Transforming organics success through technology

By Dave Gustovich

Canadian consumer demand for organic foods has never been higher. As shoppers buy more goods labelled as organic, pesticide-free, non-GMO and other attributes of healthier foods, food distributors and manufacturers face the need to adapt to the complex challenges of the organic products supply chain.

For these companies, farm-to-fork traceability of multiple ingredients is critical. Without preservatives, the limited shelf life of foods necessitates greater speed and collaboration across the entire supply chain, while pricing needs to balance the higher cost and volatile supply of organic raw materials against consumer willingness to pay premium prices for organic products.

Attaining organic certification from an organization such as the Canadian Food Inspection Agency (CFIA), and similar agencies across the world, is a rigorous and complex data-management exercise for farmers, food manufacturers and grocers — with a high risk of brand damage if certification is lost because of a violation.

And while food supply chain stakeholders have invested heavily in complying with food safety regulations, nearly half of the respondents to a recent study by analyst firm Aberdeen Group1 showed compliance as the top challenge they face.

A huge market opportunity

Globally, organic sales have recently been valued at more than US$72 billion per year, and 58 per cent of Canadians say they buy organic products every week, resulting in a CDN$4-billion local market. Expectations for continued growth have made organics a top priority across the highly competitive industry, affecting players both large and small.

Multinational consumer packaged goods (CPG) suppliers like Kellogg, Kraft Heinz, and others continue expanding their organic portfolios, in many cases acquiring smaller organics companies. However, most companies producing and selling organics in Canada are small and mid-market companies, ranging from family produce, dairy and livestock farms, to regional food processors.

Today, many of these same producers and distributors rely on disconnected and inflexible applications for financials, inventory control, demand planning, supplier management, product and ingredient tracking, and logistics. In fact, spreadsheets and paper-based processes are still being used by some, leading to both delays and guesswork in planning and production. For these companies lacking the resources of a multibillion-dollar CPG or supermarket chain, improved visibility, control and agility is needed to capitalize on the organic foods opportunity – and many are turning to new technologies to do so.

Visibility and standards

Innovative companies in the organics industry are benefiting by modernizing their technological foundations with solutions like an integrated enterprise resource planning (ERP) suite. Aberdeen, in its report on food safety, views integrated ERP as a competitive advantage for food processors, particularly in visibility and enforcing standards.

“By implementing an integrated ERP solution, top performing food and beverage manufacturers can proactively manage compliance while keeping costs low and delivering high-quality, consistent products,” Aberdeen says. “The benefit of a technology foundation that supports a single source of truth is that best practice standards, recipes and requirements can be communicated and enforced.”

Canadian manufacturers and distributors need to elevate performance in five key areas to better compete in the organics space:

• Traceability: Farm-to-fork traceability of ingredients strengthens compliance with food safety and organic certification requirements, resulting in consumer confidence and positive brand image. Real-time alerts and exception reporting are valuable in detecting and addressing anomalies.

• Demand planning: Sound processes to cost-effectively manage supply, minimize waste and adapt to consumer demand that varies seasonally, geographically and demographically is all the more important given volatile supplies of organic raw materials.

• Speed to market: Given constraints with shelf life for non-preservative foods and ingredients, companies need to accelerate production and distribution – often to comply with supermarket demands.

• Supplier and raw material flexibility: Processors need the flexibility to switch suppliers or substitute ingredients without compromising quality or production schedules, due to erratic supply and often frequent shortages of organic ingredients.

• Stakeholder collaboration: Meeting consumer demand for organic goods greatly benefits with digital collaboration between manufacturers, suppliers, logistics providers and markets. Cloud-based technology clears the path to new digital channels that aid all parties.

With demand growing, organic products have proven they’re more than just a passing fad, and strong revenue growth tracked by the Organic Trade Association over the past decade backs that up. With the right technology and innovations, Canadian food manufacturers and distributors are ready to write the recipe for success in the organics sector.

Dave Gustovich is area vice-president of NetSuite’s Manufacturing Center of Excellence and the former president and CEO of IQity Solutions, acquired by NetSuite. For more information visit www.netsuite.com