The use of ICT and e-business to support and optimise intra-firm processes has become increasingly important, particularly in manufacturing. By digitising formerly paper-based processes, information and documents related to incoming or outgoing orders can be seamlessly processed along the company's value chain; orders can be linked with production and inventory management, and the underlying software systems can better support control and management by enabling full transparency of all business processes. Furthermore, collaborative processes within and between companies are supported, such as information sharing among employees (for example by use of an intranet), planning and demand forecast, organising and archiving documents, and human resources management. In general, ICT applications for these purposes are predominantly used initially by large companies and eventually by medium-sized firms.
3.4.1 Use of software systems for internal process integration
In the F&B industry, internal process integration is a key step in order to improve integration along the value chain. Apart from the micro enterprises, the F&B industry appears to be significantly above average in the adoption of internal process integration solutions such as intranets, accounting software and Enterprise Resource Planning (ERP) systems.
The peculiarities of the F&B sales system, widely distributed over the sales territory, accounts for the wide adoption of intranet networks in medium and large companies (Exhibit 3-14), often supported by LANs, W-LANs and VPNs, as previously noted in Section 3.1. The low number of employees makes this kind of system less necessary in micro and small enterprises, thus explaining why the figures for these size classes are below the 10 sectors’ average.
As far as ERP systems are concerned, the F&B industry is well above the average. ERP systems, in fact, cover some business activities that are critical in the F&B industry, from production planning, batch control and traceability to commercial and back-office functions (pricing, promotions, finance, contract management etc). They may include stocks and inventory/warehouse management software, possibly implementing
RFID-enabled tracking and tracing systems and wireless technologies, and help companies managing challenges presented by multiple selling channels, rapidly changing customer needs, product diversity and innovation and global product availability.
As ERP systems link business processes electronically across different business functions, they are helping to improve efficiency in operating those processes. They can, thus, be crucial in the F&B sector, where margins are relatively low when compared to other manufacturing sectors. In addition, ERP systems can play an important role in supporting the connectivity between enterprises required by regulatory aspects such as food hygiene and traceability.
Therefore, the share of F&B companies adopting ERP systems (17% of small companies up to 66% of large ones, as shown in Exhibit 3-14), should not be regarded as surprising in comparison to a 10-sector average of 11%. Accounting software that can include e-invoicing options (see Section 3.4.2) is well adopted even in micro F&B enterprises, where often it substitutes to some extent the functionality which ERP software has in larger firms, although on a much simpler level and with a lower potential for automating order related document flows.
Exhibit 3-14: Use of ICT systems for internal process integration
Intranet Accounting
computers Firms not using an
ERP system firms using
computers firms using computers
N (for sector, EU-10) 775 603 775 775
Questionnaire reference D1a D1e D1d D1c
Source: e-Business W@tch (Survey 2006)
According to the e-Business Survey 2006 results, the adoption of accounting software (other than just spreadsheet calculation programmes, such as MS Excel) goes from the 54% of micro firms to 93% of large companies (out of those that do not use an ERP system) – one of the larger adoption percentages in the survey.
Special software systems for document management are rarely used in the F&B industry, as in most of the other sectors in 2006. These software systems are typically used to archive and manage documents of any type in digital format; this is highly relevant for example in the insurance industry (management of insurance policies), but not so much in this industry. An exception should be made for large companies that have to manage a larger number of documents related to recipes and ingredients.
3.4.2 Deployment of e-invoicing
Electronic invoicing (e-invoicing) is a business-to-business transaction in which invoices are issued and paid electronically, replacing traditional paper-based invoicing processes.
Most e-invoicing solutions involve four key components: delivering an invoice from the supplier to the payer using a Web browser interface that allows the payer to review online; handling billing disputes online; electronic payment through both the payer's and supplier's financial institution; and integration with applications such as accounts payable, accounts receivable and an enterprise's ERP system.
In the e-Business Survey 2006, special attention was paid to the issue of e-invoicing. It is widely recognised that the use of e-invoicing promises relatively easy-to-achieve cost savings for both parties involved (invoicing entity and receiving entity), because processing invoices in a standardised, electronic format can be accomplished much faster compared to the often cumbersome handling of printed invoices. The cost saving potential obviously depends on the number of invoices that have to be processed;
companies and sectors differ widely in this respect.
Exhibit 3-15: Adoption of e-invoicing
20
Send e-invoices to public sector Send e-invoices to private sector Receive e-invoices
Base (100%): Companies with internet access. N (for sector, EU-10) = 722.
Weighting: Totals (for the sector and for all 10 sectors) are weighted by employment and should be read as "enterprises comprising …% of employment in the sector(s)". Figures for size-bands are in
% of enterprises from the size-band. Questionnaire reference: D5 Source: e-Business W@tch (Survey 2006)
Increasingly, e-invoicing is being discovered as an effective way to reduce operating costs and improve treasury management. The shift from costly EDI-based systems to internet-based e-invoicing is helping the diffusion of this e-business practice. The presence of large distribution networks (organised distribution) as business customers in the F&B supply chain explains why the adoption of e-invoicing in this industry is above the all 10 sectors’ average (Exhibit 3-15). In fact more than half of the sector’s large companies (the main suppliers of organised distribution) reported receiving e-invoices.
When looking at those companies that actually use e-invoicing, however, the average share of e-invoices (measured as % of a company's total invoices sent or received) is slightly lower than the average figure for the total of the 10 sectors studied this year by the e-Business W@tch. On average, users report that about 10% of invoices are sent (11%) or received (9%) as an e-invoice (see Exhibit 3-16). It is also interesting to note that even if the amount of e-invoices sent is lower than on average (11% compared to 19%), the difference of turnover corresponding to e-invoices is smaller (14% compared to 17%). This shows that e-invoices is used for the fewer clients which account for a higher share of turnover – presumably, the large organised distribution firms.
Exhibit 3-16: Share of e-invoices as % of total invoices
11
19 9
15 14
17
0 5 10 15 20 25 30
Food &
beverages (EU-10)
All 10 sectors (EU-10)
% of invoices sent electronically
% of invoices received electronically
% of turnover corresponding to e-invoices
Base (100%): Companies sending/receiving e-invoices (without "don't know").
Read: "On average, firms that use e-invoicing say they send 11% of their invoices electronically."
N (for sector, EU-10) = 153/111/133. Questionnaire reference: D6, D7, D8 Source: e-Business W@tch (Survey 2006)
3.4.3 Use of ICT for cooperative and collaborative business processes
The current deployment of tools for online cooperation and collaboration34 in F&B companies is in line with the average of the 10 sectors average. Document sharing is mainly adopted by large companies (up to 62% of firms), but the relevant figures are on or above average also for small and medium F&B enterprises.
34 "Cooperation" means splitting a common, centrally managed task into sub-tasks which are performed by different partners of the cooperation. "Collaboration" means that several partners work together on the same task at the same time.
As for most manufacturing sectors, the survey results show that adoption of collaborative design processes and collaborative forecasting on demand is well above the average for medium and large companies. Apparently by necessity, size, drives the adoption of such systems in order to achieve better efficiency and a reduced time-to-market. For similar reasons, and due to the peculiarities of the F&B sector (the only one dealing with perishable items in the 10 sectors considered in the e-Business Survey 2006), online management of capacity and inventory is on or above the average also for small and micro companies.
Exhibit 3-17: Online cooperation and collaboration within the value system
Share
Base (100%) firms with internet access
Questionnaire reference D5a D5e D5d D5c
Source: e-Business W@tch (Survey 2006)
In summary, data about internal and external integration highlight a good diffusion of ERP in F&B industry: ERP appears to be an important step towards further evolution of e-business, and often includes procedures common to SCM and CRM software solutions.
Accounting systems have an even wider diffusion, extended to small and micro enterprises.
Moreover, the pressure of organised distribution keeps the adoption of e-invoicing in the F&B sector above the 10-sectors average: e-invoices are used for the fewer clients that account for the highest share of turnover.