufacturing businesses operate in unique and complex environments, in an ever shifting macro and micro environment. Technology can deliver simplicity, compliance, traceability, automation, real-time information and performance controls for food products. These food products might be perishable, multi-staged (work in progress), recipe-based, de-constructed, etc. Technology is becoming a corner-stone for success in food manufacturing, whatever the sector.
The horizontal v vertical ERP software predicament for food manufacturers
I have also seen many methodologies and approaches taken to deploy technology. A very common dilemma that I often come across in food manufacturing businesses is the Horizontal vs Vertical ERP software predicament.
What does this mean? To me, this is the approach taken by the software vendor and it could be translated as a “functionality for all” vs a “functionality for you” approach. This has many benefits and drawbacks, both for the vendor and for the client.
Many large blue chip software businesses, such as Microsoft, SAP and Oracle offer large ERP systems, which is an option for food manufacturing businesses. They offer one product that services many industries. The main benefit of this approach is that these are hugely functional, powerful products that can be deployed with a deep, structured support and consultancy network that can be relied on.
First, let’s talk horizontal ERP systems
These large ERP systems offer vast functionality for many departments within the business, such as sales, accounts, finance, warehousing. However, for many food manufacturers, especially food businesses with complex operational processes, it is difficult to mould and flex such a system to efficiently collect the information, and drill down to the necessary detail that can really drive businesses performance, growth and profitability.
Ultimately, this can lead to higher cost of ownership. Many businesses will need to pay for development and customisation to uncover the necessary detail, potentially sacrificing the ability to take upgrades in the future.
Will vertically-focused ERP software deliver the advantage?
Alternatively, there are vertically-focused ERP software companies that specialise in one to a few specific “sector verticals” that will share common processes. These food ERP applications can be built from rich-tacit knowledge in-house and will have deep sector-specific functionality for the specific vertical it is positioned for.
Vertically-focused food ERP software will be better suited to food manufacturers that have really complicated shop-floor / product related processes. These types of applications will have the features and functionality required to meet specific requirements “off-the-shelf”, to deliver a true end-to-end, 360 degrees solution.
As these software vendors are often small to mid-sized, food manufacturers need to ensure the vendor’s business structure and software platform is progressive enough to ensure it will keep up with future technological advances (i.e. that you will be continuously upgraded!).
The ERP software landscape is always evolving. Within industries that have historically not been as technologically-focused, such as food, it can be challenging and nerve-racking having to make big decisions on technology and software, in order to stay competitive and compliant.
Horizontal has its place for food manufacturers, often offering huge capability and support networks but can fall short if complexity is high. Vertically aligned ERP vendors are normally a better fit. However, they need to offer ways to fulfil progressive business aspirations, support and product development to meet a food manufacturer’s growth, evolving requirements and future demands.
What about scenario three?
What if you already have a core ERP but need to make incremental improvements, to close the gap through development or introducing another company? What if your business approach is to have best-of-breed solutions, combining vanilla horizontal ERP integrated with vertically-focused applications? In my next article I’ll share my views about how this can best be achieved.
If you would like to discuss the benefits of vertical v horizontal ERP, please don’t hesitate to email me on firstname.lastname@example.org You can also send me any questions on other areas of food production software integration, which I would be happy to answer.