Manufacturers often struggle when balancing between how much detailed traceability data they need and the cost of collecting that data. In particular, inventory consumption and genealogy data can be challenging in a high pace production environment. In this context, we would like to compare and contrast two ways of tracking inventory in production:
- Direct issue (pre-production issue)
- Backflush (post-production issue)
Let’s first discuss the challenges that both modes present and in the 2nd part of the blog post, we’ll investigate how this can be solved.
Both types are used in repetitive and complex discrete manufacturing. However, direct issue is more typical in a complex discrete where serialized components are used. Backflush is preferred for bulk inventory, particularly for low value and non-critical components. The decision whether to use one or another is usually determined by the process, production speed and component type.
When considering components traceability requirements, it is obvious that direct issue provides more accurate data. Operator issues materials against the order providing all the details needed to create genealogy (material, lot/serial, quantity), but there are a few problems that can arise:
- Components can be shared between orders, making it difficult to report quantities accurately.
- Components can be frequently replenished, and the operator can forget to register the consumption.
- Components can be stored and distributed in a way that exact lot of issued component is not known or is ambiguous (i.e. when components are stored in silos that are refilled).
- Direct issue approach is labor intensive, and with manual data collection, it is not error proof.
Backflush consumption uses bill of material to calculate component quantities based on produced quantity. That allows automatic distribution of shared components between orders, issue necessary components and warn if there is not enough inventory to consume. This kind of solution is much “cheaper” than direct issue. Nonetheless, there are some limitations of backflush consumption:
- Consumption quantity is always theoretical, based on the bill of material that can be inaccurate, leading to stock discrepancies.
- Usually FIFO rule is applied when choosing appropriate lot to be issued – there is a chance this would not be the one physically used for production.
- Non-standard scrap needs to be declared anyhow.
- ERP system usually consumes components from larger storage location (e.g. component warehouse) to reduce inventory movements.
Many manufacturers choose to use mixed mode approach, directly tracking critical components and backflushing others. While typical ERP systems support just these two modes, there is also a third way combining benefits of both. This will be explained in our next post.