How to Understand Recipe Management and Production Versions in Process Manufacturing

Executive Summary

• A recipe is the process industry name for a bill of materials.
• We cover recipes in SAP ERP, how the recipe with the Production Version of SAP ERP works, and how to create and copy Production Versions and recipe management.

Video Introduction: Considering Recipes for Process Industry Manufacturing

Text Introduction (Skip if You Watched the Video)

Recipes are a central object in process industry manufacturing, describing what makes up the finished product. This article will learn the contrast between recipes, formulas, and the bill of materials while explaining these items in SAP.

Background on Recipes

This article deals with a complex area of process industry manufacturing, recipe management. Recipes are unique to process manufacturing. Because discrete manufacturing tends to be a greater focus in literature and discussion than process manufacturing, recipes are generally much less well understood than similar master data objects in discrete manufacturing. Their management is a significant challenge for most process manufacturers.

The Recipe Versus the Bill of Material

While the bill of material (BOM) is often equated to the recipe in process manufacturing, as is pointed out by Wikipedia, there is more to the recipe than finished goods, semi-finished goods, and raw material. For instance, a recipe includes the steps to be executed and the resources required to produce the finished good. On the other hand, the BOM is composed of only the materials necessary to manufacture the finished good.

In this way, the recipe is much closer to the SAP APO PDS or PPM. These are master data objects inside SAP APO used in both APO SNP (supply planning) and PP/DS (production planning). Both of these master data objects combine the resource with the BOM as well as the routing.

How a Formula Relates to a Recipe

While sometimes blended with the term recipe (recipes are described in more detail further on in this article), formula and recipe are not the same. A formula is, in fact, a subcomponent of a recipe. Formulas can be completely separate objects, and formulas can be production scheduled all by themselves.

It can stand separate from a recipe, but in most cases, it does not stand separately and is combined as part of a subordinate object to a larger recipe, which contains multiple formulas. It is common to have multiple formulas within a recipe because each formula relates to the manufacturing configuration of a semi-finished good.

It is also quite common for semi-finished goods to have complex formulas that must be processed as part of the in-process manufacturing steps.

Recipes in SAP ERP

Recipes are part of a solution called SAP Recipe Management. (See SAP’s marketing PDF on this at this link.) And SAP’s help. Unfortunately, this solution is connected to the SAP PLM solution, one of the weakest solutions in SAP’s solution footprint, which I have previously discussed here.

• Savvy companies will learn from SAP’s problems in this area and keep their expectations concerning recipe management low. Instead, the only life-cycle or change management functionality expected from SAP on the recipe is simply the ability to make copies of recipes. Recipes can be altered by copying them from older recipes and making even small changes to make new recipe variants.
• The production version functionality then controls which recipe is activated and used for production planning. During one planning run, multiple production versions (and, therefore recipe combinations) would be used because different production versions are used per time of year for the planned production orders.
• All recipes that are to be used for the next production planning run can be changed by simply activating a different production version. However, what is more, common is that some recipes would be the same (for some products) between different production versions, but for other products, the recipes are different. There are many to many relationships between recipes and production versions, providing more flexibility in recipe selection.
• Recipes can be quite complex and can be multi-leveled (just as with a BOM). They can include ingredients, intermediates, and other formulas. Production versions are created in SAP ERP and stay there if no external production planning system exists, such as APO PP/DS.
• If an external planning system is used, the production version is exported to this system during the normal master data update process between the systems.

Selecting the Recipe with Production Versions in SAP

In SAP, the configuration object that determines which alternative BOM is used and which master recipe to produce material is called a production version. The production version functionality is part of the SAP PP module. It is set up in SAP PP and can also be used by PP/DS.

Several production versions frequently exist for one material for various validity periods and lot size ranges. (In other areas of SAP, these different versions would be called variants.) Production versions are used in both discrete manufacturing and process manufacturing. For this article, we will focus on focus on process manufacturing.

Creating and Reading Production Versions

Production versions are created with the following transaction or pathway within SAP ERP.

Transaction code C223

Logistics -> Production Process -> Master Date -> Production Version

After you create a production version, the appropriate alternative BOM components are available in the recipe as a master list or can be created from the recipe. Within the production version, you can assign a storage location to the material you want to produce.

How Process Manufacturing Differs from Discrete Manufacturing

It is important to understand how to discern between software designed for process industry manufacturing and how process manufacturing differs from discrete. You will learn exactly how to process manufacturing and planning software.

Deloitte on Process Manufacturing?

I was amazed at one point with a director at Deloitte once told me on a project that we worked together that cheese and whey processing was “somewhat-discrete.” I would beg to differ.

At the time, I said that the company in question was entirely process manufacturing. This was because it involved the…

• Liquid manufacturing or liquid processing (most process manufacturing involves liquid manufacturing or liquid processing)
• The use of vats had leading and lagging operations. (that is not start-finish or start-start, as would be the case between manufacturing operations, say pens or toys).
• Variable output per sub-process

I wish I had known Wikipedia’s definition of process manufacturing at the time because it is more definitive. This definition is highly accurate and is useful to have in one’s back pocket when debating whether a company is a process or a discrete manufacturing operation. They state that the key differentiator between process and discrete manufacturing is whether the product can be disassembled into its parts.

“…once an output is produced, it cannot be distilled back to its basic components. A can of soda cannot be returned to its basic components such as carbonated water, citric acid, potassium benzoate, aspartame and other ingredients. Juice cannot be put back into an orange. A car or computer on the other hand can be disassembled and its components, to a large extent, returned to stock.”

I found this an interesting definition. Wikipedia categorizes process industries as “food, beverage, chemical, pharmaceutical, consumer packaged goods and biotech” almost all deal with liquid manufacturing or liquid processing. And that is quite a good barometer to use. Most liquid manufacturing or liquid processing is, in fact, process manufacturing.

Liquid Processing Versus Discrete Manufacturing

Liquid processing is more complex and variable than discrete manufacturing, and its requirements are quite a bit different and require specialized software to account for its differences. One reason for this is that process manufacturing often has variable yields from its production processes. Milk is a good example of a variable yield with liquid manufacturing or liquid processing. When raw milk is brought into the plant, the resulting fat, protein, and other constituent parts change depending upon everything from the weather the grass was grown to the particular cows and their treatment and other nutrition supplements they received at the dairy.

Discrete manufacturing has defective units, especially when “dialing in” or perfecting a new product’s production, but the unit returns are stable. This means that the production rate at the beginning of the subprocess is entirely different from the middle and the end. Another common difference is the need for lagging or overlapping operations in liquid manufacturing or liquid processing, which is not the case or largely not the case in discrete manufacturing.

The Process Manufacturing Requirements List

Good insight can be obtained regarding the requirements for process manufacturing planning by observing the declared capabilities of a company called TGI states these capabilities within its Enterprise 21 product.

Supports infinite-level formulas with yielding at the top level or ingredient level and rank-ordered ingredient substitutes

Products can have global formulas or unique facility-specific formulas

Supports scalable batches

Supports recipes through the integration of formulas and associated processing instructions and notes for use during batch process production

System maintained version and revision control with a fully integrated engineering change order process

Formulas support nested formulas and intermediates and can have infinite notes and instructions

Supports online review of formulas via single-level and multi-level explosion

Multi-level where-used functionality enables rapid access and mass change to all finished goods using specific ingredients, intermediates, and nested formulas

Formulas and recipes are easily duplicated and updated for the same product or a new product

Formulas are pulled into work orders or batches for tracking and recording of actual ingredients consumed or backflushed at defined standards

Supports co-products and by-products

Supports lot control tracking, shelf life management, product grading, and hazardous materials tracking and reporting

Contains a host of functionalities for liquid manufacturing or liquid processing.

Leading and Lagging Operations

A major requirement in process scheduling is overlapping or lagging scheduling capabilities. This is because operations are not simply scheduled one after another, nor are concurrent operations scheduled to begin simultaneously.

Overlapping operations determine how soon a successor operation can be started before the predecessor operation completes. This is called an overlap. This is impossible with PP/DS, which requires FS and SS relationships but does not allow lags between roughly concurrent operations. Strangely, even though PP/DS lacks this basic functionality, companies that process manufacturers continue to try to implement it. To get it to work for process industry manufacturing, every company must add an enhancement to PP/DS.

For PlanetTogether overlapping operations are very easy to configure. One can create an overlapping or lagging schedule of jobs as part of its normal function and has this functionality live at most of its accounts.

The overlapping functionality is so detailed in PlanetTogether that it can be based on a percentage. That is a percentage of total cycle capacity, so after, say, 35% of one process is complete. The next operation can begin. Therefore, the overlapping functionality here is highly specific and easy to maintain.

The Overselling of Discrete Manufacturing Planning Functionality

Production planning and scheduling software have tended to be targeted towards discrete manufacturing, often leaving process industry manufacturing without a software solution designed for its specific requirements. One of the most common approaches is for software vendors to develop a discrete solution and then sell it into other manufacturing environments. It is a poor match to propose to executive decision-makers that their discrete solution can meet all their needs. This can and does go on for years. I have seen applications that were never designed to meet the process industry’s requirements be continually sold into process industry accounts, with the previous failures of the application in similar clients never seeming to affect the ability to sell that product to new process industry clients. SAP PP/DS is like this. It will most often fail when PP/DS is used outside of simple discrete manufacturing planning and scheduling.

All of this applies in particular to companies that have a major brand. No company at the time of this publication rates production planning and scheduling applications. If we look at Gartner, the well-known IT analyst firm that many companies use to assist in their software selection, their ratings, or what they call “magic quadrants,” are limited to supply chain planning suites.

Getting Bad Advice from Consulting Firms

A “planning suite” includes applications like demand planning, supply planning, etc..  Companies cannot turn to consulting companies for advice because of their strong tendency to recommend the software they have consultants trained for. If you approach any of the large consulting companies — the answer is always the same. They will recommend whatever software they can bill the most hours for. And they do not have expertise in process industry manufacturing.

Understanding the Differences Between Production Scheduling Applications

In many cases, because the executives at companies cannot differentiate between supply and production planning systems that can meet the process requirements and repetitive manufacturing. Instead, they make their selection decisions based upon larger, more “strategic” considerations (such as what vendor has the best-known brand or attempting to buy as many applications from the same vendor).

This means that the failure rate of supply and production planning implementations at the process and repetitive manufacturing clients tend to be high. So the software gets implemented, but it never gets used or is just partially used.

A company will often go through several implementations of inappropriate software, with many people lower down in the organization knowing the outcome of the implementation long before it is complete. Once the software has been selected, even if inappropriate, there is a great resistance to changing the software. This would mean admitting that a mistake was made in the software selection, and in companies, careers trump the acquisition of the right product that was designed with the functionality to do the job.

Being Able to Interpret Software with Process Industry Capabilities

I have worked with several clients where the companies’ executives did not understand their manufacturing and supply planning processes. A software vendor with weak process production planning and scheduling capability told them that all of the industry’s “best practices” were contained in their applications. However, the client never checked the actual capabilities of the functionality. The implementation consisted of the executives, who again did not understand their business processes, telling their own business to..

“Get with the program”

..and change their antiquated ways (which were not antiquated, they were processes that were designed for the specific requirements of their factories, rather than the generic functionality that was available for the software they have selected.), and change their processes to meet the best practices (i.e., lack of specific functionality for their actual process needs) so that the software could be implemented.

This is a case where change and transformation terminology were used as excuses to enforce a poor decision by executives to try to force changes that, if successful, would have undermined the planning effectiveness of the business that the executives thought they were improving with the software purchase and implementation.

Because this scenario has repeated itself in so many companies, a large percentage of companies are using planning systems that were never designed for their environment. Therefore, there are so many opportunities to improve planning at companies by the simple act of matching applications that have the functionality designed for a company’s planning process.

Using the Right Type of Production Planning Scheduling Software

Production planning and scheduling software vary in its ability to perform process manufacturing by the vendor. Most production planning and scheduling software are designed for discrete manufacturing. This is because the modeling problem is easier to solve. A simple observation of what makes the process industry different allows the generation of requirements. These can help eliminate many applications. These are applications that are better suited for other types of manufacturing planning. Some posts focus on this website, focusing on not using production planning software designed for discrete manufacturing for process manufacturing. This is true even if the vendor in question has high brand recognition or makes other software, such as your ERP system, that your company uses.

SAP is not the only company selling applications that are not very good at process manufacturing into process manufacturing accounts. They are the ones I am most familiar with.

Conclusion

One of the most insightful statements about process manufacturing software is the following:

“Just like the products that they produce, discrete and processing manufacturing software have different focal points and solve different problems. For the same reason that the proverbial square peg does not fit in the round hole, software geared toward discrete, or even hybrid manufacturing will not work smoothly in a process manufacturing setting. Even process manufacturing software alone needs to be tailored to a particular business context. Critical aspects such as formulation, routing, ingredients, unit of measure, and pricing must be evaluated relative to the business.” – Wikipedia

This quote above from Wikipedia emphasizes the point that I have repeatedly observed and often stated, that the most important part of the implementation is the software selection which should lead to a high match between the application and the business’s needs.

A basic rule is that enhancements should occur at the fringe of the application, not at its core. Adjustments for process manufacturing are at the core of production planning software. This is why so many companies follow a bad path when adjusting discrete manufacturing planning software to handle process industry manufacturing.

Our Work in Production Planning and Scheduling

This is one of the things we do is analyze production planning and scheduling systems and improve them. If this is something you are interested in, contact us at the chat widget in the lower right-hand corner, or at support@brightworkresearch.com.

Reference

https://www.tgiltd.com/erp-software/formulas-and-recipes-software.html

https://en.wikipedia.org/wiki/Process_manufacturing