Business Process for Bakery
The purpose of this report is to provide a link on AIS/ERS systems required for a family owned bakery business.
Ownership and Size
B Bakery is a family run company within the food and retail industry. Currently, the company employs around 70 employees with an annual turnover of $13.5 million in the last year. They have been in operation for more than 50 years implying they are a mature stable company.
Product
The products produced by bakeries are mostly flour based and consists of bread, cakes, and snacks such as pies, sweets, pastries, muffins, donuts etc (Rush, 2016). Our company B Bakery supplies baked goods such as bread and confectionaries to their customer base.
B Bakery Target Market
B bakery appears to have a mixed customer base with some prominent customers including supermarkets, shops, and various pub chains.
Key Bakery Business Process and Functions
B Bakery being involved in the bakery business should have the following basic processes and departments to in place to remain a viable business. These functions include the following (Sevilla, 2015):-
- Supply chain management and procurement
- Production unit
- Inventory and logistics department
- Sales and marketing department
- Finance and accounting department
- IT and operations function
- Human resource management
- Management
The supply chain management and procurement will be responsible for procuring and buying raw materials from suppliers such as flour, fruits and eggs plus other services like the companies insurance and lease agreements. They will also be responsible for setting up contracts with these suppliers and vendors (Handfield, 2011) .
Then production unit will turn inputs to outputs (Business Case Studies, 2017). In the case of a bakery they are responsible for producing and packing the baked goods. It is in this function that we will find the chefs and cooks.
The inventory and logistics department will be responsible for storage of baked goods. They will also be responsible for having the right amount of inventory, arranging delivery of baked orders to different supermarkets, shops and pub chains on a daily basis (Industry Star Solutions, 2016).
The sales and marketing departments will be in charge of promoting the bakery business through activities such as advertising, promotional materials, catering events and market research (Fatteross, 2017).
The finance and accounting will manage the company’s transactional accounting activities, including bookkeeping, payment to suppliers and vendors, payment from customers, credit control process, petty cash disbursements, payroll management of the staff etc (Smythe CPA, 2014).
The IT department will be responsible for setting up the bakery’s IT systems, operations and devices necessary to run the business smoothly (Cordray, 2014).
The Human resource department will be responsible for the hiring process, training and development of staff and paying employees (Heathfield, 2017).
Business Requirements for Bakery
All the above functions will be overseen by the management and owners of the bakery who will be responsible for approvals, making key decisions and growth strategies for the company (Business Matters, 2013).
The business objective of B Bakery is to be profitable and create value for its owners. All processes of a bakery are critical, however, the most indispensable processes of a medium sized bakery business would include accounting, inventory management, supply, production, and sales management (Payne, 2002).
In this section, we describe each of these key processes and their expected requirements that will achieve the business objective of the bakery.
Accounting
B Bakery has one accountant in its team. In recent years, the business appears to be facing difficulties in this department. For example, by not offering its products at competitive prices, the bakery has lost important customers. In order for the business to operate smoothly and make strategic decisions, it will require information from its market research and business processes such as inventory and sales. Once the company obtains this information, they may then be in a position to make changes to the pricing strategy. Consequently, the accounting business requirements for B Bakery will be as follows-
- Improve their financial accounts.
- Investing in accounting software that meets the needs of their business process.
- Investing in ERP AIS solutions for its core functions. ERP will integrate its business functions while providing a platform for accounting system (Di Trocchio, 2015).
- Integrating its business functions and accounting for strategic decision making.
Inventory Management
To keep its inventory purchase costs to a minimum, B bakery will have the following requirements-
- It will need to keep track of its inventory levels
- The ingredients utilized for recipes will also have to be tracked correctly and on timely basis (Eagle, 2017).
- Ability to analyze future resource requirements that must be ordered.
- Ability to send orders that have been placed with suppliers and vendor on a timely basis.
- The shelf life of resources will also have to be tracked and provide the bakery with the ability to provide an update.
The requirements above will ensure that the bakery operates efficiently and productively
Supply Chain Management
An efficient supply chain will ensure that the business more effectively sources for its raw materials. At a minimum, the business will need to know how they will purchase and acquire resources needed to run the business while avoiding wastage to ensure better profit margins.
For a bakery, some of the critical requirements from its supply chain management will include the following:-
- Ordering of raw material from suppliers
- Warehouse management of both finished goods and raw materials
- Transport of goods to their customers
- The cost of supplier contracts
Production unit
For a bakery, the business requirements needed to tighten production efficiency include the following:-
- Ability to compare actual yield versus expected output.
- Reporting of wasted ingredients during the production process
- Improved visibility of stock in hand (Global Bake, 2017).
Sales Management
It has been observed that the healthy product range of B Bakery has experienced increased growth over the years which suggest a move towards marketing this range. An efficient sales system will ensure that the bakery will match supply to demand while reducing the likelihood of shortages (Payne, 2002).
For a bakery, some of the business requirements under an efficient sales management process will include:-
- Forecasting of future sales based on history and what if analysis
- The ability to compare sales results to production costs(Global Bake, 2017).
B Bakery has 70 employees with an annual turnover of $13.5 million in the last one year. Thus one accountant is not enough to fulfill the company’s objectives. The bakery will have to invest in AIS and ERP system to meet the business requirements and improve their efficiency.
System Requirements for Bakery
The ERP management system will integrate and streamline the main activities of an indispensable business function thus making it more efficient in the process. A central database with all information will be available to the ERP. Thus it will have access to entire business processing. Figure 41 below shows how an ERP system should work for a food retailing industry.
Below are some of the system requirements of the ERP system for a bakery:-
- To track Inventory, the bakery would require an inventory system that would manage its ingredients like sugar, eggs, flour, yeast, flour, and other. The system should be able to trace for allergens to meet FDA requirements (Payne, 2002).
- The Shelf life of baked goods is a challenge to most bakeries as their products do not last for more than a week. Thus B Bakery would need to keep track and monitor their inventory turnover methods such as LIFO or other unique methods like the first expiry, first out(Payne, 2002).
- The system should be set up such that each product is linked to their ingredients. The purpose of this is so that the business can analyze the total sale of menu items and proportionately deduct the amount from its resource database at the end of the day. This will then allow it to compare its currently available resources with the threshold level of all ingredients. If the system finds that certain ingredients are below their threshold, the system would then generate a purchase order for items to its vendors. It can also be configured to send a request to management for their approval.
- The system should be able to improve product costing.
- The system should be able to manage the costs of variable products e.g. the popular healthy products range versus standard product range (Payne, 2002).
- The system should be able to track weights (Payne, 2002).
- It should also reduce the need for manual administration through automated services (Global Bake, 2017).
- For sales, the bakery would require a system that can predict scale production cost and yields (Payne, 2002).
- There should be seamless Integration into the existing business model (O’Callaghan, 2017).
Currently, the bakery has one accountant. Investing in an Accounting Information System (AIS) will transform the business to another level as the system will collect process and analyze data into useful information, much faster than a single accountant (Turner, 2013). A central database with all information will be available to the AIS. Thus it will have access to the business’s entire operations including expenditure cycle, revenue cycle, production, and payrolls.
Any AIS has three basic functions in business:-
- To collect and store data with respect to the business financial transactions. Furthermore, it should be able to record these transactions in the company’s journals, while posting the data to the company’s ledgers at which point the data is sorted on different accounts.
- The Accounting Information System should be able to provide management with useful information in the form of reports and financial statements that can be used to make strategically informed decisions.
- The system also ensures that information produced is reliable and valid by ensuring strictly control to correctly record and process data (AccountingEdu, 2017).
B Bakery would be categorized as a small to medium sized company for the following reasons. Firstly, it is a family owned business and has been in operation for over 50 years. Secondly, the company employs 70 workers. Lastly, the company has an annual turnover of $13.5 million in the past one year implying growth.
Based on the size of a company there are three types of accounting software available in the market (Finance Online, 2017). These include the following:-
Entry level software
This software is suitable for small sized companies who have one to five employees working for them. This software is more affordable than getting an accountant and is capable of providing minimum functions required for financial accounting, review of data, quick reports etc. Examples of this type of software include XERO, SAGE 50, QuickBooks, FreshBooks, and Wave etc.
This software is suitable for small to medium sized businesses that employ from five to 100 workers. The software can support additional functions than the basic entry level software such as additional transactions and support. This software can be scalable and it comes with a robust database. Examples of Small to Medium Business accounting software include CYMA, QuickBooks enterprise, SAGE 100 ERP, Reach, Microsoft Dynamics (GP, NAV, and SP), EXACT Max, SAP By Design, Global Bake etc.
Enterprise Accounting Software
The Enterprise accounting software is suitable for large companies that employ at least 100 workers and more. The systems are more robust, intelligent with advanced functionalities to meet the needs of every function/department within the organization. Examples of Enterprise accounting software include SAGE ERP X3, SAP, and Oracle (Needleman, 2017).
Based on the turnover and size of B Bakery, we recommend accounting software suited for small to medium business such as CYMA, QuickBooks enterprise, GlobalBake, SAGE 100 ERP, Reach, Microsoft Dynamics (GP, NAV, SP), EXACT Max, SAP By Design etc
In this section, we compare the Max ERP from Exact and SAP Business One and DEMMEX.
MAX ERP from Exact
The MAX ERP is catered to small and medium sized manufacturing companies. According to its website, the software assists in inventory management and increased efficiency (EXACT MAX, 2017).
MAX is available to the following manufacturing industries -food and beverage, medical equipment manufacturing, discrete manufacturing, and electronics manufacturing.
For the food and beverage industry, MAX ERP software claims to improve efficiency, manage stock, track and trace food products to ensure the business is meeting customer requirements and quality standards.
It is able to support the following functions- labor tracking, processing instructions, parts traceability, and production scheduling. Other additional features include:-
- The ability to maintain audit trail
- Provide quick easy access to data and FDA compliance.
- It has the ability to recall products to improve efficiency.
- It is embedded with a Customer Relationship Management (CRM) that will assist the business to manage its sales and marketing processes efficiently, as well as, coordinate and manage all of the businesses’ after care support and services.
- The software manages and analyzes products produced and batch recipes. Bill of Material’s Visual Bill of Resource creates a link between a single ingredient and the batch that will comprise of the finished good.
- It simplifies the audit quality by availing all program information online.
- It includes an Electronic Data Interchange (EDI) that allows businesses to conduct B2B e-commerce with suppliers and customers.
- Furthermore, MAX can be integrated with other ERP systems like Intuit QuickBooks and Microsoft Dynamics.
SAP Business One and DEMMEX
DEMMEX have partnered with SAP to produce this software that is suited specifically to manage all aspect a bakery business (Dem Intergrated Systems, 2017).
DEMMEX Suite for SAP Business One supports the following functions
- It manage inventory across many warehouses in real-time.
- The software tracks and records stock movements, optimizes inventory levels, improves on-time delivery thus making stock-outs a thing of the past.
- It connects back office financial processes with factory floor processes such as barcode scanning, weighing scale data, touch screen PC’s, high-speed label printing, and handheld mobile computers.
- It captures all key information in a single, scalable system
- It allows employees to access to the software via a mobile app
- It is built with integrated business intelligence to assist in decision making.
- It can be deployed either on the premise or in the cloud depending on the business’s needs.
- It harnesses factory floor data for quick decisions.
- It also includes CRM, yield costing, EDI support and supply chain management.
To meet the business objectives of B Bakery, we recommend the SAP Business One and DEMMEX accounting software for the business. This is because this software is specifically designed for bakeries hence meeting their needs as follows.
- It provides a fully integrated efficient platform for different parts for its employees, suppliers, vendors and customers.
- It is built with integrated business intelligence to assist in decision such as potential customers, profitable products, variation costs etc.
- It is embedded with a Customer Relationship Management (CRM) that will assist the business to manage its sales and marketing processes efficiently, as well as, coordinate and manage all of the businesses’ after care support and services.
- The bill of material module of the softwarelinks each product to their ingredients. This helps the business analyze the total sale of menu items and proportionately deduct the amount from its resource database at the end of the day.
- It includes a built in mobile app for on the go access by employees therefore allowing quick approvals of payment and purchase orders.
- It provides automation for management approvals.
- The software can be integrated with several other apps to improve the overall experience.
Conclusion
Accounting for all operational costs and material can be a big challenge for bakeries as it is impossible to keep track of ingredients usage and monitoring the shelf life of baked goods (Payne, 2002).
Investing in ERP and AIS systems will capture and compare the actual or estimated costs of finished goods more accurately than manual methods including simplified customer invoicing. Furthermore, their capabilities have increased to include business support applications like email and office suites, customer service, web conferencing facilities, enterprise applications and project planning (Edara & Kandagatla, 2012). ERP and AIS systems will ensure all key business processes are integrated, simplified, robust, and scalable (Shimpach, 2017).
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