Formula Manufacturing Blog

Evolution of Scheduling for the Process Manufacturer

2011-10-06T12:05:00.001-07:00

From my perspective companies evolve into their manufacturing scheduling process as their business evolves. Attempting to implement a complex scheduling model when a company is beginning to automate their ERP is often a mistake. The key is to take a realistic view of what stage the company is in and grow from there.

Formula manufacturing companies often start fairly manually with a Minimum Stock model. When quantity on hand or expected quantity available falls below a certain level a batch ticket is requested. This works well for small manufactures with predictive sales. The key problem with this model is that there is no time sensitivity. A sales order for tomorrow is required as is the order for next week. All quantities are lumped into a single bucket and minimums are based on historical sales values.

As the manufacturer grows they want to look out into the future and generate a Master Production Schedule. They will start to consider sales orders or sales trends (not just 100 units per month) in their calculations. They will consider over runs in production and shortages in planning future runs. This is a basic MRP design. The result is a list of items to be manufactured over time (not just right now). These companies schedule the floor manually and the production managers will be looking 1-2 days out and moving jobs around as they see fit. Visibility into the order in which jobs will be run is limited.

Finally when the process manufacturer gets to Shop Floor Scheduling they are now concerned with capacities of machines and scheduling down time. They consider run times and setup/cleanup times in the schedule. The order in which products run becomes important. Grouping allergens together and Kosher products on specific days of week become significant scheduling challenges. The scheduler is often making these decisions in each of the previous stages but now it is documented so others can see the result. Feedback from the floor is now possible. If a job is running late the operators can record that in the schedule and corrective action can be taken.

So basically there is no wrong answer to scheduling. You need to determine where you are in the life cycle and purchase accordingly. Microsoft Dynamics™ inventory functionality can handle the basics. Vicinity Manufacturing steps in for MRP/Master Production Scheduling and Planet Together finished out the scheduling with Shop Floor Scheduling.

The take away here is to buy today what you need today with any eye to the future. Vicinity coupled with Microsoft Dynamics and Planet Together is a great way to invest in your company's future for any years to come.

Reference Sites – The Final Interview

2010-09-14T08:18:00.001-07:00

When a company is selecting software one of the typical steps is to request a reference site to talk to or to visit. So what is this about and how can you make the most out of this exercise?

First a reference site is not a tool to use to pick a vendor. It is a tool to learn more about how the vendor worked with one customer and how that customer feels at the end of the process. Also remember that this site is not being paid for this work – at least I have never paid one. They are doing this as a favor for the vendor and for you. So when you interact with them remember that fact.

Here are some other helpful items to remember when preparing for a reference site call or visit.

Every implementation has its issues. The key is how the vendor dealt with the issue. A very fair question is to ask them to talk about a challenge they observed and how did the vendor address the challenge?
Ask about the implementation team or person. Did they understand the business before they arrived or did they pick it up very quickly? How did the site's team work with the vendor's team? This will help you see the style of implementation. Some are directive and others are more oriented toward team approaches.
Make the reference list the last step of the process. Don't expect a demo or to talk specifics about the product. Remember that the site has limited time. Focus on the relationship they had with the vendor and how easy is the vendor to work with.
If offered - go visit the site. Much can be learned about the vendor and the application by seeing how it works in the operations. That is difficult to get over the phone. It is often good to have the vendor with you so you can ask follow up questions that the vendor may need to clarify. This is a final interview so there should not be much left to hide. Take your time and get a good feel for the relationship. Just remember that there are a lot of reasons that a company does not allow visitors – many of those have nothing to do with the vendor (insurance as an example).
I would talk to a company that is still in the process of going live. Things are very fresh in their minds and they will be able to talk candidly about the experience. Just be careful that the vendor may be working on something and it is not done. Don't judge the application prior to live but you sure can judge the implementation prior to being live.
Try to get a reference in a similar industry. The challenge here is that most sites will not talk to their competition. That is understandable. Work with your vendor to pick a company that you can relate to. It does not have to be identical but you should feel comfortable with their process enough to envision it similar to you own.

If you get that far with a vendor a reference site call or visit is just your way of finishing the process. If you are wanting to learn about the product in the call then you are not ready for the reference site. If you have not made up your mind prior to the reference site make sure not to put the customer in the position of helping you decide. Just think about how you would like a reference call to go 2 years from now. What would you be comfortable addressing? The odds are good that if you have done your homework and have selected a good vendor this will be you in a year or so. Enjoy.

Vendor part numbers – good idea or a bad plan?

2010-09-13T13:27:00.001-07:00

It seems that every few months I am posed with a similar question from clients. They ask me about the impact of creating vendor specific part numbers in their inventory. It seems that they believe they would get more information about an inventory item if they set up each unique vendor/item combination as a different part number also some feel if they order the materials using the vendor part number then there will be less confusion for the vendor and quality data would be easier to track.

My reply is pretty basic – don't do it. Here are some reasons.

Most ERP systems today support a Vendor/Item relationship. For those that do this they also provide a vendor part number, minimum order quantities and pricing associated with the vendor/item combination. When the PO is printed the Vendor part number is printed instead or in addition to the inventory number.
If you have vendor part numbers in your inventory then when you perform a physical inventory you will need to count each item separately. You will also want to segregate the inventory from each other to facility finding the right part number when it comes time to use the inventory.
When you consume the inventory you will need to specify which vendor item is being used. This requires more effort by the production folks and typically leads to less accuracy.
Reporting becomes more difficult. To review usage of a material across vendor you would have to add values from multiple items. If these items are not in sequence then the task of reporting becomes much more difficult.
Quality data should be tied to a LOT and not a vendor item number. You can still get the same quality data using a common inventory part number as long as you are lot tracking. The lot number will tie the receipt to an inventory item and also to the vendor.
When you create formulas you do not want to substitute vendor item numbers from batch to batch. This will cause much more work than is necessary with little to no return.

So in a nutshell – there may be some reasons that at the surface look like a good idea. But take my word for it. There are a number of ways to get you to the goal – adding vendors to the part number very rarely achieves the desired result.

Increase Profits by Reviewing Material Costs

2010-08-28T06:55:00.001-07:00

How would you like to add 5% directly to your bottom line? Here is one way without much effort.

In changing economic conditions it is one thing to know your existing production costs it is another to anticipate changes before they happen. Far too few formula manufacturers have insight into upcoming production costs until it is too late. That is a bit like driving your car by looking in your rear view mirror.

Imagine the scenario where you could monitor your current production costs with an eye to changes coming in the future. What would you do with this information? Would you begin to look for alternative sources of materials? Would you work with R&D to identify replacement materials in your formulations? Would you brace your customers for a potential price increase? Any and all of these options are valid and each can add profits to your bottom line.

So how can you do it? The key is in knowing what material costs are changing in the future as well as what effect these changes have on the production cost of the finished goods.

The first part – knowing that material costs are changing – is the easier part of the challenge. If you can work with your vendors to get a better idea of when they anticipate price changes or if your material is traded on the commodities market you are most of the way there.

Spend some time looking at your most used materials in production. Specifically target those with relatively high costs per unit. Price changes in these products will have the greatest impact on your production cost. Then review the price fluctuations over the past couple years of this ingredient. Finally talk to some providers in the market. What are they seeing with this ingredient? Without much effort you can identify the key ingredients to monitor and gain some insight into the anticipated cost changes in the future.

Identify ingredients (high volume/high cost
Review price fluctuations over the past couple years (higher fluctuation is key)
Talk to suppliers in market about upcoming costs

Now that you have key items to monitor the next step is to calculate the affect these changes would have on your production costs.

Identify all formulas in which these ingredients appear. This should be a pretty basic where-used function in your manufacturing system. Once you know these formulas replace the existing cost with the proposed cost. The result is your new production cost for this formula. How does this compare with the existing formulation cost? It is enough for you to absorb or do you need to take corrective action?

Some formula manufacturing systems have functionality that will virtually automate the analysis step. The following screens are from Vicinity's Proposed Cost functionality

The user is able to select components (ingredients) and manually enter proposed costs or alter the costs by a % of current costs. With this table in place the Cost Rollup functionality is used to identify the formulas affected and calculate the new cost as seen below.

Whether you use an automated tool such as the one provided by Vicinity or you do this manually with yoru existing system the results are the same. Find out what items impact the productoin costs, research and identify the proposed material cost and finally calculate the effect this change will have on your formulation costs.

This knowledge will go a long way to provide corrective action that will increase profits without making significant changes to your production process.

Replacing formula manufacturing systems – when it is time to change? – Part 2 Obsolete Software

2009-06-22T11:53:00.001-07:00

While on a trip back from visiting clients in Barbados I was listening to some newly downloaded tunes on my trusty 5-year old iPod. I was blissfully content with my eclectic mix of Bob Marley, Rolling Stones, Katy Perry and Rhianna. Little did I realize the "kid" sitting next to me was doing the same on his brand new iPhone. The difference was that he had all these really great applications on his iPhone that I did not realize existed.

Not to be outdone with multi-tasking I pulled out my notebook computer to get some work done while I listened to my music mix. My new friend continued to read downloaded new stories, queue up emails to deliver when we land, update a white paper he was working on as well as sort through hundreds of photos stored on his phone. He was a busy fellow.

As a self-proclaimed "geek" I was amazed at how far behind I had fallen with my poor single purpose iPod.

For me it was a wakeup call that the world had moved on. Instead of multiple large devices this kid was running circles around me and loving every minute of the experience.

That got me to thinking about my clients and potential clients. How much has changed in technology that we are not taking advantage? What am I doing to help these realize the potential that can assist them today? That brings me to the second installment of "Replacing formula manufacturing systems".

Many formula manufacturers are running on systems purchased and implemented in the 1990's. Many of these were selected as a reaction to the Y2K issues in 1999 and 2000.

Since that time much has changed in the formula manufacturing industry.

Technology

SQL Server has become the default database
.Net Framework for easy integration with other systems
Virtual servers or hosted environments

Work environment

Teleworking
Toll Manufacturing / Outsourcing
Mobile access to data (smartphones/iPod)

Compliance

Country of Origin Labeling
Allergen disclosure
MSDS / Nutritional Analysis

Customer/Vendor interaction

Relationship tracking with CRM
Electronic Funds Transfer
Web based access to data (MSDS, COA)

The challenge for many companies is to look internally and see what their old legacy systems are offering and what have they just learned to live with. Has the world passed you by? Is your system living in the 1990's while your customers are living in the present?

I good way to get a reasonable assessment of your current system is to ask your colleagues. I would suggest asking your existing suppliers about their systems. What features do they have that might assist your company? How are they addressing similar business issues and can you get that out of your legacy system? If not – it might be time for a change.

In working with our clients or new prospects a couple common reasons emerge.

Hardware is obsolete but the company is concerned that the software will not be supported by the new hardware
Sales is requesting more information about customer demand
Compliance officer is addressing issues with outside applications such as excel
Scheduling is performed manually or with limited system assistance
Communication with customers/vendors is manual and not tracked

The fact is that the world has changed. Software has really stepped up to the plate for formula manufacturers over the past 10 years and it is not uncommon for new systems to pay for themselves within 12 months. That is a quick return on investment and is progress that pays dividends for years moving forward.

So how do you go from the 1990's into the 2000's without breaking the bank? How do you pick from qualified manufacturing systems?

Here are some key points to remember if you feel you have room for improvement

There are a few large ERP players in the market right now – look at them first (Microsoft, Sage, SAP, Infor)
Eliminate all discrete/assembly/BOM manufacturing applications from consideration – there are plenty formula manufacturing applications out there
Be careful of the "boutique" message that "all-in-one" solutions is the only path – a small company writing all the software running your business is very dangerous and often falls short as times change and the small company can't keep up with the changes
Select a new application to solve key business issues not just features – take some time to look at what you could do that would bring cash into your company and find an application that delivers on that vision
Ask vendors, trusted customers, advisors and search the various web sources to find candidates to replace the legacy system – if the application does not speak about your industry on the first page of their web site - move on
Forget the RFP process. If you cannot tell that an ERP system is written for your industry then you need to move on. When you come across one that focuses on your industry you will know it. There is no reason to pay a consultant that knows little to nothing about your industry to help you find potential solutions. The software developers have done a great job making them known. Instead search the web using words key to your industry, review trade show exhibitor guides, ask the major ERP suppliers how they handle formula manufacturing and ask anyone who knows your industry.

The truth is that most companies review their ERP solutions at least every 5 years and most change system or significantly upgrade systems every 10 years. How old is your system and is it time for a review or a replacement? The odds are you have unsupported business issues that can be solved by an updated application. The odds are also good that the new system can be paid for within 12 months. So what are you waiting for?

For me – I am going to start looking at alternative systems to my trusty Blackberry and iPod. I am ready to do more with my single handheld device and do more with my time when I am ready to do the work. That is where technology has progressed and I need to get on board.

So check back in the future and monitor my progress. Also if you find your systems are less than ideal and are looking to change feel free to contact me. Also check out Vicinity Manufacturing at www.vicinitymanfucturing.com to see what a formula manufacturing solution can do for you today.

Up next? We will talk about replacing the custom written software. See you then.

Replacing formula manufacturing systems – when it is time to change? – Part 1 Excel

2009-05-18T14:16:00.001-07:00

Change comes hard to many of us. My friends will agree that I am not immune to this. I personally over analyze the situation looking for reasons to keep the status quo. While on occasion this serves me well its result is often missed opportunities and sticking with a situation much longer than warranted.

In more than 20 years of implementing systems for formula manufacturing companies I would suggest that there are many of you in the same boat. Many of us are holding onto existing ERP system well beyond their useful lives.

Like me holding onto my obsolete phone system many are holding onto formula manufacturing systems well longer than we should.

In the following blog entries I will provide insight into the primary reasons formula manufacturers typically hold onto their obsolete solutions, key indicators that a time has come for a change and alternatives to the current systems.

In my experience there are 3 primary categories of formula manufacturing systems that need to be reviewed and serious consideration should be given to determine if they are still providing value to your organization.

Excel spreadsheets running the formula manufacturing business
Obsolete formula manufacturing application that is no longer up to date
Custom written solution that has not been updated with changes in the business environment

Excel spreadsheets – While I have never seen a static supporting this claim I think it is a fair assertion that the most prolific formula manufacturing solution on the market today is – EXCEL.

You would be amazed at how many companies trust their greatest asset – their formulas – with an easy to customize but impossible to integrate tool such as spreadsheets. Every month I am approached by companies that store all of their formulas in hundreds – if not thousands – of spreadsheets or one mammoth spreadsheet. Over time they have become obsolete and the company is dependent on one person to update and maintain the data. Great job security if you can get it.

It is obvious to me why these installations exist.

In the infant stages of a formula manufacturing company the R&D director (or equivalent) decided that writing the formulas on the backs of envelopes or in the lab notebook was "old school' and there was a better way to centralize the formulas. Armed with their version of Excel that shipped with their desktop computer version of Microsoft Office they began creating spreadsheets to store this data. After all the software was already owned, Excel is easy to use and new employees already had experience with the tool. What more would we want?

Well as time went on one copy of a formula became the basis for another formula. Someone requested more information to be tracked and every subsequent formula had this new addition. Changes to existing formulas made duplicates of the master formula and often multiple copies of the formulas were stored on various workstations. You know – just in case something happened to the original.

This approached worked fine as long as only one person maintained the formulas or virtually no changes to the formula structure changed. Also as long as no one needed any information across multiple formulas or the inventory data (such as price) never changed – then you were golden.

Well life does not work that way. Things change. Yes I said it – things change – and so should we.

With the growing compliance requirements such as Country of Origin, allergen disclosure, SQF audits and HACCP our life is no longer simple enough to be trusted with a spreadsheet written in the back room of an R&D laboratory. Instead formula manufacturers need centralized formulas that feed production data. We need formulas that have integrated QC functionality and the ability to perform cost rollups on the fly without additional data entry.

Excel spreadsheets are fine for analysis of existing data – such as yield trending or material usage – but to store master data such as formulas and batch tickets – we need a database oriented formula management system.

So are you one of these companies relying heavily on spreadsheets to store your master formula and production data? If so take a long hard look at what you are building. Do you really think it can continue into the future? The odds are against that design. Fortunately with enlightenment comes education and with education comes change. I am a poster child for that enlightenment – once again ask my friends.

Over the past 20 years many solutions have come and most have gone. The key is that each of the successful applications are built around a central database of master file data that multiple users can access. There is only one set of data and a change in one place affects all other parts of the organization. In this case that is a good thing.

If you are interested in a state of the art solution priced at a reasonable level then you should check out Vicinity from Vicinity Manufacturing (www.viciintymanufacturing). There are others but this one was written from the ground up with the sole purpose to address the formula manufacturing needs and is not attempting to be everything to everyone.

So take a look at your existing system. Are you using excel to store data or to analyze results? I challenge you to dig deep take a long hard look and make changes where they make sense. Once centralized source of formula data will do wonders for your company and believe it or not will save you significant profits in the months and years to come.

In the meantime stay tuned to the next couple installments where we look at obsolete market leaders and what to do with that custom solution the "Bob" wrote before he headed to Tahiti.

The root canal for the formula manufacturer

2009-05-05T09:28:00.001-07:00

In working with a bakery prospect last week I was inspired to write this blog.

I was having some pain in a tooth for quite some time and my dentist sent me to an Endodontist for a root canal. While there I was taken aback by the degrees, diplomas and accreditations proudly displayed by the doctor. When I asked about the educational requirements to perform my root canal my appreciation only increased. This person really knows what they are doing. I was impressed.

My bakery prospect is a family run company and has very limited resources and does not have a defined IT department. That is pretty typical for our prospects. When they came to me they were wrestling with the development models being presented to them – All-in-One vs Best of Breed.

I told them – "I am just glad that my general practitioner did not perform my root canal. The same can be said for business software."

It seems to me that the software development world is firmly planted in one of two worlds related to formula manufacturing. All-in-one (general practitioner) vs Best of Breed (Endodontist).

The All-in-One model of development requires one software vendor to develop, write, support and document every aspect of an information system for a formula manufacturer. This includes financials (AP, AR and GL), distribution (Pos, Sales Orders and Inventory), manufacturing and every other related feature (warehouse management, CRM, eCommerce). Some notable examples are SAP and Ross on the high end. On the lower end you have small boutique development firms that are pouring all their available resources into the products and barely keeping up with technology changes and changes in manufacturing, compliance and scheduling. Some are not even on SQL as the database and few are on .NET as a platform – each have been available for many years but some of these boutiques have not yet managed the transition to current technologies.

The other group of applications takes a best-of-breed approach where one central application is the key and additional functionality is added by smaller laser focused development firms. With this approach 75% of the features most companies require are delivered by out of the box widely distributed software such as Microsoft Dynamics. A company buying into this approach will rely on Microsoft for core functionality such as financials (AP, AR and GL), distribution (Pos, Sales Orders and Inventory). The remaining functionality is often industry specific and is delivered by ISV (Independent Software Vendors) that work very closely with the core ERP system.

So which approach is better for me?

Each has strengths and weaknesses and each has their own legacy.

All-in-One – The biggest advantage of this approach is that all development is controlled by one company. That is also the biggest liability. With exception of some large developers (SAP, Ross etc) these firms are rather small - less than 50 employees. The development resources are pulled in the direction that results in more sales, often leaving core functionality unaddressed. For example: most boutique formula manufacturing development firms spend most of their time on manufacturing issues (that makes sense) but they often overlook new developments in core product offerings such as electronic disbursement, CRM, sales taxes, commissions, warehouse management, eCommerce just to name a few. Finally – as the product matures so too does its development platform. If a developer is not careful either the product will become obsolete or a significant re-write of their product will be required – stopping all new development for at least a year. Neither is good.

Best of Breed – The biggest advantage of this approach is that the unique business requirements are developed by firms that focus entirely on solving that business issue. For example: a company specializing in formula manufacturing such as Vicinity Manufacturing writes this component, warehouse management experts provide their addition and eCommerce by people that eat sleep and breath those issues. It is all tied together by Microsoft Dynamics. In the end the total solution is tailored to meet the specific needs of the company at a very competitive price. Twenty years ago this approach would not have been feasible. But with .NET as a development platform Microsoft has made this model very attractive and the cost effective option for companies to consider. The biggest challenge of this approach is to ensure the local VAR (Value Added Reseller) can assist the implementation in ensuring the proper tools are brought to the table. In the Microsoft Dynamics channel that is easy to deliver.

So in the end it comes down to your comfort level as well as your understanding of technology advances.

If you feel your company is better served by a single (often small) company that controls all the feature functionality entering your company, if you are not interested in realizing technology improvements before changing software again and the all-in-one application has everything your company may ever need – then you would go with this approach.

If your company is dynamic in nature and experiences changes in requirements as years go along, your company has limited development resources in house to address gaps in your system functionality and you embrace competition as a way to reduce cost and increase functionality then the best-of-breed is a better model for you.

Personally – I am not excited about getting a root canal but if I have to get one then I want the person with the most experience, most up to date on the latest developments and only does root canals every day working on my mouth. If I have a problem with my foot I go to the Podiatrist or headaches to a Neurologist. While I like my family doctor I will take a team approach to my medical care thank you very much and I feel the same about my business software.

How about you?

Real life example of ROI – now it is your turn

2009-03-01T06:50:00.001-08:00

I wanted to share a real life example of ROI and how yours truly ignored it for months if not years. I think I can also tie this into your business and formula manufacturing.

Last week we cut over our phone and internet service to CBeyond – a publically traded telecom based in Atlanta. While I was satisfied with my previous carrier my internal phone system was outdated and we had limited ability to change features without a series of expensive site visits. The phone system had to go – I knew that for years.

One day a month or so ago a solicitor for CBeyond stopped by my office. I used to get these visits into my office every couple weeks and I routinely dismissed them as an inconvenience. For some reason this time I gave them my card and told the salesperson to send me some information. What was I thinking?

Wouldn't you know it? Two days later I received a packet of information in the mail and a couple pleasant emails. Before I knew it I had an appointment with this salesperson in my office to talk about what they could do to help me with my business.

It was not until that face to face meeting that I had stopped long enough to see what I was doing with my existing system. I was paying my previous carrier about $1,500 per month for services that I did not need and did not receive services that I wanted. The salesperson was successful in showing me that I could get what I wanted for about $500 per month but I would have to change phone systems. Little did he know that a new phone system is really what I needed.

So like most people I bought myself some time and sent the salesperson away. In the back of my mind I was looking for why this deal was too good to be true. What is the catch? I had every intention of ignoring the data right in my face and continue down the path of my existing system. Honestly – I was not sure how much a new phone system would cost and was not interested in the change at this point.

I did not have all the data yet and was not ready to make a decision - much less a change.

A couple weeks later I was in a conference with some Microsoft Dynamics ISV owners - much like myself. The topic of internal phone systems came up and I asked the question - Has anyone heard of this new provider? Immediately a friend spoke up saying it was the best thing he had done in years and they were very happy. When I asked further about the physical phone system he replied that it was ridiculously inexpensive and he gave me the name of a consultant that does all the work.

48 hours later I had a quote for a phone system from Logic Speak ($3,000 for a 10 phone system) and we were off to the races.

The problem has been solved and we are a better company for the change. The total cost was $3,000 up front plus $500 per month in services.

Compare that to $1,500 per month. That is an ROI of 3 months! Every month after the first three months I am making $1,000 per month – and I have more flexibility and more control. THAT is a positive ROI.

So how is this relevant to formula manufacturers and how can you use my experience in your business?

How old is your existing ERP system? Did you replace it with the Y2K conversions? If you system is 10 years old you really should look around. You have gotten your value from your existing system and you may find that changing is not as expensive as you might think.

So here is the blueprint that I used for my phone system that I think is relevant to selecting an ERP solution.

Identify if there is a need that has to be addressed – for me it was a better phone system
Quantify that need – what cash will it bring into my company if I make the change? – for me it was reducing my phone bill from $1,500 to $500 per month – for you it may be reducing inventory or identifying low batch yields
Talk to others about your issues and hear their solutions – search the web and find companies that specialize in your business. They have solved the problems before – leverage on what they have done.
Engage with a professional that understands your business and can deliver the change that is needed. Be open and honest about what you are trying to accomplish and give the professional a chance to work with you to find a workable solution.

For me the key was in leveraging people that had been through the process before. I gained confidence in the hardware supplier immediately. He knew what he was doing. From there I let the professionals do their thing and got out of their way.

The result for us is a state of the art phone system that meets our needs today with a local service provider that makes our problems go away in short order and for a reasonable rate. I could not ask for better than that.

So if you are not getting what you should out of your existing system and you think it is time for a change then follow the steps above. Feel free to reach out to me and of course check out our solution at Vicinity Manufacturing . If you want to try out our phone system just call us at 770-421-1777 – we are a better company for the change.

I also feel it is important to share the names of people that have helped me in my successes.

John Stulak – Ethotech - Microsoft ISV friend who just switched to CBeyond and gave me the courage to move forward

Andrew Griffin – Cbeyond sales representative – he did all the right things at the right time

Jared Kee – Logic Speak Inc. – provider of phone system and the guy that made this work

So here is your take away:

What are the top 5 pains that is costing your money?
What is the value of solving those pains?
Who out there has solved these pains in the past?
Why am I waiting to solve these pains if there is a positive ROI?

Decision time: Wait it out or retool now

2009-02-15T14:45:00.001-08:00

I would like to challenge some conventional wisdom during economic downturns in the formula manufacturing sector. I propose that during slow economic times it is critical to re-tool and invest in the future. It is much better to rework business processes while production is slow than when you are rushing to get orders out the door. Your project team has more time to focus on what makes your company great and what you customers really need from their supplier. When times are busy no one has time to address these critical topics.

I am working with number of formula manufacturing clients that are taking this relative slow time to rework their business and manufacturing processes. They are expecting that the market will rebound and when it does they will be ready. They are betting that their competition will be rebounding with obsolete systems and this will turn into huge market share gains when the sales return.

These clients are focusing on some of the following areas:

Reduction of inventory values to free up working capital by better inventory accuracy
Understanding future raw material price increases and the impacts on finished good costs to either identify cheaper substitutes OR differentiating their higher quality product in the market place
Retooling the scheduling process to better utilize existing capacity by implementing shop floor scheduling and MRP
Identifying formulas with lagging production yields to reengineer the formula or process or phase out the products if possible

By keeping a keen focus on the immediate goals that not only increase working capital today but also position the company for greater demand in the future, these companies are staying afloat today while becoming the leaders of tomorrow.

So the key is how to you pay for such an endeavor?

The items above are not as expensive as you might imagine. Vicinity from Vicinity Manufacturing coupled with Microsoft Dynamics is one example of an inexpensive ERP solution that addresses all these issues for formula manufacturers without breaking the bank. There are others in the market as well but one thing that makes Microsoft Dynamics so much more attractive today is financing available via Microsoft Financing. You owe it to yourself to take a look.

So what are you waiting for? Is your system a result of Y2K and approaching 10+ years old using outdated technology?

Is your competition sitting back waiting this out or are they preparing for the next wave? Can you really afford to wait to find out?

So I challenge you to think toward the future with an eye on today. It can be done with a reasonable budget and is more affordable then you might think.

Going Green – Replacing materials

2009-01-20T13:21:00.001-08:00

Identify and replace current components with eco-friendly alternatives

I am not putting myself up as a research laboratory chemist. Instead I want to talk about some of the challenges and opportunities of identifying alternative eco-friendly alternatives.

There are a number of challenges to replacing any raw material with any other raw material. I get that. The key is to reduce those challenges so the cost of change is not as significant.

When you identify that an alternative material exists which is more "Green" than a current material you must first identify all the formulas in which this material is used - a multi-level where used report is key at this stage.

Not only are you altering the formula receiving this new material but potentially every other formula that uses that formula as an intermediate. In other words if you have a multi-level formula structure you must also look at all the other formulas impacted by this change.

Fortunately formula manufacturing software applications handle this analysis fairly well. Specifically Vicinity from Vicinity Manufacturing addresses the challenge with remarkable ease.

Typically you will need to review the impact on the formulas from a physical properties perspective. Does this change impact the Viscosity or pH or Refractive Index?

Performing this analysis can be time consuming if the right tool is not utilized. Fortunately some of the more current formula manufacturing applications in the market – such as Vicinity - can assist with this review turning the task into a reasonably clerical matter.

Finally – once the impact is known for each of the formulas you will need to substitute the new material for the old material and potentially other supporting materials in the formula.

This task is tricky but is done by some of the better applications on the market. Take a look at the material substitution capability within Vicinity to see how this is addressed.

So what is the payoff?

Besides replacing a potentially harmful raw material with one that is more eco-friendly you are potentially reducing the overall cost of your formula. If nothing else you have built a model to replace raw materials based on price – not only because they are good for the environment.

So go ahead – take a look at a raw material that has a known substitute. How does your existing system assist you or hold you back? Know that today there are systems that can make this process much less painful than you may be experiencing. Hopefully this is one less barrier to "Going Green".

So this is the end of my "Green" message. I challenge us all to be more environmentally conscience in our manufacturing, reduce our carbon footprint and use materials that are easier on our planet.

And if you don't do it for our children's children then do it because often times you will become more profitable. In either case we all win.

Going Green – Increase batch yields

2009-01-08T06:04:00.001-08:00

Increase yields to consume fewer raw materials per finished goods produced

This is the second installment of how formula manufacturers can embrace the "Green Initiative".

Well this seems to be too obvious. Don't all manufacturers attempt to squeeze every drop of raw material from their process to increase production yields? And why is this Green?

You would be amazed at how few companies actually look at their yield analysis by formula over time. It is more common than not that a company looking back at production over the past 6 months will find certain formulas or processes that are resulting in less than ideal yields. This can go on for years without being detected. The financial impact is tremendous.

The problem is that the yield differences from batch to batch may be minor and subtle shifts may not be detected on a single batch. Each subsequent batch is often compared to the previous batch. If there is no significant one-time shift the change is often undetected.

Comparing batch yields over time – 6 months or greater – can show alarming results. A formula yield may shift 1-2% over time and not be noticed. This has the result of passing profits right through the finished good and not realized by your company.

So why is fixing this issue being Green?

The less you consume to make the same finished good helps do your part in reducing the consumption of valuable resources. It takes energy to make most products we consume. We have to dispose of the raw material packaging and we consume energy to transport the materials from the supplier to your facility.

By increasing your yields by 1-2% for your highest volume items can result in a significant reduction in the consumption of raw materials. The reduction helps our environment AND saves you money.

So how do you do this?

Target a formula that has a significant volume. Look at the yields by batch for this formula over the pasts 6 months. Do you see a trend? Do you see variation? If either is true you have found a potential target. Once you have identified a formula spend a little time with production and R&D and see if you can identify the source of the variation or change. Watch the batch carefully the next time it is produced. What is causing the change or variation? The answer is probably staring you right in the face.

Vicinity by Vicinity Manufacturing (www.vicinitymanufacturing.com) has added a standard query that allows a user to view yields by formula/batch for any period of time. This data can be viewed in Vicinity or easily exported to Excel or statistical packages. Additionally Vicinity has added capability to notify key personnel when a batch is out of a tolerable yield range. Corrective action can be taken immediately.

So get started. This one is easy. Increase your yields and do your part in helping the Green Initiative. Along the way you will be saving your company a lot of money. Both are good things.

Going Green – Efficient use of machines

2008-12-16T11:57:00.001-08:00

As a conscientious member of this environment I felt it was appropriate for me to share some ideas on how companies can "Go Green" and still make a buck.

As I prepare my thoughts I find that this topic is broader than a single blog supports. So I am going to break my thoughts into three different topics.

Efficient use of machines – lower carbon footprint
Increase yields to consume less raw material per finished good
Identify and replace current components with eco-friendly alternatives

So watch over the next few days as I release more on these topics. For now let's start with scheduling.

Efficient use of machines – lower carbon footprint

One of the key advantages formula manufacturers have over assembly manufacturers is our ability to fulfill multiple finished good requirements with one batch. We can make different packaged items from the exact same formula. These finished goods may be in different sizes or the labeling may be different. The common element is the formula.

Therefore there is an opportunity to consolidate production and make multiple finished goods from the same batch or compound.

So why is this "Green"?

One of the key initiatives of "Going Green" is to utilize all our resources wisely. By consolidating our production where ever possible we are reducing our overall energy consumption. This reduction can have a significant positive impact on the carbon footprint of the manufacturing facility.

So how can you accomplish this today? And why am I not already doing it?

The key is to group all finished goods by formula and then schedule at the formula level. Not all manufacturing tools support this scheduling model. Your tool may only schedule by finished good SKU. Without a scheduling tool written specifically for formula manufacturing this goal may be tough.

Fortunately there are some manufacturing applications that do in fact address this challenge. Vicinity by Vicinity Manufacturing has formula based scheduling at its core. A user can view the schedule by facility and then by formula. Within a formula the finished goods are scheduled. This view of the production allows your scheduler the opportunity to perform needed consolidations and fill the production gaps with products that family well with a proposed schedule. You can make more products with fewer batches.

If every company could reduce the number of batches or change-overs by 10% we would see a profound impact on our utilization of energy.

Not only is scheduling by formula good for the environment it is also often times more profitable.

So take a look at your scheduling tools and see how you and your organization can do a better job of reducing the number of batches and fulfill more finished goods with single runs. The dividends will be seen beyond your bank account – our children's children will thank us.

RFPs – Is that REALLY the right way to select an ERP solution for Formula Manufacturers?

2008-10-02T12:08:00.001-07:00

It seems that once a month I get a very pleasant email from a well meaning consultant asking if I would like to respond to a Request for Proposal (RFP) or Request for Information (RFI). The first few years of being in practice I took a day or two to wade through pages upon pages of questions about features and forced to answer "yes", "no", "with customization" etc to questions that could have easily been asked of a doctor's office. Very few RPFs are written in such a way that the key business issues are highlighted. Instead they are VERY broad and limited in specificity.

So now I just say "no thank you" and move on with other projects.

You may ask why I do this and why would I walk away from an opportunity. In general companies that spend $20k with an outside consultant on an RFP for a $100-200k project have bigger issues to address than software.

My experience shows that for companies with sales volume of $5 million - $200 million there are 4-5 primary providers of software for the formula manufacturing sector. A subset of that group is typically in every opportunity that I see.

Here is a secret: each of these 4-5 applications do a fine job for their clients and have a full range of functionality from financials through distribution and manufacturing. So the key should be place on finding those industry specific applications and spending time differentiating the implementation firms and less time on RFPs.

Here is another secret. As a young consultant with Arthur Andersen and Deloitte & Touche I was engaged to generate many of these RFPs. A number of companies paid my firm big money for a list of 100-200 features to include on a check list. That did not make for a good RFP.

So how should a formula manufacturing company go about finding some of these qualified applications?

Ask your suppliers and customers – those happy with their system are willing to tell you what they use
Attend trade shows or have your attendees look for applications while they are touring the expo
Take a look at the industry publications and web sites
Search the internet for key words to your industry (chemical, food manufacturing, batch processing software, MSDS, COA)
Look for formula manufacturing add-ons to the more popular ERP solutions (Microsoft Dynamics, Sage, SAP etc)
Contact a consultant with industry background. If they cannot name 4 software applications without hesitation then move on to someone who does

Once you have a list of names then run them through an acid test and shorten your list

Look at their web site – does their product focus specifically on formula manufacturing or do they treat all manufacturers as the same? – see the Vicinity Manufacturing web site at http://www.vicinitymanufacturing.com/ for a good example of this
Have a 15 minute phone call with a representative – if they don't use industry terms then move on
Obtain a high level web demo of the best solutions using demonstration data – no more than 1 hour

When this is complete you should have a good idea of what applications have the best chance of meeting your objectives. The next phase is to communicate your primary business issues and your vision on how to address the issues. Once the vendors understand your needs they will be in a position to provide a comprehensive presentation.

During your process it is fair to assume that all the applications perform accounting functions well. They all cut checks and print invoices. Instead focus your attention on business issues such as reducing inventory levels, identifying and addressing batch yields and generating compliance documents such as MSDS and COAs. This will focus both you and the vendor on topics that will result in positive results for your company.

So in the end the process of selecting software is not as difficult as it might seem – if you are working with someone that knows your business. In today's software environment there are plenty of good industry solutions available – the trick is finding them. Once you find them the difference will be obvious.

Resist the temptation to pay a consultant for them to learn what you need only to communicate to other companies in the form of a features checklist. Take it from a software supplier – they really are not helpful, cost you a lot of money and in many cases turns off potentially viable applications from consideration.

Good luck on your search and remember that there are a number of good companies out there waiting to help you address your business challenges.

Time to reflect - Lot Expiration

2008-09-22T10:30:00.001-07:00

Yesterday I celebrated by birthday. (insert noise makers here)

I had a GREAT day doing all the things I like to do best. That is what a birthday is about anyway – isn't it?

This blog the topic kept running through my head- "Lot Expiration" and "Shelf Life". I know it is a morbid thought but I just had to get it out of my brain and share it with my formula manufacturing friends.

Formula manufacturers – particularly in the food industries – are keenly aware of the issues associated with lot expiration and the financial impacts it can cause when a lot reaches the end of its prescribed useful life. What otherwise was once a perfectly suitable product has become as popular as the last kid picked on the recess kickball game. Not a fun site – trust me.

So how does a formula manufacturer address the ticking clock that is always running? Here are some ways.

Build a time machine go back to a time to address the issue. Not feasible but could be very effective.
Reduce the time to manufacture and progress toward a make-to-order model. This is very effective for the small batch manufactures with excess capacity in the manufacturing area. By holding inventory in raw materials you reduce the likelihood of finished good lot expiration – now you have to manage the raw material expiration but managing a fewer number of common raw materials is often easier than many finished goods.
Monitor lot production/expiration dates and notify appropriate users of lots reaching 50% of their useful life. This is pretty easy with today's technology. Imagine receiving an email from your system identifying the expiring lots with ample warning to take corrective action. As long as your ERP system data is hosted in an ODBC compliant database (such as MS SQL) then the task is pretty simple.

I feel pretty fortunate because tools are available in today's technology to deal with lot expiration. Vicinity by Vicinity Manufacturing is the primary application that I support on a daily basis. It helps my clients to reduce the time to production AND to notify user of aging finished goods lots. So 2 out of 3 is not bad. A little work with your IT group can make this issue a thing of the past leaving time to address bigger issues.

As a footnote: We are still working on the time machine concept – maybe by my next birthday we will have the perfected.

Until next time – take care and I look forward to talking with you soon

Scheduling by Formula – Why Bother?

2008-09-17T12:35:00.001-07:00

I was at a client the other day and heard an interesting discussion.

The production scheduler was discussing an issue with the production manager about how the scheduler was scheduling production. The production manager was making the case that the scheduler was killing the production efficiency by changing products as often as he was. Production would like to run long runs of the same formula to avoid costly changeovers. Instead he was contending that the scheduler was requesting partial batches and forcing more clean ups than needed.

The scheduler was arguing that he was changing products to keep inventories low. His position was that low inventories was in the best interest of the company and the only way to accomplish that was to run short runs and for only the quantity needed.

So who was right?

My two cents is that a company needs to balance the needs of the customer (on time product often achieved by holding FG inventory) and reduction of working capital (keeping inventories as low as possible). But how can you do that in a formula based manufacturing facility?

The easiest way to achieve this balance is to look for opportunities to produce finished goods that share the same formula. In some facilities producing bulk formula is a possibility and then fill to order. From this bulk multiple finished goods can be produced off of the same blending/mixing batch of a formula. The result is to reduce the number of mixes of the formula which reduces the number of times a change over occurs in blending.

In other facilities multiple finished goods can be filled directly from the mixing tank without much bottling like changes.

It is important for a formula manufacturer's scheduling tool to be able to combine finished good SKU's by formula and then by filling line. This allows a scheduler to better see the opportunities to run like products at the same time. Thank goodness for me the application they are implementing (Vicinity) has this capability out of the box. This is not characteristic of products designed for assembly or discrete manufacturing.

So how did this end?

The scheduler looked out into the future at sales orders and forecasts and allowed the production manager to make some product that would be needed in upcoming weeks. At the same time the production manager grouped the formulas in a specific sequence to reduce his change over time.

Both came to me and asked that we move up the implementation of Vicinity scheduling. Not a bad day for me that is certain.

Microsoft Dynamics™ and Formula Manufacturing

2008-03-08T06:19:00.001-08:00

Ask most ERP analysts and they will agree that Microsoft has entered the ERP software space and they are now a player to stay and they are in it for the long run. With four applications with strong and broad installation bases of customers Microsoft is a key player in the ERP industry.

Formula manufacturers should know that Microsoft Dynamics has offerings to help make your company more profitable. I will spend a few moments bringing you up to speed on how Microsoft Dynamics can deliver for you.

Microsoft acquired the four applications from 2001 - 2003 and each had a strong track record in providing core financial and distribution functionality prior to the acquisitions. These products include

Microsoft Dynamics AX – Axapta
Microsoft Dynamics NAV – Navision
Microsoft Dynamics GP – Great Plains
Microsoft Dynamics SL – Solomon

Each product has been branded – along with Microsoft CRM – as Microsoft Dynamics. So when you are on the Microsoft web site and see the term Dynamics – this is the brand name for all four ERP solutions and CRM.

Each application has strengths and should be viewed independently. They have their own development groups but share core Microsoft technology that assist in rapid development. As time moves on the products are moving toward each other and share functionality written by developers working across the products – such as web services and sharepoint. Also realize that not all Microsoft Dynamics resellers (VARs) sell and support all the products – in fact most VARs only support one or two Dynamics applications. So when evaluating Microsoft Dynamics it is important to match a reseller with the specific product being offered.

Each of the products compete successfully against all other similarly priced solutions.

Microsoft Dynamics AX (Axapta) – Written for the larger organization. I would recommend it for companies over $150 million in annual sales. The implementation requires significant consulting resources and is best suited for companies with significant IT resources.

Microsoft Dynamics NAV (Navision) – Navision is a major player in Europe and is known for it customization capability. It fits well for those companies that need significant localization and customization to address unique business issues. Companies of $5 million - $150 million in sales should consider this product.

Microsoft Dynamics GL (Great Plains) – Great Plains has been a well known ERP application in North America for many years. It has consistently been the leader in the market for English speaking countries. It fits well for those companies that need only limited customization and are looking for strong out of the box functionality based on US business standards. Companies of $5 million - $150 million in sales should consider this product.

Microsoft Dynamics SL (Solomon) – Solomon is becoming the Microsoft Dynamics solution geared toward project accounting. It should known that Solomon is very strong in inventory control and order processing. So while this application is moving away from manufacturing it competes very well against all other inventory, distribution and financial applications in the market. Solomon has strong customization capability and a very loyal install base. Companies of $5 million - $150 million in sales should consider this product.

As a formula manufacturer if you review Microsoft Dynamics on your own - without the assistance of a VAR experienced in formula manufacturing -you may not see how these solutions can address your manufacturing needs. This is because Microsoft Dynamics evolved from a financial and distribution application with strong discrete/assembly manufacturing offerings. Out of the box Microsoft Dynamics is challenged by the unique requirement of formula manufacturers and are critical for you to run your business. Issues such as MSDS, scheduling by formula, QC tracking, variable yields by batch and weight/volume conversions are foreign to Microsoft Dynamics. But there are great resources in the Microsoft Dynamics family that address these challenges.

Microsoft has been very public in its position that it will provide deep core functionality for each of the ERP solutions. They have written the applications to fit well into certain key industries. They do realize there are unique requirements in various industries that they are not able to provide by themselves. Formula manufacturing is NOT one of those industries Microsoft targets directly.

While developing the applications Microsoft has allowed Independent Software Vendors (ISVs) to extend Microsoft Dynamics into various vertical industries – such as formula manufacturing. Because of this you are able to achieve tremendous economies of scale with Microsoft Dynamics and still maintain the industry focus written by industry experts with years of domain industry knowledge.

When Microsoft Dynamics is extended with an ISV solution (such as Vicinity – www.vicinitymanufacturing.com) the result is a feature reach, technology advanced and widely accepted ERP solution at an affordable price. Microsoft Dynamics delivers the most popular financial and distribution applications in North America and Europe and the ISV (Vicinity) provide business critical specific formula manufacturing functionality such as

Formula management
Compliance documentation (MSDS, COA, Country of Origin)
Lot control and tracking
QC results and analysis
Batch yield analysis
Scheduling by formula
And much more

So if you are in the market for an ERP solution you would do well to consider Microsoft Dynamics matched with an ISV solution like Vicinity.

Contact information:

Microsoft Dynamics – http://www.microsoft.com/dynamics

Vicinity – http://www.vicinitymanufacturing.com

It is time to retool – managing a shrinking economy

2008-03-02T08:03:00.001-08:00

It is no secret that the US economy is tightening and the months ahead may be leaner than the months that have passed. As I travel from one formula manufacturing facility to another and meet with owners, managers and line workers I have gained a few insights that I would like to share with you.

If you are over 40 years of age you have now experienced at least one economic pull back and at least one economic expansion in the manufacturing sector. If you are over 50 you have probably experienced more than one.

One fact remains true - The US economy will change and eventually it will be stronger than it is today. With this change we will be faced with different challenges then we have in front of us now. The key is to ride out the down times while preparing for the next wave. The most successful companies are able to manage down times while retooling for the expansions.

How do you do that?

The key to a down market is cash flow and liquid working capital. In other words find ways to increase the cash flow and increase working capital. But don't do that at the expense of your future. Don't get caught flat footed when the market begins to come back. Your competition is hoping you will do just that.

Below are some ways to squeeze out working capital while investing in the future. It is all centered on cash. If you can watch the cash and working capital you will find you have plenty to make it through the slow times and will be in a position to complete as the market comes back around.

Reduce the inventory part numbers – Examine inventory levels of raw materials, packaging, intermediates and finished goods. Look for ways to reduce the number of different inventory items you are carrying in inventory. The more items you carry the more you will need to invest in safety stocks or relationships that you need to manage. Are there raw materials or packaging that can be consolidated my adjusting the formulas slightly? Look at your top 20 raw materials by value – which of those are only used in a small number of finished goods or intermediates? Those items may be able to be consolidated or the formulas may be able to be reworked.

Identify domestic suppliers - Look for local suppliers of the items even if they may cost a bit more per unit. You may be surprised that the offset in transportation and carrying costs may out-pace the cost savings of supplying from a foreign supplier. Additionally during an economic slowdown in the US foreign products become more expensive due to the currency exchange rates. Take this time to help your neighbor. You may appreciate the same attention from one of your local customers.

Collaborate with suppliers around your schedule - By working with your suppliers you can commit to a schedule that they can expect and you can live with. The result is lower carrying cost for both of you and a lower price per product. Remember that if your customers could give you insight into the future sales you would be more willing to reduce prices. The same is true with your supplier. The better your schedule the lower the price you will pay.

Shrink safety stocks - Take this opportunity to reduce safety stocks to an appropriate level considering a slowdown in business. When you are running an operation at 25% more volume you may need more safety stock. When business demand decreases the requirement for this inventory is lowered. Take a realistic look at the inventory levels for each of your items. Start with the items you carry the most – sort in descending order by value of inventory.

Promote most profitable items – If the market is absorbing a shrinking amount of sales then make sure you are selling the products that bring you the most return. Don't promote those items with limited return. Instead invest in advertising of those items that have the highest chance of sale and greatest return. Look at each of your finished goods and compare average selling price to actual production costs. Start with the finished goods that you sell the most by quantity (not price). Are you selling the most of the items that you receive the least return?

Review formulas yields – Concentrate part of your R&D money on refining the products that you will continue to sell the highest quantity. Once these are identified look for ways to reduce the costs and increase the yields. This will provide more profit for the same sale. Only focus on those items that have a high likelihood of sales. You may be amazed at the cost savings by squeaking 1-2% more yield out of each batch. Slow times are the times it pay to be frugal.

Reinvest in systems – In a down market there are often incentives in interest rates or government programs to assist companies to reinvest in the future. Many states provide tax credits for retraining your employees on newer technologies. Additionally as a market slows down it is common for interest rates to lower. Take advantage of this time to wisely invest in your information systems. As the market comes back the companies that have re-tooled will be ready to win in the recovering market. If you wait for a better market you will be fighting growing demand with limited supply.

All of these items are very manageable. The key is to get started. The sooner you look into managing cash flow and working capital the easier any economic downturn will become. Additionally don't trade long term successes for short term benefits. This economy will be back stronger than ever. Many companies make it through slow times only to be crushes as the business returns.

If your existing systems are not delivering the data I outlined above you need to do the best with what you have and address your systems issues immediately. I can guarantee that having the right information will pay for itself many times over in a shrinking or a growing economy. Putting this data at your finger tips is not as expensive as you may be lead to believe.

The primary message is to get started today and if you need help ask for it. There are some real challenges ahead of you but each can be addressed with creative thinking and access to accurate data.

Profit motive run amuck – Foreign vs. Domestic

2008-02-24T08:49:00.001-08:00

This global economy is really hurting us in our own neighborhoods and few are willing to look at why. Formula manufacturing is often in the center of this firestorm.

As I travel from one formula based manufacturer to the next I sense a real turmoil over the profit driven decisions to import foreign packaging and materials versus employing people in our own local economies. "I can get it 25% cheaper from country X versus domestically."

Given: The profit motive drives all businesses to find the lowest cost alternatives to producing products given a similar quality. After all, the purpose of a corporation is to maximize the wealth of the stockholders.

I just don't buy the argument that because the component is cheaper per unit that it is the best decision for your formula based manufacturing company. There are many more factors that should be considered.

So let me share some insights that need to be taken into consideration in determining the decision to buy locally or import foreign.

Scheduling – go to any procurement officer and ask them if everything was equal would they prefer to source their components 1,000 miles away or 10,000 miles away? Simply from a scheduling and logistics discussion – it is much easier to deal with a 1 week lead time vs. a 12 week lead time. These variables that the scheduler must address are not trivial. Because of this there is a strong argument that because your supply chain reaches across the ocean you are placing significantly more work on your procurement group. In the end that costs you productivity and money.
Quality – as quality concerns continue to grow from imported products the testing requirements for those using these products also grows. By bringing an imported product into your supply chain you are subjecting the quality of your products to standards not customary for your market. In other words the quality standards expected in your market may be far higher than the quality standards normal in your trading partner's market. To keep quality to the appropriate level will require additional oversight, testing of inbound components and a more complicated recall process. Each of these will cost you time, efficiency and eventually money.
Cost – when evaluating whether an imported component truly costs less than a domestically supplied component make sure to address the known and potential costs associated with that business relationship. How many trips overseas will it take to ensure a reasonable relationship? What is the cost of managing that relationship? What will it cost you when a shipment is delayed by natural or political reasons? Can you really absorb those costs? How much additional inventory are you going to carry to buffer the variation in foreign availability? What is in the political water related to tariffs and import fees? If there is a problem what will it cost for you to meet with someone in authority to address the problem?
Customer – More and more of your customers will not take delivery of product that is produced from components sourced from certain countries. We are seeing a strong push toward Country of Origin disclosure. What will you do after you have chosen to source a material from one of these countries that your larger customers have banned? Will you source from multiple locations and what will it cost you to verify that you can track the source of each lot by country? Sourcing domestically addresses these concerns.

So in the end I am not convinced that the price per unit is the only consideration in determining the source of certain components. In addition to price per unit consider what changes will take place in logistics, quality assurance, hidden costs and the mind of your customer.

Sadly I am seeing many companies ignoring the additional data and they are changing their supply chains without considering all the facts.

If price is the only reason to source from a foreign market I think it is prudent to consider the factors above. Profit motive is important but it is not the sole consideration.

As a last point – is it possible that a current domestic customer yours could outsource your business because they can get it cheaper from a foreign source? If so you may want to give all of this a second thought before it happens to you as well.

10 reasons manufacturing software projects fail

2008-02-12T15:11:00.001-08:00

Every project, no matter the size, has a certain level of risk - the bigger the project the bigger the risk.

The best way to manage project risk is to understand the causes of project failure.

In the 1990's I read an article that resulted from a study commissioned by APICS. The article spoke about how often manufacturing software projects fail and the top 10 reasons these projects fail. This study interviewed manufacturing companies that had recently implemented a new manufacturing information system and attempted to quantify success or failure. The results were worse than the author expected.

That study indicated that 1 in 8 projects was deemed a success by management – 7 in 8 were deemed a failure.

That is a very low number and seems a bit worse than I would believe. The article did go on to provide some insight that I really agree with and would like to share with you. The author followed up with the 7 in 8 companies that deemed their project as a failure and identified the common themes across these companies.

Below is a list of these common characteristics:

Lack of management commitment
Part-time or no internal project leader
Limited input from various departments in the organization
Lack of project focus or goal of the new system
Project seen as an IT project and not a business project
Lack of training on new system
Limited feedback on project status
Selected the wrong software to address the business issues
Inadequate outside resources
Financial resources inadequate to achieve results

So after 20 years of performing implementations I have to agree with the above list. The projects with the greatest challenges have often had one or more of the above items. The good news is that most of these items are completely in your control. So let's focus on addressing the items you can influence.

To reduce the risks in manufacturing software projects here are some items to consider.

Is this the most important project on your company's agenda for the next 6-12 months and can management articulate that fact?
Do you have a near full time project leader that understands most parts of your business? How long has this person worked for your company?
Do you have a cross-functional team that can support the project leader?
Does this team universally know the purpose and focus of this project? If you ask each member why we are doing this project, do you get the exact same answer from every team member?
Is the focus something other than IT? Is there real business benefit that everyone can rally around?
Have you considered how different people learn? Some require one-on-one, other require manuals and others repetition – does the plan account for each learning style?
How organized is the project leader and can that person report the status of the project in a clear and concise manner? If so, can the organization change course if needed?
Have you talked to other users that are using the exact system you are implementing? Did these companies have similar business issues before they started and have the issues been addressed by adding the new system?
Does the outside firm supplying training, support and programming have a clear understanding and experience in your industry?
Can you really afford the upfront costs to achieve your desired results?

Most companies are not able to address every issue on this list prior to their project. The key is to limit the number of them and manage the risks of the ones you can't. But based on my experience if you do not have management commitment, a near full-time project leader, a cross-functional project team and a clear and concise project goal – you should not continue.

Aside from that - keeping an open dialogue before, during and after the project with your team (including outside consultants) will take you a long way to reducing risks.

Best of luck on your project and I hope these insights provide a certain level of clarity.

Bar coding – the misunderstood technology

2008-02-03T12:30:00.001-08:00

I spend a lot of my day talking with formula based manufacturing companies about their business issues. About 50% of these conversations involve the request for bar coding. When asked about what business issues they are trying to solve with bar coding I typically get some of the following expectations:

Increase physical inventory accuracy
Reduce effort to identify inventory location – Bin tracking
Reduce lot expiration
Increase accuracy of usage/yield reporting
Provide real-time access to usage and production
Support lot tracking from material usage through shipping

Each company believes they have real issues around inventory control and solving these issues may yield tremendous results.

The problem is see is often in the definition of bar coding. Bar coding by itself does not solve any of these issues. Bar coding as a technology needs help from other applications and processes. What they are describing is a Warehouse Management System (WMS). The simple act of scanning a bar coded item is nothing more than a data collection exercise – what you do with that data is the key to solve the issues.

Well designed and implemented WMS systems can assist a formula manufacturer gain a better understanding of inventory levels, rotate lots prior to expiration by directed picking and improve the inventory accuracy through faster cycle counts. They do this by setting best practices for inventory movement and assist users to follow the business processes. Every time a person touches inventory the user must notify the system and that inventory must be tracked from the time it arrives on a truck to the time it leaves to a customer.

In my experience the key challenge is to ensure timely and proper application of the bar code label. Once that is done much of the remaining work is in execution and discipline when inventory is touched.

As soon as a company introduces flawed business practices the WMS system falls apart. A formula manufacturer must be able to perform all its processes to a high level of excellence prior to expecting positive results from the WMS system. Unfortunately few companies really understand this.

So for my clients we implement in this order: Financials, distribution, production, compliance, scheduling and then WMS. Only until the business processes are clearly understood and implemented will a WMS solution truly yield the results they expect.

I once heard a mentor of mine once say – "Bar coding (WMS) is great. It can screw you up at the speed of light". Do yourself a favor and get your processes under control prior to introducing WMS.

When you are ready - there are some terrific WMS systems to assist you achieve your desired results. While picking an ERP solution you should make sure there is a solid WMS solution as part of the deliverable. If you already have an ERP solution make sure your systems are well under control before adding WMS. Failure to do either of these may cost you dearly in the future.

Scheduling – How low will you go?

2008-01-20T13:42:00.001-08:00

Every formula manufacturer performs some level of scheduling. Without a schedule or a plan no plant could function for very long and based on my experience most of the schedules are manual in nature. As a company grows past the $10 million in sales mark the manual processes may become burdensome and become a drag on the manufacturing process.

Unfortunately few small formula based manufacturing firms have the resources or knowledge about their scheduling options. I will try to provide a basic primer to begin the education.

Generally you can break the scheduling process into two primary components

Production Schedule
Shop Floor schedule

The production schedule identifies what products we will be making, the qty to be made and the start and end dates for the scheduled item. It does not attempt to assign resources such as machines or people. It is typically the result of ensuring capacity and material availability. Think of it as the overview of what a company will be making and when it will be completed and will often show data 1-2 weeks out from today.

The shop floor schedule is much more detailed and identifies what resources we will be using, the precise order the items will be made and dependencies required in running this item. It is very detailed and is often more detailed than users outside production need to review. This is the document that the shift supervisor works from and directs the line supervisors and is often limited to 1-5 days out from today.

Both are required to get the raw materials converted to finished goods in an orderly fashion. Additionally most (if not all) companies perform these tasks. The questions to consider are

How efficient is your schedule?
Could you produce more with the same resources?
How much time are you spending to prepare the schedule?

To a very large degree scheduling for a significant number of small to mid-sized formula manufacturers ($1-100 million in sales) is done in Microsoft Excel or similar tool. The data for the schedule is manually obtained from printed or electronic sales orders, inventory counts and best guesses of future orders based on history or a best guess. That manual process is the norm and not the exception.

Is that a bad thing? No.

It depends on the complexity of your business and how efficiently you are trying to run.

If you always make the same products, at the same quantity and in the same order – that is not a big issue. But as lot sizes continue to shrink, breadth of products offered continues to widen and lead times are reduced then a non-integrated "back of an envelope" approach may not work anymore.

When you decide to introduce electronic tools for scheduling you need to be very careful in selecting the tool. I my experience the tool should read open sales orders, forecasts, and quantity on hand. This data can be read periodically in a batch process if needed. There needs to be a greater relationship with the production system. For formula manufacturers you need your scheduling tool to understand the formula and required resources (machines, people and tools). This data is often more detailed than the ERP data and therefore more difficult to integrate.

With that information I would suggest discussing scheduling tools with your manufacturing application. If they do not have integrations to scheduling systems your options become limited but not impossible. At this stage you may choose a custom integration or considering a new production system. If this is your case the cost of adding an integrated schedule becomes pretty expensive.

If your production system does have integrations to one or more scheduling tools then pick the one that best integrates to your ERP system and is not too complex for your personnel to use.

One thing to remember – every scheduling implementation is unique to your own business. There is no such thing as a plug and play implementation of scheduling. It will take time and effort by your company. Therefore you should be certain that there is a high level of benefit before adding this tool. Electronic scheduling is not cheap. Often times integrated scheduling tools can equal or exceed the cost of your production system.

If the benefits are real and you have the rest of your production and ERP system under control then adding electronic scheduling tools may be the right next step for you. But whatever you do – keep your manual system as the primary system until the new system has made the manual one obsolete. After all – the manual system has gotten you to this point.

Software for formula manufacturing

2008-01-03T07:12:00.001-08:00

One of the greatest misconceptions in the software industry is that manufacturing software is manufacturing software and that there are no differences in manufacturing products on the market. That is not true – let me share my perspective on the landscape.

I typically break the market into a couple sectors – much like Gartner and the like will do. I keep my categories simple – Big, Medium and Small. Big > $750 million in sales, Medium $150-750 million in sales and small $5 – 150 million in sales.

In the Big and Medium camp you have the typical very good and very expensive applications such as SAP, Oracle, Infor (many options), Ross and the like. These companies typically need outside independent consultants to assist them in the selection and it is worth every penny.

The real confusion comes in the Small sized company - $5 – 150 million in sales. While I do not have statistics to back this up I think this is the largest part of our market – at least in the US – and they have the least resources. They tend to be forced to rely on software vendors to assist in the selection process. As such there is much misinformation being spun to this group of users.

I will attempt to put some applications into groupings and give my perspective on what to look for in each grouping. To keep it simple I have limited the groups to three.

Assembly posing as formula/batch

All-in-one

Everything but financials

Extension to larger standard ERP solution

Assembly posing as formula/batch -First let me get the assembly applications out of the way first. This is a group of applications that have found very stiff competition in the assembly/discrete world and have moved over to batch/formula manufacturing where they see more potential market share. Typically they are easy to point out and are often eliminated by the trained eye. Here are a couple signs. Does their web site spend as much time talking as much time about BOMs, routings and subassemplies as they do recipes, compliance documents and intermediates? Do you see MSDS or Nutritional Analysis prominently displayed on the site? If not move on – you will spend more time customizing an assembly application than you will gaining benefit. Today there are plenty good vertical applications that do exactly what you need. Some examples include Macola, MAS90 and Dynamics Manufacturing – each are well suited for assemblers but not necessarily formula/batch manufacturing.

All-in-One – Through the 1980's and 1990's this model really was the standard. This is an application that was written specifically for an industry and hand tailiored to that industry. It will look and feel like your industry and will be feature rich and very deep in functionality. For the first couple years of usage you will feel great. The primary drawback of this approach is that it does not talk to any other application and they are the only ones doing the development for your solution. Sure you can export data to excel and manipulate it into other applications but that is a bit different than being able to pick from a myriad of solutions to solve unique challenges. Additionally these applications are typically written to fill as specific need such as Lab Analysis, MSDS, Scheduling or Formula Management. They will be strong is certain areas and very weak in others – such as financial analysis or business intelligence. This is largely caused by limited resources and the resources they do have know the technical aspects of the industry and not the broader ever-changing business issues impacting your business. The risk of this solution is in the unknown. How will they handle electronic payment of payables (common in the EU)? How will they handle web orders if you choose to go there? How will they broaden their sales order processing to handle export orders and all the paperwork associated with that business. Some examples include Deacom (although really assembly but have made a reasonable attempt at batch), ProcessPro and Syspro. Biggest benefit – it is a one stop shop for software. Biggest drawback – if the store does not have what you want after purchase – tough.

Everything but financials – This group amazes me. These are applications written specifically for the industry and have stopped short of being an All-in-One by attaching themselves to the core financials of many ERP systems. This model has tightly integrated data within their own functionality such as formula management, inventory control and compliance. When it comes to integrating with financials (GL, AP and AR) the integration is relatively weak. Normally there simple transactions sent to AP to pay the inventory invoices or transactions to AR to track outstanding receivables. All this is great until you want to perform analysis on costs from the GL and flow back into production. Because the transaction is foreign to the financial system (GP, AP, AR) it will not be able to make the jump to the source document (sales order, purchase order or batch ticket). This is often frustrating for users. Like All-in-One there are no other resources developing for this implementation. So if EDI becomes an issue for you after purchase you really only have one option with this group. As well if your financial application changes you are dependent on this group to keep up to speed with the changes. Now the part that amazes me is this. These applications tend to work with any and every financial solution on the market and claim to be tightly integrated with each. Logic tells you that can't be the truth. It is the old saying – "If you say it loud enough and often enough it becomes the truth". Not so. The prime application doing this today is Batchmaster (the one owned by eWorkplace). Biggest benefit – most of the software is written by one company. Biggest drawback – that one company may be trying to service far too many markets.

Extension to larger standard ERP solution – This is where the trend seems to be today. It is similar to the Everything but financials group with more reliance on the ERP solution for core business processes. In this model the application handles only the parts of your business that is truly unique – MSDS, scheduling by formula, formula management. It is not trying to handle order entry, purchasing, inventory or financials. The groups doing this are highly focused on the formula manufacturing parts of the solution and leave the routine transactions to the standard ERP solution. The reason this is a new development is that ERP solutions have gotten to a place in technology where they can accept third party applications into their suite of offerings. This was a huge technology change that began in the late 1990s and really picked up speed in the early 2000s . Now it is common place for software developers to leverage the work done by very large ERP developers and focus on what they do best. Some examples include Vicinity (Dynamics GP, SL and NAV), O2/EscapeVelocity (MAS500), JustFoodERP (Dynamics NAV), and Fullscope (Dynamics AX). Biggest benefit – significant resources are in both standard ERP and vertical requirements. Biggest drawback – upgrades need to be coordinated by your local reseller.

In 1,500 words or less I have attempted to group the software solutions for you. Each has merits to consider. Each has legacy to look into. For my money I would look for the solution that addresses your needs today, is easy to use and has the ability to change as your business changes around the corner.

Will the real Batchmaster please stand up?

2007-12-18T07:36:00.001-08:00

From 1985 through 2000 Batchmaster software ruled the roost when it came to batch manufacturing software – especially for the paint industry. So what happened? What happened to the product and where does Batchmaster stand today?

Batchmaster currently is offered in two flavors – Batchmaster Enterprise by eWorkplace and Batchmaster Platinum by Sage. But how did we get there and what is the difference and why two Batchmasters?

Well I will shed some light.

Batchmaster was originally written in the 1980's by a company called Pacific Micro Software Engineering (Pacific Micro) and was owned by Randy Peck out of Seal Beach, CA. The initial product was called Batchmaster Plus and was a simple but effective laboratory management application written primarily to track master formulas and perform laboratory calculations that are pretty simple based on today's standards.

In 1992 Pacific Micro released a modular application and dropped the Plus from its name simply calling it Batchmaster. At the same time they renamed the company Batchmaster Sofware Corp (Batchmaster). This product offered modules for Inventory, Production, MSDS, Costing and the like. It also expanded its reach by integrating the industry leading accounting package at the time - Platinum DOS. Batchmaster handled the Production, Inventory, Purchasing, Order Entry and Platinum handled financials. This combination did rather well for Batchmaster and Platinum.

This was the time Batchmaster really expanded outside the paint industry and began focusing more broadly on batch manufacturing in general. Some say it was the beginning of the end – at least that is the opinion of many paint chemists.

In the mid 1990's it became apparent to most that Platinum was falling significantly behind the market in releasing their Windows product. So far behind that Platinum quickly relinquished its role as the dominant ERP solution to products such as Solomon, Great Plains and MAS 90. Platinum finally released a version of a windows product in the late 1990's but most would agree it was too little too late. The market had moved on and Platinum for Windows never really caught up.

Batchmaster was caught in this strategic mistake. The growing company had invested its future in the Platinum architecture of Pervasive.SQL and the look and feel of Platinum for Windows. With the sale of the flagship product Platinum (Windows and DOS) from the now public and rebranded Epicor (formerly Platinum Software Corp) to Sage (formerly Best formerly Sage) the writing was on the wall. For Batchmaster to succeed it must diversify away from Platinum.

While keeping significant development efforts in place to support Batchmaster Platinum – Batchmaster hired an outside firm to write an interface to Solomon. This ended up being a huge mistake and cost Batchmaster and others a lot of money. In the end the focus of Batchmaster was truly lost never to be recovered.

In 2000 Randy Peck (majority stockholder of Batchmaster Software Corporation) sold the company to an offshore development company interested in expanding its existing SQL based manufacturing solution (Optipro) into the batch manufacturing arena. They purchased all the assets and marketing rights to Batchmaster and began work converting their discrete product Optipro into a batch manufacturing solution to replace Batchmaster.

After one year of development and little to show for its efforts eWorkplace sold the Batchmaster Platinum product to Best. This move finally put Batchmaster Platinum and its 3,000 users together with the ERP solution – Platinum for Windows.

The odd part of this transaction was that Best did not purchased the Batchmaster brand but only the windows product and the windows users. Best had a right to market under the Batchmaster name for a limited time. That time has since run out and eWorkplace maintains the marketing rights to a product they do not own – Batchmaster Platinum.

At the time of the sale of Batchmaster from eWorkplace to Sage eWorkplace did not have a product to take to market. They had experienced significant resistance from the market for a product that was written for an assembly company and morphed into a batch manufacturing product. That resistance continues to this day.

Through time eWorkplace released their Optipro product. Instead of branding the product Optipro they went to market calling this altered product Batchmaster Enterprise. To this day eWorkplace claims their Batchmaster Enterprise product is the Batchmaster product most users recall. Unfortunately that is not the case.

The true Batchmaster that has earned its name and following is actually owned by Sage software. Unfortunately for us in the batch manufacturing industry Sage relegated that product to virtual extinction and has not yielded much in the way of new features since they owned the product. In effect that product is now dead.

So there you have it. The story is told and you are left to decide which is the true Batchmaster. In the end it really does not matter. Neither product lives up their own hype nor to the core functionality Randy Peck put into the very first product – Batchmaster Plus.

I hope this help reveal the mystery behind the legendary Batchmaster.

To Yield or not to Yield?

2007-11-10T10:16:00.000-08:00

Formula manufacturers need to keep a keen eye on the yields they experience by formula. It is easy to be lulled into sleep by average yields and not realize a potential for significant profits or significant losses.

If a company typically experiences a high yield when measuring raw material input vs finished goods output it is hard to see that certain products may be achieving far less than standard. These differences can be masked by total production averages - total usage vs total production.

Identifying yields by formula over time provides the following benefits:

Efficient use of R&D - allows a an R&D department to focus on those few formulas that experience an lower than normal yield on a regular basis
Reduce Inventory - permits the reduction in finished goods inventory by reducing the likelihood of finished good shortages because the scheduler is not being caught off guard by not achieving expected results - many companies hold excess finished goods inventory to buffer from these variations
Improve Costing Accuracy - provides accurate costing data to calculate finished goods selling prices - if a formula yield drops from 90% to 80% that has the effect of reducing the selling price up to 10%

The address this issue a formula manufacturer should routinely compare actual production yield (raw material input vs finished goods produced) at a batch level. If the company is running a manual batch management system this can be done on a sample basis.

Newer computer based manufacturing systems can notify specified users when any formula experiences a lower than anticipated yield. This allows immediate action to be taken if necessary.

In summary, potential profits are easily masked by neglecting to observe yields at a formula level. By relying on total production yield calculations the details are lost in the averages.

Take a look today at some of your highest moving formulas. Is the yield what you expect? Could the yield be better? The time spent may have a dramatic impact on your bottom line.

Certificate of Origin

2007-11-03T13:15:00.001-07:00

One of the most recent advances in formula manufacturing compliance has been the advent of the Certificate of Origin. While this document has been around for years - starting in 2007 this document has taken on even more importance.

As United States companies increase their dependence on foreign suppliers the reliance on quality standards from remote locations also increases. Some countries will pay more attention to quality standards than others.

The Certificate of Origin provides at least a basic understanding the source of all components used to produce a product. Typically this report identifies the country and often the component in the formula. Data is captured by raw material components and the approved suppliers.

While this document does not speak directly to the quality of the product manufactured it does provide a basic understanding of the countries involved in the supply chain.

As more countries earn a reputation of lacking quality this document will be used by more companies in restricting approved suppliers.

As of the date of this entry very few applications actually address this compliance requirement. As time passes this document will become as standard as a Certificate of Analysis and should become a standard feature in most software.

If you are considering new formula managment and batch manufacturing software for your organization make sure it addresses this document. Automating this process will save you signifiant effort in the long run.