Page 332 - Orlicky's Material Requirements Planning

CHAPTER 18 Process Industry Application 311

Multiple units of measure for each item. The units of measure can be very com-
plex for a process industry. A piece may be tracked in inventory as an “each,” but the part
may be sold by the pound. The system must have the capability to recognize the part as
both units of measure and convert between these units of measure automatically. The
unit-of-measure conversion also should include tracking retail packs to case packs to pal-
let packs. These multiple units of measure also require very sophisticated and complex
pricing models to support the business as well. The same product may have different
prices depending on the location to which it will be shipped. Volume and customer dis-
counts are also normal. The product can change composition during transit owing to
external influences, such as pressure or temperature, or internal influences, such as prod-
uct mixing in common pipelines or storage tanks. The planning system must be able to
take these variations into account.

Formula management. Similar to how a cookbook is written, a different formula
is required for different production batches in a process plant. Unlike the discrete busi-
ness, these formulas are different from the BOM in that if a double batch is required, each
component in the formula may not be doubled. Any good cook can relate failed attempts
at doubling a recipe. A big issue in the process industry is how exactly a recipe is scaled
to a desired batch size. These different recipes should be able to be tracked in the enter-
prise resource planning (ERP) system for different batch sizes. Also, component lots need
to be tracked to meet government regulations for processing, particularly in food and
pharmaceutical operations.

Quality tests and specifications. Since quality is not a binary function for the
process industry, the quality tests and specification should be traceable in a computerized
system. This is frequently an external execution system. The tolerances for specification
also should be integrated into this process so that automatic grading is possible.
Variances on shop orders are considered as a statistical process control chart over time
rather than on each order, as in discrete manufacturing.
Orders then can be allocated automatically based on grading. Assume that grade A
is superior to grade B and grade B is superior to grade C. If a customer orders grade C
and no grade C inventory is in stock, the system should follow predefined business rules
for allocating available B grade material or A grade material to the order. This type of
functionality is very unique and normally is handled through a suffix at the end of the
part number to denote grade. Sophisticated substitution logic then is required to handle
this process.

Pack bill of materials. Another unique BOM function is the pack BOM. This
defines which items are packed and shipped together to the customer. This can include
packing multiple items into a single package for sale, such as an assortment of the same
product, or packing complementary products together for sale as a complete unit. One
example would be to pack a television, VCR, and stereo speakers together for shipment