Image: Al Drago/CQ Roll Call Via AP/Associated Press

The FDA has appeared at one of your plants and would like to see your records showing how much of which products were manufactured using a particular lot of raw material, where those products were shipped, and to which customers they were sold.

(Hint: you’re supposed to be able to do this, in about two hours, preferably faster).

Many companies can’t produce what the FDA is asking for, in a complete and accurate form, and in the time the FDA expects.

Supply chain executives assume their warehouse management system (WMS) will provide the traceability they need, but many WMS applications in use today are either limited in scope or not integrated to the rest of the upstream and downstream supply chain.

The average WMS inside a plant, for example, is good for tracing lot codes of raw materials coming in and following them into batches of finished goods and out the door to customers.

But many consumer goods companies use third party logistics services and sell to multiple channels where manufacturing lots are further and further subdivided until product reaches the retail customer and the consumer. All of these handoffs occur outside the scope of your enterprise systems, including your WMS.

The trail is easily lost because downstream from the plant the product may take on several different identities – without retaining lot information — as it passes from one player in the supply chain to another.

Without all the data in one place, companies rifle through purchasing receipts, production records, and bills of lading, send urgent requests for reports from trading partners, and assemble something resembling a lot code bridge in an Excel worksheet. This might take days.

The ideal track and trace system is an information repository into which data is automatically dumped as your product travels through the supply chain – the chronicling of all the places your product went after you produced it. And for that you need connectivity to all the downstream events through which your product travels, and a place to put all the data.

Companies without the full picture are betting on dodging the bullet somehow. While the odds of a recall of your product may be low, the odds of an FDA visit are much higher. And the FDA does send warning letters for an inability to demonstrate full traceability – letters that wind up online in a very public way.

Inside a Red Wing shoe factory.  Photo by Nina Hale, cc license.

The supply chain – a term used to describe all the activities needed to bring goods to market, is a natural beneficiary of a good ERP system because the supply chain extends from one end of an enterprise to another. Often the individual parts of a supply chain run on their own systems – a system for raw materials, another for planning finished goods production and deployment, and so on. It’s possible to have three or four separate systems running different parts of the supply chain. With an ERP system, all parts of the supply chain are connected to one another.

All of the costs and activities associated with each part of the supply chain are in one place, and they are mutually dependent on one another as either inputs or outputs. It is at least theoretically the logical software equivalent of the connected enterprise. And if the enterprise is truly connected and coordinated, then theoretically there is never any wasted inventory, lost sales, out of stocks, overproduction, late deliveries, etc.

A good ERP system will coordinate the supply chain like this:

• It will have a sales forecasting module that allows users to source historical sales data and model it to derive projected sales;
• The projected demand, by day, week, and month, will automatically determine quantities of raw materials needed, where, and when;
• The required materials will automatically be converted to purchase orders for those raw materials;
• The projected demand will determine a production schedule by plant and a schedule of where the finished goods are to be shipped;
• Sales orders are received, checked, confirmed, and sent to the warehouse or distribution center for shipment;
• Sales orders will “consume” a sales forecast so that managers can track shipments against projected sales;
• Sales orders will be routed for delivery via the most efficient method of transportation and transportation providers will be confirmed and scheduled;
• Inventory will be shipped to distribution centers according to the geographic demand of product;
• Distribution centers will receive sales orders for shipment, and shipments to customers will recorded, posted to financials, and used to generate an invoice;
• Warehousing and transportation costs will be posted back to the financial system and the corresponding accounts payable will be created.

For more on this topic, Gartner has some interesting research here.