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Cut-to-size/shape Industries

Written By: Predrag Jakovljevic
Published On: September 8 2006

Introduction

SYSPRO and a few other vendors that cater to metal service centers and related material converting places (involving, for example, paper, textiles, plastics, and so on) have also expanded the applicability of their enterprise software to address the specialized requirements of a group of cut-to-shape plastics and similar suppliers that have traditionally been ignored. (Metal service centers perform operations like cutting, slitting, painting, galvanizing, anodizing, and the like—see The Exacting Needs of Metal Service Centers).

Part Four of the series The Tricky Enterprise Applications Needs of Plastics Producers.

In a specific segment of the plastics industry, namely that occupied by cut-to-shape suppliers, material is typically sold according to customer-specific dimensional requirements. That is, rather than ordering standard size sheets, rods, tubes, and so forth, customers typically purchase custom sizes, requiring the suppliers to cut materials from existing inventory. These custom cuts typically result in remnants, which depending on the type of material used, may have a value, and good business dictates that remnants (also known as "drops") be valued and returned to inventory, so that they can be considered for future order fulfillment. The restocking of these, however, imposes additional burdens on sales personnel, who must calculate yields for the purposes of pricing and order fulfillment. These calculations, which must take into account the widths of the blades used during the cutting process, can be extremely time-consuming.

To illustrate, custom cut orders require suppliers to determine how the cuts can best be made from standard size sheets, rods, or tubes in order to maximize yields and minimize scraps. Thus, it can take many work-hours to manually estimate if the order can be filled from existing inventory; if additional materials must be secured from another branch's inventory, made, or purchased in order to satisfy the order; how to make the required cuts to maximize yields; and how to allow for blade widths.

Since suppliers cannot justify (or are burdened with) the time and effort necessary to measure, value and assign inventory numbers for the return of remnants to stock, many would traditionally consider these remnants "waste."

Yet, as with most other industries, the plastics industry has been experiencing slower growth and return on investment (ROI). Once having enjoyed an annual growth rate of 7 percent, the industry growth has slowed to 1.2 percent, according to the Society of Plastics Industry (SPI), and tossing remnants onto a scrap pile is certainly no longer an option. This is particularly not justifiable if plastics fabricators and distributors estimate that the plastic scrap generated by the cutting process can amount to nearly 40 percent of the total produced.

For more information on the plastics industry see The Tricky Enterprise Applications Needs of Plastics Producers, Differing Plastic Flavors, and Quoting and Costing for Multiple Units of Measure.

A System to Minimize Waste

In other words, numerous automated calculations and decisions are required to determine how best to fill orders in the most expeditious and cost-effective manner. To that end, solutions like SYSPRO Material Yield System (MYS) alleviate the pesky problem of time-consuming yield estimations and excessive scrap wastage while accommodating customer-specific dimensional requirements, by making automatic yield calculations from full sheets, rods or tubes or stock remnants, and facilitating the return of scraps to inventory.

On one hand, when processing a quotation or a sales order for cut-to-size sheet, rod, or tube products, the resulting yields are automatically calculated and displayed from existing inventory and inventory master items based on customer-specific dimensional requirements. In addition, the system automatically creates new part numbers and pricing for the scraps returned to stock, and it attempts to fill custom orders from existing inventory, inventory at another branch, the purchasing of material from a vendor, or a combination of each.

As a desirable feature, a cutting workflow can thereby be created if any cutting operations are required, with blade widths taken into account in yield calculations. The astute software also must be able to optimize cutting operations and minimize waste, starting with the ability to pre-filter inventory whose dimensions, chemical or physical properties do not match the order specifications. It should then be possible to nest the current order with other open orders (even for other customers) that can be produced from the same inventory result set, (whereby an optimal cutting layout to optimize yield is produced), and then to identify expected remnants.

The system has to be able to distinguish scrap and waste from expected remnants that can be further used. Software has to be able to optimize the useful remnant inventory, in terms of multiple units of measure (UOMs), material grade, lot and serial tracking, and other attributes, while the sales staff must be able to foresee when remnant or off-cut will be created (along with the size of the remnant), preferably under the same item number (but with different size attributes), in order not to encumber the item master.

In any case, with the feature of automatic creation of new part numbers and pricing for the scraps returned to stock (if necessary), waste can be significantly reduced, since the system sends remnants back into stock with the automatic creation of part numbers and values, as they become part of the inventory from which new orders are calculated. This feature encompasses the issuing of raw material to the job, receipting the cut item, and placing remnants back into stock, automatically creating new inventory codes, and updating the cost of goods sold (COGS) on that line item. Furthermore, remnants returned to stock can be put back at zero cost, or have a value placed according to need.

One should note that traditional material resource planning (MRP) systems only look at quantity on hand, demand quantity, and on-order quantity, and are able to advise users whether there is enough tonnage to meet the customer demand. But they cannot discern whether the available total tonnage on stock meets the specific customer dimensional specifications. The specialized MRP module for cut-to-size/shape industries must thus be able to recognize when current demand cannot be satisfied by the in-stock inventory due to dimensional issues, and include that unsatisfied demand in its reorder messages. This particular inventory information, and how it is used to optimize operations, is often a showstopper for most general enterprise resource planning (ERP) solution providers. For example, when companies in such industries approach mainstream or general ERP providers and ask for solutions to manage down costing of drops and remnants, they are often met with a blank stare, which then coverts into a less than 50 percent out-of-the-box functional fit, and a horrendous number and scope of resulting system customizations.

By eliminating waste, such material yield optimization solutions are even environmentally friendly, and they minimize the need for finding environmentally safe disposal, which is also often a significant cost item. They put sales people in more control of the actual items selected for order processing. Because the system automatically calculates yields from customer-specific dimensional requirements against existing inventory in multiple locations, the salesperson has the ability to determine the most appropriate price on the spot.

User Recommendations

Simply said, based on the exhaustive analysis so far, the general ERP providers who likely have a solid product and are viable companies, typically do not meet the particular requirements outlined above that are vital to the plastics industry. This article suggests a number of litmus test questions for the contesting solutions in any selection, which are likely stumbling blocks for many generic ERP providers.

This concludes the series The Tricky Enterprise Applications Needs of Plastics Producers.

 
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