SAP ERP for the Meat Industry

1
SAP ERP for the Meat Industry
2
Meat Trends and Challenges
Industry Business Scenarios
3
Meat Trends and Challenges
Industry Business Scenarios
4
The Meat Industry Ecosystem
Supply
Distribute/Deliver/ Retailer
Consumer
Produce
Farmers
Retail,Wholesale
Co-ops
Major RestaurantChains
Consumers
Dealers
Meat Products Company
Restaurants,Hotels,Canteens,Schools
Food Service
Packaging Ingredient Suppliers
Other Meat Processors
Other Meat Processors
Government Regulations (Taxes, Compliance, Trade
Restrictions, Import/Export rules)
5
Meat Processors Often Havethe Right Focus and
the Right Strategies
YOUR FOCUS Increase Shareholder Value Increase
Revenue and Profit Margins Operational
Excellence Product Leadership Improve Customer
Satisfaction

• Protect and enhance revenue
• Improve margins
• Drive for lower costs
• Get closer to the consumer
• Improve time-to-market
• Enhance operational efficiency
• Ensure food safety

Business STRATEGY
6
But Are Facing a Number of ChallengingMarket
Trends and Industry Issues

• Retailer clout and channel complexity
• Cost containment and margin improvement
• Product quality, safety, and security legislation
  
• Managing mergers and acquisitions
• Product innovation and consumer trends

YOUR FOCUS Increase Shareholder Value Increase
Revenue and Profit Margins Operational
Excellence Product Leadership Improve Customer
Satisfaction
Key Market Trends
7
Market Forces and Business Needs

• Market Forces
• Retailer power (Wal-Mart effect)
• Consumer concerns over food safety, and media
  attention
• Increased legislation and regulations around food
  safety by FDA and other authorities (e.g., EU
  Dir. 178/2002, the U.S. Bioterrorism Act of 2002)
• Changing consumer demands due to demographics and
  trends
• Decreasing consumer loyalty for products and
  brands
• Shorter product life cycles
• Global commodity price fluctuations
• Price pressure/margin erosion
• Restrictive consumer spending pattern
• Market consolidation (globalization, MAs)
• Increasing competition
• Emerging private labels
• New technologies reshaping the industry

• Resulting Key Challenges
• Manufacturing cost reduction
• Price and margin management
• Effective operations in sales and production
• Efficient procurement
• Food safety and regulatory compliance
• Support of mergers and acquisitions

8
Manufacturing Cost Reduction
Challenges

• Measure and monitor actual yield performance,
  make incremental process improvements
• Implement formula changes efficiently and timely
• Control component usage on shop floor
• Improve asset use through better production
  planning
• Monitor direct and support manufacturing costs

SAP can help you

• Monitor actual material yields
• Manage inventory usage and highlight near
  expiration date inventory
• Maintain/change formulas centrally, with instant
  visibility to all departments
• Plan material and capacity requirements and
  optimize production plans
• Real-time access to production cost information

• Improved material yields
• Improved product quality
• Improved labor efficiency and overhead absorption
• Access to actionable information to manage the
  business
• Lower operating costs
• Higher process transparency

9
Price and Margin Management
Challenges

• Proactive pricing based on internal and external
  factors
• Monitor product margins take corrective action
  on those below target
• Routine cost simulation with commodity price
  projections
• Effective sales forecasting and production and
  materials planning (from end to end)

SAP can help you

• Track average actual or standard cost
• Analyze historical and current product margins
• Analyze profitability results ondifferent levels
• Run simulated product costs
• Maintain price lists and enforce pricing at order
  entry
• Forecast demand and plan production and
  materials

• Improved price realization
• Tighter control over pricing at order entry
• Concentration on profitable products
• Increase overall company profitability
• Access to actionable information to manage the
  business

10
Effective Operations in Sales and Production
Challenges

• Effectively forecast demand
• Formal and frequent production and materials
  planning cycles
• Sales and operations planning process
• Advance planning and optimization tools
• Accurate and timely procurement shop-floor and
  customer-order data factored into plans

SAP can help you

• Track planned in-bound raw material, ingredient,
  and packaging components
• Shelf-life management in finished goods area and
  expiration date monitoring
• Real-time production cost monitoring
• Forecast/plan sales demand
• Plan material and capacity requirements optimize
  production plans

• Higher customer satisfaction by increased service
  level
• Lower distressed inventory sales
• Fast stock reduction
• Reduced operating costs by efficient production
  processes

11
Efficient Procurement
Challenges

• Maintenance of medium- and long-term contracts
  for livestock and meat parts
• New product/formulation changes to correct
  supply/demand imbalances
• Streamline procurement and push sales processes
• Formal and frequent production and materials
  planning cycles

• Set up inbound procurement and out-bound sales
  contracts
• Settle livestock payment based on slaughter
  yield, grade, and other parameters
• Maintain supplier schedules, slaughter, and/or
  segmentation schedules
• Efficiently collect slaughter operations data and
  settle livestock contracts

• Improve price realization on commodity sales
• Lower costs on commodity purchases
• Reduce fire sales and short buys
• Efficient procurement operations
• Access to actionable information to manage the
  business

12
Food Safety and Regulatory Compliance
Challenges

• Support mid- and long-term company success by
  ensuring regulatory compliance
• Set efficient processes in place to record,
  store, and report traceability information
• Enable targeted product recalls to contain costs
  while ensuring public safety and trust

SAP can help you

• Faster lot genealogy reporting and more efficient
  recall analysis
• Reduced penalty risk
• Decreased risk for food-safety-compensation
  payments
• Reduced risk of bad reputation
• Contained scope of recall
• Lower operating costs

• Track, monitor, and trace batches and inventory
• Streamline procurement, production, and sales
  processes
• Manage sales returns
• Enable targeted product recalls

13
Support of Mergers and Acquisitions
Challenges

• Level load materials and capacity use across
  multiple sites
• Consolidate production planning across multiple
  sites
• Consolidate SGA functions
• - Sales force
• - Marketing
• - Finance organization
• - Customer service
• - RD
• - Procurement

SAP can help you

• Improved operations excellence
• Access to actionable information to manage the
  business
• Reduced SGA costs
• Ability to reorganize to satisfy organizational
  objectives

• Maintain one common set of master data for
  real-time use by all users, enterprisewide
• Consolidate and plan financial information across
  multiple financial entities
• Forecast sales centrally
• Plan production and materials across multiple
  sites
• Plan intersite distributions

14
Meat Trends and Challenges
Industry Business Scenarios
15
SAP ERP Packaged Solution for the Meat Industry
Description
Focuses on key business processes that create a
baseline for future growth Delivers immediate
benefits by solving the problem of system
heterogeneity Enables significant business
process automation

• Increase forecast efficiency
• Increase speed of reaction of fluctuating demand
• Understand company performance and profitability

• Realize purchase savings
• Improve purchasing efficiency
• Evaluate supplier quality and performance
• Ensure tracking and traceability

• Improve material yields
• Improve manufacturing efficiency
• Increase flexibility in production
• Ensure quality manufacturing process
• Ensure tracking and traceability

• Improve fill rates
• Improve order promising
• Improve customer service and distribution
  efficiency
• Ensure tracking and traceability

• Improve price realization
• Reduce distressed sales
• Improved margin analysis
• Improve trade promotion visibility and performance

Business Objectives
Complete logistical and financial integration
Key Performance Indicators

• Throughput (animals, slaughter weight, cutting
  weight)
• Slaughter efficiency
• Overall equipment efficiency (OEE)
• Labor cost per unit weight (lbs or kgs) or weight
  processed per man hour

• Gross profit/total net sales
• Price, operating margin, and cost per unit weight
  (lbs or kgs)
• Percent standard yield attainment
• Plant and department use
• Inventory turns

16