The food distribution industry is very unique in a number of different ways. With numerous standards and regulations set by governing bodies in place, as well as an overall level of quality that must be upheld to customers, it is important to employ a software program designed specifically for food wholesalers and distributors. Most enterprise-level software packages have similar standard inventory and accounting functionality that users have come to expect as part of a true ERP software system. However, it is the additional food industry specific features such as lot tracking, landed cost tracking, multiple units of measure, and flexible pricing that make a system optimized for the food industry. In addition, there are different complexities based on the type of food products you sell and which customers you serve. This post helps to clarify the different software options and outlines key features to look for in food distribution software programs.
Different Types of Food Distributors
One of the first things to identify when looking at food distribution software programs is WHAT type of food distributor the system is designed for. Although you may think all food distribution companies are treated equal, the biggest differentiator is around catch weight requirements. This requirement is common among businesses that deal with produce, meat, poultry and fish as it refers to the ability to track variable product weights. Managing different/variable weights for the same inventory items usually requires catch weight functionality. This requirement is different from businesses that deal with canned, frozen and dry packaged goods, in which the weights and sizes will be standard each time, it is unlikely that you will require catch weight functionality. Therefore, before you start looking for a solution, determine if you will require catch weight functionality as this can frequently be a differentiating factor between systems.
If you don't require catch weight functionality, other key features to look for include:
- Lot Tracking
- Landed Cost Tracking
- Multiple Units of Measurement
- Flexible Pricing
Lot tracking facilitates robust product traceability in order to keep records of which customers received specific groups of items or shipments. The supplier and the date that items were purchased are also referenced, allowing managers to track an individual group of products throughout the supply chain, ultimately from supplier to end customer. This functionality is especially important to food distributors as it is a key competency in achieving FDA/ISO/CFIA compliance. Many companies in the food distribution industry rely on lot tracking to track internal and external lot numbers, manage best before and expiry dates, as well as simplify product recalls and warnings in case of an emergency.
Landed Cost Tracking
Landed cost tracking allows a food distribution company to account for all the costs associated with getting inventory from a supplier to their warehouse. This allows a company to arrive at its ‘true inventory costs’, which may include duty, brokerage, freight, insurance, and storage, in addition to the cost of the inventory itself. Landed cost tracking provides important information to business owners and decision makers when making purchasing and pricing decisions, as well as aids in maintaining target gross margins by accounting for the total inventory cost, and not just a sub-section of it.
Multiple Units of Measure
Due to the nature of the products, food items are often purchased and sold using different units of measure. A company may buy and sell the same products by weight, units, volume, etc. - and an effective software optimized for food distribution should be able to account for the variance. The ability to track multiple UOMs is different from requiring catch weight functionality as per the example below.
- Multiple UOMs - the ability to track that one box is equal to 10 eaches
- Catch Weight - the ability to track a 20 lbs box, and then account for the variable weight of each item in the box
When investing in a food distribution software program for your company, flexible pricing should be a consideration. Your software should automatically allow for different prices for different customers. For example, the option should be available for customer specific discounts for preferred customers or quantity discounts for customers who purchase a defined quantity of product. It is also important to be able to quickly adjust prices in the system based on changes to market prices – a common occurrence in the food industry.
These are just a few of the features that most food distribution companies find useful in a software system. In addition to the basic inventory and accounting features that most companies will need, lot tracking, landed cost tracking, multiple units of measurement and flexible pricing provide a strong foundation for food distribution companies. It is important for companies to carefully evaluate potential software vendors to ensure that their solution encompasses the features outlined above, as well as any additional features that are identified throughout a detailed sales and implementation process.