Sunday, April 14, 2013

when to use discrete orders, process orders or repetitive manufacturing in SAP-ERP

There seems to be a lot of confusion in our world about how to use these three "concepts(?)". I see lots of related questions in forums and many discussions on the subject too. Allow me take a shot at an explanation and decision matrix. I want to do this primarily because I am very adamant about getting my clients to use more 'repetitive', in order to lean and automate their supply chain and to provide them with more flexibility. And I realize that some of you are rolling your eyes... "here he goes again...". Yes, I won't give up anytime soon :-)

First of all: repetitive manufacturing works for both discrete as well as process orders. So there are actually two questions:

1. are we a discrete manufacturer or a process manufacturer?
2. are we operating in a repetitive environment or not?

Unfortunately not a lot of SAP implementations have thoroughly answered both of these questions before Go-Live. And once 'live' with SAP, there is an unwillingness to change, fix or adopt to the right concept. "The way we went live is how we were taught and that's how we do it." "It is too much effort and costs too much money to switch". Not cool and not true! In my mind the cost of not switching is by far larger. If you don't use the SAP software the way it was intended, your inventories will blow up or you don't have component availability; your service levels - internally or to the customers - may not be as good as they could be; your lead and cycle times are too long. There could be many reasons for these issues, but using the wrong production type will certainly disable you from achieving a lean, agile, effective, optimized and automated supply chain.

And most important of all: Automation is out the door! I have seen many installations using a sub-optimized basic data setup. They all work... they all make money and are competitive. Very often the only question is: how much manual activity are you performing to achieve your goal? How much do you do in Excel? How much money do you spend on Third-Party Products? Let SAP do the work for you. It does so with the selection of the appropriate tool for the according situation.

Question 1: discrete or process. To put it very simple: if you can take your product apart after it's finished, you make discrete products like a motorcycle, a piece of furniture or a gear box for an automobile  Should you make something that you really can't put back into where you started out with, chances are you are a process manufacturer. Try putting orange juice back into an orange or paper into a tree; or try to make a cow out of a hot dog. This is a rough guideline and not always to take literally, but you can see that process manufacturing - like its name implies - takes some sort of 'processing' to make a product that's not assembled, screwed together or packaged (yes, packaging is a discrete process, even though it might be used in a process environment). I know that once you drilled a hole into a sheet of metal, you can't "put that back" either, but the drilling is a discrete activity that can be described in a discrete routing and does not require a material yield calculation or processing instruction as a blending operation, where you never know what exactly comes out, would require. To describe this type of processing you would use a recipe.

Always think about what element can best describe your activities on the floor. Is it a routing with instructions on how to perform certain steps in a sequence that take a certain amount of time - every time you perform them? (a cut is a cut is a cut, right?). Or is it a sequence of steps (phases) where there are relative unpredictable yields, the input differs, a formula is required to describe the outcome and something is 'cooking' while it's processing (the chemical distribution changes, maybe). In that case, a routing and it's associated production order will not sufficiently describe the 'process' and therefore it's hard - if not impossible - to accurately schedule, report or execute production.

Question 2: repetitive or ... ?? What actually is the opposite of 'repetitive'? Most people think of it being 'discrete'. I would like to use another term here for purposes of clarity; since we are using 'discrete' in another sense here, as the opposite to 'process': 'jumbled' (like in a job shop) or 'discontinued' (as the opposite of continued flow production).

The actual difference is one where you look at how the product flows through your shop floor. Is it driven by an individual order? or is it a period-based rate production, where you make the same product over and over (...and over)? In a 'jumbled' job shop your products change all the time (sometimes you drill three holes, sometimes four; sometimes you fix the breaks; at other times you perform a 10,000 mile service). For each of these jobs you have an individual routing, a Bill of Material and MRP generates you a planned order that you check individually for availability of components, you schedule it and then you convert it into a 'jumbled', individual job shop production order which you issue components to, confirm and post a goods receipt from; before you cost that individual job! (please forgive me all these terms; but I want to make it 100% clear what it actually is!).

Not so on a 'repetitive shop floor (both discrete or process)! If you make turkey dogs, do you really want to have individual orders that all have the same routing or recipe for years to come? do you really want to release, availability check, convert, goods issue, confirm, receive and cost individual orders when you make the same turkey dogs every day? Shouldn't you simply confirm how much your line yielded today as compared to yesterday? If you make 4 different types of rice and you produce a 100 tons of each every day, why would you want to know how much each order has cost you today? Wouldn't it be much more important to know how much type A has cost us in comparison to type B during the months of May?

That's easy to see if you use the tools of repetitive manufacturing; not so with jumbled, job shop orders where every order is costed individually and you will have to put the monthly report together afterwards (you're probably doing it in Excel).

RepMan provides many more advantages. The biggest one: MRP creates executable run schedules, instead of planned orders that you will have to convert. There is a collective availability check for the components needed at the line (btw... components in jumbled job shop orders are order related wheras in repetitive they are neutral) and LAS2 (or MF50) lets you schedule, sequence and capacity level your plan in one step - automatically!

sequence schedule of repetitive orders


Using RepMan you can achieve 'flow' on your production lines. The routings can be 'rate routings' representing your lines (with feeder lines) and you can balance the line (making sure that every step takes roughly the same amount of time so that flow is achieved). A balanced line that achieves flow is low on WIP, short on cycle time and very agile (flexible) and lean.

Best of all you can measure your repetitive line with Factory Physics (see my other blogs on that subject).

In closing I want to make a point that I consider very important and where I see many misunderstandings all over the place: One method does NOT fit all! Your milling process might be 'process', but your packaging is discrete. Your factory makes repetitive machines, but there is some fabrication that is job shop. You might be a jumbled, discontinued testing laboratory for cancer research, but every one of your products needs a base emulsion that you are processing repetitively to stock.

Use the right tool for the appropriate situation. That is why SAP is providing all this stuff!