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Bakery Industry: A Fresh Foods Industry Segment (IInd Chapter of a 3 part series )

Before going into that let’s look at some facts & figures about bakery industry.

The report “Bakery Products: A Global Strategic Business Report”  which analyses the worldwide markets for bakery products by segment and geographic region, predicts that by 2010 the world bakery products market will be worth about US$407B. A compound annual growth rate (CAGR) of 3.93% is projected over the period 2001 – 2010.



Similar to the value chain of any manufacturing company, procurement is the foremost activity. Raw materials for manufacturing bakery products are a combination of agricultural industry products, imported ingredients and other commodities. The procured raw materials undergo thorough quality inspection procedure before they are approved and stored in the raw material warehouse. These raw materials are then processed to manufacture finished goods (FGs) such as breads, buns, cookies etc.

The produced finished goods or SKUs are packaged and loaded into the vehicles from where they are transported to the regional depots. It is from these regional depots that the products get distributed to retail outlets which include large retail chains, big independent stores, hotels and restaurants, supermarkets etc. End consumers purchase bakery products from these retail outlets for consumption. 

During this process, freshness of end products, usage of technology and adherence to Trade & Food Regulatory mandates play a vital role.

Bakery industry value chain is depicted in the figure below:



Bakery Industry Challenges 

A bakery company has a large numbers of customers namely retail chains, supermarkets, restaurants, office cafeteria etc. The regional depots first consolidate the demand from these customers and subsequently place an order with the bakery company for the required quantity. This quantity is referred to as “Sales Order” from the market. This Sales Order is reviewed with the current Stock in hand. Based on the Actual Demand (Sales Order), the Supply Situation (Actual Stock) and the Forecasted Demand (Planned Independent Requirement), the Planner triggers the MRP Run for the day.



1.MRP run considers Forecast, Actual Sales Orders and Current Stock for generating Plan Orders and Purchase Requisition.

2  Purchase Requisitions are converted to Purchase Orders for Raw Material procurement.

3. Plan Orders are converted to Process Orders which are then released and firmed up.

4. Production takes place as per the firmed-up Process Orders


Typical challenges faced by the planner during this process are depicted in the figure below:



Due to the dynamic nature of planning involved, various challenges exist which can be classified as:






Business Challenges

1.Short visibility on firm customer orders – Typically in a Perishable Goods industry, 25% of the orders for the day undergo change. Owing to the short visibility in demand for such orders, planning is a tedious task for these orders.

2.Last minute customer orders – Customers also insist on delivery of goods at the last minute. This customer requirement is more predominant during weekends where in customers come up with additional demands. Manufacturing to meet this weekend demand of customers poses a challenge for the Fresh Foods industry due to Capacity constraints on the production floor. 


Operational Challenges

1.Lack of Real time visibility – Because of the change in the customer requirements, re-planning needs to be done in the system which is a cumbersome process. Customers prefer to work on tools like spreadsheets and then update the ERP system during the end of the day. Due to this real time visibility in ERP system is lost.

2.Limited visibility of capacity & material across the plant – For manufacturing the fluctuating customer demands, especially during the weekends, it becomes imperative for the Planner in a Fresh Foods industry to have a visibility of Capacity and Material availability across plants. In the absence of these the Planner of a Fresh Foods industry finds it difficult to address the fluctuating demands. 


Challenges with the existing solutions

1.No readily available view to display the demand and supply elements in a single screen – At any point of time during the day it becomes necessary for the Planner to have an overview of the Demand and Supply elements for the Finished Goods. But existing systems require significant effort to get an overview of the Demand and Supply Elements. In the absence of such a view, the Planner finds it difficult to address these demand changes.

2.There is no linkage between the parent (Finished Goods – Bread) and the child materials (Semi Finished Goods – Dough and Mix) in the existing tools, so changes at Finished Product process order level need to be manually cascaded down to Dough and Mix. Essentially with lack of automation, it leads to effort, time and complexity in manually linking the FGs with the SFGs.



  • Do you witness challenges in managing your Production Orders in the ERP?
  • Are you able to plan capacity and material availability across various plants easily or is there limited visibility across plants?
  • Does your current production planning process involve extensive manual intervention? 



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