Controlling complex production processes in the food and beverage industry requires a great deal more than ‘panel beating’ systems that were designed for the predictable world of discrete manufacturing.
The production model approach has won favour with world-leading food and beverage manufacturers because it puts them firmly in the driving seat of their manufacturing and business processes.
In the previous article, we saw how production models manage the complex environment of multiple outputs and recycles. In this final article, we will look at multiple formulations as well as the necessity to manage all resources and how production models can help with these issues.
Managing all resources
"Food and beverage companies need to be able to plan and schedule the availability of material and other capacity type resources like equipment and labour," says Ian Huntly, Business Development Manager at Futuristix-Wonderware. "For some operations, by-product or waste production must be planned because it may be a constraint of the production process. Resources need to be scheduled free of system-imposed inventory limitations or item definition workarounds. Food and beverage companies also need to understand, at a detailed level, where costs are coming from in the process. They need to capture all resources and resource costs contributing to overall product costs and they need a better idea of the contribution of nonmaterial costs."
An example of the need to manage all resources
Consider the apple juice manufacturer who presses apples and then pasteurises the juice (see Figure 1). Juice flows to a fill line where it is bottled and sent on to a labelling and packing step to produce the final bottled juice product. This same company also produces fresh apple cider (that is not pasteurised) and dried apple products. The processes for producing each of these product lines are very different. In addition, each product line has different requirements for equipment and energy usage.
The apple juice company's current costing method assigns the same overhead to the juice, cider and dried apple products. This method falsely inflates the cost of products using less energy. Management is trying to determine whether to discontinue the cider products because they are not competitively priced. Planners are looking for better requirements information that takes into consideration the constraints of fill lines with different rates, waste and yields.
Managing all resources using production models
With production models, resources may be anything you define from capacity to energy to materials. This flexible resource definition means that you can plan requirements for all resources from packaging materials, to fill line hours, to energy, as part of a single resource planning run. The benefit of this simultaneous planning is more timely, accurate information for the planner.
By defining all resources on production models, you are able to take costs, traditionally managed as overhead, and capture them directly at the product level. For the apple juice manufacturer with energy requirements that vary dramatically from apple juice to dried apple products, the ability to directly measure energy costs on the production model generates a more accurate cost profile than the traditional overhead allocation based on labour. By including energy on the production model, the management team of the juice company would find that the unpasteurised cider products are being inaccurately burdened with a disproportionate amount of energy cost.
While defining resources on the production model gives cost accountants a powerful tool for improving cost accuracy; it does not encumber the planner with recommendations and inventory requirements for noninventoried resources. For example, with production models, electricity is not inventoried or issued on a work order. Users are not forced to create a part number for electricity, receive it fictitiously, and distort the true value of inventory. When electricity costs a few cents per kWh, it is inefficient to spend labour resource creating human workarounds. The production model allows you to manage your important business resources the way you need to - providing powerful planning and costing abilities without requiring that you manage all resources as inventory items.
Accommodating multiple formulations and production methods
Most food and beverage processing operations manage multiple product formulations as well as different methods of production. Formula or recipe changes may result from variations in ingredient quality, seasonal considerations and technology used. To properly manage the business, an effective planning and control system needs to accommodate planning, costing and reporting for each formula across multiple lines.
A multiple formulation/processing example
In the case of the apple juice manufacturer, there may be two processing lines making the 8-ounce bottled juice product (see Figure 2). The second line is used to meet increased customer demand. The new line (line #2) improves the yield at the apple press and has a higher case/hour fill rate.
To meet customer demand, planners need to load both production lines to run concurrently. In anticipation of increased demand, the management team needs to determine the cost impact of running additional shifts versus upgrading the equipment on line #1. In order to make this decision, management needs to compare cost information for producing juice on each line, taking into consideration different yield percentages, fill rates and waste. To compound this problem, the management team has found that in the winter months, when apples are imported, yields are lower and consequently they need to manage a different set of formulations and production schedules.
How production models manage multiple formulations and production methods
A production model represents a formula/process combination. Where it is important to plan a separate process or to capture costs against a different formulation, you define a different production model. The planner can easily distribute customer or order demand across multiple production models.
The ability to define multiple production models for the same product eliminates the need to designate primary or alternate routings. This flexibility means that the user can capture cost and performance measurements against the actual production model used as opposed to having averages serve as benchmarks for comparison. The cost of making apple juice on line #2 incorporates the higher yield and fill rates offered by the technology being used on that line. Powerful cost simulation capabilities enable management to compare the actual costs of running an additional shift on line #2 versus the projected capital expenditure of adding new equipment.
Conclusion
"Based on extensive research into the needs of food and beverage processing operations, Wonderware's Protean has a patented production model at its core," says Huntly. "This helps customers combine recipe or formula considerations with operational tasks in an environment that is more flexible than traditional bill of material based systems for addressing the complicated business requirements of food and beverage companies."
These key requirements include the management of batches, multiple outputs, recycled material, resources in addition to material and multiple formulations and production methods. By addressing these, the production model approach delivers the following benefits:
* More accurate planning of batch production tasks feeding continuous processes.
* Improved planning of by-products and co-products.
* Cost distribution and NRV cost techniques for improved costing of multiple outputs.
* Reporting of multiple outputs against a single production schedule.
* Improved management of recycles.
* More accurate costing of products with multiple formulations and production methods.
"Production models provide the framework to deliver the precise control over planning, inventory, reporting and costing critical to process operations. As a result, Protean's better overall fit for food and beverage processing operations speeds return on investment and lowers implementation risk," concludes Huntly.
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