WHITE PAPER USING ERP FOR PROCESS MANUFACTURING QUALITY MANAGEMENT

Transcription

1 WHITE PAPER USING ERP FOR PROCESS MANUFACTURING QUALITY MANAGEMENT

2 CONTENT NAVIGATING THE COMPLEX COMPLIANCE ENVIRONMENT... 2 TRENDS IN SUSTAINABILITY AND RESPONSIBILITY... 5 THE ESSENTIAL FEATURES OF YOUR ERP SOLUTION... 7 CONCLUSION... 9 ABOUT IFS... 10

3 USING ERP FOR PROCESS MANUFACTURING QUALITY MANAGEMENT BY JAKOB BJÖRKLUND IFS GLOBAL INDUSTRY DIRECTOR, PROCESS MANUFACTURING Process manufacturing executives considering enterprise software solutions like enterprise resource planning (ERP) today need to think about more than core batch and recipe management capabilities. Due to both regulatory and market factors, quality management and documentation of the quality and content of goods produced is essential. Advancing environmental awareness and the ability to handle recalls both factor into this increased focus on quality. Research conducted by IFS suggests that as manufacturers implement sustainability programs, the primary motivation for this is not regulation, but requirements from customers that push their own environmental and quality/traceability requirements onto their suppliers. These customers have high expectations of manufacturers and other suppliers such that focus on their good corporate behaviors, especially surrounding sustainability. Adherence to legislation is of course necessary but manufacturers who go beyond the required can find this can be considered a competitive advantage. As supply chains and distribution patterns become more global, more process manufacturers also need to pay attention to and comply with numerous national and regional regulatory schema. In this white paper, we ll discuss how batch process manufacturers can select and use enterprise software with embedded quality management functionality to surmount these challenges across a number of industries including: Chemicals Pharmaceuticals Food and beverage Batch process manufacturers, which manufacture something from a recipe and then package and sell it as a discrete item have similar requirements for ERP, regardless of industry. From a quality management standpoint, the requirements are somewhat different between these three segments, but all in essence require the documentation of processes and confirmation that they are being followed in the enterprise. 1

4 Pharmaceuticals manufacturers of course need to comply with US Food and Drug Administration (FDA) regulations and analogous bodies like the European Medicines Agency (EMA). They must be able to use ERP to document their manufacturing, lot control and other practices and prove these processes are compliant with FDA requirements. Food and beverage manufacturers need document commodity flow, critical control points and threshold levels for each point, monitoring processes and corrective measures. Again, per Hazard Analysis and Critical Control Point (HACCP) regulation, these processes must be documented and verified regularly through a program of sampling and testing and third party audits. In the chemicals sector, manufacturers face a bevy of environmental regulations on how to document and distribute documentation to customers. REACH (the Registration, Evaluation, Authorization and Restriction of Chemicals) European Union legislation affects a spectrum of industries ranging from high-tech manufacturing and discrete manufacturers that use chemicals to importers and manufacturers of chemicals. Similar regulations are in place in California in the United States in the form of the California Green Chemistry Initiative. This means that any process manufacturer will need to be able to document the percentage of certain potentially hazardous substances in their product. This is one thing REACH and the California initiative have with the requirement for material safety data sheets (MSDS), required in the US through the Occupational Safety and Licensing Administration, as well as by governing bodies in Europe, Canada, the United Kingdom and in some cases, by the UN. These documents must contain proscribed data ranging from the nature of the chemical contents of the products along with cautions about risk of release into the environment, flammability and methods of extinguishing flames, first aid measures, and more. These various regulations are of course in addition to requirements customers (think Walmart, and its request that suppliers report on their environmental footprint) may place on a process manufacturer. NAVIGATING THE COMPLEX COMPLIANCE ENVIRONMENT The commonality between all of these regulatory and market-based requirements, from an ERP perspective, is the need for a robust, reliable and trusted set of tools to help companies document their processes according to the standard or the legislation they need to adhere to; and to help them produce the necessary documentation to comply with the standard or regulation. But documenting processes is not the only thing a process manufacturing ERP product ought to do. It really needs to offer full analysis capabilities as well as cross-lifecycle traceability and genealogy on all critical materials. 2

5 You can get a clear sense of why this is crucial if we look at REACH, one of the important aspects of which is SVHC Substances of Very High Concern. This is a list of chemical substances that the European Union has indicated as harmful or perhaps even impossible to judge in terms of their long-term impact. While the EU s goal over time is to remove those substances from circulation, right now it means that any enterprise or company that introduces products that contain more than 0.1 weight percent of one of the SVCH-designated substances must make a REACH registration. Such a complex compliance environment begs the question: how do you as a manufacturer quickly, easily and routinely understand which products contain any of the chemical substances on the evolving SVHC list? It s a key question that requires a clear answer about the enterprise software you use. That tool must enable you to register your critical substances on the lowest level for example, on the component or the raw material that you have in your product. Then you can make a complete breakdown through the bill of material giving you a net content-by-substance for the SKU or the finished goods that you sell to your customers. And you want to have different types of alert functionalities to easily understand which products need registration and which ones are not on the SVHC list and therefore don t need to be registered. In pharmaceuticals, there is a new European initiative driven by a growing market of so-called grey imports: products produced by a third party somewhere else, who is not licensed to manufacture a specific pharmaceutical product. It s often hard for the consumer to distinguish the owner of the brand and the active substance in a grey import. As a result, pharmaceutical manufacturers in Europe will have to, as of 2017, register every package they ship. Against this unique registration, pharmacies, consumers, hospitals and other health care providers will be able to verify the authenticity of the product that they buy to make sure that they re not using products that are manufactured in the grey market. With traceability, the requirements are similar across pharmaceuticals and chemicals even though the level of criticality is a little different. In the life sciences field, there is a pressing need to actually know which batch of a raw material went into a given medication or device that went into a certain patient s body. In chemicals, on the other hand, there are usually certain critical raw materials that are tracked. This might be only 10 percent of materials, but the chemical manufacturer still needs complete visibility and control over these ingredients in their supply chain and products. What s important here is the ability to easily and quickly understand which customers got what product from a particular batch, and to trace each batch to raw materials from a supplier or source all the way through sale or final consumption. 3

6 So for example, if you discover that you had a bad batch of a raw material into finished goods, you then need quick access to your data see which customer got deliveries from that particular batch number. And vice-versa: if you discover a problem with a particular batch of finished goods, then you need to look upstream through the supply chain to see which batches and from which suppliers did you put into the finished goods to help you understand where the potential problems can be. Your enterprise solution must contain appropriate fields to track analysis results for each batch, and also allow you to attach critical quality-related documents like certificates of analysis to the batch record. This means that for every batch number that you manufacture or for every batch that you inspect for the incoming raw materials, you always have access to the analysis results where you have measured the control points that you have defined for the raw material or the finished goods that you want to check. This means that an ERP system with embedded quality management and document management functionality is more or less required by the process manufacturing industry. Only through this level of deep integration can you attach an analysis result to a batch in the ERP system With embedded document management functionality, users of IFS Applications can effectively integrate quality-related documents with product or batch data. 4

7 Across all segments of the process manufacturing industry, executives need ERP with embedded quality management functionality that streamlines control plans to define which tests you make on the raw material or the intermediate or finished goods. The ERP application must then integrate the analysis process with the purchase arrival process or the manufacturing process. The system must allow you to create an analysis as a business event in the system, perform the actual analysis based on a sample of the raw material or the product that you manufactured and you log the results back to the system, attaching these results to the appropriate batch record. Using this information, you can of course track problems that occur further down the supply chain at a retailer or at the distributor, or even at the consumer. But ERP for the process manufacturing industry should also facilitate Statistical Process Control, to make sure the process results are within boundaries and aligned with nominal values. And if you see a constant deviation from the optimum values, you can go back and update your formulations or your bills of materials to better align the process. All of this is normal procedure for any company in process manufacturing, but the ERP in place may not contain all of the processes, and in fact may keep testing data or results in a separate system, making it hard to tie them to specific batches, suppliers, lots, shipment and other events that take place in ERP. Lacking embedded functionality for quality management, integrated product recalls, quality claims and other pressing quality control actions are much harder and more time consuming to manage. And the results may also be less reliable or accurate. TRENDS IN SUSTAINABILITY AND RESPONSIBILITY In the food and beverage industry, there is a clear trend towards increased social responsibility and visibility into the origins of food products. People care more than they used to about where a product has been produced, whether it been produced in an ethical way, whether the raw materials used are reliable, or if the product has been certified as organic. Consumers care about such matters, and they want to know that you as a manufacturer care, too. You need to show them that you care by providing transparency throughout the supply chain, providing your channel of distribution as well as the ultimate customer the consumer with information about where you sourced your raw materials. You need to make it credible that you re using good-quality raw materials and you can verify that you and your suppliers have quality processes in place that allow you to stand behind your claims regarding things like product purity, organic status, genetically modified status and geographic origins of the materials. 5

8 USING ERP FOR PROCESS MANUFACTURING QUALITY MANAGEMENT Within IFS Applications, a unique embedded Eco Footprint Management Tool allows users to track not only environmental footprint of manufactured goods, but the chemical makeup of goods by individual manufactured item or SKU. This has obvious implications for quality management or environmental reporting. This is giving rise to two further important developments in supply-chain management: near-sourcing, with local food and beverage companies supplying a local market; and big, well-known brands growing even bigger and, as a consequence, more valuable and more recognized. The implications for near-sourcing are obvious. If you are claiming to use locallygrown and sourced ingredients, you had better be able to prove it. At the very least, you need to avoid being proven wrong. And large food and beverage manufacturers are painfully aware that one of the biggest assets in this industry is the brand. Recalls, revelations of misstated ingredients and other quality problems can damage a consumer packaged goods brand faster than anything else. Therefore, food and beverage manufacturers ought to be prepared to invest substantially to protect that good name in the market by implementing ERP that adheres to these quality principles. Within IFS Applications, a unique embedded Eco Footprint Management Tool allows users to track not only environmental footprint of manufactured goods, but the chemical makeup of goods by individual manufactured item or SKU. This has obvious implications for quality management or environmental reporting. 6

9 THE ESSENTIAL FEATURES OF YOUR ERP SOLUTION So what implications does this have for process manufacturers evaluating ERP software? Here are a few tips. When choosing an ERP product, make sure it enables you to work with your formulations within the application with embedded quality management functionality. Separate quality management software will be suboptimal you want all information on manufacturing, supply chain management, bills of material, lot control and more in the same database, providing a single version of the truth, with quality data including test results and quality assurance processes. Look for a product that helps you resolve one of the major sustainability issues: how to arrive at a measurable environmental evaluation based on meaningful data. Most of the data required to measure this environmental impact already resides within ERP, so functionality within ERP is a better choice than implementing bolton functionality that would force duplicate data entry. Environmental reporting often means that you need to combine product related data such as the weight share of a critical substance with transactional data. This can be a tricky and risky operation if you have to deal with multiple systems. But it is very simple if you have it all at your fingertips within your ERP. ERP with embedded environmental footprint functionality would streamline something like REACH reporting, or any reporting on the origins, chemical makeup or total environmental impact of a product. In generating a SVHC list for instance, the software would facilitate a complete breakdown through the bill of material through to a single finished product or shipment, giving you a net content-by-substance for each SKU that you sell to your customers. In essence, the sustainability tool will enable you to calculate and analyze the environmental impact of your operations, control costs, and prepare for future environmental legislation because it is part and parcel of your ERP application, giving you instant access to all the data you require for a variety of quality and environmental documentation needs. When it comes to aligning with process manufacturing regulations and quality standards like ISO 14000, HACCP, REACH or HACCP, as well as the IFS Audit Companion notifies managers of key noncomformance events that require immediate action. FDA s specific requirements for the pharmaceutical industry, your enterprise software must include these essential features: 7

10 1. DOCUMENT MANAGEMENT. When it is part and parcel of your ERP, document management functionality streamlines quality management and documentation in several ways. It allows you to document your processes, store control results, generate and keep up with work instructions, raw materials specifications, materials test results. Embedded document management offers safe storage, authorizations and approvals of documents, along with revision handling of those documents. Integrated document management also means that you can easily publish, or otherwise make accessible, quality documentation to the organization. For example, you may display the appropriate safety instructions to the operators in the same window as they report materials and operations for a production order. 2. BILL OF MATERIALS (BOM) AND FORMULATIONS. You can use bills of materials to specify the product and its composition. Routings and operations can be used to specify the process that you use to manufacture the product. This is the documentation that you d use when you look for approval according to a quality standard (one reason your quality functionality should be part of your ERP software the data is already in there). It should also support work instructions in plain text, pre-defined phrases, pictures, drawings; and offer full support for an audit trail or revision handling and traceability to view the composition and the manufacturing process through the lifecycle of your product. Data from BOM addresses not only quality, but the qualities of the product. What is it made out of? This means that requirements like REACH and MSDS can be driven from the BOM. 3. QUALITY MANAGEMENT. This belabors a point we have made numerous times in this whitepaper, but quality control functionality ought to be embedded in ERP. The tight relationship between quality control and ERP allows, for instance, specification of the control points and the limits that you need to adhere to directly in the system where work will be done in that system of record. Test results can be stored directly against every batch number. It should support statistical process control and monitor analysis results, automatically notifying the user when a deviation occurs. This should be fully integrated with purchase receipt and inventory as well as the work order in manufacturing. 4. QUALITY ASSURANCE. While quality management is a preventive control, quality assurance is detective control, and also needs to be embedded in ERP. Quality assurance functionality must allow you to control elements regardless of whether they are directly linked with the manufacturing process or factors beyond the shop floor, like procedures you use in the warehouse or the laboratory. It should support quality standards compliance planning, fully integrated audit management, and integrated nonconformance reporting. There should also be mobile apps so the user can report directly from his or her cellphone if any nonconformance event should occur. 8

11 5. FAILURE MODES AND EFFECT ANALYSIS (FMEA). FMEA is a systematic approach to predict potential errors, evaluate their potential consequences and suggest which actions could be taken to prevent such potential errors from actually occurring. Judging the impact of a failure, and combining that with the likelihood that it will happen, you can see where in a design or a manufacturing process you have potential issues that you need to resolve. FMEA functionality, as an embedded component of ERP software, can address the design of the product as well as the processes that you use to manufacture the product. CONCLUSION Process manufacturers need quality control functionality as a native, embedded part of ERP. Regardless of specific market segment, that quality management system must allow you to document quality processes, product and ingredient histories and chemical composition up and down the supply chain. Silos of information separate systems and point solutions are the enemy of this process. Quality control regulation is one more reason batch process manufacturers need ERP with powerful embedded quality control and traceability functionality. Jakob Björklund is the global director for process industries at IFS. He holds an M.Sc. in industrial engineering and management from the University of Linköping, Sweden. In almost 20 years with IFS, he has been involved with supply chain management consulting, sales and marketing, and strategy for process industries and supply chain management. 9

12 ABOUT IFS IFS is a public company (OMX STO: IFS) founded in 1983 that develops, supplies, and implements IFS Applications, a component-based extended ERP suite built on SOA technology. IFS focuses on agile businesses where any of four core processes are strategic: service & asset management, manufacturing, supply chain and projects. The company has more than 2,000 customers and is present in 50+ countries with 2,800 employees in total. More details can be found at For further information, to info@ifsworld.com AMERICAS ARGENTINA, BRAZIL, CANADA, MEXICO, UNITED STATES ASIA PACIFIC AUSTRALIA, INDONESIA, JAPAN, MALAYSIA, NEW ZEALAND, PHILIPPINES, PR CHINA, SINGAPORE, THAILAND EUROPE EAST AND CENTRAL ASIA BALKANS, CZECH REPUBLIC, GEORGIA, HUNGARY, ISRAEL, KAZAKHSTAN, POLAND, RUSSIA AND CIS, SLOVAKIA, TURKEY, UKRAINE EUROPE CENTRAL AUSTRIA, BELGIUM, GERMANY, ITALY, NETHERLANDS, SWITZERLAND EUROPE WEST FRANCE, IRELAND, PORTUGAL, SPAIN, UNITED KINGDOM MIDDLE EAST AND AFRICA INDIA, SOUTH AFRICA, SRI LANKA, UNITED ARAB EMIRATES NORDIC DENMARK, NORWAY, SWEDEN FINLAND AND THE BALTIC AREA ESTONIA, FINLAND, LATVIA, LITHUANIA THIS DOCUMENT MAY CONTAIN STATEMENTS OF POSSIBLE FUTURE FUNCTIONALITY FOR IFS SOFTWARE PRODUCTS AND TECHNOLOGY. SUCH STATEMENTS OF FUTURE FUNCTIONALITY ARE FOR INFORMATION PURPOSES ONLY AND SHOULD NOT BE INTERPRETED AS ANY COMMITMENT OR REPRESENTATION. IFS AND ALL IFS PRODUCT NAMES ARE TRADEMARKS OF IFS. THE NAMES OF ACTUAL COMPANIES AND PRODUCTS MENTIONED HEREIN MAY BE THE TRADEMARKS OF THEIR RESPECTIVE OWNERS. IFS AB 2013 En Production: IFS Corporate Marketing, December 2013.