Here are some useful data regarding MAX’ use of this technology:
Repetitive/Lean Mfg in MAX = No Order
Not all manufacturing requires the overhead associated with shop orders. When the same parts are built on the same line over and over (i.e., repetitive) the Repetitive Manufacturing option can be used for processing transactions. Repetitive transactions do not require the use of a shop order and combine the issue and receipt transactions into one transaction called a “Backflush.”
When the Repetitive Manufacturing module of MAX is implemented, it does not use work orders. If there are no work orders, then we do not have WIP. This is a perfect example of when stockrooms are set up to be WIP stockrooms from a general ledger accounting perspective. To MAX they are not considered WIP since the End of Period WIP report will not reflect the value.
The same discussion applies to a lean manufacturing production line or cell. In this environment, a series of stockrooms may be set up between production operations and production “pulled” from one operation to the next based upon a signal such as a Kanban card. The stockrooms representing buffer stock separating production operations are not considered WIP since the End of Period WIP report will not reflect their value.
In both cases, MAX does not see these as WIP, but that does not mean we cannot point them to a WIP general ledger account. When doing so we need to consider a separate account for this type of WIP. We also need to consider how we will separate this value on the stock cost, or equivalent custom report at the end of the accounting period.
Receipt and “Backflush” – Uses an Order – IMPORTANT COSTING CONSIDERATIONS
Backflush – Receive a Shop Order to stock and simultaneously issue all components (Master Scheduled, ‘3’ orders or Shop Floor Execution, ‘5’ orders). While MAX calls this a backflush, it is not a true backflush as true backflush transactions do not require order numbers. The Repetitive tab is a true backflush.
Here is an example that should considered when deciding on whether to use this logic in MAX.
One client that operates with a single level BOM from an operational viewpoint. This means that all of the intermediate levels have been changed to a pseudo or phantom Part Type Code. The main reason for this was so the backflush by shop order function of MAX will work.
Early work centers however are machining centers that like to run parts to an Economic Order Quantity (EOQ) or until the roll of material is used up. The overproduction of these parts is left unaccounted for since there is no level of the BOM. This causes the following operational problems:
• Raw material inventory is never correct. MAX thinks that the overproduced parts are still in inventory as raw material because only the finished items are backflushed. If the item is not used in a parent part (i.e., it is left sitting on the floor) then it is not backflushed. As a result, purchasing doesn’t know if they have the material or not without visiting the warehouse.
• At physical inventory, the overproduced parts must be run through a BOM and broken down to the raw material so that raw material counts are verified. Again, the overproduced level does not exist in MAX. This makes physical inventory extremely painful as the MAX Physical Inventory module does not operate that way. In fact, a parallel database is used where all pseudo and phantom Part Type Codes are changed back to normal MRP so that counts can be entered.
• Because there is no reporting of material at all in WIP, there is no discipline instilled that says if you move the part, you need to transact it. The backflush mentality has replaced this discipline. As a result, inventory accuracy is horrible.
What is not realized is that the design was flawed from the beginning. The repetitive backflush assumes that the material that is used to produce the item and the production of the parent item occurs at the same time. The backflush issues all component material and receives the parent into stock. In this situation, it takes five days for the raw material to become a finished unit (not counting the time the overproduced material sits). Even if they stopped overproducing intermediate parts, raw material would be five days off or five days inaccurate. This is a blatant misuse of the backflush concept.
This can be fixed.
- Stop the overproducing. If you want to overproduce, create a level of the BOM so that the overproduction can be received back into a stockroom in a timely manner. Of course, this would require production completions at that work center to be performed.
- Stop the backflushing. Instead, issue the raw material as the order is started and receive the finished item when it is completed. This will separate the issue and receipt transactions and move them to the proper time periods.
Just those two declarations alone would help the situation and allow raw material inventory to be more accurate, allow the Physical Inventory module to function properly and begin to instill disciplines for transacting when material moves.
A key point here that is not easy to recognize is the amount of rework that is required to overcome a bad design. When purchasing has to walk to the warehouse to verify what needs to be ordered and when modules don’t work properly you need to recognize that something is wrong.