Using Technology to Mitigate Risks in Chemical Manufacturing

1© 2017 Edgewater Fullscope Using Technology to Mitigate Risks in Chemical Manufacturing 2© 2017 Edgewater Fullscope INTRODUCTION While the process manufacturing market is typically categorized as large and mature, it remains one of the most competitive and dynamic segments of manufacturing. In today’s frenetic global markets, process manufacturers must evolve to meet the challenges of changing market demands, the increasing commoditization of products, and the volatility of pricing in energy and raw materials. The stakes have never been higher for process manufacturers as they replace or upgrade their systems: they need to boost quality, efficiency, safety, and regulatory compliance for maximum productivity and process control. For the major process segments including chemicals, pharmaceuticals, food processing, pulp and paper, cosmetics and metals (industries whose business model is typically high volume, low margin), the ability to improve margins and to cost product and inventory based on the active ingredients central to their recipes are key to maintaining and improving competitive vitality. Chemical manufacturing is about transforming materials from one form/state/type to another, and during the process, some of the base raw material characteristics are inherited by the semi-finished or finished goods. Having to retest for those characteristics independently on the finished goods imposes undue cost and effort burdens on quality and compliance departments. This white paper explores this topic in further detail. This white paper uses the word “potency,” but some process industries may use the terms assay, concentration, or others. The underlying technology in these new features supports these potency-like types of requirements found across the chemical, food and beverage and pharmaceutical industries. Production in most chemical manufacturing organizations is either run in a batch mode or continuous mode. Setup and cleanup operations are quite expensive and laborious. For these reasons, very often most chemical manufacturers have a need to sequence the products they run on a given production line to achieve a controlled transition, reduced changeover loss and minimized setup costs. Read further to understand how this is achieved with Dynamics 365 for Finance and Operations. Dynamics 365 for Finance and Operations: The Power of Potency Potency is the concentration of an active ingredient and is typically expressed as a percentage of a batch or as a multiple of the standard or usual potency.1 Furthermore, potency is the measurement of an active material in a specific lot, normally expressed in the terms of an active unit.² Process manufacturers purchase products that have a certain active ingredient; for example, a drum of raw material whose potency is 75 percent means that 75 percent of the material in the container is active. The balance is filler or an inactive ingredient such as water or some other stabilizer that makes storage, use and transfer of the active ingredient safe and possible. What manufacturers really care about is how active the ingredient is, its potency. Process manufacturers pay their raw material vendors based on the percentage of active ingredient or concentration of what they receive. All production recipes are based on a specific nominal concentration of the material being used; inventory is valued based on the actual concentration. 3© 2017 Edgewater Fullscope Dynamics 365 for Finance and Operations has added a number of fields around potency to improve its definition and automate its use in the manufacturing process. Key among these fields is “base attribute,” a generic term that refers to the key active characteristic of the product. This characteristic is an existing batch attribute of a fractional or integer type that defines this item as a potency item. The “Target” field is the standard or nominal value upon which this item is defined, costed and priced. Finally, how the attribute value is to be recorded (e.g., upon purchase or production receipt with information from a certificate of analysis, or by a quality order result) is documented. 1. http://www.erpglossary.com/definition.php?id=”1256” 2. American Production and Inventory Control Society (APICS) Dictionary, 15th Edition. 4© 2017 Edgewater Fullscope At the formula level, Dynamics 365 for Finance and Operations defaults the target concentration established on the item to the formula that is using the active ingredient. In the process industry, there are three types of concentration adjustments: one is called “difference additive,” simply consuming more or less of an active material based on its concentration; a second is called “compensating ingredient,” where a quantity of a second ingredient is adjusted according to whether the concentration of the active ingredient is over or under specification. (For example, water is adjusted to compensate for the level of acidity in vinegar production.) The third adjustment is simply adding “filler.” Consider a chemical compound that is sold as a slurry in a 50 gallon drum. A customer may require that this concentration have a specific concentration that would be referred to as the “dry weight.” The active ingredient used for a given batch of slurry for this customer may be a higher concentration than the standard, reducing the amount of the active ingredient needed. A filler ingredient is adjusted for the amount of difference in the active (and compensating, if used) ingredients to completely fill the 50 gallon drum. 5© 2017 Edgewater Fullscope Dynamics 365 for Finance and Operations uses this information to provide Batch Balancing to speed and improve production. A batch formula is defined interactively based on the concentration of a key ingredient or ingredients. The user selects inventory lots and based on the lot’s current potency, automatically calculates the required inventory quantity of the active ingredient. Once all of the active ingredients in the formula have been fulfilled, the Balance Batch Ingredients function determines the quantity needed for the compensating ingredient and for the filler, and finally creates a pick list based on the adjusted formula for the warehouse worker to use to select the materials for production. This eliminates the need to guess quantity adjustment of non-active ingredient components in the formulation that are impacted by the actual quantity of active ingredient picked. This is a very common scenario in the chemical industry, where, for example, a manufacturer is producing a batch of given compound that requires potassium chloride as a key material. If the potency of the potassium chloride is more or less than required, a quantity of water or other neutralizing material needs to be adjusted. For a host of reasons, companies don’t want the operator to have to do the math for that calculation. Dynamics 365 for Finance and Operations automates the process and makes it simple for the operator to come up with a properly balanced set of ingredients. As each batch is launched, Dynamics 365 for Finance and Operations provides a screen for the operator that shows every ingredient and its actual concentration. It shows batch number, quantity, and attribute value. Depending on which inventory batch or lot is selected, when the operator hits a button to balance batch ingredients, the system automatically recalculates the formula based on the lots selected. This procedure helps ensure quality, reduce costs, and eliminate waste. For a host of reasons, companies don’t want the operator to have to do the math for that calculation. Dynamics 365 for Finance and Operations automates the process and makes it simple for the operator to come up with a properly balanced set of ingredients. As each batch is launched, Dynamics 365 for Finance and Operations provides a screen for the operator that shows every ingredient and its actual concentration. It shows batch number, quantity, and attribute value. Depending on which inventory batch or lot is selected, when the operator hits a button to balance batch ingredients, the system automatically recalculates the formula based on the lots selected. This procedure helps ensure quality, reduce costs, and eliminate waste. A large part of Dynamics 365 for Finance and Finance and Operations’ elegance and utility comes through its flexibility: even though the metals industry will use a different formula than those used by the dairy or chemical industries, each can build their own formulas easily with this new functionality. 6© 2017 Edgewater Fullscope Lot Inheritance and Traceability Lot Inheritance is the ability to automatically transfer properties of raw material lots to one or more manufactured items’ lot. An effective lot inheritance system must transfer key lot characteristics. For example, a manufacturer may convert a chemical product from a bulk item’s lot that has certain quality characteristics to a packaged item (e.g. item Ammonium Sulfate Bulk is converted to item Ammonium Sulfate 10Gal Drum). If this bulk inventory lot is packaged into Ammonium Sulfate 10Gal Drum, those quality properties need to be transferred automatically to the packaged item lot. Sometimes this is referred to as parent-child inheritance. A manufacturer wants the characteristics from the original bulk lot to carry over into the packaged product. They also want to be able to transfer shelf life information. The system will take the earliest Best Before and Expiration dates across all of the configured shelf life ingredients and update the shelf life dates accordingly on all of the manufactured products for that batch order. 7© 2017 Edgewater Fullscope Lot Inheritance applies to two things: first, the attributes or characteristics, and second, the shelf life. Both need to be carried over. In a formula where the raw material defines the shelf life or the characteristics, the finished goods, which will consume those raw materials, need to inherit the properties of its raw materials. Here’s a bit of terminology: an end item is a typical formula where something is consumed and made into a finished good. A co-product occurs when an end item is produced or is produced without an end item with other co-products, but there is also a co-product that can be used for some other purpose—either to resell or to use in another production process. Take for example the production of even-sized plastic pellets or granules. A manufacturer may produce pellets that go through a specific-size screener and off-size pellets are set aside. The off-size pellets are considered a co-product. These are useful and can be sold, reused or re-blended to make more pellets. Dynamics 365 for Finance and Operations sets lot inheritance at the formula level and allows inheritance for both end items and co-products. 8© 2017 Edgewater Fullscope Batch Order Sequencing Dynamics 365 for Finance and Operations includes functionality that considers demand for a product having a certain characteristic such as color, flavor, or package size that can prove problematic if produced out of sequence; or, conversely, it may prove more cost effective if sequenced properly. Consider paint production. Sequencing from light to dark (white-yellow-green-blue-red-black) can minimize cleanup and setup during changeovers. Dynamics 365 for Finance and Operations allows manufacturers to define an optimum sequence based on prioritization of simple or complex characteristics of the product. 9© 2017 Edgewater Fullscope By using these characteristics, defined as Sequence code, and ranking them within a Sequence Group and assigning those groups to those bottleneck resources, Dynamics 365 for Finance and Operations provides a simplistic and pragmatic method to sequence planned batch orders in a desired order. Master Plans are defined further with a Campaign Cycle so that the period of time is defined over which those sequence planned orders would be grouped. Campaign cycles could be defined as a few days or several weeks. Planned batch orders within an individual campaign cycle will be sorted in a desired sequence with any major cleanup or changeover occurring at the end of each campaign cycle. Instead of a planner working all day to determine the first viable production schedule for a facility, these sequencing tools provide a sequenced plan much more quickly so that the planner can concentrate on refining that schedule – using their own experience and expertise – and other value-added activities. By increasing the efficiency of the planner as well as the efficiency of bottleneck resources, there is the opportunity to offset future expense by creating additional capacity with additional capital expenditures. The planner can review the Sequenced planned orders and decide which ones to accept. In larger planning environments, a planner may need to Accept the sequenced orders and have a Master Planner firm those modified orders into Batch orders. In smaller planning environments there may be a single planner who can then Accept and Firm those Sequenced planned orders directly to Batch order in a single interface. 10© 2017 Edgewater Fullscope Conclusion Process manufacturers focus their business activities around the development, manufacturing, assembling, and selling of products and the delivery of related services. The defining characteristic of process manufacturing—namely, that once a process manufacturer produces a product, that product cannot be reduced back to its constituent parts—makes control of the manufacturing process critical and risk-intense. Powerful functionality in Dynamics 365 for Finance and Operations helps strengthen the already strong position of the solution among mid- to large-sized chemical process manufacturers and in pharmaceutical, food processing, pulp and paper, metals, and cosmetics/health and beauty segments. It does so by leveraging three key areas– potency management, lot inheritance, and batch order sequencing—to mitigate risk, provide more efficient and effective control of the manufacturing process, and improve both asset valuation and margins to better compete in a demanding global marketplace. Propel your business forward with business software that provides powerful and flexible manufacturing, financial, and customer relationship management (CRM) solutions that support recipe management and efficient demand planning. Edgewater Fullscope delivers systems that can help you shrink development cycles, respond quickly to customer trends, and comply with changing regulations. With the right technology in place, you can run your business in ways that can help improve operations, open visibility into the supply chain, and increase your competitiveness—worldwide. About Edgewater Fullscope, Inc. About Microsoft Dynamics 365 for Finance and Operations Edgewater Fullscope delivers innovative Microsoft ERP, CRM and BI solutions and services on premise or in the cloud to companies in North America and Europe. The award-winning company is one of the largest resellers of Microsoft Dynamics 365 (formerly Dynamics AX and CRM). We also offer strategic consulting delivering a blend of classic and product-based consulting services that help clients reduce costs, improve processes and increase revenue through the judicious use of technology. We continually fine-tune our process and user-adoption programs to give you the maximum return on your investment. This commitment to stay with you throughout your Dynamics 365 journey has earned us the highest customer retention rate in the business. Dynamics 365 for Finance and Operations is ideally suited for process manufacturers in the chemical, food and beverage, life sciences, pharmaceutical and primary metals industries. As part of the Microsoft industry solutions program, Fullscope developed the original Process Manufacturing, Process Distribution and Total Quality Management modules, and they are now owned by Microsoft and included as part of Dynamics 365 for Operations. Fullscope has continued to build and sell process industry IP to Microsoft, including most recently the functionality described in this document. For more information, find Fullscope at www.fullscope.com.