Re: scrap percentages for MRP

Al makes an interesting point, in that it kind of depends on your definition of
"scrap".  As a food ingredient manufacturer, we use the scrap factor in the bill
of material file to define our expected production loss ... i.e., loss from
evaporation, etc.  By putting in a scrap factor of 1.04 on a bill component, we
know we will use 4% more of this material for this item to make the correct
yield.  We also have rejected product, usually caused by an error during the
manufacturing process, that is accounted for as we JIT the shop order, which
sounds like what Al is calling "scrap".   How you define "scrap" helps define
how you use and account for it.





MacWheel99@aol.com on 08/07/2000 01:30:05 PM

Please respond to BPCS-L@midrange.com

To:   BPCS-L@midrange.com
cc:    (bcc: Lisa Abney/Flavor-Indianapolis/NAFL/UFC)

Subject:  Re: scrap percentages for MRP



From Al Macintyre on BPCS 405 CD mixed mode

Capturing information on production scrap, such as cost implications, is a
separate topic in my opinion from how best to manage replacement of parts
production & their raw material requirements within an MRP system, such as
budgeting for extra raw materials aquisition in anticipation of some scrap
percentage.

You might check out the labor related ITH transactions & whether scrap
appears in your FLT labor history.  There is a labor ticket number assigned,
that appears both in the FLT & ITH history transactions, so you could use
that to link the data involved in any given scrap reporting transaction,
obtaining performance numbers from FLT & cost data from ITH.

We cope with scrap many different ways & it comes from many different sources
& reasons, so we do not want MRP to be second guessing an average scrap rate.
 Long time ago, on BPCS/36 there were parameters to cause MRP to schedule
extra production based on scrap espectations, but we turned that off because
the reality is that scrap is lumpy & needs to be dealt with by relevant
production people when it happens.  Report the scrap, make more of that part,
perhaps a problem can be repaired, keep track of where the repaired parts are
supposed to go & include a carbon copy shop transaction, of repair status,
with the good parts, so the next users will know that repaired quantity is
coming, from where.  It is a desgin issue for labor transaction forms that
support a diversity of tracking capabilities.

Our interests have been in determining percentage scrap by work center,
identifying areas with high percentage scrap that need better machines or
training or scheduling to permit larger lots without interruption.  Since our
percentage scrap is generally below 2% & our cost variance actual to standard
is considerably above that (in some cases our variance is like 300% & are
currently believed to be primarily in labor rates of sub-assemblies), scrap
has not factored into our focus analysis of where our cost variances are
coming from.

One topic is determining whether SFC & JIT reporting & data entry is
capturing scrap quantities correctly. There was a suspicion that fear of
finger pointing might lead some people to under report scrap.  We wrote a
program to look at the BOM of reported scrap then multiply by sample weights
to get what the actual weight of all the scrap must be by work center, then
compare it to physical audit of weighing the actual scrap & the numbers
agreed.

Another topic is easy access of people to what the current figures are on
scrap percentages by areas of factory.  We have a lot of queries but
unfortunately not enough people who understand the limitations of query/400 &
often the people who create a query are different from those who use them,
resulting in information being misused.

> From: "David Baird/NMT"
>
>  We are version 6.1 full cs running on AS400 v4r3.
>
>  We are looking to find some information on how to capture the cost of scrap
>  within MRP systems. It has been suggested to us that scrap is captured in
>  the bill of materials by inflating the quantity per unit by the scrap
>  percentage. So a component with a quantity per unit of 1 and an average
>  scrap rate of 2% would have a new quantity per unit of 1.02.
>
>  However this will have implications for the current system of inventory
>  processing and control (which we are keen to avoid!). Is anyone out there
>  currently using or aware of an alternative method? Ideally I think that
>  there should be an additional field separate from the BOM that captures
>  scrap percentages for MRP purposes.
>
>  If anyone out there can offer any guidance or assistance on this one, it
>  would be very much appreciated.

Al Macintyre  

©¿©
MIS Manager Green Screen Programmer & Computer Janitor of BPCS 405 CD Rel-02
running on AS/400 V4R3 http://www.cen-elec.com Central Industries of
Indiana--->Quality manufacturer of wire harnesses and electrical
sub-assemblies
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