Reduce Formula Losses with Batch Manufacturing Software

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Recently we wrote a post, Increase Profits with Batch Manufacturing Software, identifying four ways software such as VicinityChem can help you get the most out of your existing operations. One important step is reviewing and reducing inventory shrinkage. The next step is to increase profits by minimizing formula losses.

Formula manufacturers depend on yields

If your product varies significantly from batch to batch, there will be problems. If a formula uses more inventory than expected to produce the same finished batch, you may run short. A shortage of just one ingredient snowballs into delayed shipments, backorders, and dissatisfied customers. Employees must work overtime, quality control scrambles to bring products within specifications, and profits shrink. In short, it’s the opposite of a smoothly running operation.

Each time a formula yield is not in line with projected yields, it cuts into your profit margin. When you experience higher than average costs for a formula, you lose an opportunity for a healthy bottom line.

Formula manufacturers often establish a theoretical production yield, or batch yield, based on the times when all has gone smoothly and production is flowing nicely.  However, once that theoretical yield has been set, it might not be revisited. Production continues to run, but little attention is placed on the actual yield of the formula. It is nearly impossible to identify the factors contributing to yield loss if you don’t track your products accurately and consistently.

How can you reduce formula loss?

Many factors can contribute to formula loss. You have to pay attention to ingredients, equipment, processes, etc. Here are some steps you can take to identify problem areas and more accurately track your yields.

The first step is to track everything. Can you identify your losses for each formula for the previous three months? Compare input vs. total output, finished goods as well as intermediates, for the last three months. Be careful to include only batches closed to future production.

Identify the losers

Next, target items that show the greatest loss. List your formulas in order of loss value, greater to less. Those items with the greatest loss have the greatest potential for draining profits. And because they have the greatest margin of loss, successfully dealing with them will bring the greatest degree of change.

Focusing on items with a low margin of loss, low cost, or low volume will not yield such dramatic results. Those items with high loss, high cost, and high volume will make a real difference to your business.

Identify the causes of loss

Causes of loss may vary from formula to formula. If you see across-the-board losses, you might ask yourself what’s going on with the employees handling those formulas. Have there been delays in obtaining raw materials or changes in manufacturing procedures? Have packing materials or operating instructions changed? Can you identify any areas where employees are failing to keep up?

You might want to get your Research and Development lab to recalculate theoretical yields based on current conditions and currently available raw materials.

Implement policies to track your formulas and note exceptions

You’ll want a clear picture of what’s going on. Track and document losses for each formula for the next three months. Mark the formulas in such a way that after three months, you can review the loss for each batch. Make this a part of the final QC/packaging process. Isolate any batches that reflect high losses and investigate the causes immediately.

Custom software for batch manufacturers

Knowledge is power. Software developed specifically for formula batch manufacturing can provide you with the knowledge and insight you need without costly customization to your Microsoft Dynamics ERP solution. With manufacturing solutions for the chemical (VicinityChem), food (VicinityFood), and brewing (VicinityBrew) markets, you can review formula yield by batch and aggregate the results by periods such as months or years. You can see immediately if batch results are below the forecasted production yield standards. Data is preserved for ongoing evaluation.

Vicinity has created a unique and flexible ERP software solution enabling manufacturers to maximize productivity, manage limitless recipes or formulas, improve inventory visibility and control, enhance quality assurance, eliminate redundancies, reduce costs, increase profits, and experience smart growth.

Contact us today to learn more about Vicinity Software’s specialized manufacturing software solutions.

By Vicinity Software, vicinitysoftware.com

 

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