Mill Industries: A Generic ERP Challenge
Written By: Predrag Jakovljevic
Published On: September 2006
A mill is a factory where value is added to raw material by processing it into a form suitable either for further manufacturing or for immediate end-use. Outside the food industry, where traditional mills turn grain into flour, or extract sucrose from sugar beet and cane, mill operations apply to a wide range of industrial activities (many other process manufacturing sectors also comply with this definition). These include the spinning and weaving mills of the textiles and carpets sectors, through the rolling plants of steel, aluminum, and other metals semi-fabricators, to the continuous outputs of paper and board mills. There are thus several broad categories of mill industries outside food producers:
Activity in the metals sector typically consists of rolling cast steel or aluminum into sheets and coils or extruding profiles, which are sold either to manufacturers or distributors.
Industry-specific activities consists of transformation of raw materials as for metals, or production of thermally extruded and formed plastics.
Bulk products are usually not delivered directly to printers and packaging manufacturers or to wholesalers and distributors. Paper mills usually produce rolls of paper or card, which are used as rolls by relatively few companies. Thus, mills supply to "converters," that cut the rolls into sheets, and sell these sheets to printers, publishers, packaging manufacturers, and so on (there are also similar converter businesses for cutting metal rolls for further use). Mills also supply to packaging manufacturing companies, who may print or coat the rolls, and sell them onto the packaging users in the form of rolls ready to load onto packaging machinery.
Packaging delivers heavier paper-based products, foil, and plastics, which mostly go directly to manufacturers across basically all sectors.
The textiles sector produces woven fabrics produced mostly for apparel manufacturers, the interior decoration trade, and retailers.
Carpet mills supply to the retail trade cut-to-order for commercial (store chains, hotels, cruise liners, and major companies) and domestic applications.
Common to all these mill types is that they have few input materials, but many variations in their outputs. An aluminum ingot, for example, could be rolled to plate inches thick, or to foil measured in microns—and everything in between. A plain clothing fabric could be printed with hundreds of combinations of colors and patterns. This complicates conventional forecasting and planning below the generic level. Such exacting business requirements demand distinctive software that is designed to concurrently handle and track several inventory item attributes or specifications, such as heat, dimension (width, length, or gauge), form, diameter, shape, grade, grain direction or texture, density, and more.
Detailed information on chemical, metallurgical, and physical properties must be recorded and evaluated by these businesses too. Tracking of inventory up and down the supply chain, including lot, heat, tag, and certifications is also vital (see The Exacting Needs of Metal Service Centers). For information specific to the plastics industry, see The Tricky Enterprise Applications Needs of Plastics Producers, Differing Plastics Flavors,
Quoting and Costing for Multiple Units of Measure, and Cut-to-size/shape Industries.
For information specific to the textile industry, see Process Manufacturing: Industry Specific Requirements; Part Three: Textiles and Production Planning and Scheduling Software for the Textile Industry: Unknown Frontiers. For more generally pertinent information, see What Makes Process Process? and Process Manufacturing Software: A Primer.
Attributes: Dealing with Unique Products
Indeed, dimension-based manufacturers such as paper mills, carpet makers, and steel plants face very different challenges from their brethren in other sectors, since potentially every single product they make may be unique. Like food manufacturers and chemicals process industries, these environments do not use traditional discrete bills of material (BOMs) or product identity in the traditional way that discrete engineering companies do. This is because derivative products must have multiple attributes covering dimensions, length, color, coating, texture, width, grade, thickness, patterns, and specification, all to be defined without creating new product codes. Therefore, the attributes handling capability within the enterprise resource planning (ERP) system must provide a facility for those industries whose ordered products are not discretely definable. It also represents an ideal place to store customer-specific data on the ERP database, with the added advantage that it can be flexibly searched; the ability to search by attribute (by dimension, for example) is fundamental, and needs to be fast.
Some attribute-oriented systems provide user-definable "intelligent" attributes that can be set up by applicability for all key data entities and contexts, such as product group, product, customer, customer/product, sales order line, and so on, where attributes default according to a defined hierarchy of data entities (such as product or customer/product to sales order line). There can be multiple attributes defined for each data entity in the ERP database, and they can be numeric, calculated, selected from a menu, or free text. Further, user-defined calculations can be added to calculate attribute values from other attribute values or even from a customized access to the database for additional data. UOM conversions can also be attribute-based and automatically linked to inventory movements—for example, inventory can be moved in units of a defined attribute in addition to the default inventory and standard ordering units for the product.
It is important to note that attribute-based BOMs are readily available in configure-to-order (CTO) modules in many ERP systems. In mills, there is more to this element, since an attribute may cause the cost, process, or materials used to be different for each order, despite the same nominal item code. Thus, in this industry, an attribute may be linked to a process or process variation, parts list variation, and cost or price variation. This means an attribute, once attached to the core standard product, results not just in a descriptive and BOM change, but in a cost or selling price change, and routing changes as well. This last change is very important for mill manufacturers.
For example, a one-inch diameter extruded brass rod will have a certain nominal product ID number in the system. If ordered in cut lengths, packed and marked, one or two attributes should trigger the following operations:
- a process operation to cut the rod to lengths;
- a process operation to mark the rods (such as a color code with paint on the ends);
- adding paint to the parts list for the job;
- adding strapping to the parts list for the job;
- a process operation to strap the rods into bundles;
- a process instruction for the job;
- a change to the quality test (which now has to check whether it has been cut, marked, and packed correctly); and
- a calculated cost and selling price for the job.
As for another absolute must, metal processors and service centers need to trace the ancestry or genealogy of an inventory tag from purchase order (PO) receipt to customer delivery ticket. It is invaluable to be able to enter a master tag number or heat number for a coil or a bundle of sheets, pipes, or tubes, and to see every single piece produced from the master tag along with what processes were performed, and at what cost. It is also important to have visibility into details as to who purchased the piece, when, and for how much. These companies need the information that shows not only what each customer purchased, but also how much profit (or loss) was generated from that order, part, or tag.
These products are metal sheets, pipes, tubes, or wire with enormous varieties in grade, size, and chemical composition: more than 90 percent of customer ordering patterns can vary considerably. Thus, the software has to allow the user enterprise to efficiently manage and control inventory, effectively plan production, and perform the necessary quality control and traceability process all the way down to each steel heat and the particular national standard grades (for instance, for mild or carbon steel, stainless steel, aluminum alloys, and so on).
The appropriate software must also be able to identify the ideal raw materials needed to fulfill any given customer order, since the allocation of inventory is sensitive to attributes: only lots with matching attribute values will be allocated to orders that specify a required attribute or range of attributes. When the stock on hand cannot satisfy the requirements for the order, users must be able to quickly view material on order and see when it will arrive, as well as what the specification and attributes are. In case users do not stock the item the customer is requesting, or if they have never purchased the item before, resulting buyouts must be handled quickly without disrupting the normal order flow. These buyouts might have to be drop-shipped directly from the supplier to the end customer or sub-contractor if outside value-added services are being performed.
In most manufacturing environments, shop floor data collection requires a simple, single point of entry for data capture, and many ERP products should be able to support the following capabilities:
- provide the exact location, grade, size, and quantity of material to pull from inventory
- display the finished product, scrap, and remnants they are expected to produce
- allow the employee to record actual products produced and to record the time expended to produce them
But although these three capabilities might be generally supported by many generic ERP products, to help communicate accurate delivery dates (and keep customers happy) the system must deliver up-to-the-minute information about on-hand available inventory, in-transit inventory, replenishment orders, manufacturing schedules, and lead times, all while taking the attributes into consideration. For shipping and receiving, the distribution solutions should allow users to define carriers, shipment methods, freight rates, and customer routings. Often these solutions have to also easily interface with common third party shipping and manifest software (such as Kewill's Clippership). Radio frequency (RF) or barcode functionality should provide the following transactions to help ease data collection: inventory move within a facility, print location labels, shipping, inventory move, physical inventory, and cycle counting. Some mill environments might have a need for yard management systems (YMS) and truck route scheduling and optimization capabilities.
How This Relates to General-purpose ERP Solutions
While general ERP solutions may offer a method of determining inventory availability, only a selected few allow for user-definable attributes to be associated and validated for each item and piece of stock within that item's inventory, without unnecessarily encumbering the system's item master classification. While standard products (typically in the minority) are manufactured and placed into inventory to meet sales forecast demand as well as long term contracts with customers, often the more numerous non-standard sub-assemblies are only fabricated upon receipt of actual customer orders—they are typically not placed into inventory, as they are rather shipped directly to the customer upon completion of the fabrication process.
The customer specifications can change from one order to the next, and are communicated to the production floor so that appropriate action and documentation takes place. Many times, completion of specific activities must be certified to the customer. The supplier (for instance, a metal center) has to accommodate customer specifications without requiring a new BOM or routing (sequence of operations) for each new customer configuration. During the quoting and order entry process, having historical cost and pricing data available for instant retrieval is also critical to servicing customers while one has them on the telephone.
As a matter of fact, BOMs are often not required, since the starting item (such as sheet metal or a coil) and the finished item (an assortment of cut and converted items) are the same item in the customer's mind, and the system has to follow that logic. There has to be the flexibility for the user to determine what constitutes a separate item number (for example, a mild steel grade, a mild steel grade standard size sheet, or a mild steel grade standard size sheet that is an inch thick), whereas the end item variants can be handled under the same item number, but with a multiplicity of variations via attributes. Yet, often the generic ERP systems customarily require each order (or even worse, each order line item) to be treated as a new product or item number, creating redundant work, an item nomenclature glut, and delays, to the dismay of customers and use company's employees. For instance, its sales force or shipping personnel will then have to plow through a number of illogical item numbers, with a likelihood of several redundant item numbers referring to the same actual physical product.
Standard products and the typical "one product equals one product number" principle do not apply, especially in the mill industries, since here customers prefer to order in an "attribute" of a product group manner, such as a specific dimension, grade, quality, catch-weight, or pack type. If there is a distinct product and process code for each potential ordered item, the item master and process maintenance are unwieldy, and the resultant planning, ordering, production, costing, inventory management, allocation, delivery, tracking, invoicing and dispatch processes are very difficult to manage. Thus, the attributes functionality is specifically designed for industries which sell many derivatives of a standard product: a single product code and process of manufacture per product group or type can be complemented by user-defined attributes, with the result of slicker business processes and a system which is easier to use and maintain.
What is so Peculiar about Wire and Cable Needs?
While there are many similarities with cutting metal or plastic sheets, wire and cable products have certain peculiar requirements owing to their shape (accompanying attributes) and the industry practices. AXIS Computer Systems (now also a business unit of Made2Manage Systems) has been an undisputed market leader (if not the sole provider), with the AXIOM Enterprise Management Suite. As with the sheet metal centers (where is AXIS also highly competitive), wire and cable enterprises have to quickly find the spool, reel, box, and so on, which best fits the customer's needs, while conforming to customer constraints such as put-up size, packaging requirements, and the like. To that end, the software has to be able to identify and find inventory based on a variety of physical characteristics such as cable type, gauge, stranding, number of conductors or pairs, jacket color, and so on. The products that wire and cable manufacturers buy, sell, and process are also quite different from those handled by a typical manufacturer. For instance, a part number alone cannot fully differentiate or describe material; tracking units are containers, not individual items; and material is handled with multiple units—there must be automatic conversion from one UOM to another (for instance, pounds to feet when recording scrap) and automatic calculation of the quantity of the commodity (copper, for instance) at each stage.
Also analogous to processing sheets, one needs a quick identification and reservation of the best master reel for a given cut-to-length order, with the ability to optimize cutting to make full use of each reel, as well as subsequent provision of the proper certifications and conformance documents, barcode labels, packaging, shipping papers, and other information the customer needs along with the product. Similar requirements hold for tracking of inventory by individual container (Gaylord, reel, spool, coil, and so on), with details on length and weight. Searching and reservation of inventory has to be able to take place across all locations, including company, vendor, customer-owned (so called "toll" inventory), and consignment inventory. As for further similarities with the metal sheet centers, wire and cables need an enterprise system with incisive capabilities of scheduling and execution of work orders to draw, extrude, cable (and so on), and sequence production by attribute (for example, gauge, then light to dark). While production sequencing is critical to productivity and cost control, length management on the other hand is a key issue in production planning and control, since planning of the proper lengths of lower-level materials is required for end-product orders, considering factors such as put-ups, twist loss, and the like.
Since inexact quantities are a way of life in these environments, one has to be able to define static setup quantities for component material (such as insulation, wire, tape, and armor) regardless of the wire or cable order size. Also, since semi-finished material often flows directly into next-stage production, one needs dynamic dispatch of semi-finished products into next level processes as they are produced (as with insulated conductors into cabling). Given that selling prices can often fluctuate with commodity prices, the system has to automatically reflect changing commodity prices into end-product prices, while the capability to automatically consider shipments complete when they are within a certain plus/minus quantity tolerance also comes in handy. Last but not least (and we have certainly not included all possible "fatal flaw" needs of wire and cables), for profitability reasons, they need to closely track returnable reels and other containers by customer location.
Conclusion and User Recommendations
To recap, general ERP providers, which may have a solid product and be viable companies in their own right, typically do not meet the dimensional inventory, chemical, and physical properties requirements that are vital to mill industries. On the other hand, in addition to AXIS, several metals industry-specific solutions providers, such as Verticent (see The Strengths of a Vertically-centric Enterprise Software Provider), SSI-World with the TROPOS product suite (see Vendor Defends Its Strongholds with Focused Enterprise Resource Planning Solution), Enmark Systems, Invera, Compusource Corporation, STEELMAN Software, SAP for Mill Products, and to some degree SoftBrands evolution (see Extended Enterprise Resource Planning Vendor Shows Its Lean Side), Lawson M3 (formerly Intentia Movex), IFS, or Exact Software JobBOSS products may also certainly address the complexities of the industry.
On a general note, as a litmus test for whether any ERP solution caters for the needs of mills, one should ask whether the contesting solution can automatically compare available inventory attribute specifications like width, length, gauge, and chemical and physical properties against a customer's order specifications, and show which pieces of inventory meet the customer specifications and which pieces do not. It is quite likely that this will be one of the first stumbling blocks for many generic ERP providers.