In the previous blog post, we covered the definition, initial setup and advantages of managing consignment inventory using Epicor ERP v9 or v10.
Below are the steps that must be done to implement a new consignment customer with a new consignment part, assuming that you already have a consignment plant (in v9) or site (in v10) set up in the system.
- New consignment agreement is placed by the customer
- Create a “Consignment Warehouse” for this new customer (one time for each customer).
- Define minimum stocking levels in the consignment plant/site; i.e., if your contract says you are to always have 100 on hand, then set 100 as the minimum on hand for the consignment plant/site.
- Define minimum stocking level at the manufacturer’s local plant. This would be any inventory that you want to keep on hand to fulfill any rush requirements. Typically, this is less than or equal to the minimum consignment level above.
- In the consignment plant/site, specify that this item is a “Transfer” item, and that the “Supply Plant/Site” is your main manufacturing plant. Also specify the transfer lead time (the number of days that the item will be in transit).
- Create the MRP forecast for this customer part in the consignment plant (i.e., you are forecasting that the inventory will be consumed from consignment, not from your local stores).
- Note: at this point, you do not have to have any firm Sales order entered… MRP Forecasting + minimum on-hand will drive the first fulfillment of consignment inventory.
Firm Job, and Make Product
- MRP will see that you are currently below the minimum in the consignment plant, and will generate suggested transfer order requirements from the manufacturer’s plant to consignment.
- MRP will then add these requirements to the minimum on hand specified in the manufacturer’s plant, and will generate “unfirm jobs” to fill these demands (even without a firm sales order).
Ship Transfer Order from the manufacturer’s plant
- This is a normal job in your local plant.
- When complete, the product is received to stock.
- Once in stock, it will show on the suggested transfer order shipments.
Receive Transfer Order into Consignment
- Transfer orders generate Transfer Order Packslips. These packslips show the address of the demand (the consignment plant). It is your paperwork that goes to the customer.
- Note that this is not a customer shipment…it is a transfer, because you are not transferring ownership, only moving inventory locations.
Consumption of Consignment Inventory
- This is done once you receive confirmation from the customer that they have received the shipment.
- This function actually takes the inventory out of “In transit” and puts it into the consignment plant.
Replenishing consignment locations (basically, Go to Step 2 above)
- In most cases, your customers give a report showing what items were consumed. When this happens, an order needs to be entered, shipped and invoiced.
- There are several ways that this can be done, but easiest is to create a new “counter sale” sales order. Counter sales allow for an order to be entered, “shipped” and immediately invoiced without all the extra processing.
- When you create the counter sales order, you tell the system that you are selling it from the “consignment warehouse” location. This then automatically reduces the quantity on hand in consignment.
- If there are a large number of parts consumed each day, then this could be automated with a Service Connect process to create and ship the orders. Alternately, an Excel spreadsheet could be copied and pasted into the counter sale section on the sales order.
- If the customer’s consumption above did not reduce inventory below the “minimum” on hand in the consignment plant, then nothing will happen.
- But, if it does reduce the on hand below minimum, then when MRP has its nightly run (see step 2 above), it will create another transfer order suggestion to move more inventory from your main stock to consignment.
While there are “urban legends” that Epicor ERP v9 and v10 cannot do consignment inventory because there is not a consignment module, this is not true, and as shown above, the actual steps are not difficult. In fact, once set up, the system will self-fulfill as the customer consumes the inventory. The manufacturer may need some help from an Epicor consultant in setting this up the first time, but once the model is complete, it can be easily replicated.
In the last part of this series, we will discuss how to verify the quantities and finish the contract for consignment inventory.
Posted by Tim Shoemaker, Senior Principal Consultant, Epicor Professional Services
The food industry has changed dramatically since the millennial turn. Consumers are more demanding, driving up expectations across a range of factors, including availability, price, quality, freshness, and service. Retailers are more demanding as well, expecting replenishment systems that allow them to meet volatile demand while keeping costs low. The regulatory environment has pushed tracking and traceability to the fore. Pressure on pricing is constant as well, fueled by increasing competition, and the business is ever more promotion-driven. Add to this shrinking product lifecycles and the proliferation of private labels.
In this daunting environment, small and mid-sized food manufacturers face a host of challenges, including:
- Developing new products. In markets with an unquenchable thirst for the new, there are ever-more products and SKUs. This had led to a growing number of suppliers. Often products that are here today are gone tomorrow.
- Customer retention. Quality is now a universal expectation, along with competitive pricing. Service demands are higher than ever before, with excellent service really being a component of quality. To meet retailers’ demands, controlling costs while meeting schedules is critical.
- Improved process efficiency. To compete, food manufacturers have had to drive up productivity and efficiency. Supply chain integration is key to achieve this goal, along with implementation of Lean manufacturing methods. The need to improve and manage yield is constant.
- Schedule compliance. With shortened time-to-delivery, shelf life management issues, and increasingly schedule variability, schedule compliance is a significant challenge.
- Regulatory compliance. Compliance demands are an increasing concern as government regulations (e.g., safety, environmental) become increasingly strict and complex.
- Market volatility. Having the ability to respond to uncertain market demand is vital, particularly as materials and energy costs rise.
From a planning and scheduling perspective, these challenges pose a litany of operational requirements to food manufacturers. Manufacturers must:
- Execute dynamic scheduling for normal and special demand variation.
- Support product (and especially new product) SOPs, recipes, operator instruction, and compliance.
- Ensure schedule changes are made to accommodate contract variation.
- Be capable of seasonal planning within forecasts.
- Have necessary visibility to ensure efficient operation while assuring compliance.
- Have forecasts and schedules that enable change for special and promotional products.
While this is a formidable list, successful food manufacturers are meeting these demands with a number of effective strategies:
- Simplify forecasting, planning, and transactions.
- Implement dynamic daily scheduling and planning systems for faster and more effective responsiveness to change.
- Enable paperless production and control with built-in compliance to minimize risk.
- Build in real-time visibility across the enterprise for alerts and analysis.
- Establish closed-loop control between the back office and production floor.
Enabling technologies have provided the necessary functionality to support these strategies, including dynamic planning and scheduling tools, what-if analytics, real-time visibility, agility for seasonality, capacity, and maintenance management, and automation of process control. Among the benefits being realized by adopting these strategies and the tools to implement them: better decision making, stronger internal and external connections, more reliable delivery on shorter production and supply schedules, greater business efficiency, and significant cost savings.
Posted by Tom Muth Senior Manager, Product Marketing, Epicor
In a post on thinkeatsave.org, waste reduction has been identified as the number one trend in food and beverage for 2014:
For some time now manufacturers' sustainability efforts have been zeroed in on, with a more recent shift in focus being to reduce food lost or waste, wherever possible. Food loss during production and food waste at the retailer and consumer end of the food-supply chain will be heavily scrutinized. Ingredients derived from the waste stream will also hold enormous potential.
Campbell’s Culinary TrendScape also cites food waste awareness as a top trend for the year.
These pronouncements come in the wake of the food industry’s first-ever analysis of food waste data collected directly from food manufacturers, retailers and wholesalers. Released in June of last year, the study was conducted by consulting firm BSR and commissioned by the Food Waste Reduction Alliance (FWRA), a cross-sector industry initiative led by the Grocery Manufacturers Association (GMA), the Food Marketing Institute (FMI), and the National Restaurant Association (NRA). Among the study’s findings, which are expected to accelerate industry food waste reduction efforts:
The food waste profiles of the food manufacturing sector and the grocery retail/wholesale sector differ significantly, which reflects their different operating environments. Extrapolated to the entire United States, in 2011:
The manufacturing sector generated a larger volume of food waste (44.3 billion pounds), but the large majority (94.6 percent) was diverted from landfills to higher uses, such as donation and recycling.
The retail and wholesale sectors generated less food waste (3.8 billion pounds), but they diverted a smaller proportion (55.6 percent) to higher uses.
Despite significant differences in the total amount of food waste the sectors generate, they donated and disposed of similar amounts:
In total, 4.1 billion pounds of food waste was disposed in 2011 in landfills or incinerators. This represents only 8.5 percent of the 48.1 billion pounds of food waste generated collectively across the food manufacturing, retail, and wholesale sectors.
Based on the survey results, companies have opportunities to continue to reduce the amount of food waste they generate within the supply chain, as well as to identify options for directing it toward higher uses, as outlined in the EPA’s Food Waste Recovery Hierarchy.
Food manufacturers have an opportunity to continue to reduce the amount of food waste they generate and to move up the food waste hierarchy to increase the percentage they donate.
Food retailers and wholesalers have an opportunity to divert more waste from landfills to higher uses, while continuing to focus on reducing the amount of food waste they generate.
To support this effort, an article on Food Drink Europe lists six ways food manufacturers can help consumers drive down waste:
Extend shelf life through packaging and processing innovation.
Provide clear date labels.
Provide clear storage, freezing, defrosting and preparation instructions.
Make dispensing food easier.
Provide a variety of portion sizes.
Inform consumers about packaging and labeling innovations that help prevent food spoilage.
The BSR report notes eight “farm to fork” actions taking place in the private sector (of which manufacturers are a key component) that are facilitating waste reduction efforts:
Enabling technologies that can affect and reduce waste through the supply chain inlcude dynamic planning and scheduling tools, what-if analytics, real-time visibility, agility for seasonality, capacity, and maintenance management, and automation of process control. Among the benefits being realized by adopting these strategies and the tools to implement them: better decision making, ,insight into waste before occurance, stronger internal and external connections, more reliable delivery on shorter production and supply schedules, greater business efficiency, and significant cost savings.
Posted by Tom Muth Senior Manager, Product Marketing, Epicor
Consignment inventory is inventory that is:
- Owned by the manufacturer
- Shipped to the customer, but not invoiced until—
- Consumption of the inventory is advised by the customer—at which time, it is invoiced.
Consignment and Epicor ERP v9 & v10
Epicor ERP (v9 & v10) does not have a “consignment module” per se, but it does support consignment very well, with well-defined procedures. For example, the method described below has been used by multiple companies in the aerospace industry.
There are several deviations from this model that can cause it to malfunction. We conclude this post by highlighting those pitfalls so they are not pursued.
Consignment with MRP-Multi-Site Advantages
By setting up consignment in the manner described here, there are many advantages and processes that can be managed within Epicor ERP v9 or v10. These include:
- Forecasting of consignment usage by location
- Management of minimum stocking levels by consignment location
- Management of minimum stocking levels at manufacturer’s location to fill consignment emergencies
- Automatic replenishment of minimum levels at the consignment location
- Ability to cycle count/physically inventory a specific customer’s inventory
- Easy shipment of “Transfer Orders” to move inventory to consignment location
- Material requirements for future consignment deliveries are still calculated based on the forecast that is entered into consignment
The Required Initial Setup
To process consignment inventory, there are several modules required, as well as some specific setups.
- Must have Material Requirements Planning (MRP)
- Must have Multi-site
- Must create a new “Plant” (in v9) or “Site” (in v10) to hold “Consignment Inventory”
Optional Setup Items
There are some decisions that are optional, depending on the customers, and the products that are shipping to those customers:
- You can set up either one consignment plant/site for the entire company, or one consignment plant/site for each Customer Ship-To. The reason is:
You can alternatively create separate cost tables for each plant. This allows the plant to have its own average cost. However, many companies do not want this to happen, and tie the costs of the consignment plant to the main plant.
- If you ship common assemblies to multiple consignment sites, then it is easier to track requirements if there is a separate plant for each location.
- But if there are no common parts between customers, then creating one plant (or site), with one warehouse for each customer, is sufficient.
Pitfalls of Skipping Steps or Incorrect Setup
As stated above, there are several pitfalls that are potential causes for failure and should be avoided:
- Some think that these consignment locations are supposed to be “non-net inventory”… this is not true. They must be considered “nettable” inventory in order for this to work.
- Ignoring forecasts, or putting forecasts in the wrong location.
Forgetting transfer lead time.
Entering sales orders against the wrong plant. All consignment usage must be “shipped” (consumed) from the consignment plant.
- Forecasts should always be entered, and they should be entered into the consignment plant.
- Forecasts are what drives the future purchases (and even manufactured job orders, if the lead time on purchasing/manufacturing is longer).
In the next post, we will discuss the consignment process in action.
Posted by Tim Shoemaker, Senior Principal Consultant, Epicor Professional Services
In a recent post, we addressed how manufacturers are seeking greater vertical functionality from their ERP providers. A perfect example of how this is succeeding can be seen at Illinois-based Chirch Global Manufacturing LLC (Chirch Global). Consistent with its mission of creating an optimal customer experience, the leading Chicago-area manufacturer of metal stampings and sheet metal fabrications strategically chose Epicor Software Corporation as its enterprise resource planning (ERP) software provider.
“The core reason why we selected Epicor was that its roots were in manufacturing,” says Anthony L. Chirchirillo, CEO of Chirch Global. “With their robust service available in the cloud, we’re able to focus on our end goal: fulfilling customer needs in the best way possible. This adoption comes at a key time for us, and has already helped us further improve our responsiveness to customers.”
Operations manager Michael A. Chirchirillo adds that using the Epicor ERP solution has improved communications across the Chirch Global enterprise, enabling better, faster reactions to market demand changes and customer needs.
The partnership with Epicor reflects Chirch Global’s continual commitment to innovation, to staying abreast of technological advancements, and to serve as an all-encompassing resource for the manufacturing community. With the inception of the Chirch Global Manufacturing Network that currently consists of 15 best-in-class businesses, the company is poised to become the single-source provider for nearly any type of manufacturing need in the year ahead.
For an up-close interview with the Chirchirillo’s regarding their selection and use of Epicor ERP, you can watch here.
Posted by Epicor Social Media Team
An article in CIO points to the strategic conundrum that is giving rise to increasing vertical functionality in ERP, for manufacturing as well as other business sectors:
If your enterprise has customized your mission-critical ERP systems over the years, your future upgrades will likely be more troublesome and terrifying because the changes can conflict with the patches. On the other hand, if you are running out-of-the-box ERP with little customization, maybe you're not getting all the important features your business needs. So what's a CIO to do? And how do you figure out what to do next if upgrades or replacement are looming in your future?
According to Rebecca Wettemann, VP of Research at Nucleus Research, an increasing number of CIOs are choosing the less customization path. A major driver of this development is that ERP vendors are building applications with greater industry-specific vertical functionality. “Part of the reason for this recent trend is that ERP vendors are now recognizing that if they build applications that include verticalization, they will be easier for more companies to adopt with fewer problems and far less customization,” says Wettemann.
CIO defines verticalized applications as those “built with specific industries in mind, so they are essentially designed to fit different kinds of businesses out of the box.” Typically, to help the applications better conform to a specific industry vertical, they include role-based views and components that users can easily configure so they more closely suit business and process needs, without requiring code writing and deep code customization.
Wettemann says that this approach—which she describes as install vanilla—is good for many companies using ERP. "I think it depends to a certain extent on the application that is chosen. If the application has vertical functionality with role-based sourcing and other possible configuring, then, yes, you're better off going vanilla," she says. "Clients see this as a less risky move, a more predictable way to deploy ERP and a way that is more likely to minimize disruptions and costs over time, which is even more important."
In fact, a survey cited in Industry Week showed that 96 percent of manufacturers “need or want” more specialized ERP. The single greatest need for more industry-specific functionality was cited among manufacturers who say managing return on assets is a core part of their business. The rationale is straightforward:
Manufacturing in North America has become more complex as long-run repetitive manufacturing has become less common. More and more manufacturing in the Western Hemisphere centers around demanding processes like engineer-to-order (ETO), product lifecycles are becoming shorter and manufacturers are focusing more on the specific needs of the vertical industries they serve.
As manufacturers themselves have become more sensitive to the vertical segments they serve, manufacturing companies are increasingly valuing ERP solutions that have been developed and maintain vertical functionality with their industry in mind. This trend gained traction at the outset of the decade, and has been building momentum ever since.
Posted by Tom Muth, Senior Manager, Product Marketing at Epicor
We’ve all heard the idea that cleanliness is next to godliness; that sentiment dates back to scriptures several thousand years old. Today, cleanliness is big business, generating nearly $200 billion in revenue worldwide at the start of the decade. At that time, the Bureau of Labor
reported that annual spending on cleaning products approached $700 annually for each American household, something you can observe when the post Christmas/New Year’s cleaning frenzy begins. Spring cleaning may be the most entrenched practice we think of when attacking whatever has accumulated in the household over the winter; but, often it’s the end of the holiday season that has one looking around the house and reaching for the bleach.
In Japan, clearing dirt, clutter, and the disorganization from the old year is an integral part of their New Year tradition. Because each year is seen as separate and distinct, the final week of the old year is devoted to cleaning, de-cluttering, and organizing. Based on what’s travelling down the local checkout lines, that practice is increasingly observed in the States, if not globally. For manufacturers of cleaning products, this means assuring production goes on without a hitch to meet demand.
An interesting example of this practice can be seen at the Clorox
Chicago bleach products manufacturing site, where a new Enterprise Manufacturing Intelligence (EMI
) system has been introduced to keep operations up and running efficiently and effectively.
The challenges this production facility faced:
- Replacing manual processes with automated data capture and accurate, consistent efficiency metrics
- Boosting overall equipment effectiveness (OEE)
- Building a culture of understanding and driving out losses on the plant floor
- Accurately benchmarking against other plants across the Clorox cleaning products division
To see how Clorox successfully met these challenges with a new EMI system, you can go here. You’ll have plenty of time to do so after you finish cleaning the house.
Posted by Epicor Social Media Team
Are your line operators "checked in," engaged, and excited about the impact they have on business results? How about managers and executives? Are the top floor and shop floor connected?
Businesses achieve some amazing things with line metrics – but the most surprising improvement of all is around human capital. When manufacturing data and information starts to flow throughout the business, it becomes a story of uniting your team around performance. An engaged workforce translates to passionate, empowered individuals – operators right on up to plant management and the executive suite – working together to build, sustain, and multiply improvements in operations performance.
While there is an unquestionable link between employee engagement and organizational performance, unfortunately, engagement is a real problem in manufacturing. According to Gallup’s 2012 Employee Engagement Index, only 1 in 4 production staff was engaged last year – line operators ranked last among the 12 manufacturing occupation types. The Gallup Index also shows that among disengaged workers, 50% were “mentally checked out” and about one-quarter of them were unhappy and actively undermining the employer.
Any manufacturer who is concerned about factory performance might also be concerned that plant staff might reject line metrics en masse. However, a new and entirely unexpected trend is emerging among businesses that use metrics and analytics to drive performance improvement. Manufacturers who leverage technology to establish a connection between the top floor and shop floor see a dramatic and unexpected shift in culture – one that unites and inspires operators, supervisors, plant management, and corporate executives to work together to build and sustain performance, and extend improvements across the production network.
The information-sharing loop begins with line and plant performance, then involves and engages people across the organization, from operators on up to the executive suite. These passionate, empowered individuals have what they need to drive financial and operational directives into specific, meaningful action.
Join us and special guest John Oskin, leading industry advisor on operations performance, this Thursday at 11:00 AM Pacific / 2:00 PM Eastern to learn more. Oskin will discuss how companies blend corporate initiatives and technology to drive operations performance – and along the way create collaboration among operators, management, and executives.
Epicor Webcast Event: Line Metrics Changed a Culture.
Sign up for this webcast today!
Posted by Diane Murray, Manager, Product Marketing
Key emerging markets offer excellent demand for enterprise applications. This is especially the case with Brazil. The country’s ongoing economic expansion continues to place it at or near the head of emerging markets. Bill Adams, senior international economist for Pittsburgh, Penn.-based PNC Financial Services group, described the Brazilian economy in a recent Forbes
article: “Brazil’s economy is in a self-sustaining expansion. A tight labor market fuels persistent wage gains even in a slow economy, and these wage gains fuel higher consumer purchasing power and domestic demand and sustain economic growth.”
According to a recent report from Gartner, Inc.
, Brazil’s overall IT spending will near $124 billion (US dollars) in 2013, with IT modernization at the top of the list of priorities for Brazilian IT leaders. Furthermore, within the context of IT spending, the report also indicated that in 2013, ERP, CRM, industry-specific software, office and personal productivity tools, and e-commerce software lead the application software investment initiatives for organizations.
Such development is leading to an increase in customer-specific functionality (CSF) in software solutions, a trend underscored by the new release of Epicor iScala that integrates with the Epicor ICE Business Architecture to help customers gain increased agility, mobility, and flexibility while incorporating CSF functionality. “The new release of Epicor iScala represents a significant investment, bringing new capabilities designed to increase system performance, improve stability, and deliver long-term support for the latest technologies. This will enable our customers to realize even greater business value from the solution,” says Robert Sinfield, senior manager, product marketing for Epicor. “The increasing demand for enterprise applications within key emerging markets such as Brazil offers growth opportunities for Epicor iScala, while supporting our customers who are moving into this new market space.”
As companies increasingly target emerging economies as part of their strategic growth initiatives, support such as CSF is increasingly seen as an essential software component.
Posted by Robert, Sinfield Senior Manager, Product Marketing
Food Manufacturing interview with Tom Muth, senior manager of product marketing for process manufacturing, Epicor Software Corporation.
Food Manufacturing spoke with Tom Muth of Epicor Software Corporation about the challenges processors face regarding food safety and traceability, and how ERP software can help mitigate these issues.
Q: What unique challenges do food manufacturers face regarding documenting food safety and traceability efforts?
A: Food safety is seen as the single most important issue among manufacturers, and the demands to document information relating to food sourcing, material flow, traceability and more present an ongoing challenge. These complex demands have a real cost, one very critical to bottom-line profitability as major food retailers take on a larger role in controlling. Forward and backward traceability of processed products, batches and lots requires detailed tracking from the point of materials receipt throughout production and delivery to customer shelves. Food manufacturers also require strict ingredient and environmental control throughout the manufacturing process, driving the need for food manufacturers to have the flexibility and details recorded across lots, batches, co- and bi-products. Lastly, food manufacturers are increasing the value of traceability responsiveness to quickly and efficiently respond to recall events or customer inquirers within minutes versus days.
Q: How can ERP systems help food producers meet these challenges?
A: ERP systems are providing the means to meet these challenges while improving internal business processes. By providing a framework to meet regulatory compliance demands, ensure product safety and control costs, ERP is proving increasingly essential as a tool in the food manufacturer’s arsenal for traceability. The ERP role is automating traceability of ingredients from origin to the final customer, as well as speeding and simplifying the audit process. A holistic electronic quality management approach is essential for meeting the challenges associated with traceability and quality. With ERP systems such as Epicor Tropos, quality workflows are integrated from the time of a sales order, to purchasing, to production, into inventory and finally to dispatch. ERP maintains quality specifications, sampling regimes and QA test results from order to dispatch and also may dynamically link to material lot and product release controls to help control quality and ensure full traceability.
Q: What are some best practices food companies should put in place regarding their supply chain management to help their business succeed?
A: Food manufacturers can help improve their bottom line by having standardized procedures for order management and delivery fulfillment. Another is to have standardized workflow and procedures for production planning and execution, and to ensure their operations are integrated and coordinated with customer service, logistics and delivery to improve process visibility and improve efficiencies. By doing these best practices, food manufacturers can better manage items throughout the whole value chain: improve controlling and planning stock, production, packaging, and distribution; and improve the collaboration between departments to optimize production capacity, perishability, warehousing and cash flow.
Q: What are the latest trends with process manufacturing that food manufacturers can take advantage of to lower operational costs?
A: Some of the latest trends with process manufacturing that food manufacturers can take advantage of to lower operational costs include:
- Optimizing materials consumption (reducing waste)
- Extending shelf life of final products by speeding throughput
- Lowering energy costs through real-time visibility
- Benchmarking energy usage
Q: What should food manufacturers consider before implementing an ERP system?
A: Food manufactures should consider an ERP system that has been designed for their unique business requirements for the food industry and representative success in their particular segment. Effective food ERP solutions such as Epicor Tropos are designed for process manufacturing and have a built-in process model and recipe and materials management support aimed at driving efficiencies and improving margins specifically for food and beverage industries. The ERP system should also be able to monitor and manage the variable nature of yields and product quality, shelf life and accurately forecast, optimize scheduling, manage materials, labeling and transportation in order to properly fulfill order to promise with a short notice. Lastly, an ERP package designed for food manufacturers will also have industry-specific functionality designed to minimize customization and include support for date code management, rebates and commissions, consignment costing, day one for day one order and delivery, multiple product attributes and grades, retailer-specific packing, and catch weight labeling.