Page 345 - Orlicky's Material Requirements Planning

324 PART 3 Managing with the MRP System

next pay point may not be until routing step 30. When this transaction is done, both com-
ponent C and D will be consumed. If the transaction was missed at routing step 10, the
system also should consume the materials assigned to routing step 10. Component E is
not consumed until the very end, when the product is transacted as completed and put
into inventory. At this time, the MRP system will transact all parts that have not already
been consumed, relieve work-in-process of the temporary staging, and receive the part
into finished goods. This is all accomplished by a single completion transaction. By using
the pay-point backflush method, validation of inventory on the line is a much simpler
process because less work-in-process needs to be considered when reconciling inventory.
A good inventory management process to support backflush is to perform a trans-
action when moving a bin of parts to the line location and then backflush from the line
location. This does create an extra inventory transaction for the bin of parts, but the con-
trol may be worth it, especially in the early stages of implementation. This provides a
clear demarcation between the active inventory on the production line and any invento-
ry that should be in the stockroom. If the inventory in the line location goes negative, it
is much easier to detect and resolve the process problem that is causing it rather than
allowing the error to continue and affect the main stockroom. Of course, the ideal would
be that there is no inventory in a main stockroom as a backup for the line. Unfortunately,
most companies do not have sufficient reliability in supply-chain performance for this to
be true for all parts.
Backflushing in an enterprise that requires lot or serial number traceability, which
can appear like a mission impossible. MRP does not support backflush capability for
parts requiring lot or serial number traceability. This is because the lot number of the
component parts must be identified when material transactions are done. The answer to
this problem has been the process of issuing material to work orders including detailed
lot numbers of component parts. However, this does not mean that a facility with lot or
serial number traceability is doomed to a life with work orders. Creatively applying the
backflush process is still possible. Rather than using the standard backflush feature, the
standard work order issue function is used at the end of the manufacturing process. This
is known as a postdeduct process. Rather than attempting to predict which lot of parts will
go onto a particular end item through the traditional job order release and parts issue
function, the information on what lot numbers of parts were really used is collected as
the part flows through manufacturing. This is usually tracked through a piece of paper
traveling with the part and then transacted at the end of the process. Another option is to
use bar-coding technology to collect that data and automatically deduct the parts from
inventory as the parent part is flowing through the process. At the end of the process, a
hard copy can be printed for the device master record. This process has all the benefits of
backflushing but still provides the required traceability.
In addition, some MRP systems provide the option of backflushing labor as part of
the transaction. The backflush transaction creates a general ledger transaction for labor at
the same time the material is relieved. Another option could be to consider labor a peri-
od expense and simply divide it by the number of units completed. This is an excellent