Chemical

The Role of an agile & cloud-based ERP in Chemical Manufacturing

The Role of an agile & cloud-based ERP in Chemical Manufacturing

The Role of an agile & cloud-based ERP in Chemical Manufacturing 1920 1080 shahid.anis

Modern Manufacturing

In recent years the chemical industry has witnessed a radical change in production methods. With technology gaining more attention in almost every sector, including manufacturing and distribution, business leaders need to upgrade their technology stack and outdated processes to meet the changing demands of the market. A rapid transformation of the Chemical manufacturing value chain is required to improve efficiency, productivity, quality, precision, pricing, and more.

While “Complexity” serves no good for business, it has been part and parcel of the chemical industry for decades. Many companies suffer from siloed department structures, disparate systems, inefficient data management, and a lack of streamlined processes due to lack of an agile ERP solution. These have all helped create roadblocks that hurt the bottom line of the business. Most companies don’t realize the gravity of the issue until the lack of integration between the floor and functional areas rears its head. As a result, it’s been easy for orders to get lost and product quality to suffer thanks to suboptimal production runs or poor capacity planning.

Chemical manufacturing companies need to take action by redefining their business models and re-evaluating their IT roadmaps. Chemical companies invest in transformation projects such as integrating a cloud-based ERP solution with operations to streamline processes, drive collaboration and efficiency, and offer much more informed decision-making.

Figure 1Agile ERP Solutions in Various Phases of Chemical Manufacturing

Unforeseen Circumstances: COVID-19

The COVID-19 pandemic caused havoc, severely impacting every industry. The functioning of departments such as production and shipping became increasingly challenging. As a result, hundreds of companies had to scale down their manufacturing operations by as much as 40-60%. With such fewer raw materials being supplied, by February, the global production of chemicals had dropped by 2.4%.

The drop in business severely impacted revenue in Chemical companies. On top of that, transportation costs have gone up, and priority has shifted to essentials. This sort of financial pressure has forced companies to downsize the workforce, yet having to continue the business, which now is enforcing rapid technology transformations at an optimal cost.

An Agile ERP in Manufacturing

Unlike many other sectors, businesses in the chemical industry may not be able to stop production and send workers home. On the flip side, many chemical companies are pivoting operations to meet the demand of the market.

Add to this, a unique share of challenges that already exist for the chemical industry, including issues like

  • Fluctuating prices of raw materials and their impact on margins
  • The need for constant product innovation
  • Increasing risks in supply chain & manufacturing
  • Tightening regulations
  • Market uncertainty, budget & controlling costs
  • Difficulty in resource management

To overcome these complexities, companies need to possess a detailed overview of the market to identify the shifting customer dynamics and plan appropriately. Cloud-based ERP systems for manufacturing can help identify market needs, shape the manufacturing processes, and finance a chemical company’s financial business processes.

6 Ways Implementing ERP will Improve Operations in Chemical Manufacturing

01.Improved Visibility

An agile ERP unifies data across departments, increasing the visibility of information across an organization, and eliminates unnecessary infrastructure costs while providing higher data security. Within a chemical company, process automation add-ons to the cloud ERP eases resource overload by optimizing workforce utilization on the shop floor. All departments across the company, including inventory management, purchasing, accounting, human resource management, production, and finance function together with a minimum breakdown and maximum clarity in operations. Agile cloud-based ERP systems for manufacturing can help a chemical company access real-time data on a uniform platform and boost throughput to reduce downtime.

02.Enhanced Flexibility

As market demand fluctuates, there is a growing need for increased adaptability in the manufacturing and supply chain, enabled using the right ERP solutions. A Chemical company can share important updates and revised manufacturing plans/ schedules utilizing the supply chain planning system to plan stock availability. An agile ERP system for chemical manufacturing should follow a tiered approach comprising

  • secure database
  • simple user interface and higher accessibility
  • easy integration with external tools

The Chemical industry has a unique set of functional requirements to accommodate Environment health and safety and OSHA regulations. Cloud ERPs give Chemical companies the flexibility to customize the solution to suit their needs without migrating data or altering the entire piece of software.

03.Better Collaboration and Transparency

Data associated with the right ERP leads to better collaboration across the enterprise. Complex business procedures often are simplified, and simpler processes with no controls are made more stringent due to an ERP implementation project. All modern systems have enough restrictions to enable a disciplined method of functioning, that companies may have missing. A process and rule-based system improves transparency and sets the organization for growth.

04.Better Supply Chain Efficiency

A successful ERP software implementation eases the complexity of supply chain management with better-informed demand and supply management. Data insights collected from a well-designed ERP system for chemical manufacturing can reduce inventory cost, enhance supply chain efficiency, and optimize production processes that, in turn, build a robust supply chain. Building supply chain efficiency has further benefits such as decreasing expenditure on raw materials, increasing profit leading to capital growth for any company.

05.Improved Production

Chemical companies often pay a hefty price if the system they use is lacking functionality. The typical end-to-end chemical production process comprises – scheduling lot production, estimating the cost of the lot produced, recording consumption of raw materials, recording route operations, quality control check on lots, and accurately recording yields. This process exchanges multiple hands and devices. A poorly designed manufacturing execution system can hinder the batches produced, draining resources, and add unplanned costs to the company. All you need is an agile, cloud-based ERP system for chemical manufacturing.

06.Enhanced Customer Service

With the right suite of ERP and CRM solutions, it is possible to fulfill the customer-centric objectives such as understanding the customers’ needs, improving service levels, and enhancing customer experience. An agile ERP that supports companies to attend to their customers’ needs and resolve issues faster ultimately drives customer retention.

Final Thoughts

A Chemical manufacturing company holds its share of challenges. Be it specialty chemicals, bulk chemicals, private-label, co-pack, or a contract manufacturer, having the right cloud-based ERP systems for manufacturing helps to build operational efficiency, bring products to market faster, reduce the cost of operations, be more agile, and responsive to market changes.

About XcelPros

XcelPros is a Chicago-based company and delivers transformation through technology. We offer business and technology solutions with deep industry experience in Chemical, Pharma, Life Sciences (including Medical Devices, Bio-Medical & Biotech), Insurance, Discrete Manufacturing, Process Manufacturing, Distribution and Food & Beverage.

XcelPros is a Microsoft Gold Partner, Direct Cloud Solutions Provider (CSP) and a Systems Integrator (SI) offering software licensing, implementation and consulting services for Microsoft Dynamics 365, CRM, Microsoft Dynamics AX, Business Intelligence & Analytics (Power BI), SharePoint, Office 365 and Azure (Cloud, IOT, Microsoft Flow amongst many others).

Our mission is to provide integrated technology solutions that amplify impact and empower our customer’s businesses. We believe technology is the key enabler of exponential growth for us and our customers.

Contact XcelPros today to transform your business.

Call us toll-free – 1.855.411.0585 (or) visit www.xcelpros.com

AI ml in chemical industry

Transforming Business with AI and ML in the Chemical Industry

Transforming Business with AI and ML in the Chemical Industry 1920 1080 Xcelpros Team

At a Glance

  • Innovation is the name of the game for chemical companies to optimize operations and enhance profits. To fast-track innovations, use of AI and Machine Learning in the chemical industry is crucial.
  • Many in the chemical industry are touting benefits of leveraging AI and machine learning to analyze data, systemize processes and mitigate errors by minimizing manual interventions.
  • Human-machine combination is proving to be a transformational phenomenon that can change the way the chemical industry is functioning in the USA and all over the world.

Introduction

The world is growing and seeing changes at an unprecedented rate. The year 2020 has shown us that advancement in science, especially the field of chemicals (and related fields such as biotechnology that deal with the vast majority of chemicals), cannot come fast enough! We need faster, error-free methods to test chemical molecules, computer-generated models for process optimizations, and digitally-adept sensors for quality controls. AI and machine learning play an integral role in efficiently taking the chemical industry towards a trend of modernization and innovation.

The path to digital transformation involves infusing AI into crucial processes and milestones. The journey includes digitizing assets, automating processes based on those assets (known as digitalization), and then creating new ways of doing business.

Figure 1 AI is the greatest commercial opportunity in today’s economy

When organizations invest in AI, the goal is to create and enhance digital experiences. AI apps can employ skills to mimic human cognitive functions such as vision, speech, and natural language understanding. By including these human-like capabilities, AI can enable organizations to construct digital experiences that are smart, fast, and helpful to end-users.

A recent study by Accenture shows some promising figures when it comes to use of artificial Intelligence in the chemical industry. According to research, companies that have implemented Industrial AI in the chemical sector are exhibiting significant benefits as follows:

72%report a minimum 2x improvement in some process KPIs

37%report a 5x improvement in KPIs

4 Ways of Applying AI and Machine Learning in the Chemical Industry

While every enterprise has its blueprint to follow when it comes to the application of tools and techniques on AI and Machine Learning, certain broader areas can be common for the chemical industry. Let us have a look at 4 such facets:

01. Data Crunching and Analysis for Molecular Activity Studies

Understanding chemical products and utilizing them for desired effects usually take years of analytical studies, laboratory experiments, clinical trials, farm trials, etc. However, these days, faster results that can mitigate manual errors and minimize efforts are required. Machine learning and AI tools are effectively used to feed and churn a humongous amount of data, and can systematically analyze the said data. This data churning and analysis will help separate chemicals that are effective yet have fewer or no side-effects from the ones that do not have desired effects or are toxic. Apart from the use of AI and machine learning in the pharmaceutical and pesticide industry, possibilities can also be explored in the manufacturing industry, which is heavily dependent on chemicals. Applying AI and machine learning in the chemical industry can also help expedite the efforts in fighting climate change by estimating the damage done by harmful pollutants. This will aid companies in making essential changes in their machinery and processes to minimize the pollutants being released into the water bodies and air.

02. Result-oriented Innovation and Boost in the Chemical Industry R&D Sector

R&D forms the backbone of any industry, and the chemical industry is no exception to this. Today, major players in this sector are looking for focused R&D and innovation that can yield faster and more accurate results following the use of artificial intelligence in the chemical industry. Machine learning tools can help in exercising this type of quick research with the help of computerized permutations and combinations. It can also help in recognizing the right molecules, generate formulas, and aid in knowing the precise quantities of different chemicals required. AI, on the other hand, can help in predicting chemical combinations that can be a breakthrough in terms of innovation. These innovations can boost the ongoing and upcoming efforts in the pharmaceutical, food, biotechnology, oil and gas, petrochemical, manufacturing, and many such industries.

03. Seamless Juxtaposition of Human and Machine Efforts

Since the introduction of computers in the workplace, humans and machines have proven to be the best combination for effective results. However, digital transformation and the introduction of layers and layers of machine-generated intelligence can make this combination even more successful than ever before. Imagine an idea that has come out of the human mind, but it can be analyzed, tested, and streamlined to mitigate risks or errors even before it has physically been put to the test? This can lead to unprecedented time and efforts being saved. Such amalgamation of human and machine efforts can influence the chemical industry to fast-paced innovations, productions, operations optimization, and other concurrent developments.

04. Preventative Measures and Predictive Forecasting

In today’s industrial world, competition is steep and it is essential for enterprises in the chemical industry to be prepared and to be proactive. AI and machine learning tools can help a great deal in this by predicting snafus or future maintenance requirements. Advanced analogs and mathematical models can also be used to estimate oil, gas, and other raw material demands so that the companies can streamline their supply chain in a manner that avoids potential delays and last-minute cost hikes.

While these applications of AI and machine learning cover the broad spectrum when it comes to the chemical industry, there is still a lot of research and development going on in this field. As the world embarks upon a new journey of Industry 4.0, it would be interesting to see more transformations brought in by the use of artificial intelligence in the chemical industry.

Where is the Challenge?

AI-enabled systems are helping companies achieve objectives, goals, and enhance user experience. However, each time a system is not maintained correctly, the process begins to decay by behaving unpredictably. Organizational leadership can thus lose confidence in AI as a process enhancement system. Moreover, organizations should have the required maturity—which encompasses strategy, culture, organizational structure, and core capabilities—to own an AI-based system responsibly. In some cases, this may mean a withdrawal or rejection of AI technologies based on unsuccessful attempts to adopt AI. Organizations or their customers may lose trust in AI as a technology, branding it as unpredictable or too hard to operate. This outcome will push real digital transformation further away and cause the organization to miss out on the powerful impact that AI can have on their business.

Microsoft has worked on defining an operational model that helps organizations assess their attributes that contribute to the adoption of AI technologies. A well designed AI Maturity Model assists organizations in gathering information related to the core characteristics required for teams. Forward-thinking organizations that have embraced AI are witnessing improvement in user behavior. The transformation meets all prime objectives of a Chemical company, mainly driving productivity, sales, Environment Health and Safety, appropriate management of hazardous chemicals in the warehouse.

Figure 2AI Maturity Model

Additionally, Microsoft has compiled prescriptive guidance associated with adopting the right AI technologies for an organization’s current maturity level, while advising on how to increase maturity to embrace more advanced AI capabilities.

Key Takeaways

  • AI and machine learning in the chemical industry can be critical players in clinical trials, farm trials and overall study of chemical molecules.
  • With the cutting-edge application of AI and machine learning tools, the chemical industry can streamline its processes and supply chain for better operations and enhanced profitability.

Explore how you can transform processes, engage customers, and modernize your apps with Microsoft Business Applications.

About XcelPros

XcelPros is a Chicago-based company and delivers transformation through technology. We offer business and technology solutions with deep industry experience in Chemical, Pharma, Life Sciences (including Medical Devices, Bio-Medical & Biotech), Insurance, Discrete Manufacturing, Process Manufacturing, Distribution and Food & Beverage.

XcelPros is a Microsoft Gold Partner, Direct Cloud Solutions Provider (CSP) and a Systems Integrator (SI) offering software licensing, implementation and consulting services for Microsoft Dynamics 365, CRM, Microsoft Dynamics AX, Business Intelligence & Analytics (Power BI), SharePoint, Office 365 and Azure (Cloud, IOT, Microsoft Flow amongst many others).

Our mission is to provide integrated technology solutions that amplify impact and empower our customer’s businesses. We believe technology is the key enabler of exponential growth for us and our customers.

Contact XcelPros today to transform your business.

Call us toll-free – 1.855.411.0585 (or) visit www.xcelpros.com

The role of an ERP System in Handling Hazardous Chemicals

The role of an ERP System in Handling Hazardous Chemicals 1920 1080 Xcelpros Team

At a Glance

  • The chemical manufacturing industry is under severe scrutiny for ecological and environmental reasons. Chemical companies are required to maintain various documents such as safety data sheets and hazard labels with pictograms.
  • The hazardous chemicals produced or used by the industry need to be tracked and managed to meet the rules and regulations set forth by OSHA.
  • The right ERP systems can help companies in collating and systemizing the records of these hazardous chemicals for proper usage and disposal in a responsible manner.

Chemical Manufacturers – Managing Compliance

The chemical manufacturing industry has an expectation and in many cases even a mandate to work with added responsibility when it comes to the usage, transport, and disposal of hazardous chemicals.

Out of the more than 80,000 chemicals currently used in the United States, most haven’t been adequately tested for their effects on human health. Contract Research Organizations Global Market Report

Chemical manufacturers are an integral part of the overall chemical value chain, and the overall supply chain from ‘raw materials to finished products’ needs to be maintained with additional hazard visibility. How would these manufacturers manage compliance and adhere to proper documentation of hazardous chemicals? The answer lies in an ERP software system that can facilitate record maintenance, compliance, and visibility. A reliable ERP system has become the need of the hour for chemical companies – to act proactively and to avoid environmental or human mishaps.

The ‘One Microsoft Ecosystem’ with the embedded ‘Integrated Chemical Management’ solution will provide a comprehensive solution to aid all the needs of a chemical company – Supply Chain, Finance, Manufacturing, Quality, Document Management, or Chemical Data and Documents.

Figure 1Digital Business Transformation with One-Microsoft Ecosystem

Let us look at some of the ways compliance is achievable through the Microsoft ecosystem:

01.Being proactive instead of reactive:

Business processes would be simplified for bulk chemical or toll manufacturers if they could regulate hazardous substances from the point of inventory receipt through a purchase order or a manufacturing production order. Better management of dangerous materials is possible by an integrated chemical management system within ERP software. This unified system can automatically overlook the formulations, spot the hazardous substances, and evaluate them for their further use. This way, manufacturers will get to know the risk levels involved regarding the usage and distribution of chemicals. Identifying these hazardous substances at the beginning stage also allows manufacturers to act proactively rather than working reactively, leading to better safety.

02.Developing a Prototype/ Standard Operating Procedure for Worker Safety

It is important to note that manufacturers have found that even if they have implemented safety procedures in place for the wide range of chemicals used, mishandling and mismanaging the chemicals will jeopardize workers’ safety. Working with hazardous chemicals is inevitable for chemical companies making it business challenge to handle production and distribution of finished products. Microsoft Dynamics 365 integrates natively into Sharepoint and One drive, which are Microsoft’s document management systems. These integrated tools in the Microsoft ecosystem provide the ability to develop a standard operating procedure or prototype process to handle chemicals – avoiding chemical hazard accidents and enhancing workers’ safety on the shop floor. 

03.Facilitating Better Equipment Maintenance

Record maintenance for the equipment used in chemical plants is a tedious task. Microsoft Dynamics 365 helps in keeping a record of equipment maintenance and marking them for preventive/ proactive maintenance. These maintenance call-to-actions are system generated and can be automated, leaving minimal scope for manual errors. Chemical manufacturing companies can thus form a thorough strategy for equipment maintenance, repair, and operation.

Figure 2How an ERP System Helps in Managing Hazardous Chemicals

04.Systemizing Record Maintenance

The vast range of chemicals used by manufacturing companies need to be labeled for their chemical composition, risk factors, expiry dates, safety procedures, and other special instructions. There has to be a consolidated record of all these chemicals, their quantities, distribution, costs, etc. Such a humongous task is prone to different manual errors within legacy systems. Microsoft Dynamics 365 along with Integrated Chemical Management can maintain chemical data (for individual chemicals and on a consolidated level) through easy excel updates or interfaced updates.

Chemical companies can be assured of safely using,
distributing, and disposing of the hazardous chemicals through an automated workflow for adding and editing chemical data.

05.Meeting Compliance Standards

As mentioned earlier in the article, the world over, the laws are getting more stringent regarding compliance and regulations for hazardous chemicals. Chemical companies ideally look for an ERP solution that helps meet the local as well as international requirements, to function with least regulatory hassles.

70%of participants pointed compliance as the single largest priority for their company

80% of them cited monthly obligations to create, print, or affix workplace labels to containers in their inventory as a challenge

Per the 2017 Hazard Communication Survey

Microsoft Dynamics 365 with an embedded chemical management solution that can house chemical data, print GHS compliant labels, and Safety data sheets will be an ideal choice in order to reduce GHS related compliance issues.

To conclude, one could reasonably say that an advanced ERP system such as the Microsoft Dynamics 365 ERPs can become the backbone of record maintenance for hazardous chemicals. The chemical industry can benefit from this sophisticated software system and function seamlessly while also helping with environmental and personnel safety. Microsoft’s Chemical manufacturers Supply Chain solution provides a cutting-edge system to ease record maintenance, streamline the overall chemical supply chain, inventory, and warehouse management processes; and create a platform for productivity and growth.

Key Takeaways

  • An ERP system with chemical data is necessary for the chemical industry to manage OSHA and GHS compliance from within the system.
  • Microsoft’s integrated ERP software in conjunction with integrated chemical management solution is capable of smooth record-keeping of hazardous chemicals, print GHS labels, and safety data sheets.
  • Ultimately Chemical manufacturers need to ensure compliance along with environmental and worker safety with the help of the right ERP system.

Explore our Products page to learn about the different ERP Solutions available to jumpstart your evaluation process.

About XcelPros

XcelPros is a Chicago-based company and delivers transformation through technology. We offer business and technology solutions with deep industry experience in Chemical, Pharma, Life Sciences (including Medical Devices, Bio-Medical & Biotech), Insurance, Discrete Manufacturing, Process Manufacturing, Distribution and Food & Beverage.

XcelPros is a Microsoft Gold Partner, Direct Cloud Solutions Provider (CSP) and a Systems Integrator (SI) offering software licensing, implementation and consulting services for Microsoft Dynamics 365, CRM, Microsoft Dynamics AX, Business Intelligence & Analytics (Power BI), SharePoint, Office 365 and Azure (Cloud, IOT, Microsoft Flow amongst many others).

Our mission is to provide integrated technology solutions that amplify impact and empower our customer’s businesses. We believe technology is the key enabler of exponential growth for us and our customers.

Contact XcelPros today to transform your business.

Call us toll-free – 1.855.411.0585 (or) visit www.xcelpros.com

Chemical Industry Software Solutions

Active Ingredient Management & Potency-Based Pricing in Microsoft Dynamics 365 The Caustic Soda Example

Active Ingredient Management & Potency-Based Pricing in Microsoft Dynamics 365 The Caustic Soda Example 1400 820 Xcelpros Team

At a Glance

  • Active Ingredient Management and Potency-Based Pricing are highly relevant to process manufacturing, distribution, and other manufacturing industries.
  • The products in these industries consist of Active Ingredients, Compensating & Filler Ingredients (sometimes referred to as buffers, fillers and excipients).
  • Active Ingredients and Potency have a significant impact on price variations in-turn affecting downstream functions such as customer billing and value.
  • In order to calculate potency, it would be required to maintain min, max and target values of batch attributes such as potency, concentration and purity on items, inventory or batches.
  • The calculation of a potency-based price that is dependent on the percentage of active ingredient purity or potency can be achieved by maintaining an attribute-based price with algebraic equations.
  • The industry requires that the purity and potency of active ingredients be captured at the time of incoming inspection / receipt of the product or at the time of quality testing of goods received.
  • Batch attributes, such as potency and purity, captured at various stages of the operation have an impact on the value of physical and financial inventory.
  • Unit of measure conversion from weight or volume would be a key element in determining the appropriate price for a certain customer-specific batch and potency requirement.
  • Manufacturing an item with a specific active ingredient, requires an ability to maintain a specific weight or volume-based formula and be able to balance a batch using compensating and filler ingredients with a compensating factor.

Active Ingredient Management & Potency-Based Pricing: Which industries is this relevant to?

  • Chemicals (Specialty, Bulk and Distribution)
  • Pharmaceutical (Manufacturers & Distributors)
  • Food & Beverage
  • Cannabis
  • Distribution
  • Textile and
  • Paper

Active Ingredient Tracking

Highly regulated and process industries such as Chemical, Pharmaceutical or Food & Beverage have an inherent operational need to manage and account for active ingredients.

Batch attributes such as potency and purity are maintained in the system along with pricing based on target values. Behind the scenes, an algebraic equation combines the unit price, quantity, batch attribute – target & actual values and determines an automatically adjusted price within the target transaction such as purchase order or sales order invoice. A key element for active ingredient management is to be able to capture potency, purity or other batch attributes during quality testing of a batch. This allows you to view inventory by recorded batch attributes and reserve these batches for the appropriate transactions. As stated above, leveraging the pricing formula allows you to implement price adjustments to the downstream transactions based on actual values.

Microsoft Dynamics 365 for Finance & Operations has extensive out-of-the-box functionality to help manage active ingredients for both make and buy items.

Item Batch Attributes

Batch Attributes are properties of raw materials, intermediates or finished products that capture the key distinguishing factors for an inventory batch. These attributes vary by industry, use and other factors such as environmental.

As discussed above, in Microsoft Dynamics 365, you have the ability to manage item batch attributes such as potency and purity. The first step would be to create an item that is tracked at a batch level and define batch attributes that can handle a range of potency values. Dynamics 365 allows for managing multiple attributes for the same item, including one primary and multiple secondary batch attributes.

A few examples of batch attributes in different industries:

Industry Example of Batch Attributes
Chemical & Pharmaceutical Potency, Purity, Concentration etc.
Food & Beverage Fat Content, Percentage Weight, Moisture, Age
Steel / Metals / Mining % of Magnesium content
% of silver content
% of zinc content
Cannabis % of CBD
% of THC
Purity
Contamination etc.

The screens below provide a quick view of what batch attributes look like in Dynamics 365 for Finance and Operations.

Figure 1 Released products – Caustic Soda

Figure 2 Released Product Details – Product Tab Expanded

Figure 3 Released Products – Manage Inventory Tab Expanded

The screens below show product-specific batch attributes that can be set for either purity or potency with an acceptable range and a target value.

Figure 4 Released Products Attributes – Purity

Figure 5 Released Products Attributes – Potency

Purchasing and Receiving Items with Active Ingredients: Attribute-Based Pricing

There are times you may purchase one or more items from an approved supplier with a specific active ingredient and it may be required to track active ingredients’ potency at a specific value.

To learn more about the receiving process in Microsoft Dynamics 365, refer to “An Overview of Chemical Distribution in Microsoft Dynamics 365”

When an item has batch attributes, you receive the item batch and enter the batch attribute value along with the vendor batch details. The attribute-based pricing that is derived during invoicing alters the unit price and net amounts based on the potency value of the batch.

Purchase prices for active ingredient purity or potency can be maintained in the attribute-based pricing details section shown in the screen below.

Figure 6 Attribute-based pricing details

Figure 7 Attribute-based pricing for Caustic Soda based on Pricing Formulas

Figure 8 Purchase Orders – Purchase Order Lines

The screens below show the different batches in inventory with specific batch attributes.

Figure 9 Batch Tracking (These are the batches in inventory with specific batch attributes. You can add / remove columns you want to see in any view)

Figure 10 Released Products – Inventory Batch Attributes

Manufacturing with Active Ingredients

Caustic Soda is just one example to demonstrate active ingredient management in process industries. The same concepts can be applied to different types of chemicals or products that contain a variety of batch attribute requirements.

A formula is defined by taking active ingredients, compensating & filler ingredients and applying a conversion factor to calculate the totals on batch production. Microsoft Dynamics 365 is able to meet this requirement with the included batch balancing functionality.

Manufacturing to meet a certain potency by using active ingredients can be tricky if you do not have a way to calculate amounts based on the potency of the active ingredient batch picked during production. When a formula is setup to meet a specific potency requirement, the weight / volume of the active ingredient, compensating ingredient and filler ingredients need to be defined.

Figure 11 Released Products – Inventory Batch Attributes

Figure 12 Released Products – Formulas Details

Formulas can be setup by maintaining the quantities of Active, Compensating and Filler ingredients along with a compensating factor designed to automatically adjust batches.

With a compensating factor, the system will recalculate and adjust batches as needed to produce desired potency values. The compensating factor always refers back to the base value, in order to correctly calculate batch quantities.

Figure 13 Formula Lines – Compensating Principle

Figure 14 Compensation Principle Example

Batch orders created for the item in Fig. 14 (shown above) will have standard values proposed at the time of estimation. When the batch order is started and the appropriate active ingredient batch is picked with a specific potency, the batch balancing function in Microsoft Dynamics 365 provides the ability to balance the ingredients based on the compensating principle setup in the Formula.

Figure 15 Production Orders – Batch Order

Figure 16 Production Orders – Batch Balancing – By confirming the formula, the balanced quantity is automatically selected to continue through the process

Active Ingredient Attribute-Based Pricing for Customer Billing

Similar to purchasing, potency-based pricing can also be active during the sales process and within customer billing.

Using the same Caustic Soda example as above, if you sell a Caustic Soda tote, the calculation will auto-adjust billing based on the potency or purity selected. I will illustrate the Caustic Soda billing based on the purity of the batch consumed through the example below.

The Caustic Soda tote is created as a product in Microsoft Dynamics 365 with a specific purity of Na2O as the base attribute. This includes an acceptable range of Na2O purity and any other customer-specific requirement for the batch. The illustration of this example starts with assigning a batch attribute and a target value of the attribute. For Caustic Soda, we use batch attribute ‘purity’ of Na2O. Microsoft Dynamics provides the ability to capture multiple attributes for an item, in this case the purity of Na2O which is the active ingredient and the purity of Caustic Soda itself becomes relevant for pricing purposes.

Figure 17 Batch Balancing

Figure 18 Released Product Details – Label Print Options

Microsoft Dynamics provides the ability to maintain product-specific as well as customer-specific batch attributes. For example, if your customer has additional potency requirements on the batch, over and above purity, the system provides the ability to maintain acceptable potency values for the batches that would be sold.

Figure 19 Released Product Details – Manage Inventory Tab Expanded

Product information management in the system has the ability to maintain attribute-based pricing from trade agreements, which is a journal to maintain sales and purchase prices.

Figure 20 Compensation Principle Example

In the example shown in the screen below (Fig. 21), the sales price is maintained in pounds for an effectivity date that is tied to an attribute-based price calculation. This can include an algebraic equation that adjusts the price based on the purity or potency of the batch being sold.

Figure 21 Attribute-based Pricing – Trade Agreement for Sales Price

The figure below shows the calculation that includes the purity of Na2O and Caustic Soda if the price is dependant on both attributes.

Figure 22 Attribute-based Pricing Details – Trade Agreements

In this example, we demonstrate the use of a simple calculation based on actual purity and target values. The system would read the below calculation and, based on the actual value of the batch, automatically adjust the price on the customer’s bill.

Figure 23 Attribute-based Pricing

Figure 24 Attribute-based Pricing

The invoiced sales order below shows the adjusted price for the batch based on the purity of Caustic Soda.

Figure 25 Sales Order with an Invoiced Line

Key Takeaways

  • Active Ingredient Management functionality in Microsoft Dynamics 365 distinguishes the “Active” content of the material from the other compensating or filler ingredients.
  • This function ensures that a company gets paid for the active ingredient content it delivers to its customers and pays its vendors only for the active or potent content of the product.
  • Microsoft Dynamics has the ability to proportionately adjust price on downstream transactions based on the quality test results captured on the Batch Attribute which determines the percentage of the Active Ingredient in the product.
  • The system has the ability to track and maintain inventory based on the percentage of the Active Ingredient.
  • Microsoft Dynamics 365 for Finance & Operations delivers powerful and comprehensive out-of-the-box functionality to support Active Ingredient and Potency Management that is critical to the process and other highly regulated industries.

About XcelPros

XcelPros is a Chicago-based company and delivers transformation through technology. We offer business and technology solutions with deep industry experience in Chemical, Pharma, Life Sciences (including Medical Devices, Bio-Medical & Biotech), Insurance, Discrete Manufacturing, Process Manufacturing, Distribution and Food & Beverage.

XcelPros is a Microsoft Gold Partner, Direct Cloud Solutions Provider (CSP) and a Systems Integrator (SI) offering software licensing, implementation and consulting services for Microsoft Dynamics 365, CRM, Microsoft Dynamics AX, Business Intelligence & Analytics (Power BI), SharePoint, Office 365 and Azure (Cloud, IOT, Microsoft Flow amongst many others).

Our mission is to provide integrated technology solutions that amplify impact and empower our customer’s businesses. We believe technology is the key enabler of exponential growth for us and our customers.

Contact XcelPros today to transform your business.

Call us toll-free – 1.855.411.0585 (or) visit www.xcelpros.com

overview of chemical distribution in Microsoft dynamics 375

An Overview of Chemical Distribution in Microsoft Dynamics 365

An Overview of Chemical Distribution in Microsoft Dynamics 365 1400 820 Xcelpros Team

At a Glance

  • Failure to meet customer demand at Chemical Distribution companies
  • Overview of End-to-End supply chain processes including solutions to increase operational efficiencies
  • Overview of planning and inventory management for bulk chemicals and packaged chemicals
  • Best practice depictions of typical Chemical distribution processes including the need to track hazardous chemicals, product labels, shipping labels, safety data sheets, certificate of analysis and shipping documentation
  • Quick glimpse of a chemical distribution company in Microsoft Dynamics 365

If you are a chemical distribution company, it is all about optimized supply chain, warehouse and floor operations. In the current day, you are more a supply chain partner to your customers, anticipating their needs and helping them stay ahead of their competition.

Chemical distribution industry is on a massive growth curve now more than ever. There is a need to set your processes straight and streamline supply chain with sufficient controls in place to keep up with the pace of the market.

You need to organize your warehouse in a way that can provide an optimized pick route for your warehouse operator to pick inventory for break bulk, repack operation or an outbound shipment. Inventory transactions and storage need to be planned with precision while handling hazardous chemicals (HAZMAT).

There are 4 key processes that matter to a chemical distribution company:

  1. Order-to-Cash: Ability to take a customer order efficiently and deliver within the shortest time / customer requested date.
  2. Procure-to-Pay: Ability to manage purchase orders and receiving efficiently, optimize spend on procurement to avoid high capital inventory spend.
  3. Inventory Management: Maintain optimal inventory levels without excessive capital spend. Ability to conduct inventory operations seamlessly with the desired visibility.
  4. Break Bulk Operations: Applicable if you receive in bulk totes, drums or tankers and do pack-downs into smaller pack-sizes.

From 2012 through 2017, specialty chemical distribution increased by a compound annual growth rate (CAGR) of 5.6% each year, to a global market size of about €97 billion.

There is also an anticipated growth in specialty chemical distribution, which will ease slightly, to 5%, through 2022 -Boston Consulting Group

The Pain Point – Warehouse Chaos & Lack of a Trace on Inventory Movement

If this connects with you, then you are one of the many companies that suffer with lack of inventory optimization and procedures to move inventory from cradle-to-grave in a methodical manner.

This article provides insights on key processes within Chemical Distribution companies and the value delivered by Microsoft Dynamics 365 for Finance and Operations to this industry.

User Story

One of our chemical customers has 3 big warehouses with bulk as well as packaged chemicals stocked in row, rack and bins spread across multiple aisles. Some of these chemicals require temperature control and many have restrictions on how they need to be stored to avoid hazards. Their focus was just the basic must-haves and not necessarily a well-organized warehouse. The warehouse space was highly disorganized making it difficult to track inventory movements in and out to fulfill customer demand.

To top it off, operators had poor operational practices of inventory movements to staging. One of their high volume orders involved a break-bulk operation from a 55 gallon drum of bulk chemical. Operators would carry the drum to staging, dispense the chemical for the order and leave the drum at staging without recording the location / remaining inventory for the batch. At best, inventory numbers were manually written on a tag attached to the drum and not within the system.

This process created many inefficiencies downstream:

  • The physical space within “Staging” was limited. However, the drums and totes for most break-bulk orders were still left at staging. The size of staging grew everyday. The system showed the drums to be still at their primary inventory location. When picking for an order, the operators check the primary location first and when they cannot locate the drum in inventory, they launched a massive hunt for the missing drum in staging by manually checking each tag. With time, some operators developed tribal knowledge on where to look for inventory – staging or primary. For other temporary workers, it was extreme inefficiency.
  • Lack of a method to properly track inventory movement.
  • Inventory counts were completely inaccurate as they would constantly adjust inventory for missing / untraceable inventory.
  • With inaccurate counts, planners ordered more supply to fulfill customer demand.
  • The inaccurately stated inventory caused over-supply and more bulk material than needed / could be handled.
  • Due to the chaos, conducting a physical inventory count was a Herculean task. As the operators traced the missing inventory stuck at unplanned staging locations, it caused further imbalance of inventory in the warehouse.

The Ideal Journey

Be it chemical manufacturing or distribution, you need to analyze how your company operates, your growth initiatives and business goals for the next 5 years.

Below are a few points that can help improve your operations:

  • Review your warehouse storage and design – locations and inventory groupings.
  • Create proper location directives to adhere to all restrictions on chemicals based on properties.
  • Number your locations by aisle, row, rack and bins or aise, row and rack to the bare minimum.
  • Stock your fast moving items optimally to speedup packout work orders and shipments.
  • Label the bulk containers at the time of receiving with a barcode that can be scanned.
  • Label the put away locations as well as staging locations to count how many items and quantities by lot are available at a specific location.
  • Give the warehouse user the ability to sign in to a mobile device to scan a work order that provides real time work details and status of orders.

Inventory that is accurate and visible is the key to efficiently operate a chemical distribution company

Chemical Industry – Process & Procedure

You will notice some commonalities between manufacturing and distribution of Bulk / Speciality Chemicals with respect to receiving, inventory, planning, shipments and warehouse management.

The basic processes within chemical distribution industry are centered more around warehouse management, inventory, planning, repacking, light manufacturing, shipping and receiving. While Chemical Manufacturing also includes extensive route operations, resources and elaborate Work-in-Process (WIP) testing.

Let us dive into typical processes within a Chemical Distribution company:

01. Purchasing and Receiving

Purchased products are bulk chemicals, packaged chemicals, packaging items, labels and other supplies. These products are almost always purchased from an approved and primary vendor / supplier.

There are 2 statistics that determine the course of action with respect to future purchases that could be shown through reporting and analytics.

  • Your buyer’s decision to ‘switch to an alternate vendor’ for a specific purchase, and the number of times ‘a switch to an alternate supplier’ occurs.
  • A vendor rating that depicts the percentage of purchases that were delivered on time and in full is another statistic that your buyer may be interested in.

02. Inventory and Warehouse Management

  • Organize by aisle, row, rack, bin, lot / batch, pallet IDs and box IDs. Your materials manager that is responsible to organize the warehouse is always looking for ways to stack inventory into row, rack and bins by pallets with a license plate number. The pallets could be scanned to easily retrieve inventory using a mobile device.
  • Organizing inventory through optimization of the warehouse is the primary responsibility of anyone keeping inventory counts accurate.
  • Majority of the issues within your warehouse are with respect to lost inventory, inability to track a product, incorrect counts or products constantly showing up in wrong locations, especially at the time of physical inventory or when inventory inspections are done. The overall chaos could be attributed to multiple issues in processes and inefficiencies within methods.
  • Being able to track-and-trace inventory, especially when you are performing repack operations, requires visibility of how inventory is moving into pack sizes.
  • Labeling of all locations in the warehouse is critical to streamline operations. Labeling of the locations can be done a couple of different ways – Serpentine and Standard Methods. Most companies follow a 4-dimensional naming standard – Aisle-Rack-Row-Bin.

03. Materials and Capacity Planning / Master Planning

  • As a Chemical distribution company you need to plan for break-bulk / repack, labeling operations and need to track capacity of human resources, label printers, packaging machines etc.
  • Typical operations involved such as repackaging or break bulk would require those stations to be available along with operators who perform the operation.
  • Planning supply demand signals for distribution is a challenge of its own, however when done correctly, there is no better solution to fulfill orders.
  • Be it static or a dynamic plan, there are daily decisions made on how to allocate inventory for a certain repack order.

  • Being a distribution company, you see fast moving or express items that require your planning to be more agile and be able to operate on a net change mode rather than a complete recreation every hour. Providing that flexibility would help your planner make key decisions and set priorities on work orders to optimize the work effort.

04. Production and Packaging

  • Production in Chemical Distribution companies includes light manufacturing operations such as repack and break-bulk. A bulk container is opened to consume quantities in the base unit of measure such as kilograms or pounds and yield packages in eaches to fulfill a sales order.
  • The work order includes operations such as Filling, Packing, Labor, Quality and Labeling. The produced yield will give you the quantities and cost to produce each bottle / container.

05. Labeling

Labeling would be an additional operation on the shop-floor work order. An integrated label management solution would be an ideal to be included within the workflow of the business process.

06. Order Management

  • Your customer service places an order with the correct ship-to address that may either come from the Customer Master or it could be a brand new address that you have never shipped before. You would need to add this to the sales order for the repacked chemical or a packaged product.
  • Once inventory becomes available, your warehouse picker needs to select an optimal pick route to pick all orders in the pipeline for shipment.
  • The items picked for each individual sales order would need to be
    • packaged into appropriate boxes
    • shipping labels and DOT labels printed and applied
    • shrink wrapped
    • print and attach a certificate of analysis, safety data sheet, packing slip and a bill of lading for a truck or a UPS or Fedex label to be printed with a tracking number for small parcel

07. Billing

The final step in this process would be to send a bill to the appropriate bill-to address of the Customer.

What Does a Distribution Company Look Like in Microsoft Dynamics 365

Below is a quick view of what your company would look like within Microsoft Dynamics 365 assuming all required raw materials are available in stock.

01. Products

  • This information is maintained within the Product Information Management (PIM) module, and for a chemical distribution company, it is the heart of supply chain and manufacturing.
  • At a high level, it falls into the following categories:
ITEM GROUP TYPE DEFINITION
ITEM – RM RAW MATERIAL INGREDIENT PURCHASED
ITEM – INT INTERMEDIATE PRODUCED AS PART OF THE FORMULATION
SKU FINISHED PRODUCT CONTAINERIZED FINISHED PRODUCT THROUGH A FORMULA
LABEL PACKAGE – RAW MATERIAL LABELLED RAW MATERIAL
KIT FINISHED PRODUCT PACKAGED INTO 1 CASE WITH SAME SKUS
BOX PACKAGE – RAW MATERIAL PACKAGE PURCHASED
CONTAINER (TOTE, DRUM, etc) PACKAGE – RAW MATERIAL PACKAGE PURCHASED
PACKAGE (CASES, KITS, etc) PACKAGE – RAW MATERIAL PACKAGE PURCHASED
SERVICES SERVICE  
SUPPLIES EXPENSED PACKAGING MATERIAL, LAB SUPPLIES, OFFICE SUPPLIES, etc.  
  • On top of this, you need to define which of the inventory products require tracking by batch, location and license plate turned on, the coverage settings, lead times and other item attributes such as chemical properties, label elements (hazard statements, pictograms, hazard symbols, etc.)

02. On-Hand Inventory

  • You need a detailed view of inventory slice-and-dice by batch, serial number, site, warehouse, location and license plate number (could be a pallet or other depending on how the containers need to be grouped) for each product. This view will provide a snapshot of inventory to multiple roles such as a planner, buyer, customer service representative, materials manager.
  • Your controller will be most interested in an Inventory value report that shows the glimpse of inventory quantity, total value along with physical and financial cost by unit. Having a view into on-hand inventory value for both inventory and WIP would need to be defined that can be reconciled back to General Ledger.
  • In Dynamics 365, there are many different ways of viewing slice and dice of inventory. One such screen is an on-hand list view that displays all available inventory based on the dimensions selected on the dimension display that allows a user to select site, warehouse, location, Batch, Serial Number etc.

03. Sales Orders

  • Your customer calls to place a sales order for chemical products, kits or cases. In Microsoft Dynamics 365, a customer can have the products shipped to their own ship-to addresses or a drop ship address directly to their customer.
  • Customer service creates a sales order with customer’s PO number and adds the kits or cases that need to shipped to the customer. The order can include specific instructions and notes as requested by the customer. Notes / attachments can be categorized to be printed on specific downstream documents such as packing slip, BOL etc.
  • For distribution, Microsoft Dynamics provides a DOM (Distributed Order Management) indicator that allows the user to have a complete picture of inventory across the warehouse and handle order process to fulfill orders correctly.

04. Master Planning

  • Depending on how the packaged items have been setup for planning (Min/Max, Requirement or Period) with the lead times and calendar setup, you have the ability to run a master plan in a regeneration mode – which nets all supply, demand, planned supply and forecasted demand or in net change that considers changes since the last full run of MRP.
  • Typically you would run master planning for all items or items under a certain coverage group, a good example would be your “Fast moving items”.

05. Production of Kits and Cases

Microsoft Dynamics 365 has extensive functionality to support all production operations for the Chemical Distribution company. The operations can be streamlined to be made really simple or suit your current state on the shop-floor.

5.1 Production Order

  • You can go with a Production order in Microsoft Dynamics 365 if you need your finished goods produced, work planned along with tracking operations, routes, resource cost and scheduling of jobs.
  • There are different views available that would be based on security roles and privileges that allow different sets of users to view the production order, picklists, route cards or job cards.

5.2 Visual Planning and Scheduling of Jobs Using Production Gantts

  • D365 has a powerful visual planning and scheduling tool that comes handy when scheduling a job / operation for all sales orders planned during a day, week or a month.
  • It gives you the ability to reschedule and re-prioritize an operation or a work order depending on customer demand.

I recommend reading one of our prior blogs – “Operational Challenges in a Chemical Company: Key Solutions”. This blog will help you learn more on production and operations.

5.3 BOM Journal

  • BOM Journals are used in the production process to add finished goods into inventory and to reduce the inventory components within the Formula or Bill of Material.
  • BOM Journals help reduce the process time instead of using a full production order.
  • A BOM journal, however, cannot perform functions like tracking jobs and operations and cannot be a part of visual planning.

06. Shipments

  • The difference between domestic and international shipments is the add on export documentation that needs to be attached for international shipments.
  • For most customers you need a common set of documentation that can be generated from the application.
  • With advanced warehouse management, outbound work and shipment wave is created to pick products and put-away for packaging (There is too much to discuss about warehouse work and will be a topic of its own).

Before the product can be shipped, Microsoft Dynamics 365 enhanced with the power of Integrated Chemical Management (iCM) prints the below documentation package.

  • Warehouse Work – Displays sales order number, work number in barcode format, product batch/ lot number in barcode format, license plate information in barcode format, put-away location in barcode format. Work is processed using a barcode device.
  • Packing Slip – Displays the sales order number, customer PO number, delivery method, ship date, product to be delivered, quantity delivered, unit of measure, batch number/ lot number delivered, ship to address, ship from address, back-order quantity (if any), etc.
  • Bill of Lading (BOL) – Displays ship to address, sales order number, hazard information, pallet information, number of boxes, master bill of lading number (if any), etc.
  • Certificate of Analysis (C of A) – Displays product, company logo (for private label customer logo), test specifications, test results (min/ max or average), visual, fraction, integer tests, approver information, expiration dates/ best before dates, test dates, etc.
  • Safety Data Sheets (SDS) – Displays product label information, pictograms, hazard statements, warning statements, transportation/ DOT information, by country, by language, CAS number information, etc.
  • Shipping Labels – Displays company logo, ship to address, product information, etc.

07. Invoicing

After shipments are done, Microsoft Dynamics 365 gives you the ability to create invoices in a batch mode or mass select shipments for invoicing. The system also gives you the ability to print or email a specific customer email address.

Key Takeaways

  • The above information should give you a decent picture in understanding your current state and what your company would look like in Dynamics 365.
  • You can streamline your processes with a robust, simple, easy to understand yet powerful system like Microsoft Dynamics 365.
  • The ability to integrate with other Microsoft applications allows your company to fully integrate and enhance efficiencies.
  • Power tools such as master planning and production gantt charts provide the ability to plan and schedule your production operations.
  • Microsoft Dynamics 365 will help you boost your business efficiencies through the “one Microsoft ecosystem” and enhances the interoperability across other Microsoft applications.
  • Microsoft Dynamics 365 has the ability to address most, if not all requirements for a Chemical Distribution company out-of-the-box.

What does your company look like in Microsoft Dynamics 365? Talk to us to take a test drive.

About XcelPros

XcelPros is a Chicago-based company and delivers transformation through technology. We offer business and technology solutions with deep industry experience in Chemical, Pharma, Life Sciences (including Medical Devices, Bio-Medical & Biotech), Insurance, Discrete Manufacturing, Process Manufacturing, Distribution and Food & Beverage.

XcelPros is a Microsoft Gold Partner, Direct Cloud Solutions Provider (CSP) and a Systems Integrator (SI) offering software licensing, implementation and consulting services for Microsoft Dynamics 365, CRM, Microsoft Dynamics AX, Business Intelligence & Analytics (Power BI), SharePoint, Office 365 and Azure (Cloud, IOT, Microsoft Flow amongst many others).

Our mission is to provide integrated technology solutions that amplify impact and empower our customer’s businesses. We believe technology is the key enabler of exponential growth for us and our customers.

Contact XcelPros today to transform your business.

Call us toll-free – 1.855.411.0585 (or) visit www.xcelpros.com

operational challenges in a chemical company solutions

Operational Challenges in a Chemical Company: Key Solutions

Operational Challenges in a Chemical Company: Key Solutions 1400 820 Xcelpros Team

At a Glance

  • Despite macro factors such as rising interest rates and impact of tariffs, Chemical industry in the US is expected to increase production in 2019.
  • Per estimates by the American Chemistry Council (ACC), chemical output in the US is expected to rise from 3.1% in 2018 to 3.6% in 2019.
  • Higher production translates to higher capacity, and production managers need to equip themselves well to brace the changing environment.
  • Technology is one such critical area that modern-day production managers see as a key enabler to ease their growing challenges.
  • In chemical industry, raw materials weigh in close to 50% of the cost of production. With the US government proposal of hiking tariff by 25%, the cost of raw material from China to US could go over $3B.
  • A sophisticated business application (ERP) will help Plant/Production Managers keep up with the challenges and track key metrics such as inventory turnover and manufacturing throughput to optimize cost of production.
  • Noncompliance to GHS Labeling standards could lead to penalties of up to $127,000. Production managers will benefit from integrated labelling solutions to streamline shop floor activities.

Production in modern-day chemical companies involves a plethora of unforeseen challenges – all the way from raw materials and their procurement, to quality, fluctuating demand, tariffs, dwindling margins, capacity and resource planning, and more importantly, confidentiality of formulas.

Regulatory and compliance needs are relentless and require utmost care operationally. Off late, the tariff imposed by the government adds additional stress on the margins and supply chain.

Tariffs require you to leverage your resources more efficiently to achieve better margins while promoting trade. As a result of tariffs, you are now required to explore local near-shore vendors that can fulfill your organization’s supply needs within the constraints of your price. Despite the short-term instability, in the long run this is only good for the growth of your local ecosystem.

Necessity is the mother of invention. Due to the changing market dynamics, Plant Managers are now forced to engage in technology alternatives that will help realize sustained efficiencies in people, process and technology. Regardless of these inherent challenges the responsibility of the Production Manager to keep the plants production moving forward without any hindrance takes precedence and requires deep industry knowledge, relentless watch and extreme skill.

The job roles of Production Managers have only grown in complexity, demanding higher amount of control and planning within supply chain. They operate in an environment which is seeing heightened competition, higher expectation from customers, stringent regulatory norms, coupled with volatile raw material price that stresses margin. They ought to comprehend the multifaceted relationships between the unpredictability of raw materials, optimal utilization of operating units and highly fluctuating demand from customers. The industry relies on technology solutions to optimize planning and production schedules.

Production Scheduling is a quintessential function of a Production Manager. Scheduling is complex and needs to take into account numerous elements such as –

  • Planning of resources
  • Continuous production
  • Optimal asset planning
  • Fluctuating demand
  • Tighter lead time
  • Procurement delays
  • Outages
  • Quality check
  • Recalls, etc.

This article examines 5 key challenges faced by Production Managers to optimize planning and ways to mitigate them.

01. Fluctuating Demand for Products

Per Institute of Supply Management (ISI), the industrial sectors in the US are expected to increase capital spending from 8.7% in 2017 to 11.4% in 2018. E.g. the housing sector is forecasted to increase capacity from 1.2M units in 2017 to 1.31M (2018) and 1.34M (2019). Per ACC every new house contributes on an average $15,000 to the chemical industry. Per estimates by the American Chemistry Council, chemical output in the US is expected to rise from 3.1% in 2018 to 3.6% in 2019.

3.7%

Unemployment Rate

With business confidence growing and unemployment dropping, the US economy is set to hum, if not roar, through the rest of 2018.

– Bureau of Labor Statistics | 2018

2.7%

Capital Expenditure

The capital spending in the industrial sectors is expected to rise by 2.7% in 2018.

– Institute of Supply Management (ISI)

With the economy picking up, below are the estimated earnings from some leading chemical manufacturers in the US.

Companies Headquarters Expected Earnings growth in 2018 Top product
Kronos Worldwide Dallas, TX 41.1% Titanium Dioxide
Westlake Chemical Houston, TX 25.7% Vinyls and Olefins
Kraton Corporation Houston, TX 30.6% Polymers
Albemarle Charlotte, NC 16.9% Lithium
Celanese Irving, TX 20-25% Acetyl intermediates

While these developments position chemical companies in a bright spot, not all is bullish. Such growth intensifies competition among peers to capture market share and innovate to differentiate their offerings. The race for differentiation and providing niche services to gain customer loyalty results in higher operational complexities. Production Managers now handle unprecedented demand from customers, tight deadlines, and overstressing resources.

Production Managers need an air-tight strategy to meet such sporadic demand and ensure business continuity. A sophisticated full-function Enterprise Resource Planning (ERP) software is equipped to handle such strategies and ensure complete visibility and control over the entire supply chain and underpin informed decision-making.

Some of the critical elements in production planning and control includes Master Planning, Production Scheduling, and Production Control (see below).

This is an on-demand economy. Production managers often run into situations where customers increase sales order quantities on the fly. Though this is good from a sales perspective, it adds immense pressure on Production.

Let’s take an example of a Chemical plant:

  • Your customer calls and asks to update order quantity from 5000 to 10000 pounds.
  • To meet this demand, the production manager needs to be able to respond quickly by evaluating resources at hand and scale batch sizes in the reactor.
  • If your order management system is designed well, your customer service can update the sales order quantity and set the priority on the order to high.
  • Order priority can be designed to consider criticality of demand, customer categories – A, B, C etc. or even your relationship with your customers. This signals your MRP system to issue an updated production order to reflect the higher batch size.
  • The production supervisor needs to review production schedule and adjust resources as required to accommodate this expedited demand.

Such situations are quite common at a chemical company. Plant Managers recognize the need for an integrated ERP system to manage communication between all functional areas seamlessly.

The production control module within Microsoft Dynamics 365 offers powerful Gantt Charts to visually represent the flow of production, map resources, checks on material availability or inventories, utilization of machineries, etc., helping PMs to control and optimize the production plan and make informed decisions. Gantt charts within Dynamics 365 for Finance and Operations provide a uniform view of scheduled activities within a defined time interval including:

  • Scheduled jobs from production orders – Gantt charts allow the production managers/schedulers to modify production plans either through a drag and drop mechanism or from the menu option. Job scheduling indicator on a Formula or a BOM needs to be turned on in order to schedule jobs for production.
  • Jobs from planned production orders – These are planned production orders that are to be scheduled. Scheduling will only be in place when the production plan converts to an actual order and the production order is in a scheduled status.
  • Hourly schedules of all jobs – A calendar that has active working times is a prerequisite for all production activities. Scheduling can be done on hourly timelines if needed and gives you the true picture of job status for the day such as “jobs that have started”, “jobs that have ended”

The Gantt Chart in Microsoft Dynamics 365 provides a view of production orders organized by order and resources respectively. Production Managers get a real-time pictorial view of a production schedule that displays scheduled production orders, material availability as well as resource capacity within the organization. These screens provide the ability to drag and drop and change schedules as deemed required.

View of the resources available or engaged –

02. Raw Materials – Volatility in Commodity Prices

Chemical manufacturers use crude oil and natural gas byproducts as the base for their product, which accounts for about 50% of the production cost. Oil and gas are extremely volatile commodities, and their pricing is subject to a multitude of macroeconomic factors, including geopolitical risks, OPEC member nation policies, sanctions, currency fluctuation, etc. – which chemical manufacturers have no control over.

US was ranked amongst the most expensive destinations to manufacture chemicals, but ever since the accessibility to extract shale gas in 2014, the country’s indigenous chemical companies has had an edge considering lower energy cost and raw material.

25% tariff hike effective January 2019 will impact nearly 1,363 chemical and plastic productsWith raw materials weighing in about 50% of the cost, it is important for Chemical companies and their Production Managers to be vigilant of the cost of raw material. China is a key exporter of major raw materials to the US, and with 25% tariff hike effective January 2019, it will impact nearly 1,363 chemical and plastic products valued at about $13B in 2017.

An effective ERP solution will help Plant Managers keep track of key metrics such as inventory turnover and manufacturing throughput to optimize cost of production. As ERP tracks data real-time, it offers the following benefits to help minimize the effect of price fluctuation in raw material:

  • A modern-day ERP system is best suited to give Production Managers an effective and transparent solution to track actuals and accordingly account for cost of goods sold, revenue, margins, cash flow, etc.
  • For organizations with cross-geographic manufacturing locations, ERP can be used to analyze the arbitrage available in low cost manufacturing destination and offset it with any other high cost location. This helps in finding newer efficiencies to ease the strain on high cost areas.
  • It can help analyze order volumes, budget for cost, and arrive at better pricing and production planning.

03. Hazardous Chemicals & Associated Compliance

Supervising the production of hazardous chemicals requires highest attention for safety, and this isn’t a unique cite for a Production managers. Safe handling of chemicals is not only a regulatory compulsion but also a moral obligation on part of chemical companies. Labeling is one of the major operations in the production routes and would need availability of a functioning label printer on the production floor to complete the packaging step in production.

Noncompliance to GHS standards can attract monetary penalties to the tune of $12,600 per violation, while the more serious ones could range up to $127,000. It is also detrimental for your company reputation.In the US, companies dealing with hazardous chemicals including manufacturers, distributors, transporters and end-users must adhere to the Globally Harmonized System (GHS) label compliance requirements.

Production managers must ensure that there are systems and technologies in place to schedule shop floor activities diligently to avoid two or more reactive chemicals to come in close contact during staging. This brings out the need for a labeling solution that prints properties, characteristics and batch information of the chemical such as batch/lot number, test specifications, etc.

Hazardous chemicals need to be distinctly marked for readability and cautioning. Labeling applications such as Integrated Chemical Management (iCM) within the Microsoft Dynamics 365 are capable of addressing regulatory requirements that require embedded workflows with Production. iCM not only provides label management (including private labels) as per GHS standards, but also includes Safety Data Sheet authoring and management. iCM reduces human error in printing labels during a production run as the system automatically knows which product labels to print during the process.

04. Stringent Quality Checks

Quality checks and recalls are key activities that have a long lasting impact on the reputation of the organization. Chemical industry is subject to stringent regulations that requires heavy documentation across processes such as production, use of raw materials, packaging, etc. Such documentation improves visibility in the supply chain and enhances traceability of the product in an event of an inquiry, recall or audit.

Chemicals are used as a base in multiple industries such as automotive, paints, food & beverage, appliance, electronics, packaging, textiles, cosmetics, toys, etc. The graph below captures an indicative number of recalls across industries in 2016.

A closer look reveals the reasons for such recalls. In the IT and Electronics industry, faulty batteries was one of the most cited reasons for the recall. The medical industry attributed voluntary recall of stimulants due to hazard concerns as one of the reasons, while the chemical industry blamed faulty packaging/labeling chemicals for the recall.

Microsoft Dynamics 365 has the ability to track and trace products at a batch or lot level from the source to the end user. The application can help in many ways:

  • Ensure regulatory compliance
  • Track and trace batches/lots to identify damaged or contaminated products
  • Visualize the journey of the product from the manufacturing site to its end-users
  • Using analytics, chemical companies can trace the root cause of the issue and treat it accordingly

05. Resources & Production Throughput

Managing the production shop floor requires diligent planning of human capital and other interdependent machine resources such as blenders, reactors, mixers, hot ovens, separators, packaging, tanks etc.

Production Planning and Scheduling can get overwhelming depending on the number of resources and shifts you manage. Getting more output from less resources is something Production Managers can relate to. They are under pressure to increase production volume with resource constraints. Recurrent variation in batches to meet higher volume demand and continuous production often sways away from achieving consistency in batch results.

Real-time data monitoring using measured and inferred values can increase production by up to 4%Microsoft Dynamics 365 can be instrumental in tracking real-time production data using measured and inferred values to track batch completion, thereby reducing batch cycle time. The solution can help determine the quantum of ingredients that goes in to production at each stage to achieve consistency. Data collected over a period can be modeled using analytics to predict any event that can potentially disrupt the cycle and decrease operating cost.

Being able to track & analyze real-time data can also improve asset/resource effectiveness by up to 4%. Unscheduled downtime due to maintenance or breakdown isn’t new to manufacturing plants. Using predictive analytics, past performance of assets can be harnessed to model scenarios to detect equipment health and prevent failures.

Key Takeaways

  • The US Chemical industry is facing strong tailwind from harnessing its shale gas reserve and soaring crude oil price. As a result US chemical companies are benefiting from lower cost of production (affordable raw material and energy), and at the same time reaping higher profits due to increase in global crude oil price.
  • While the tailwinds are favoring the industry, there is a growing competitiveness among participants to distinguish their offerings, increase production, gain customer loyalty, and comply with stringent regulations.
  • The life of a Production Manager in a chemical industry is complex. Production Managers are at the crossroad where the buoyancy of the industry is increasingly putting their ability to test and stay relevant. They should embrace technology to achieve their goals and ensure highest compliance with regulations.
  • Microsoft D365 offers easy-to-use visualization of data across all functions of an organization including production, sales, compliance, marketing, etc. Unified access to data seamlessly across multiple sites or location enhances transparency, improves track and trace in case of an inquiry, audit or recall, leading to effective decision making.

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About XcelPros

XcelPros is a Chicago-based company and delivers transformation through technology. We offer business and technology solutions with deep industry experience in Chemical, Pharma, Life Sciences (including Medical Devices, Bio-Medical & Biotech), Insurance, Discrete Manufacturing, Process Manufacturing, Distribution and Food & Beverage.

XcelPros is a Microsoft Gold Partner, Direct Cloud Solutions Provider (CSP) and a Systems Integrator (SI) offering software licensing, implementation and consulting services for Microsoft Dynamics 365, CRM, Microsoft Dynamics AX, Business Intelligence & Analytics (Power BI), SharePoint, Office 365 and Azure (Cloud, IOT, Microsoft Flow amongst many others).

Our mission is to provide integrated technology solutions that amplify impact and empower our customer’s businesses. We believe technology is the key enabler of exponential growth for us and our customers.

Contact XcelPros today to transform your business.

Call us toll-free – 1.855.411.0585 (or) visit www.xcelpros.com