Posted by Diane Ramaglia on Tue, Aug 03, 2010 @ 08:40 AM
Some people do not realize the impact of what happens within an Enterprise Resource Planning (ERP) system when your inventory is not accurate. And when I say accurate; I mean at least 98% accurate.
A common issue at companies is they do not have the disciplines in place to assure inventory accuracy. Some common pitfalls of inventory inaccuracy would be that bills of material (BOM) are incorrect. I have a history working with plastic processing (along with other types of manufacturing) and one thing that throws off inventory is incorrect part and runner/sprue weights in the BOMs. A lot of manufacturers also do assembly/secondary processes and the quantity per could be incorrect in the BOMs. There are two different ways I have seen consumption of materials being completed during production reporting.
One is the function of back-flushing material based on parts produced based on your BOM. Many systems that I have used allow for the back-flushing of their materials when they report production. This is the time when you can catch inventory issues due to BOM inaccuracies. You can check your work center location inventory and verify at the end of shift if the computer matches the actual inventory counts. If not, start weighing your parts and checking your BOM.
The other type of system out there allows you to issue material to a job/work order. The downside to this is you can’t see this inventory since it is typically removed from any on-hand quantities. You have to reconcile at the end of the job/run.
Another common factor with inventory inaccuracy is that your users are not moving material to proper locations based on procedures. If your system allows a location to go negative, it's time to check a negative report and get to root cause of what may have cause this. It can come down to material not being moved or inaccurate BOMs. I hate repeating myself on the BOM issue but I have seen issues time and time again. In fact, I have recently worked with two customers who are struggling with negative locations. If a location is negative and other locations are positive, what is your true on-hand quantities? One can only guess.
What happens within your ERP when your inventory is inaccurate? The system might not generate work/job orders for customer orders if it thinks you have finished goods/work in process stock. If you don’t have the inventory or the work orders you will likely miss shipments. Customers won’t be too happy if you don’t have on-time shipments. In addition, if the work orders are not generated the system will not tell you to purchase material. It’s a downhill spiral from here.
Speaking of purchased material, let’s talk raw materials and purchased on-hand balances. If these are not correct, you will not have product to produce your manufactured parts. You will possibly be expediting material which can become very costly to your company. On top of that, it can cause havoc on the production floor. A scheduler has to decide to keep running parts that might not be due for over a month or lose costly production time by keeping the machine in downtime.
Think of the breakdown for downtime costs due to material inaccuracy in this way: If a machine rate if $50 per hour and your machines sits down for 48 hours, the cost is $2,400 for two days. If that happens weekly, the annual lost utilization is $124,800. That is more than a lot of peoples' salaries on the production floor. For this annual cost, you can justify hiring people to fix the inventory issues.
Add to this cost, other factors such as the cost to deal with machines that need to be changed over quickly to fill an order because your finished goods on-hand counts were inaccurate. How much does it cost your company when you have to switch over jobs that you were not thinking you had to run? What is the time it takes to switch over jobs? Depending on the jobs, setup times can range from one hour to ten hours. That is a lot of downtime for changeovers.
What can you do to start fixing these issues?
- Have the right people handle inventory management – they have to care and be analytical.
- Training/education– you need to make sure that people know what they are supposed to do in the system and what the impacts are if they don’t.
- Get to root cause of the inventory issues and have a corrective action to prevent this from happening again.
- Track the downtime costs due to inventory issues (waiting on material, changeover/setup)
- Create a process to validate bills of material.
- Ensure people are following their procedures.
I hope this helps some of you out there in the manufacturing world.
Posted by Liz Alflen on Thu, Jul 29, 2010 @ 02:33 PM
One unfortunate morning a few years ago, I got an early call at home from my boss informing me that my 1st floor office had been broken into and my computer was stolen. It so happened that I had left my laptop on my desk, hooked to an external monitor, a VOIP phone and a printer. When the burglar alarm/noise-intrusion sensor went off, scaring the intruders into a more heightened sense of urgency, they made a quick grab for my laptop, but ended up dragging along the monitor, the phone and the printer. Pieces of my printer (the paper tray, paper, little broken plastic pieces) were strewn across the parking lot. By the time the police arrived on the scene, the intruders were long gone, miscellaneous plastic parts left behind, and they were likely on the highway headed out of town.
Not surprisingly, I panicked at this news. What about all my information? My reports? My data? What would I do? How painful would this be?
The local police made note of all the pertinent information but offered little hope for recovery. Our IT department made available an alternate computer for my use while ordering me a new one; I received the usual talking-to about backing-up my data. When I finally got back to work, I quickly found that I wasn’t in too much trouble.
I still had access to our EnterpriseIQ ERP system! They couldn’t take that away from me. I can access the system from anywhere, log in, run a report, review documents, respond to workflows - from anywhere.
Until that day, I hadn’t realized that the bulk of any day’s work was not dependent on my personal computer, my stored information or my reports. Most of any day’s work could be completed by accessing information in EnterpriseIQ, views or reports.
For my purposes related to both Administration and HR, areas I access on any given day include:
And on and on. It was almost disappointing. My data isn’t even really special (although my particular role is); I’m replaceable by someone else (or perhaps multiple individuals) who is (are) trained in the system, can access the same information, and plan equivalent courses of action. One of the tremendous values in having a comprehensive ERP system is in the ease with which I can fulfill my responsibilities, independent of specific hardware or location, as well as the ease with which a “backup” could do the same.
I still try to remember to back-up the data on my personal computer, but I’m confident that most of the information I need at work will be available to me when I need it. It’s nice to NOT worry about something!
Posted by Glenn Nowak on Fri, Jun 18, 2010 @ 11:45 AM
Most companies today are looking for an industry specific ERP system that handles their requirements and meets more than just the basic ERP needs like inventory control, financial management, and sales and distribution. Many companies today want Quality, SPC, CRM, MES, Maintenance, Bar Code Scanning, EDI and more and realize the value of all of these components residing in one, nice package.
The ERP system vetting process used in most cases entails sending out long generic vendor questionnaires, selecting a few suppliers for short presentations, and scheduling day long, scripted demos. At the end of the day all the systems begin to look the same. Not only that, but often the software sales people were convincing in the illusion that any system can handle all the customer's unique needs and any required third party interface to a another system would be invisible and seamless. So how has the research process changed and most importantly how do you make the right decision?
The first step in the process is to look at other companies in your industry. Ask colleagues, trade organizations, social network sites, and yes, even competitors. Find out what systems they are using. Ask them how they truly like the system. Does it handle the specific process or industry needs? How easy is it to use? How long did it take to implement? What is the software support like? How are software changes handled? Go back to that 5 year-old in us all and ask every question you can think of and then really listen to the answers.
The next step is to bring in some selected companies for a day of discovery and plant tour at your facility. This allows ERP vendors to see your unique needs. Show them your pain points and your detailed requirements. Let them ask questions on your processes and what is driving your search for an ERP system - whether it is your first one or your last one. Make the suppliers fully aware of the specific topics they need to cover and gauge their confidence. Be as specific as possible and ask for the same in return - don't be generic where specificity is best.
The detailed demos are the next step in the process. To best determine whether the vendor can meet your needs and requirements you should consider providing the vendor, in advance, with some of your data for utilization during this demo stage. Have the supplier present your data and show in detail how they would handle your process, needs, and issues. If they have multiple systems that are required to be linked or interfaced together have them not only indicate those disparate systems but also walk you through the connectivity process and data sharing process. Is it easy or cumbersome? Is there a batch transfer or real-time data? These factors will be extremely important when utilizing the system.
Once the top suppliers are selected it often comes down to evaluating the price. Some systems may seem less expensive on paper but they are often less expensive for a reason that you will pay for later. Make sure you are looking at all the hidden costs and comparing apples to apples not apples to oranges. This often works best by putting all the details side by side in a spreadsheet to make sure you aren't missing anything. One system might be less but support isn't included. No one thinks they will need support, but inevitably everyone does. Scalability might not be a factor now but what about in 3 -5 years? The cost for having to buy another system is significantly more than that of being able to enhance the system you already bought. By reviewing all these details as well as pros and cons, you can get the value of the system and not just the price.
So if you are at the beginning stages of an ERP selection, I encourage you to follow these steps in helping guide your search. Being thorough, objective, and detailed will yield great results. Because when you look at all the details is when you are most likely to know which is the best and most cost effective solution.
Posted by Randy Flamm on Fri, Apr 16, 2010 @ 07:24 AM
We've all read how a popular automaker has been under fire recently for their quality problems. I can just imagine how devastating it must be to find out that a product you've been shipping for years is subject to a recall for a quality defect. The first step in damage control would be to completely understand the underlying cause of the problem. Many times the fault lies in one of the raw materials used to manufacture the product. In that case, strong lot tracing functionality can be the difference between recalling millions vs. recalling thousands or less. In order for lot traceability to be cost effective it should be built into the normal workflow of the manufacturing process.
The first step begins when the raw materials are purchased and received. At that time the vendor lot number of the container of material is communicated to your ERP system. This communication can take many forms such as a vendor supplied advance shipping notice (EDI ASN), bar coded labels or packing slips. However it's done the lot number must follow the raw material until it is consumed by the next level product. Many times an agreement can be made with the vendor to supply customer defined labeling for serialized control that can be sent electronically via EDI to the ERP system. This method eliminates the cost and accuracy issues of relabeling while converting foreign vendor labels to ERP native serialized labels. Business rules for manual receipts include being able to setup mandatory lot number entry before the transaction is allowed to go through.
The second step is to rely on the inventory control system to keep the material container lot numbers separated from each other. This separation must be built into the system and cause minimal burden to the user. As an example, a warehouse inventory location can contain many lots of the same material but they all need to be listed by FIFO and accessible for allocation or back flushing individually.
The third step is to have the system generate and assign a manufacturing (FG) lot number to the products being produced in real time. All levels of products including sub assemblies will be assigned FG lot numbers during production. Typically the generation of a new FG lot number happens when an event takes place. Events are things like starting a new raw material lot number, machine restarts or even operator changes. As a rule, the more often FG lot numbers are changed the more granular the lot traceability will be making it easier to pinpoint critical information.
The fourth step occurs during production reporting via hand scanners, touch screens, automated conveyors, pallet wrappers or input screens. The result of the reporting is a "balanced" inventory transaction. A balanced transaction includes adding the parts that were manufactured and relieving the raw material used to make them. As the transactions are applied to the perpetual inventory they are logged in the transaction log. All inventory transactions are logged. No exception. The transaction log is the key to lot number traceability. It contains all kinds of information about the transactions including both FG lot number and raw material lot number fields. This creates the ability to query the transaction log to cross reference lot number "trees".
Incorporating these 4 steps during the normal production reporting and inventory transaction process will provide bullet proof pain free lot traceability.
To download product datasheets on various capabilities mentioned, click here.