July 24, 2020

Manufacturing Best Practices

Episode: 4 with Seth King & Daniel Shepherd

"Don't Mix those Lots" is just one of the words of wisdom that you can expect from this episode. Supply chain experts Seth King and Daniel Shepherd join us to talk about lots, kits, assembly builds, work order reporting and so much more!

What You’ll Learn

  • Some answers to common manufacturing questions.
  • When to choose KITs or Work Order Assemblies
  • To back flush, or not to back flush? That is the real question.

Want to learn more about Work Order Reporting?

Let's Talk!

Who You’ll Hear on this Episode:

Seth King, Sales Manager, RF-SMART

Seth is a Sales Manager at RF-SMART and has been with the company for 4 years. He’s worked with 300+ customers.

Daniel Shepherd, Business Analyst, RF-SMART

Daniel is a senior business analyst. He’s been at RF-SMART for 6 years, and he’s worked with most of our customers either directly or by assisting his colleagues. He has 20+ year of experience in manufacturing.

Sarah Archer, Digital Marketing Coordinator, RF-SMART

Sarah has been with RF-SMART since 2018. She is the host of this podcast and the YouTube series Q&A.

Sarah Archer:

Hi, welcome to Taking Inventory with RF-SMART. My name is Sarah Archer and I am your host. I'm joined today by two of my very favorite NetSuite guys at RF-SMART, Seth King and Daniel Shepherd. I'm so excited to have them on the podcast today because they are a wealth of knowledge about our NetSuite product. I'm going to introduce them a little bit. Seth is here with me in the studio. Seth is a senior sales executive and he's been with RF-SMART for four years. He has worked with 300 plus companies, which includes FDA-regulated companies, ATF-regulated companies, startups, and publicly traded organizations. Fun fact, he has been to a lot of national parks. How many national parks have you been to Seth?

Seth King:

I don't know how many I've been to but certainly my job and traveling and visiting warehouses, I get the opportunity to see a lot of different states. Sometimes I take my family along for those trips. One I remember here recently was we flew everyone out on a four day notice. I got called to be onsite in Washington and we flew a few days early and spent three days camping out in Olympic National Park right in the middle of fall. That was probably a really good memorable event for me in the last three or four months.

Sarah Archer:

Oh yeah, I bet that was really beautiful. Cool, awesome. Daniel is here. He's actually calling in because he is onsite with a customer. If you know Daniel Shepherd, you probably love Daniel Shepherd. He is one of our customer's favorite people to talk to. That's because he has worked with most of our customers. He's a senior business analyst at RF-SMART and he's been with our company for six years. He has, like I said, worked either directly or by assisting his colleagues with most of our customers. Besides that, he has 20 plus years of experience in manufacturing. He worked in handguns and aircraft ignition systems before RF-SMART. Of course, now he works with warehouse customers directly and he is known for his inventory management background. His fun fact is that he enjoys inventory and solving inventory problems but the real fun fact is that Daniel's family is a band. Daniel, can you talk a little bit about your family?

Daniel Shepherd:

Sure. As I travel on the road, my wife and five of the nine children practice at home playing their bluegrass gospel music. Once I land back home on Friday evenings, they take off from Friday evening through Sunday when they're dumping me off on a Monday to play at various churches and festivals around the state of Florida. As a matter of fact, yesterday morning when they dropped me off, they went to a church up in North Jacksonville right after they dropped me off. Inventory though is the part of it so as you hear, yes, nine children.

Sarah Archer:

Yeah, there's definitely inventory to be taken with nine children. That's awesome. Thank you so much for joining us, Daniel. Let's talk a little bit about manufacturing. RF-SMART has hundreds of manufacturing customers. Today we want to address some questions that we get around manufacturing. Seth, could you explain manufacturing in NetSuite? Maybe some terms that we need to know if you're new to NetSuite.

Seth King:

Yeah, sure. I think before we talk about the different levels of manufacturing in NetSuite, we need to identify what type of manufacturer are you? There's really two categories you would fall into. The most common in the NetSuite world would be that you are a discreet manufacturer. What this means is you have a work order, you have some components and you assemble an item. This chair, for example, I can take these different pieces and put them together but if I wanted to take this chair apart, I could take this chair apart. If you fall into the category of a process manufacturer, it's a completely different situation because that's probably more like baking a cake. You've got a list of components. In this case, though, it's more like flour and eggs, water. When you put these components together, you can't exactly disassemble a cake.

Seth King:

Discrete manufacturing, process manufacturing, two completely different processes and probably need different levels of manufacturing in NetSuite, whether that's a work order assembly or a whip and routing process. So Daniel, maybe you can start by talking through a little bit of those different levels of manufacturing and maybe start at kit package items and then we'll work our way up to work order assemblies.

Daniel Shepherd:

Sure. Kits are where of your you've got components sitting on the shelf that you can sell them separately or you can start selling as a bundle pack like people do at holidays time. You buy these three for a great deal but those three are put together for a price break for you, the end user consumer. A kit is a top level item that is sold but you pick individual components to make that up and you can sort and select, you can have various options to it because you don't stock the kit. Whereas the work order process, you do want to stock things ahead of time. You're going to use some sort of a work order to build a top level, whether you're using the whip with the operations and routing and timing, or whether you're just doing it as a straight build. This way, your personnel can clearly define where they're going to stock this finished good product and whether they're going to use it as a sub assembly into the next layer of a build, or if it's sold as is once it's finished.

Seth King:

Kits, you're not really stocking an item. It's more of a phantom item for the sake of selling, maybe on a website so you want to be able to sell a group of components and then provide your end user with a discount upon that purchase. Then assembled items would be, now you're going to build a finished good then stock that in your actual warehouse.

Daniel Shepherd:

Yes, sir.

Seth King:

Okay. Work order assemblies. We have work order assemblies. We have WIP and routing. We have a lot of customers that do things very differently. Some of our customers have flat build materials. It's a very simple manufacturing process. They take a group of components and they build a finished good. A bike, for example. They take a couple tires, a frame, handlebars and they build that bike. We also have some customers that leverage sub-assemblies with the work order assembly process IN NetSuite. Maybe they actually stock those tires separately as well because they sell them on their website. Daniel, could you talk us through a bit where customers would leverage work order with sub-assemblies, rather than a top level assembly?

Daniel Shepherd:

Sure. Just as you were mentioning, if you're doing it as a sub-assembly so that bike, you want to make those tires ahead of time. 22 inch tires go on many various types of bikes so they can make the tires ahead of time and stock them in the shelf. now you can order a replacement tire and it's already made for you and you're purchasing that or that finished tire can also now be put into the next layer of that finished bike that's going to be sold at the store instead of just the component tire. Now it's added as a sub-assemblied item into the top layer of the bike that's going to be finished. Also, you have your bike frames and so forth that you can make them into different finishes. That's where you would stock the sub-assembly of the bike that's just raw, waiting for it to go through sanding, polishing, finishing, and then coloring. That's the different ways you'd want to use WIP versus sub-assembly and versus being able to sell that sub-assembly or build it into the next level.

Seth King:

Kits being the foundation of manufacturing. It's a phantom item, you want to grab some components. Work order assembly being, I want to build a basic component, stock it. Sub-assemblies meaning I build segments of that finished good and stock it and that ultimately roll up to that finished good. Then WIP and routing being, maybe I'm not a bike manufacturer, but I actually weld the frame. I sanded it, cures. It's a longer, more complex process, which means I'm going to need visibility into those individual operations.

Daniel Shepherd:

Yep. Then the outside, yeah. When you use an outside vendor, that's the good thing about WIP because you could have that slotted operation that sends it out to that vendor to do that welding for you to even know how long it takes at the vendor.

Sarah Archer:

All right. Thank you guys. Let's move on and talk a little bit about back flushing. We get a lot of questions about when to back flush or when not to back flush. Can you explain what back flushing is and scenarios that you would use back flushing?

Seth King:

Daniel? Why don't you take the back flushing conversation?

Daniel Shepherd:

Sure. No worries. Back flushing is just a simple way of completing your work order and letting the system deduct all the components that are set for that build of material. Some customers find use in that. Those that are quick builds and assemblies, that they don't want to sit there and go through the [inaudible 00:09:18] each subset component and moving into an area to issue to the work order first. Other customers that would rather not, they would rather control where the inventory sits within their organization. They will do the issue to the work order so that they can move it out of their stock then so that their inventory is perfect at all times in the system. Because, otherwise, if it takes five days to build a product, the system will not deduct the components used in it until five days later. Whereas, if you issue to the work order, it's an immediate movement of inventory. Your inventory is solid within that bin or location within the warehouse.

Seth King:

Daniel, is there a case where you may want to issue only some of the components from that work order, but you may want to back flush things like the screws and the bolts and the small widgets?

Daniel Shepherd:

There is. Yeah, manufacturers that use those small type of components with a Kanban type system at their work assembly, they'll just back flush those smaller ones, issue the larger ones out of their stock area that they don't have room for on the floor. You can, in NetSuite, delve it out either way that you can back flush what's not issued. You can back flush everything or you can issue everything. It does come in handy though, with the smaller components, like you mentioned.

Seth King:

I'm kind of curious, we've both worked with a lot of customers. When would you determine it's smart to have work orders with multiple sub-assemblies that you then build in stock to roll up to that top level assembly? When would you determine, this manufacturing process is really long, it's not always static, maybe I need to transition to WIP and routing? That's something you've been very good about in identifying in our customers. You've even actually convinced some of our customers to purchase that WIP and routing module in NetSuite because it was going to streamline their manufacturing process.

Daniel Shepherd:

Sure. The WIP and routing really comes into it is that higher level of NetSuite so they even have to upgrade NetSuite besides our product. This is where you want to capture the time that the personnel take to build that product, where you want more finite operations system that you say, "Okay, first it goes to pick components. Then the next level is sanding down the items that are going to be used in the build, et cetera." Using the sub assembly method, this way you can build your sub components ahead of time and not have to wait for the whole work order to be released out to the floor. If you've got an item like the bike tires that you mentioned earlier, and it's used on many various finished bikes, you would want to build these ahead of time because you're always going to utilize them. You would use that sub-assembly build, stock it into a bin so that now your next layer of your build work order, you can pull that finished item and start using it while you're pulling your other components for the next step.

Daniel Shepherd:

Lots of customers look at it that they have to jump into WIP right away, unless they're truly set up in NetSuite all the way with all their accounting background features, WIP does become a challenge for some. They need to be extremely careful in what they're doing.

Sarah Archer:

Let's actually talk a little bit about WIP. First of all, Seth, can you define WIP for us?

Seth King:

WIP would be work-in-process manufacturing. As Daniel mentioned, generally this is a process where you're going to start tracking things like machine run time, actual labor spent on an assembly. This brings up a good point as well, as you look at these different levels of manufacturing in NetSuite, you've got, kits on the lower end. You have work order assemblies as stair step two. You then have WIP and routing as that third step. Then you have NetSuite's advanced manufacturing module but there's a lot of runway in between that WIP and routing module and advanced manufacturing. That's where we came up with the idea to release work order reporting in the last few days.

Sarah Archer:

Let's talk about work order reporting a little bit. That's exciting new functionality for NetSuite that we are getting ready to roll out. The great thing about our work order reporting is that it gives you complete mobile visibility into every step of your [inaudible 00:13:33]. So can you talk about how that works with manufacturers and where they might be able to use that?

Seth King:

When you install the WIP and routing modules in NetSuite, it starts to expose some additional fields. As Daniel mentioned, right now, you're not doing this assembly but now you have what they call is an operation. That operation could be sanding, cleaning, packaging, welding. What this gives you the ability to do is start to set up some of those fields like machine set up times. You could default that to say, hey, I know this sander takes five minutes for the employee to get set up. Then there's an actual labor runtime there as well. Now some customers decide they want to default this time and know, hey, it always takes this average employee about 10 minutes to sand this material down at this operation. There are other customers looking to get a further insight into their operations and they want to track that actual runtime.

Seth King:

That's where work order reporting comes in, is your user will actually be able to scan into their work order at that point, select the operation they're at, and then essentially you're starting a clock. I could go through that process of working on a single work order or I could even work on two work orders because maybe it's more efficient for me to do two customers' product at the same time. Then once I stop that operation, we'll track that labor back to that work order. If you're working on multiple work orders, we'll actually split that time across those work orders, whether it's an even split of time or whether it's based on the quantity on that work order.

Sarah Archer:

Awesome. This could be a question for you Seth or for you, Daniel, but how is work order reporting different from work center reporting and how do those two play into each other?

Seth King:

Work center reporting has been out for some time. It was more of a kiosk version tool so you would run this more on a terminal or a desktop out in the warehouse. What we found was a lot of customers in their manufacturing processes either didn't have the equipment or the space for a full desktop application or kiosk out on the floor. A lot of those existing customers came to us and said, "Hey, it'd be great if we could leverage these devices or mobile devices out on the floor to then start to track this labor." As part of that rebuild, we also went ahead and added some new features to that, to be able to do things like splitting time across multiple work orders, support for lots and serials and generating those labels at the end of the process.

Sarah Archer:

It sounds like if you have work center reporting now, you're a good candidate for work order reporting. Are there any other scenarios that maybe work order reporting could work into your business?

Seth King:

Yeah, I think the first thing is to ask yourself is, do you use the WIP and routing modules of NetSuite? If that answer is yes, then you should certainly explore work order reporting. If you're already a customer that owns works center reporting, then you should certainly take a look at it to see if that's going to be a viable upgrade for you and increase process even more.

Sarah Archer:

Anything to add there, Daniel, about work order reporting or work center reporting?

Daniel Shepherd:

No. As Seth was saying about the different operations in time, it all relates back to any customer for the accounting. WIP is used mainly by customers who want to validate their costs, that they're selling it at the right level price. They'll only know that if they're meeting what the design was for how long that operation takes.

Sarah Archer:

Cool. Well, I'm really excited about this functionality because I think it's going to be a big change and big, exciting stuff for our customers. Let's move on past work order reporting. If you have questions about that, please reach out because we'd love to talk more. Seth, you teased this a moment ago, so I'd like to talk a little bit more about it. After WIP, you said there are there levels once you get to WIP. What's the next level? Will you talk a little bit about advanced manufacturing? Daniel, of course, please feel free to add in some commentary.

Seth King:

I think it's important to notate that in these different levels of manufacturing, there are different modules that are required inside of NetSuite. Generally, if you own advanced inventory inside of NetSuite, you own the ability to do work orders in assemblies and kits. You then have to purchase that WIP and routing module to be able to leverage things like operations, and labor runtime, and machine setup time. Let's say you're doing that. You're leveraging work order reporting, you're tracking labor, and you still need more efficiencies in your business. There is a module in NetSuite called advanced manufacturing. Now where the big value of advanced manufacturing comes, is now you're generating at such a high level of process and you have so many work orders a day and so many different routing steps and machines, you're maybe starting to get backlogged in certain operations. You're getting stacked up or you're getting a bottleneck at a certain operation and maybe you need a better scheduling tool. You want to release work orders and a certain process to make sure that they're moving through all of the operations without jamming up any particular step in the process.

Seth King:

Daniel, I know you have a fair amount of experience from being out in the field and working with advanced manufacturing customers. We do work alongside advanced manufacturing. Some of our customers even just leverage RF-SMART to do that front end issue of those components. Then, from there, advanced manufacturing would take over and then we may even pick back up for that final completion to generate things like the finished good labels with barcode, serial, and lot information on there.

Daniel Shepherd:

Sure. The customers that are using the advanced manufacturing, also, what it helps them with is the future forecast for planning and bringing materials in. You're not bringing it all in today when you don't need it for another six months. It will lay that out for them in more of a line. It's got a lot of different reporting tools that add onto what NetSuite's got dor the manufacturing side. Also, if you change the schedule midstream, it will then take care of changing, moving out or moving in those requirements. It just adds that layer of help. What it doesn't do is lead anyone through their warehouse in a logical path. This is why customers rely on the RF-SMART functionalities to lead them down that pathway through their warehouse to get their components and stuff for it.

Seth King:

While we're talking about components, I just thought of a question, Daniel, that comes up often. We talk about build materials and certainly in the process of picking for a work order assembly, we're consuming materials based on that build of material. As you know, in WIP and routing, you can actually over issue components and you also get the ability to do scrap and some additional logic there in WIP and routing. Can you maybe talk about the scenarios where WIP would provide that extra flexibility in what to look for if you're that type of customer as to when you're going to want to over issue components and how that would work?

Daniel Shepherd:

Sure. Just to be clear for anyone that the scrap section of NetSuite that calls out scrap on its work order completions, it's actually scrapping the costing in the finished product, not the sub-components that might be bad. The customers, they don't want to issue exactly 100 pieces to the work order. They know they'd use extra because of scraps through the process. They will use work order issue and issue 125 pieces. This way their stock inventory is straight. It's already lost 125 by the issue. Now the floor, if all 25, that they're guesstimating is going to be scrapped, they don't have to write it off as inventory adjustment. It's already been issued through the work order and taken out of the general ledger. The part where if there's any extra leftover, then they can make an inventory adjustment increase back to their area and transfer that back to their stock room.

Daniel Shepherd:

That's the biggest level of the scrap part that customers like the utilization of NetSuite doing. NetSuite allows you to finish building products. A lot of customers that have come on lately, what they want to do is they want to complete their work order first and then decide to issue the components later because of that scrap process. They don't want to have to write inventory adjustments, writing off the product. They want to validate it, that it was issued to the work order and caused scrap from their GL adjustment.

Seth King:

Great. I've worked with quite a few customers, class II medical device customers, ATF regulator customers. As I'm doing demonstrations for clients and walking them through these processes, there's always the same question. I need traceability through that process. I need to know what lot control components, what's serial numbers go into this finished product. As you and I both know, there are some best practices around that. Things like not mixing lots that roll into a finished good so you can then maintain that traceability. Maybe talk through some of your experience out in the field, as it relates to best practices in maintaining that traceability of those inventory details, on those components all the way through that finished. Good.

Daniel Shepherd:

Serialized, as you said, it is simpler because it's one for one. It's the lot of control items that really become the struggle because if you have a work order for 100 finished, goods and it's going to take two different lot sub-components to make it, NetSuite isn't going to separate it out. That the first 20 were used from lot number A, whereas the next 80 were used from lot number B. There's just no way it's just going to know that both lot number components were issued. Customers are finding that struggle and so what they'll do is they'll break down their top level into two work orders, just so that they can have that traceability of exactly what lot number got issued to which work order to come out which completed lot number assembly.

Daniel Shepherd:

I do have a few customers that they can't do that. They have two mix lots. They've got oils, for example, and oils are put into a VAT and they've got two different shipments. There's nothing they can do about it. Both raw materials are dumped in so two different lot numbers from the vendors. Now they have to somehow traceability and right now they're currently doing that outside of NetSuite to trace which two lot numbers became this brand new lot number that they're adjusting into NetSuite.

Seth King:

It sounds like best practices don't mix those lots in a work order. You still will still have visibility if you do mix lots in a work order but if, in the case of a recall, you're generally led to recalling a much larger group of product. Because if you do build 100 finished goods, you're not going to know which 50 contained that lot that may have been compromised.

Daniel Shepherd:

Exactly, Seth. That's the biggest challenge they're seeing today.

Sarah Archer:

Wrap up here today, Seth or Daniel, do you have any customer stories that you want to share? Maybe a particular manufacturing customer comes to mind of how they implemented any of the features that we've talked about today and how that transformed their business?

Seth King:

I have a customer of a medical device company and they purchased the WIP and routing modules of NetSuite. The next step of this process in their growth will be work order reporting. I'll talk about why they decided WIP and routing was right for them rather than the work order assemblies. When they started with NetSuite, they went straight into WIP and routing. Now their process is they bring all of these components in and they're raw materials. Things like gauze, packaging materials, and various medical device, small instruments and widgets. They custom pack these into different containers for surgeons and doctors. Now it's not just a process of grabbing these components and putting them in a box and sealing them. It's a pretty in-depth process.

Seth King:

Now, as you can imagine, if I have a box of gauze and I have different versions of gauze that are all different skews, when I grab those components to go push them into a clean room for this manufacturing process, I still need to know what lot and component that is. They actually did some really cool customization of the product at that point, to print custom labels out on mobile printers and then label those materials before they go in this clean room. This starts that process of WIP. That's that issue of components out in the warehouse, grabbing those materials. These now go into a clean room where they go through an assembly process.

Seth King:

Well, after this assembly process and product gets packaged, it actually has to go off site for three or four days and be sterilized. As this product goes off site, they wanted to be able to track, well, what work orders are off site right now? They didn't want to set that up as a location or a bin and try and transfer this inventory. One of their routing steps was this sterilization process. They were able to set up that time and how long that would take of three days. If a customer was to call in and say, "Hey, where is my product? I need it." They could look in that longer manufacturing process and tell that customer, "Hey, we're expecting your product back from sterilization in one day." That was a really good use case of WIP and routing and how they set up those routing steps to gain visibility into their manufacturing process.

Sarah Archer:

Awesome. Daniel, do you have any stories from the field you want to share?

Daniel Shepherd:

We got the bakeries that we're doing right now and they are using even the advanced manufacturing of NetSuite to try and pull in all the best of both, what RF-SMART and NetSuite's modules can do for them. They have had some customizations where they make their baked goods and they need to know by hour because of course, like Seth mentioned earlier, if they made 20,000 pies, for example, they don't want to pull back 20,000. They can now solidify it to which ones were made within the hour from 9 to 10 AM, from 10 to 11 because of their date code sequencing of that finished lot. It's been a really good module for them to leverage for both of us.

Daniel Shepherd:

The newest one that I've got coming on is going to do a similar process that Seth just mentioned of his, which may even bounce off of some different things that they rolled out. It definitely sounds like they want to be able to, from the field, you the sales rep, who that customer's going to call first, you're able to look in your NetSuite system long range and say, "Okay, it's at operation 20 so the next three, it should be down to you and ready to ship to you in five days." NetSuite doesn't, out of the box, do that and so that's where the customization processes will come in.

Sarah Archer:

All right. Well, we're right at our time so I think we'll get it wrapped up for today. Thank you so much, Seth and Daniel for joining me. Thank you for listening. If you have questions about what we covered today, you can visit our website at www.rfsmart.com. If you search podcast in the search bar, up in the right hand corner of our website, it'll take you to a page where you can submit questions or you can access other episodes of the podcast. Stay tuned and look for more information there. Thanks again so much for joining us. Seth and Daniel, you guys are so great and I'm so glad that we got to listen to everything you had to share today. With that, thanks for listening. See you again soon.

 

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