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Regulatory issues a heavy burden, Sage survey finds

Sage survey respondents cited compliance, inventory management and accounting-related issues as the most common obstacles to growing their businesses and providing the increasingly high levels of transparency their customers demand.

Sage North America, a leading provider of business management software and services to small and medium-sized businesses, on Thursday released the findings of the 2015 Sage Survey on Food and Beverage Regulatory Environment Challenges, which researched the issues this industry’s producers, distributors and retailers are facing.

Sage surveyed more than 300 business owners and other senior-level executives at the 35th annual Natural Products Expo West, the world's largest natural, organic and healthy products event, in March 2015. Respondents cited compliance, inventory management and accounting-related issues as the most common obstacles to growing their businesses and providing the increasingly high levels of transparency their customers demand.

"The food supply chain continues to grow more complex. For example, the natural products industry will reach $252 billion by 2019, and companies all along the supply chain are feeling the growing pains that come with trying to serve a larger, more geographically-dispersed customer base and increased government scrutiny," said Diane Haines, vice president of product marketing for Sage North America. "Our deep experience working with thousands of manufacturers has given us a greater understanding of their business needs and aspirations. By closely examining the issues companies are struggling with, we can identify the steps needed to overcome those challenges while still staying efficient and accelerating business growth."

Forty-eight percent of survey respondents stated their top challenge is compliance with various laws and industry regulations, such as the Food Safety Modernization Act (FSMA), genetically modified organism (GMO) labeling and lot tracking, followed by inventory management (29 percent) and integrated accounting (20 percent).

Respondents pointed to FMSA in particular when discussing compliance challenges. Signed into law in January 2011, FSMA is arguably the most significant reform to the nation’s food safety laws in more than 70 years. The Food and Drug Administration (FDA) states the law’s primary goal is “to ensure the U.S. food supply is safe by shifting the focus from responding to contamination to preventing it.”

Sixty-three percent of Sage survey respondents believe they are "somewhat" or "extremely" prepared to meet FSMA's requirements. Yet, 36 percent find FSMA mandates "somewhat" to "extremely" challenging to meet, particularly allergy tracking (26 percent), tracking processes (26 percent) and traceability (25) percent.

Fifty percent of all respondents still “don’t know yet” how they plan to comply with FSMA. Others are allocating budget dollars — typically $15,000 annually — to bring in expertise, new technology tools, or a combination of the two. Thirty-seven percent have either hired consultants or added staff, or plan to. Nearly one-third are using or plan to use software tools:

  • Ten percent use systems custom-built for FSMA compliance.
  • Seven percent turn to commercially available software that is separate from their accounting systems.
  • Five percent use commercial software that is integrated with their accounting systems.
  • Five percent use formal ERP (enterprise resource planning) software.

Respondents were also conflicted about how to achieve the high levels of transparency customers require. Seventy-two percent called transparency “somewhat” or “extremely” important to their customers, yet 30 percent admitted their companies are less than “somewhat” transparent. That is not for a lack of spending money: Spending on transparency efforts averages $15,000-$20,000 annually.

"Larger companies typically have the budgets and IT staff to develop and implement custom-built software solutions, but smaller businesses may not have the same time, IT expertise or budgets," Haines said. "However, all businesses alike realize the benefits technology can play in improving transparency and demonstrating compliance."

Recommendations

Sage recommends small and medium-sized businesses work with their preferred solution providers and integrators that can recommend and install commercially available software, as well as provide training and support. Sage also suggests working with a solution provider who can ensure seamless integration of the various systems, ideally through a single dashboard. The following capabilities can be combined into one centralized system:

  • Compliance: A technology solution should provide end-to-end ingredient and product tracking throughout the manufacturing and distribution process with quick access to data.
  • FSMA: Technology helps maintain compliance by tracking preventative and reactive measures, managing recalls, and enabling creation of plans/reactions to reduce future incidents.
  • Inventory management: Automating inventory management with advanced software functionality and tracking tools, such as bar coding or RFID, is a critical component of any technology solution.
  • Transparency: An integrated system helps you maintain transparency by helping you manage detailed record-sharing, stricter supplier verification, and product tracking further along the supply chain.

Sage will host small and medium-sized businesses at Sage Summit on July 27-30 at the Ernest N. Morial Convention Center in New Orleans.

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