The Importance of Aligning IT with the Business
We have all heard the phrase “align IT with the business”. Usually it’s just a catch phrase you hear in interviews. Any IT department worth its salt is going to naturally put the systems and policies in place to better support the business–right? Not necessarily so and not due to any type of neglect either. The Food and Beverage industry is an interesting animal. For the outsider you would think that based on the sector alone that aside from slight differences in manufacturing, that Information Technology would be essentially the same. The truth is that from business to business and even business unit to unit within the same company can be drastically different.
It is important to understand that a customer facing business, someone creating a food or drink that they sell directly to the store shelf have different demands than those businesses that sell micro nutrient pre-blends, raw ingredients or colors to those businesses. A company that is selling directly to the consumer builds a differentiator through taste, texture and branding. The consumer falls in love with their product and will seek it out on the store shelf. If a store runs out of a particular item the customer likes, the consumer may purchase a substitute but likely will return to their favorite brand on the next shopping trip. Unless there is a prolonged absence of the desired item, the customer for the most part will stay loyal.
Food Manufacturing systems must accurately control inventory and make the process almost fool proof coming as close to a desired product to avoid re-manufacturing efforts.
However, for B2B efforts it is a different story. The reason is simple; it is easy to be a distributor of ingredients or colors and it is not rocket science to take the customer’s specifications and create a blended product which they in turn use in their manufacturing process to create the consumer good. So what is the differentiator that draws or keeps customers in this type of business? Responsiveness, reliability, accuracy and innovation are the keys to retaining customers. That is where the critical nature of how IT is implemented, used and supported can actually be seen as a business driver or detriment.
It would be interesting to ask your IT department for the single most important core reason they exist. You may hear reasons like “to keep services available, secure, provide disaster recovery” and so on. I feel that in any business but especially in this sub-sector I am describing that the number one effort of an IT department, outweighing all others, is to make the employee as productive as possible. It is then the secondary responsibility to make sure the systems are up, protected and recoverable. Consumer facing producers are constantly facing pressure to keep the store shelf full. If they cannot keep the shelf full then the store owner must put into place a product that can drive revenue–business 101.
The supplier must be able to respond to their food producers quickly, reliably, accurately, safely (quality control) and be seen by the producer as a business partner especially in the area of innovation. In most businesses you innovate or die. In the food industry the changing whims of the consumer push them constantly into a never ending cycle of innovation. This not only pushes the supplier to have a talented staff in place, trained in the food sciences but it also means that the systems in place must be able to aid in the formulation process and be capable of producing sample product and quote requests very quickly.
Further, within the production environment, the manufacturing process to make blended product must be very flexible in order to respond to a customers’ needs, often on the same day. Those systems must also be able to accurately control inventory and make the process almost fool proof coming as close to a 100 percent match of produced product to desired product in order to avoid re-manufacturing efforts.
Unlike the consumer facing food businesses what distributors and blend manufacturers do is not tricky and the barrier to entry is very low as previously mentioned. If product is not available, ingredient or blended, exactly when the food producer needs them, there is a very short window they will wait before getting that product from any one of a hundred other competitors. Once that business is gone, there is very little to no reason for it to return.
Simply put, if the policies and systems that are in place make the employee less productive; perhaps they are slow or cumbersome, then in an effort to keep being responsive to the customer, more people are often hired. This of course raises overhead and shrinks margin. When the company starts missing the KPI’s that gauge how well they are differentiating themselves from the competition, they may be forced into price matching scenarios with competitors. With thinner margins this potentially means the loss of even more business.
As stated above; ineffective policies and systems lead to lost revenue. This causes the knee jerk reaction of increasing head count to better run the business which in turn restricts the company’s ability to maneuver if needed. Even in the area of business continuity, a non-Food and Beverage type business or a consumer facing food producer may be able to be down for a week before any serious repercussions are felt. The consumer is loyal to the brand, there is stock in other stores, and this provides a cushion. As a supplier for a consumer facing food producer, if the business is down for a week the likelihood is that a good portion of business is permanently gone. This type of business needs to be able to recover in twenty-four hours from even the worst disasters to the point where they can contact customers in an emergency and let them know where the product is, start to order new inventory, drop ship product and find alternative manufacturing if required.
Information Technology cannot be a ‘one size fits all’ system. What may be perfectly fine for one Food and Beverage company may spell disaster for another. A four hour loss of a manufacturing system in some industries means lost work. To a cheese or whey producer, it could literally mean flushing a quarter million gallons of milk down the drain. To a micronutrient blend manufacturer, it will mean missed shipments and a tarnished image. If the customer has to halt their production due to inefficiencies in the supplier, they won’t be your customer for long.