Member Article

Traceability and Compliance - How ERP Can Help

Process automation includes capturing essential information about the source, storage, treatment and testing of materials through the manufacturing cycle.

Take control of quality

Accountability in manufacturing isn’t an optional extra. Whether you’re making sauces, sofas or sports cars, you need to know exactly what’s gone into your product. You must be able to track back every ingredient/component to its source. Who might want to know?

• You
• Your customers
• Trading standards
• Industry regulators
• Insurers

There were almost 400 consumer product recalls in 2011 in the UK (Source: RecallUK). This is just a fraction of the massive volume of products that failed to make it through multiple quality control tests. Spot audits are not uncommon.

“The companies that can recover rapidly and maintain public confidence are the ones whose foods safety system detects the problem early, minimises its scope, and acts swiftly to protect consumers.“ Michael Taylor, FDA Deputy Commissioner for Foods & Veterinary Medicine, speaking at an event in China

Expensive mistakes

General Food Law Regulation (EC) 178/2002 requires that traceability records be made available to the competent authorities on demand. Here are examples of expensive mistakes which you want to avoid:

• Over £20 million - the estimated cost to Cadbury of recalling over 1 million chocolate bars in 2006.
• £16.9 million - the estimated cost to Britvic, according to some reports, of recalling all its Fruit Shoot drinks in 2012.
• Undisclosed - the cost to Toyota of recalling 7.4 million cars worldwide in 2012, to fix a power window defect. Coming soon after a 2009 recall of 12 million vehicles, the firm refused to give estimates of costs.

58 per cent of businesses see a role for ERP in compliance in the near future.

Controlling traceability costs

Every product failure costs money and, if it occurs after the product has gone out into the market, the impact on profits can be huge. The costs of product failure, at any stage in manufacturing, include:

• Time spent tracing the problem
• Cost of actions to correct the problem
• Lost profits from potential sales
• Damage to reputation

There’s also a cost to keeping the detailed records required for traceability and compliance. Manual recording is an expensive use of valuable resources. By automating much of the material and product tracking, ERP systems make the record keeping process quicker and easier, reducing the scope for error. Electronic storage of conformance certificates is easier today than ever before.

Quality control at your fingertips

The more control you have over the quality of data available about your products, the more control you have over your costs and your reputation. If you supply companies like Rolls Royce or Tesco, traceability back to the casting or ingredient is a prerequisite to doing business. ERP systems help you achieve that control. Automated data collection and validation, real time updates and fast retrieval of information provide you with reassurance that the information is there if it’s needed.

By holding comprehensive data on the sources and movements of all your materials and products, ERP software helps manufacturers to solve the problems of traceability, compliance, accountability and for some liability.

Questions an ERP system can answer at the touch of a button, and how it’s achieved:

1. Where did it come from? Data captured as raw materials are delivered.
2. How old is it? Automated alerts provide advance warning of product expiry.
3. Where was it stored? Stock rotation is monitored automatically.
4. When was it tested? Automated recording of real-time events.
5. Who issued the certificates?

Do you think your business is ready for a product recall? Let us know what you think in the comments area below.

You can also discover more detailed insight about ERP systems in the Finance Director’s Guide: Nine Key Opportunities for Using ERP. Copy and paste http://bit.ly/financedirectorsguide into your browser to read.

This was posted in Bdaily's Members' News section by Paul Bywater .