G Costa, which makes brands including Blue Dragon Chinese sauces and French's Mustard, made the savings by integrating the stock-control system at a newly-acquired plant in Stansted, Essex into its existing core Geac System 21 software.
The Geac software gives managers real-time data on manufacturing runs of 950 products and the scheduling, delivery and stock control of ingredients, which it manages according to recipes that are held centrally on the system.
Geac discovered that the Stansted plant suffered from massive overstocking and poor inventory controls when it took over the site a year ago, said finance director Nick Williams.
"When we acquired the Stansted site, stock control was done on Sage and a PC server - it really didn't cut it for manufacturing. They were using the 'hunt' method of stock control - in other words, you had to look for it. There was £1m worth of stock and we got that down to £600,000 or £700,000 within six months.
"The catalyst was good business management systems, having visibility of what is there and controlling it. With food manufacturing you have a recipe and from that you derive the stock you need so we were able to identify what was excess to production needs."
G Costa has also saved £20,000 a year by not having to pay finance charges on the excess stock held.
Simon Bragg, an analyst with ARC Consulting, said, "ERP investments are justified on inventory reductions. However, the softer benefits are often ignored. Controlling inventory enables order-takers to give customers reliable delivery, which potentially enhances market share."
All four of the company's production sites run Geac on IBM AS400s mirrored across two sites to minimise disruption to systems that schedule production.