Peas in a Pod MRP Sensitive to Lots of Material

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1 Peas in a Pod MRP Sensitive to Lots of Material The need for lot-sensitive MPS/MRP Most ERP systems (including BPCS and ERP LX), employ a non-discriminatory inventory netting process in order to plan material requirements. MPS and MRP results generated from these systems assume that it is proper to accumulate all on-hand or planned available inventory to satisfy the dependent demand for a raw material or component. without regard to the physical attributes of those materials or components. This is not a valid approach for all manufacturing environments. Some manufacturing enterprises have more sophisticated requirements for satisfying dependent demands. Two crucial requirements related to the precise physical attributes of materials are explained below: All demand must be satisfied with a single lot of material Some manufactured products require raw materials or components which have precisely uniform physical attributes. If the physical attributes of raw materials or components are not consistently uniform, then something about the color, texture, viscosity, resiliency, shelf-life, and/or potency of the finished product is likely to be unsatisfactory. Enterprises with this physical attribute uniformity requirement typically purchase or manufacture materials/components in distinct lots such that the physical attributes of the material within each specific lot are uniform. If more than one lot of a raw material is used to manufacture a product, then there is a risk that something about the characteristics of the manufactured item will fall outside quality specification tolerances. The implication is that manufacturing processes of this genre require software functionality which generates a material plan that supplies 100% of the raw material for each planned production order from a single lot. All demand must be satisfied with non-expired material If a raw material attribute changes with time, the manufacturing process may require that the material be consumed before the expiration date assigned to the material. To sustain the quality or performance characteristics of a manufactured item, it is then imperative that MRP assign lots of raw material to a planned manufacturing order only if the manufacturing date of the planned order falls before lot expiration date. The implication is that manufacturing processes of this genre require planning functionality that examines the expiration date of each lot of raw material and then assigns only non-expired material to a planned manufacturing order. The "plain-vanilla" material planning functionality available from BPCS and ERP LX doesn t provide any practical help in manufacturing environments which have the sophisticated lot planning requirements explained above. Shop floor supervisors in these environments don t get any help from BPCS or ERP LX (BPCS). See the next page for the consequences. Page 1 of 5

2 Consequences for shop floor management Here s what shop floor supervisors in lot-sensitive manufacturing environments must do to ensure product quality. They invent informal/makeshift procedures. Shop floor supervisors typically perform ad hoc, "on-the-run/under-thegun" analyses to come up with a workable allocation of raw material to set up the next production order. This informal process requires quite a bit of experience and intuition. The job may get done but. there is no assurance that the visibly expedient solution invented "under-the-gun" on the third shift will provide anything approaching an optimal situation for the first shift tomorrow morning. Seasoned shop floor supervisors can keep the plant running within lot requirement constraints only if there is a generous enough supply of raw material and WIP inventory available in the back room. The typical compensating element for the void in BPCS planning functionality is more on-hand inventory than would otherwise be needed. The consequences of informal/"on-the-run" manufacturing planning procedures are frequently discovered in the form of: Small (hard-to-use-up) residual lot quantities, and Lower inventory turns, and Stock-outs, and Emergency orders for another lot of raw material, and Disrupted master production schedules, and Unfavorable factory productivity, and. Unreliable product quality, and Customer service complaints. Not infrequently, enormous pressure to ship finished product on time may force a lot allocation decision which results in a "maybe-we-can-get-away-with-it-this-time" type of quality issue. Too often, the eventual consequences of that kind of decision include a tarnished quality image, fullemployment for the claims department, round-trip freight expenses, and an unwelcome supply of finished goods that must be scrapped or liquidated at second-quality prices. Quite frankly, the challenge of efficiently planning materials for future production orders within a sophisticated lot control environment is mind-boggling. Without software functionality to do this forward planning, the best the shop floor can do is to juggle materials around until someone discovers an expeditious "solution-of-the-shift" approach to get the setup for the next production order underway. Unfortunately, "solution-of-the-shift" planning doesn t begin to address the opportunities inherent in world-class manufacturing performance. Page 2 of 5

3 The solution Peas in a Pod is an entirely new MPS/MRP planning process for BPCS. This product enables sophisticated planning for lot requirements for all parent-child bill of material relationships. Peas in a Pod provides for the definition of a lot requirement at the child level of a bill of material. The lot requirement for each child in a parent-child relationship can be defined independently of the lot requirements for other children in that parent-child relationship. This child-specific lot requirement definition enables Peas in a Pod planning functionality to determine if dependent demand for a specific raw material or component requires fulfillment from a single lot source. If a single lot fulfillment requirement is identified for a specific child, then Peas in a Pod recognizes that dependent demand for that specific raw material or component cannot be fulfilled with an aggregation of inventory from multiple lots of that material. The following example from the tufted carpet industry will illustrate the problem and the solution. A production order for carpet specifies a single color for the entire twelve foot width of the tufting equipment. There are approximately 1450 spools or ends of yarn needed to make the carpet. If just one spool of yarn is from a different dye lot than the rest of the yarn, the final carpet is likely to have a visible streak which makes the finished product into a second quality or scrap item. The normal BPCS planning process cannot adequately cope with this requirement because all available on hand and planned available quantities of the component yarn would be aggregated to determine if enough inventory is available to produce the order for tufted carpet. Vanilla BPCS functionality adds together multiple lots of the same yarn SKU and then tests to see if enough stock is available. For example, if 1450 spools of BLUE212 are needed and if BPCS finds 1460 spools of BLUE212, it will then plan the finished goods production even though 1449 spools of yarn are from dye lot X and 11 spools of yarn are from dye lot Z. The problem remains concealed until someone manually interrogates the BPCS inventory system about what BLUE212 yarn lot(s) are on hand or in transit or on order. Sometimes the problem does not appear until the moment arrives to set up the creel for tufting. Peas in a Pod recognizes that all 1450 spools must be from the same lot of BLUE212 yarn. The product will attempt to satisfy the material requirement by utilizing on hand yarn from a single dye lot. If the entire material quantity for a planned production order cannot be met with a single onhand lot, Peas in a Pod will then generate a planned order to make (or purchase) a single lot of yarn that does have a sufficient quantity of raw material. Commentary on a related inventory allocation subject A single raw material or component can be specified as a child in the bill of material for multiple parents. Peas in a Pod has been designed to analyze and evaluate the unique lot requirement profile for each unique parent-child relationship. The product allows for a unique lot requirement definition for each specific bill of material. We ll continue at the top of the next page with the tufted carpet example to illustrate this additional facet of Peas in a Pod functionality. Page 3 of 5

4 Commentary, continued... The same yarn SKU (BLUE212) can be used as the raw material for tufting a "solidblue color" carpet, and to be a blue accent color yarn in a carpet with a multiple color pattern. The first illustration on page three spoke to the single blue color carpet case. This second illustration adds a second type of tufted carpet a patterned carpet that is primarily green with some small blue (BLUE212) accents appearing in the pattern. The same blue yarn (BLUE212) appears as a component in the bill of material for both the "solid blue color" carpet and the "green pattern with small blue accents" carpet. Unlike the "solid blue color" carpet which required that all BLUE212 yarn be supplied from a single dye lot, the "green pattern with small blue accents" carpet can use BLUE212 yarn from multiple dye lots without any quality related consequence. Peas in a Pod has been designed to understand this distinction and plan for future BLUE212 requirements accordingly. Peas in a Pod users inform the product about the distinction by appropriately setting the value (on or off) of the lot requirement switch for each unique parent child relationship. Once the lot requirement switch setting has been established (perhaps by product engineering personnel), no further input is required to maintain the Peas in a Pod planning process. The Peas in a Pod functionality illustrated above helps enterprises use up the residual material in small-quantity lots. It s the best of both worlds from the viewpoint of efficient inventory utilization: Parent-child relationships that do require single-lot supply trigger plans to order material in efficiently-sized single lots. Parent-child relationships that do not require single-lot supply trigger plans to use up residual inventory odds and ends across multiple small lots. Peas in a Pod handles the lot expiration date subject While designing Peas in a Pod to accomplish the single-lot supply functionality discussed above, Unbeaten Path augmented BPCS vanilla MRP functionality in an additional way. Peas in a Pod will inspect the expiration date of each lot of material. It will then compare the lot expiration date with the planned production start date for each planned manufacturing order. If the expiration date for a given lot falls before the start date for a planned manufacturing order, then Peas in a Pod will treat that specific lot as "ineligible" to satisfy the dependent materials demand generated by that planned manufacturing order. Page 4 of 5

5 Effects on vanilla BPCS / ERP LX Peas in a Pod is an extension of the planning process of BPCS. It does not place any restraints on the operational capabilities of BPCS. Furthermore, Peas in a Pod requires no changes to the standard BPCS planning file system to provide the incremental functionality described earlier in this document. Some existing "vanilla" BPCS planning programs will be entirely replaced by Peas in a Pod programs. In our experience, the BPCS programs replaced by Peas in a Pod are rarely, if ever, the target of BPCS user modifications. One of the most important BPCS changes associated with Peas in a Pod is apparent in the structure of the bill of material information. The vanilla BPCS structure has been enhanced to include a lot requirement planning switch. The user can set the switch to "on" to indicate that the required quantity of a specific component can only be satisfied with material from a single lot. The default "off" setting of this switch will allow inventory from multiple lots to be assigned to the same planned manufacturing order. The "off" setting will cause Peas in a Pod to perform the planning function just like vanilla BPCS with one important exception: Peas in a Pod will inspect lot expiration dates before assigning a lot to a planned production order whether the requirement planning switch is set to on or off. Another change visible to BPCS users will be an adjustment to the MRP Inquiry, Maintenance, and Planned Order Release programs. Peas in a Pod will cause these programs to display the type of lot requirement that has been generated by the Peas in a Pod planning functionality. Furthermore, various MPS/MRP report programs typically used to support the planning process will be changed by Peas in a Pod so as to alert material planners to the type of lot requirement that has been generated by the Peas in a Pod planning functionality Questions? It would be a privilege to answer any questions about Peas in a Pod. Here s Unbeaten Path International s contact information: Toll free North America: (888) International: (+USA) Send us an ( click here ) Unbeaten Path Page 5 of 5