FOOD ERP – the role of the item number

After writing pretty passionately and sometimes emotionally about traceability for the past several weeks, I will go back to the roots of the blog. It has been my intend to give users and management some important information about aspects of ERP in the food industry. Traceability is one, a very important one, but not the only one. One of the foundation key elements of an ERP system and any other business application is the item number.

Companies which are implementing new ERP Systems should always rethink what they are currently doing. If you don’t take the time to reengineer some of the business processes in your organization, you will not achieve significant payback. The new system will just allow you to do the old things (and mistakes) faster. One of the key decisions that companies make during this phase is the structure of the item number.

These discussions start with some ‘smart code’. A smart code is an item number that is segmented and structured. E.g. the first digit may be the primary ingredient, the last digit represents the packaging size, etc. People turn sometimes to alphanumeric numbering schemes, because they allow more information in the same length of numbers and are supposing self explanatory and shall enable the user to find the right item number very quickly. You rarely achieve these results. Regardless how much time you spend designing these smart numbers, they sooner or later fail. There is the digit in the number that just has not enough space to accommodate a new item and a few years from now, the people that came up with the numbering scheme are no longer with the organization, these have been than the ones that perhaps understood the intend of the smart numbers.

Search for items is normally a multi dimensional question. If a customer inquires about a certain product you may need to search internally by pretty much any given product attribute: organic, hormone free, ABF, primary ingredient, pack size and others. The item number as the ultimate search criteria will fail you very quickly. The next aspect is ‘remembering and learning’ item numbers. This means it is more important to have greatly designed search functions in an ERP system, then a great design of item numbers. Smart numbers are normally longer than needed, because you need to allow for additional space to accommodate all the information segments you want, but human brains work differently. The smaller the numbers, the better and the more you can remember. So it makes a lot of sense to make item numbers as short as possible and as long as needed. Shorter numbers have also the advantage to occupy less real estate: on screens, reports, labels you just have more space for other information, especially since some of the devices we use have now smaller screens (e.g. our smart phones). On top of all this, we need to keep in mind that we still sometimes manually need to enter item numbers, every keystroke more creates potential for user errors and makes the data entry process slower, thus hurts productivity.

In a nutshell: the shorter the better.

It makes a lot of sense to consider some external constraints in the equation. The item number is beside its value internally an important key element for external communication with customers and vendors. Of course, external parties have their own numbering scheme for numbers, but there are a few common concepts in the food supply chain. There are two in the food supply chain that truly matter. One is the so called PLU, and the other one is the so called GTIN (aka UPC, SCC, EAN). The PLU is by default 4 digits, but can contain as a 5th digit some attribute criteria (e.g. organic). The GTIN is 14 digits, and has an item segment that can be up to 5-digits long, depending on your license agreement with GS1.

All of these systems are based on a 5-digit numeric code. It makes external communication and interoperability between systems much easier to consider these structures and implement internal numbering schemes based on these. Interoperability of computer systems will be one of the key drivers for innovation in ERP systems. We want our ERP systems to talk directly to market information of Urner Barry, USDA or Chisholm , we want to talk to our banks to get payment information, we want to talk to business partners. Most of these information are communicated today via paper, via phone and via fax. EDI has hardly delivered on its promise, and new technologies such as EPCIS are still in the evolutionary stage. The internet is the ultimate interoperable platform we use today. Businesses are mostly using it ‘next’ to their business systems, but current technology allows already a seamless integration into the web, provided that you build your ERP data structure on interoperable key elements.

So, in my opinion, the 5-digit numeric code (or less) is the best option for sales items in most organizations, and there are very little exceptions to that rule.

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