There is a belief that manufacturing is a mechanical process with not much thinking involved. While this is wrong for manufacturing in general it is especially wrong for process manufacturers – companies that produce food and beverages, paints, chemicals, pharmaceuticals, and cosmetics. Each day these manufacturers manage complex supply chains, carry out highly precise production, and must negotiate a raft of regulations. Like all other companies, process manufacturers are dealing with a new world in which the cycle of plan-execute-analyze is now constant because conditions can change suddenly. To operate in this environment, manufacturers need technology to improve speed, quality, and efficiency and streamline their processes.
What is process manufacturing?
Discrete manufacturing involves assembling and making distinct things. It is characterized by production in which units are composed of component parts that can be individually counted and disassembled into the original raw materials.
Process manufacturing is a production method that uses formulas or recipes to produce goods by combining ingredients or raw materials. Manufacturing is intricate due to the blending and mixing of raw materials and ingredients in batches. The end product is measured according to weight or volume, and once made, cannot be broken down back into raw materials.
Types of process manufacturing
Process manufacturing is not the same for all industries. For example, the manufacturing of pharmaceuticals vs. processing liquid waste in the mining industry. In the pharmaceutical example, it is a batch process manufacturing where the products are made as specified groups. For liquid waste, there is a continuous flow process that moves one work unit at a time between each step of the process, with no breaks in time, sequence or substance.
Mid-size manufacturers operate mainly in the batch process space and that is what this article focuses on.
Process industry challenges
Many aspects of process manufacturing are more complex than the discrete version. From inbound, to processing, to storing and outbound.
Use ingredients not parts
Discrete manufacturers produce items that are measured in “eaches” (e.g. for a bicycle, you need one handlebar, two sprockets, two rims, one seat). For a process manufacturer, a formula is set up for one unit (e.g. litres or kilograms) and the formula can be scaled up or down to any batch and production run size.
Units of measure
In batch process manufacturing, there can be different units of measure for raw ingredients and recipes (e.g. grams for dry materials and litres for liquid ingredients). This can be different as well as for the purchasing (e.g. kilograms of dry ingredients) and for stocking (e.g., 500ml or 1-litre bottles).
One key issue is the quality control of incoming raw materials to ensure that a recipe does not change. For storing, some ingredients and end products must be kept in specific conditions, such as temperature control. In the chemical industry, certain chemicals can be dangerous if stored or transported close to each other.
The production process often results in finished goods as well as other products, by-products and co-products which can be recycled, sold or used to produce other goods. These are not considered scrap as would be done in discrete manufacturing. By-and co-products are often unavoidable outputs and tracking and costing them is critical.
Compliance and traceability
Process manufacturers in industries ranging from food to chemicals and pharmaceuticals are obliged to meet stringent requirements of local and international safety and quality regulations. To comply with regulations, companies must be able to identify and trace every ingredient used in the manufacturing process. This includes bi-directional traceability from source to receipt, processing, packaging, shipping to final consumption. In the event of a problem, full recalls are required and must be audited.
How an ERP system can help process manufacturing
As it has done in many areas of work and life, technology is transforming the process manufacturing industry. An ERP system provides the software applications to address industry-specific challenges such as recipe management, variable product output and traceability. It can also connect disparate functions, consolidate data and processes, improve operational efficiency and profitability, and help to enforce quality control and compliance.
Process manufacturers can use an ERP system to control formula development and handle complex multi-level formulae. It can also help product development to track costs of intermediate and finished goods and maintain revision history.
The equivalent of discrete manufacturing’s Bill of Materials is the Production Recipe in process manufacturing. An ERP system can improve the management of complex production recipes with multi-level recipes and different routes for variable end products. With the current supply chain challenges being experienced worldwide, manufacturers need a system that will allow substitute ingredients when actual ingredients are unavailable. A process manufacturing ERP system can also generate stock codes for by- and co-products, and allocate them to warehouses or bins.
Mixed Units of Measure
An ERP solution can be set up to automatically convert between different measurements for the mixing requirements of a particular product. It also allows procurement to purchase according to their required measures and enables end products to be stored in different units of measures, such as different packaging sizes.
Sale prices are usually more rigid than the costs of incoming materials, so on receipt of ingredients from a supplier, an ERP system can record the quality criteria of incoming materials and ensure they have been supplied at the agreed price.
Stock location may also require careful management. Raw materials and products that require temperature control need to be allocated to a cold-store warehouse. By integrating the ERP system with temperature sensors, any temperature problems can be recorded and the system can create alerts.
For those products with use-by dates, an ERP system can use bins to allocate products by expiry dates. This reduces the chance of loss and wastage. For hazardous chemicals, bins can be used to ensure chemicals are stored appropriately and safely.
Managing supply chains has become a critical part of manufacturing since 2020. Now more than ever before, visibility, compliance, cost management and quality control in the procurement and supplier selection process are key.
An ERP application can ensure the right raw materials are in place for each job. As material moves through the production process, the application can keep track of the quality status of material in each job, allocate material to lot numbers, record expiration dates and handle the different units of measure from receipt to production to packaging. The data that the ERP system holds can be used to get accurate production costs. At the warehouse level, the system can improve the visibility of activities from receipt of goods through outbound shipping.
Production management in process manufacturing has some unique challenges. For example, when one batch has finished a step of the production process, you can’t necessarily add the next batch in that step. The equipment may need to be cleaned first, adding a potential bottleneck in the production line. Production scheduling needs to take account of these factors by sequencing production based on product characteristics in order to maximize capacity.
When getting stock needed for a production job, the ERP system can ensure inventory is allocate on a first-expire-first-out basis to minimize waste. The inspection details of material from allocation to a job, through steps of production, to putting away at the end of the job can be tracked using batch and lot numbering, which comes standard with an ERP system. Material under inspection is visible in the system, but can be made unavailable for use until inspection is passed. Inspection functionality enables receipting of products as alternate stock codes, or into alternate warehouses or bins, depending on the results.
As factories become increasingly digitized, an ERP solution with manufacturing operations functionality can allow management of the complete manufacturing process to improve production efficiencies. By connecting to machine sensors and other devices, it can help to digitize the factory to Industry 4.0 standards.
Co- and by-products
Management of co- and by-products is another challenge unique to process manufacturing that an ERP system can assist with.
The ERP system can assist with allocating inspected items as the end product, or as different co- or by-products. It can cost and capture the receipt of multiple products and apportion costs between them. This is useful for companies that want to recycle, sell or use these by-products for some other value-added purpose, rather than write them off as scrap.
Compliance regulations require process manufacturers to test and record raw ingredients and finished products with the ability to quarantine materials by batch. This includes raw materials, work-in-progress, and finished goods. A process manufacturing ERP software makes testing, identifying, and quarantining easy through integrated quality control functionalities and the ability to track a product with full forward and backward lot traceability.
For many process manufacturers, regulations require tracking of products, materials and processes and implementing effective recalls. This was emphasized by a recent recall of tinned goods by a food manufacturer involving 20 million cans at a cost of over US$30 million. A system is required that can trace a lot or batch through the entire value chain from raw material receiving to dispatch.
An ERP system can provide bi-directional traceability reports against ingredients, finished goods and packaging. It is not only accuracy that is needed but also speed. A company must be able to trace every part of a batch that came out of the factory to each customer as soon as possible after receiving a notification of a food safety problem.
Process manufacturing 2.0
Many process manufacturers are realizing that they need to become a version 2.0 of themselves. The traditional way of operating, version 1.0, based on old practices set up many years ago will not work in an increasingly digitized world. Companies will need to invest in technologies that improve real-time visibility across operations using data for smarter decision-making. This will improve processes, control costs and enable greater production efficiency, quality and compliance across the enterprise, allowing it to remain flexible and responsive in a world where disruptive change is becoming normal.