Integrated DNA Technologies (IDT) is a leader in life sciences manufacturing and developing products for the research and diagnostic market. It serves the areas of academic research, biotechnology, clinical diagnostics and pharmaceutical development. IDT synthesizes and ships an average of 36,000 custom products per day and serves more than 86,000 customers worldwide.

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With the challenges of double-digit growth; expanding into several new product markets and fulfilling FDA traceability requirements, IDT knew it needed a new business system.  Ultimately IDT selected Microsoft Dynamics AX ERP 2012 and implementation partner Edgewater Fullscope.

According to Aaron Warner, CIO, “From an integration perspective, IDT has easily combined Dynamics AX ERP with existing custom software used in our complex manufacturing environment. The consistency of interface design and familiarity of other Microsoft products greatly simplified the training requirements. Ultimately, we found the total cost of ownership to be lower than our projections.”

Watch this short video and learn more …

It’s been a mixed year for chemical manufacturers.  While end-use markets have recovered to their pre-recession levels, growth beyond that level has been slow.  For many North American firms, exports have been especially weak as markets in Europe have all but disappeared.  There are bright spots, such as the surge in demand for ethylene-based products, driven by burgeoning natural gas capacity.  Still, it’s been a year of eking out profitability wherever it can be found.  One of the strategies many chemical manufacturers are using to improve margins is a renewed focus on business basics, the industry best practices that separate market leaders from the rest of the pack.

Common strategies in emphasizing best practices include process intensification (the merging of two or more production processes), a search for greater supply chain efficiency and a renewed drive to pare overhead even more.  While every business process can yield some additional waste and performance improvement, producers often overlook the benefits to be gained from more effective vendor management and purchasing.

Procurement leaders differ on some of the details of what constitutes purchasing excellence, but several themes recur in almost every vendor management or purchasing excellence initiative.  We’ll discuss some of these initiatives shortly.  The common foundations of purchasing excellence initiatives are better communication, more accurate data at all levels and a focus on enforceable, repeatable processes.  Finding a way to achieve these objectives can be a challenge.  Microsoft Dynamics AX ERP for chemical manufacturers provides these foundations, as well as other tools required to implement best-in-class processes that can give you the competitive advantage you need to sustain and grow margins in an already competitive business.

First we’ll discuss some of the tactics you can use to improve purchasing performance and contribute to stronger margins.  Then we’ll look at how Microsoft Dynamics AX ERP can help you, as a chemical manufacturer, to effectively implement some or all of these approaches in your company.  Read the rest of this entry »

Fullsope’s new series of Process Accelerators makes it easy for manufacturers to employ potency pricing procedures.

With potency pricing, a manufacturer sets purchase pricing and inventory value based on the received material’s active concentration (i.e., potency) or some other quality-controlled values (fat content, protein content, etc). This is a key requirement for process industries where low margins require costing and margin analysis at the lot level. It’s required in industries such as dairy and feed which measure and pay based on butterfat content or protein content, and is standard business practice for pricing precious metals. This is equally applicable to any process industries company that manufactures or distributes high valued, active ingredient based products.

Common enterprise resource planning (ERP) solutions price materials according to linear pricing schedules, but in process industries, multiple factors come into play in determining compensation for a supplier. The Fullscope Process Accelerators:

  • Provide a flexible formula that allows companies to pay suppliers based on actual quality results for potency.
  • Assign actual inventory value for each inventory lot that is potency-controlled.
  • Help record more accurate margins based on the actual potent value of materials sold or consumed.

Using milk again as an example, a typical dairy producer will send a tanker with paperwork specifying that this tanker of milk has a certain stated butterfat and protein content. But the manufacturer, the buyer of the milk, wants to run their own tests because the agreement is that payment will be made based on the manufacturer’s quality analysis result. Or, payment could be based on the average of the milk vendor’s value and the manufacturer’s value: the buyer and supplier can meet halfway.

A typical ERP solution pricing scheme won’t address that scenario.

Fullscope Process Accelerators use an advanced pricing formula that gives the manufacturer the ability to define which characteristics are going to drive the price. It can be the concentration alone or multiple characteristics of an incoming shipment. The formula applies equally well to chemicals, food, or metals. The system will calculate a price and hence the inventory value based on those user‑defined characteristics.

A large part of our Process Accelerators’ elegance and utility comes from 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.

Lot Genealogy and Traceability

Lot genealogy is the ability to automatically transfer properties of a raw material lot to a manufactured item’s lot. An effective lot genealogy system must transfer key lot characteristics. For example, a manufacturer may use a metal coil that has a certain alloy content and mechanical strength. If this coil is cut into a smaller one, those properties need to follow the smaller coil as well. Sometimes this is referred to as parent-child inheritance. A manufacturer wants the characteristics from the original coil to carry over into the product that ultimately contains the small coil. They also want to be able to transfer shelf life information. There are rules about combining materials with different shelf lives into one package. One should take the earliest individual material shelf life and make that the expiration date for the overall product.

Genealogy 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 good, which will consume the raw materials, needs 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, 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, a jumbo roll of paper 60 inches wide. A manufacturer may cut five 11-inch rolls out of it, leaving 5 inches of trim. That trim is a co-product. It’s still good and can be reused or re-blended to make more paper.

Fullscope Process Accelerators set lot genealogy at the formula level and allows inheritance for both end items and co-products.

Product Sequencing

The Process Accelerators also add key capabilities to Dynamics AX in this arena. It adds 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 changeover. The Fullscope Process Accelerators allow manufacturers to define an optimum sequence based on prioritization of simple or complex characteristics of the product.

So What’s the Takeaway?

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.

By providing more powerful functionality to Microsoft Dynamics AX ERP, Fullscope Process Accelerators help strengthen the already strong position of Dynamics AX among mid- to large-sized process manufacturers in the chemical, pharmaceutical, food processing, pulp and paper, metals, and cosmetics/health and beauty segments. It does so by leveraging three key areas—potency, lot genealogy, and product 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.

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.

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 materials vendors based on the 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 concentration.

Fullscope’s Process Accelerators for chemical, food and beverage and life sciences industries extend ERP system Microsoft Dynamics AX by adding 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. Another is whether the attribute is fixed (i.e., can it or can it not be altered after the value of the base attribute is set?). A third is “adjustment principle,” which indicates which type of potency calculation or concentration adjustment (difference additive, compensating ingredient, or filler) has been used for the recipe. Finally, how the attribute value is to be recorded (e.g., inventory receipt or lab verification) is documented.

At the formula level, the Process Accelerators allows a target concentration to be set with the Dynamics AX ERP system. If what is available in inventory does not meet the established concentration of the recipe during batch production, the Process Accelerator will suggest adjustments accordingly based on the actual concentration of the selected active ingredient.

In the process industries, there are three types of concentration adjustments: one is called “difference additive,” simply consuming more or less of a material based on its concentration; a second is called “compensating ingredient,” where a quantity of a second ingredient is added according to whether the concentration of the active ingredient is over or under specification. (For example, water is added to compensate for the level of acidic acid in vinegar production.)  The third adjustment is simply adding “filler.”   Consider prescription medication. An ibuprofen capsule may need to be 300 mg, but the active ingredient (i.e., ibuprofen) is not 300 mg. Filler is added to the active medicinal ingredient to comprise the 300 mg capsule.

Fullscope Process Accelerators use this information to provide Batch Balancing to speed and improve production. In Dynamics AX ERP, a batch formula is defined interactively based on the concentration of a key ingredient or ingredients. The Process Accelerator picks inventory lots based on current potency, automatically calculates the required active ingredient, determines the quantity needed for the compensating ingredient or filler, and finally creates a material consumption transaction based on the adjusted formula.

This is a very common scenario in the food industry, where, for example, a manufacturer is producing a batch of yogurt. If the butterfat content of the milk is more or less than required, a quantity of water or skim milk needs to be added. For a host of reasons, companies don’t want the operator to have to do the math for that calculation. Therefore, the Process Accelerators automate the process and makes it simple for the operator to come up with a properly balanced set of ingredients. As each batch is launched, each Process Accelerator 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 rescales the formula based on the lots selected. This procedure helps ensure quality, reduce costs, and eliminate waste.

Watch Next Month for:  Potency Pricing, Lot Genealogy and Traceability, and Product Sequencing

Designed for Microsoft Dynamics AX users, each month Fullscope publishes a short technical tip to for greater insight into this powerful ERP system.

Technical Tip#2: Record Level Security

Microsoft Dynamics AX lets users easily manage screen/table and report filters through record level security. Use this feature to filter screen and report data that you specifically design by user group.

To begin, open the Record Level Security screen (in the Administration module), and choose the appropriate user group. Click on the “new” button and the Record Level Security wizard will walk you through the remaining setup. This feature allows you to apply specific queries to data tables resulting in data security and an enhanced end user experience where the user doesn’t have to filter through irrelevant data. The table queries also apply to report data, which allows you to filter down to critical data.

Companies in pharmaceutical and life sciences manufacturing share a technology requirement for a strong enterprise resource planning (ERP) system to enforce the common principles of validation projects. The goal of these validation projects is to demonstrate consistent, secure and traceable transactions for any product throughout all stages of its lifecycle. By examining three key pillars of applications validation, the importance of the underlying ERP system becomes evident.

Consistent Processes: Life sciences and pharmaceutical companies depend on ERP systems to help maintain consistent and repeatable quality. First and foremost, the recipes (the formula or bill or material [BOMs] and the routings) must be approved and locked into place so that when production is launched, only the authorized recipe is issued. These recipes are tied to specific documents called “operations procedures” which outline the specific materials, quantities and processes necessary to make a consistent quality product. The recipes require valid quality control testing with operational tie-ins to ensure an intermediate meets the specifications before it moves to the next operation. Any raw material, intermediate or finished product that is tested and falls outside of the pre-defined specification must immediately generate a non-conformance alert that is sent to internal stakeholders. An authorized formula, tied to its approved operations document, tied to an internal quality management application, is the first step to maintaining consistent processes.

Secure Processes: The CFR Part 11 compliance code addresses security.  ERP applications help support security requirements by applying electronic signatures to insure authorization for certain business process steps. For example, many life sciences companies lock down their formulas or BOMs in order to comply; and in most cases, authorized individuals can look and review formulas, but not change them. Electronic signatures can add another level of password requirement, so if someone tries to change or update a formula, a pop-up window requests an additional password. Electronic signatures frequently are used with formulas, BOMs, routings, quality specifications, and operations procedure documents.

Traceability:  The final pillar of control is the ability to track all components of the product from its raw material purchase through work in process to the final customer ship-to location. Many pharmaceutical manufacturers have co- and by-product issues, and some split and merge lots during the production process. It is essential for an ERP application in companies with highly regulated environments to manage both discrete (medical device manufacturing), as well as process (pharmaceutical and life sciences manufacturing) production requirements.