One of my favorite simple tests is to determine how the ERP calculates production yield. For process manufacturers, yield is such a simple and basic concept, it’s hard to believe that not everyone does it the way we do. Here’s the formula to calculate yield, process manufacturing-style:

Qty Output / Qty Input

If you have an output of 90 pounds (maybe packaged in multiple pack sizes) and the inputs were 100 pounds you have a 90% yield.

Simple!

The problem is, that’s not how discrete manufacturing ERP works. Since their bill of material assumes a discrete quantity (multiples of 1) there is a link between the items issued to a work order and the output. So most discrete ERP modules, if they have yield at all, typically only allow a variable output, the input is static based on the bill of material.

This is a problem.

Because in process manufacturing you may have QC adds that effect input quantities and machine issues and yield loss which effect output quantities. Yield has to be flexible enough to understand variable inputs and outputs to calculate yield.

It’s the little things that make a system work for you as a process manufacturer vs. a system that just doesn’t; almost like a rock in your shoe, it’s just irritating.

If you are evaluating process manufacturing ERP, dig deep into how yield is calculated. A simple test will revel much.

Let’s build a car

As I read the instruction manual I gain knowledge of valves, camshafts, timing belts, alternators, etc. All of the parts are interesting and have a defined purpose in the engine.

As I learn how the parts work together I begin to gain understanding.

With wisdom, a car can be re-engineered to run on hydrogen.

Knowledge is by far the most dangerous as it can deceive us into thinking we are wise. When someone reads an instruction manual, the newspaper, a blog, political commentary, etc. they have knowledge but may think that they have understanding or wisdom. Knowledge alone can lead to arrogance. Listen to people debate politics, they spew facts at each other (knowledge) but have very little wisdom…unless you listen to O’Reilly or Judge Napolitano (!)

Whether you are learning new ERP software, refining your political or religious beliefs, or learning about our economy, understand where your level of learning lies. If you are at knowledge, seek understanding (and keep your ego in check); if at understanding, seek wisdom.

A Proverb says “How much better to get wisdom than gold, to choose understanding rather than silver.”

One of my friends purposefully moved into the worst area of his community where drugs, murder, violent crimes, prostitution, etc. run rampant. He said it wasn’t uncommon for someone to get stabbed outside the front door of his apartment.

He and his friends moved into this neighborhood to ‘clean it up.’ They clean up the neighborhood by getting to know the local people, having them over for a meal, by building these broken people up and offering support for them. Currently, he has a guy sleeping on his couch who has been clean from drugs for three whole days.

In the six months since my friend and his team moved into the area, crimes and violence is down by 50%. Local landlords are begging this guy and his team to buy real estate, as their property values are increasing exponentially. Both local government and law enforcement are providing amazing support for this team since the government had previously written off this portion of town as a lost cause.

This is a team of 20 people who completely changed the environment and lives of thousands of people.

This Christmas, I was beside myself with joy when I heard about the so-called “Layaway Angel” and their copycats on the news. In case you didn’t hear about these amazing people here’s the story. A person in the Detroit area walked into a Kmart, went to the layaway area and paid off some random layaway tickets. When people came in to pay for their layaway items cashiers would tell them that their tickets had already been paid in full. If you read real stories of Santa Claus…umm, Saint Nicholas, you’ll see that type of giving is what made him a legendary figure.

The local news reported this amazing act of generosity and before you knew it, there were hundreds of copycats. While copycat typically has a negative connotation, in this case it is an extreme compliment; so from here on out, I’ll call them “inspired givers.” USA Today on January 21, 2011 reported that $412,000 had been donated to more than 1,000 layaway accounts.

Lisa Dietlin, a Chicago philanthropic advisor said “Generosity is contagious” and that people are “knocking the economy in the eye…”

I say BRAVO!

Here are a couple more incidents of amazing generosity that I came across during the Christmas season.

In the Tacoma, WA area, an anonymous person dropped a South African Krugerrand into a Salvation Army kettle. A Krugerrand contains one ounce of gold (as of today, is worth about $1,750). Again, the news got out and inspired givers began giving Krugerrands in Florida, Pennsylvania, Nebraska, Kentucky, Colorado, etc.

Lastly, this one didn’t make it in the USA Today but is just as inspiring, the development department of a small software development firm received a quarterly performance bonus. Instead of splitting the bonus among themselves, as they absolutely had the right to do, they filled up two shopping carts of toys from Target and donated them to Toys for Tots.

This is the solution that I’ve been talking about. The answer to our economic problems isn’t quantitative easing, it’s vision, boldness, personal responsibility and caring for people. People want to be inspired. People have so much to give but fear or lack of vision suppress them. If someone does an amazing act of kindness, be a copycat (and wear it as a badge of honor). Let’s resolve to kick the economy in the eye (or lower if you wish) this year.

I’m not sure where time goes but it sure goes by fast, especially when you are trying to keep up with a blog. I love to write but I also love to learn. For the last few months, I’ve been in a season of learning and absorbing. I’m still not an expert in this field of study but the pieces are beginning to come together for me.

So now, I write.  (If you say that with a Russian accent, it sounds more profound).

The inspiration for my latest journey was a simple frustration with investing money in the stock market. How could we lose a decade in the market? Why don’t any of the “professionals” seem to know how to make their customers money commensurate with the risks they take? And, if not the stock market, where do we put money?

On this journey I’ve learned about the history of monetary policy and financial markets (two very different disciplines), the history of gold as currency, and what happened in 1971 that caused the downward spiral of the US Dollar. At times I wondered if I’ve opened up Pandora’s Box, as the research can be downright terrifying.

Believing that knowledge is power, I persisted and came into a new level of understanding. I also realized that you (the average US citizen) are encouraged not to learn about this stuff. How many stock broker advertisements try to scare you in to thinking that the market is a big scary place, that everyone who tries it on their own always loses money and that they are so smart and insightful that you should trust them implicitly with your hard earned money? How many politicians say that policy is too complicated for the average US citizen to understand so we need to check our brains at the door and blindly trust them to do what’s best for us.

Rubbish!

What have we gotten by trusting others with our responsibilities? I’ll give you one example. Currently gas in Boulder, CO is about $2.85 per gallon. I’m going to show you a magic trick; how you can buy this same gas for a slightly more than a dime.

Observe.

If you fish around in your piggy bank long enough you may find a dime that was minted before 1964. That dime has .0734 oz of silver, at todays silver spot rate of $30.62 per ounce, your dime is worth $2.25. Voila! A gallon of gas for a dime…. well, close enough.

So what happened that made our old dimes so valuable? Here’s a hint, it has nothing to do with the collectable value of your dime. It doesn’t even have anything to do with the excess demand or lack of supply of silver in industry. What makes the dime so valuable is the devaluation of our dollar, aka the dollar doesn’t buy what it used to. So the good news is that in just 40 years, your little dime has increased in value by 2,250%. The bad news is that the buying power of the money in your saving account is going down at a similar rate.

But be encouraged.

I don’t share this with you for any other reason than to encourage you to take responsibility for your future, don’t allow fear or lack of understanding make you give someone else responsibility for your future. Your financial future is ultimately your responsibility regardless of who manages your money. There are ways to protect your assets and even grow them regardless of how crazy the economy is and how deflated the dollar becomes. You don’t have to be a Harvard MBA to understand this stuff, case and point, I went to public high school and a state university. All you have to do is be inquisitive.

Read, learn, take responsibility

I’m not sure if I read this somewhere or if this is an Evan-ism but I’ll share it with you. “I’d rather lose money by my own hand for if someone loses it for me, I also lose the lesson.” …..from a quick Google search I don’t see the quote so I’ll take credit for that one:-)

A formula represents the percentage relationship between each ingredient, i.e. 40% sugar, 40% flour, 10% eggs, 10% flavor. As we discussed in entry #3, a process manufacturing blend is typically scheduled in terms of weight or volume (since the mixing vessel is usually the batch size constraint). So in a real process manufacturing ERP software, the formula will allow you to formulate by percentage (and usually discrete quantities as well) and will be able to scale the formula to meet a certain weight or volume. So a formula like the above can be scaled to 500 pounds and will have 200 pounds of sugar.

If you chose to formulate by discrete quantities, i.e. 100# sugar, 100# flour, etc., the system should still allow you to scale up or down to achieve a total formula weight/volume. It can do this because while you are entering discrete units of measure, the system knows the percentage of that unit to the total formula.

So what happens if, in a formula, you enter 10 pounds of flour and 5 gallons of water?

The problem is that pounds is a weight unit of measure and gallons is a volume unit of measure. You either have to convert pounds of flour into gallons or convert water into pounds, then you can add them together. A real process manufacturing ERP software will do that easily, because nearly every process manufacturing company needs that feature.

Let’s contrast that to discrete manufacturing ERP

A BOM represents how to make one ‘each’ of a finished good. To make one table you have 4 legs, a top and 16 screws. A discrete ERP salesperson will suggest making the BOM equal to 1 each. So you put together a BOM that has 10# of sugar and 5 gallons of water which equals one ‘each.’

So how many total pounds/gallons do you have?

The system won’t tell you.

What if you want to scale the formula to achieve 100 total gallons?

You really can’t; you can only guess how many each this will produce. As with any ERP, there is usually a work around that can get the presenter through a demonstration of the software but in reality may not be a great fit for the operations of your organization on a daily basis.

Knowing what to look for when you are evaluating a process manufacturing software can help you make a good decision. If the formula has weight and volume conversions and can scale based on a percentage, there is a good chance that you are looking at a process manufacturing ERP.

In discrete manufacturing, BOMs are typically developed and maintained by engineers. Engineers determine how pieces are to be assembled, how electrical circuits will work, how to package the product in the most convenient packaging, etc. They usually try to solve for dimension, weight, sturdiness, etc. Since discrete products can be assembled and disassembled, an engineer can produce prototypes to see how they fit together and break down.

In process manufacturing, a formula is developed and maintained by chemists or food scientists. A food scientist is not only working to achieve a taste or smell but nutritional values as well; don’t let the name confuse you, food science is a combination of art and science…probably leaning more toward art. It’s not uncommon for someone to formulate a product that needs to have certain key values such as: fat, calories, gluten-free, etc. When an ERP with a laboratory module can help the food scientist with the ‘science’ or calculation portion of the product development, he/she can have more time to be creative with the ‘art’ portion.

The chemical manufacturing industry has similar laboratory requirements. They may formulate to achieve certain percent solids, %VOC, density, etc. Again, when an ERP software can easily manage the math of these calculations and allow the chemist to focus on the testing and more ‘artistic’ portion, you have an efficiency not possible in discrete systems.

Having a built-in laboratory module in the same ERP as purchasing, compliance and production provides a seamless and efficient workflow required by process manufacturers that does not exist in discrete manufacturing ERP software.

To continue reading this series, see the next article: Process v Discrete Mfg #8: Weight/Volume vs. Each

As a Gen X’er, I wanted to share my personal experience with a variety of Millennial interns this summer. If you read any article about Millennials you will see that this generation has been called many derogatory names; lazy, stupid, entitled, etc. I would argue that most generations have probably been called similar names by their predecessors (except Gen X, of course!).

Everyone knows that Millennials are the Facebook, texting, Harry Potter, entitilement generation. What I didn’t know going into this summer was what this generation stands for relating to work and career. I’ll begin my observation with the lens by which my generation views work. I believe that my generation views work as a means for money – “I’m going to school to be a (fill in the blank)…doctor, lawyer, accountant, computer programer, manager, etc., and I will make $X per year” Mostly the roles and positions were defined, we went to school to learn how to do the job and sometimes we got a job in that field.

Personally, I received both my bachelors and masters degrees in accounting; as a next logical step I went to work in a CPA firm, became licensed and soon after realized that, for me, accounting was a slow, painful death. Once, while on an audit, I actually had thoughts of ramming my mechanical pencil in my eye just to see if my adrenal glads still worked. Only then did I realize that I was an entrepreneur at heart and needed to invent a business that fit my personality vs. trying to fit my personality into a job.

Herein lies my most profound observation of Millennials. The traditional career-in-a-box is too constraining for them. They go to school and study interesting things but they don’t necessarily want to spend their lives doing those things. They want their career to mean something to them personally, emotionally, spiritually not just financially. If I hadn’t had the close call with my mechanical pencil and had grit-my-teeth and stuck with the CPA-of-death position I would probably view Millennials as flaky, no-purpose-having, no-drive-posessing, losers that don’t have the fortitude to stick-it-out and make good money. Fortunately, I find myself almost envious that Millennials possess, at such a young age, the wisdom to declare their lives too sacred and important to go into a corporate prison for 30 years, retire with a phat 401(k) and die; a revelation I didn’t have until I was in my 30’s.

Some of the interns we had this summer would have otherwise done the job for free; the fact that they got paid for doing the work was simply an extra nicety. Think about it, the work was more important to them than the money. If you have ever been an entrepreneur and started your own business, you can probably relate to the mindset. We don’t open our own business because we have a “guaranteed” salary of six-figures, a 401(k) plan and four weeks of vacation. We open our businesses because we believe passionately about the business, we want freedom to work the business as we see fit and hope that money will eventually follow.

I now find myself unusually hopeful for the future of this country. With the insanity, corruption and power-mongering of our current ruling generation, I see a generation of people coming up who value their freedom and passions more than power and money. Amazing, a generation who believes in freedom and the pursuit of happiness (who would have thought such a crazy idea?)

My advice to my Millennial friends: You have an attribute that many from generations before you wish they had; freedom…freedom to chose and an aversion to bondage. As you experience life, seek truth, gain wisdom, cherish your freedom and don’t let the promise of money or power distract you from it.

Food companies deal with product labeling regulations that are not only demanding but, if done wrong, can be extremely costly. If you’ve ever read the labels on your food at the grocery store you’ve probably noticed that there is a consistency on all labels to have nutritional, allergen and nutritional statements on the container. Did you ever wonder what happens when a food manufacturers label is wrong or missing?
The product gets recalled.

As you can imagine, a recall is a very expensive proposition for food manufacturers. Something as simple as an incorrect allergen statement can cost a food manufacturer tens of thousands of dollars.

Chemical manufacturers reporting requirements aren’t quite as well known as food, but are as important. If a truck carrying a load of chemicals crashes, the driver needs to have a document stating what the chemical is and how to remediate it. If the driver doesn’t have the documentation or the documentation is wrong, the manufacturer will be fined unmercifully.

Similarly, for hazardous chemicals used in industrial or household applications, manufacturers are required to have material safety data sheets (MSDS) so users can know what hazardous materials the product contains and what do do if the products in ingested, catches on fire, etc.

Typically discrete manufacturers don’t have to deal with these types of regulations and their ERP solutions typically don’t manage these regulations. Keeping allergen/nutritional labeling and MSDS and other chemical reporting outside of the ERP is generally risky and could cost the company a lot of money if/when it messes up. Any ERP made for process manufacturing will have these regulatory compliance modules built in.

To continue reading this series, see the next article: Process v Discrete Mfg #7: Laboratory Function

One of the most common and obvious features that process manufacturing ERPs have and discrete ERP has no use for is a laboratory module. Since process manufacturers mainly deal with food and chemicals they need to be able to calculate values while formulating a product. For example, a food manufacturer needs to be able to calculate nutritional values of products that they formulate. Chemical manufacturers need to calculate percentage solids, VOC, % pigment, etc for their formulas. Many times, specifications from customers or the sales team require them to meet certain vales of new products.

A discrete ERP salesperson will ask how you currently do your laboratory calculations now. When you mention that you use Excel or Genesis they will say to keep using the systems. However, having a disparate laboratory system creates significant issues. For example, when a chemist changes a formula he has to also change the BOM in the ERP. If the formula change creates the need for an updated product label, the compliance department needs to be notified and the proper label needs to be updated and used at the right time in production. How much does the new formula cost? Well, the purchasing agent needs to do some research to determine the last or market price of the ingredients then give them back to the chemist.

Seems like a lot of plates in the air at once, doesn’t it? Let’s assume that the chemist makes multiple changes to the formula over the period of a week and sends them out to the various departments as the ‘final’ then ‘final-final’ then ‘this is really the final one’ and ‘now I’m shutting down my computer’ version. If Excel spreadsheets are being distributed to the various departments, whose to say that the most current version is what everyone is using?

You can’t.

If you are a food manufacturer and send a new product out with the wrong label, you will have the huge expense and bad press of a product recall. If you are a chemical manufacturer and your Haz Mat label or MSDS are incorrect you could face huge fines.

Only when the laboratory function is part of the ERP can you control the R&D process; not only more accurately but more efficiently as well. When the laboratory and formula function is integrated to the ERP, the ERP can tell the chemist the last product cost (purchasing is off the hook), complacence labels can be printed from the updated formula and with the check of a box, the formula can be live and ready for production.

To continue reading this series, see the next article: Process v Discrete Mfg #6: Allergen/Hazardous

If a US senator (or VP) calls someone, or a group of people “terrorists” they are wielding a very dangerous weapon. A weapon that shouldn’t be threatened unless they are ready to use it.

Let’s take a look at a section of the Patriot Act of 2001 which defines domestic terrorism:

Sec. 802(5) The term ‘domestic terrorism’ means activities that (B) appear to be intended (i) to intimidate or coerce a civilian population, (ii) to influence the policy of a government by intimidation or coercion.

While I’m not sure how any leader in Congress or in the White House wouldn’t be considered a terrorist under this definition, I’m sure that going on TV and calling people a terrorist would, in fact, make them a terrorist as well….can a terrorist call a terrorist a terrorist?

When the government decides that you are a terrorist, under the Patriot Act, they can do some really nasty stuff – intercept communications, detention, freeze assets, etc. The Act is a creepy piece of legislation, you should read it sometime.

Whether used in jest, out of frustration or trying to undermine a political foe, our legislators and leaders need to be more responsible with their words. In the absence of responsibility, they should be held accountable for the threats they wield, as they are very serious.

This is the last of my politically charged entries for a while; at least until the next infuriating incident happens:-) . Ok, back to process manufacturing….