Using the Work Policy for warehouse processes in production

Warehouse processes don’t always include warehouse work. By using the new warehouse work policy introduced with KB3184505, you can omit work warehouse processes in production for specific products and locations.

Below figure shows a scenario how the Work Policy can be used (double-click on the figures to make them bigger).

In this scenario, we have two production orders; one for painting Comp-1 and one for the assembly of Fg-1. The production order for Comp-1 is reported as finished to the location 001. The production order for Fg-1 is later consuming Comp-1 and Rm-1 from location 001. When the production order for Fg-1 is released, warehouse work for raw material picking is generated to move Rm-1 from the Bulk locations to 001.

For this scenario, we can set up following requirements for the warehouse processes:

No warehouse work for Finished goods put away should be created when reporting as finished Comp-1 to location 001 because Comp-1 is later consumed on the same location by the Assembly operation.
No Work for Raw Material Picking should be generated for Comp-1 when releasing the Assembly operation to the warehouse.
Work for Raw material picking should be generated for Rm-1 when releasing the production order for the Assembly operation to the warehouse.
It should be possible to define location 001 as non-license plate controlled, as it acts both as a production input location and a production output location (so far it has not been possible to define the production output location as non-license plate controlled).

The following walkthrough shows how these requirements are supported by the Work Policy. First we will set up a Work policy named NoPickPutAway-001-FG1 as shown below

As it can be seen from the figure, the Work policy uses the following three criteria to define work creation:

The Work Order Type
The Location
The Product (selected or all products)

Above policy will prevent Finished good put away work to be generated when Reporting as finished product Comp-1 to location 001 in warehouse 51.

The policy will also prevent Work for raw material picking to be generated when releasing a production order that is consuming product Comp-1 from production input location 001.

Location 001 is defined as a non-license plate controlled location. It is pre requisite for defining a non-license plate output location, that a work policy exists for the location that prevents work for Finished goods put-away from being created.

Let’s take a closer look at the setup of the products and then how the work policy works in this scenario. Product Comp-1 has a Painting operation which is associated a resource group with output location 001

The Assembly operation for the production order for FG-1 is consuming the products Comp-1 and RM-1 from the input location 001. The input location is setup on the resource requirements for the Assembly operation

The active bill of material version for Fg-1 is setup for materials Comp-1 and Rm-1

Now we create a production order for Comp-1 for 20 pieces

The production order is Started

The production order is Reported as finished from the hand-held device in the below flow

In this case Comp-1 was reported as finished directly to location 001 and no put-away work was generated because of the Work policy.

Now we create a production order for FG-1

The production order is Estimated and Released

Work for raw material picking has been generated for Rm-1, because the Work policy is only preventing work for raw material picking for product Comp-1 to be generated from location 001

In the first release of the Work policy only the following three Work order types for production are supported

Raw material picking
Finished goods put away
Co-product and by-product put away

Overproduction in Microsoft Dynamics AX 2012

With the introduction of the new warehouse management capabilities in Microsoft Dynamics AX 2012 R3, it is possible to Report as finished a production or batch order from a handheld device. The only disadvantage of using this capability is that you can’t overproduce. The user will be blocked by the error: Quantity reported as finished exceed the quantity started, and have no option to override the setting.

With Hotfix KB 3034999, we leverage the quantity validation parameters, originally built for the Manufacturing execution module, so the user can now report overproduction from a handheld device.

Overproduction is the term used in Microsoft Dynamics AX 2012 for reporting a production or batch order as finished when the quantity produced is greater than originally planned. This is a common scenario in the process industry and can be caused by many factors, for example, potency and yield.

When you produce more items than planned for a production or batch order, you will get the following blocking error: Quantity reported as finished exceeds the quantity started.

In order to allow for overproduction, you have to select the parameter Accept error in the Report as finished parameters. This will bypass the quantity validation check and then allow for overproduction.

For companies that use the Manufacturing execution module in Dynamics AX2012, there is a more advanced support for overproduction. In this module, you can set up a quantity validation based on different criteria. For example, you can accept overproduction in percent based on the planned quantity, the started quantity, or the quantity reported on the previous operation.

To show an example of how overproduction is reported, I have changed the demo script for CU8 “SCM Demo Script – Batch orders and WMS integration” (Attached). I have changed the section:

DEMO: REPORT THE PRODUCTS AS FINISHED AND MOVE THEM TO LOCATION FOR FINISHED PRODUCTS

The following diagram shows the complete logic. The logic was originally only applicable for reporting overproduction from the job registration form in the Manufacturing execution module, but is now applicable for the scenario where the user needs to report overproduction from a handheld device.

SCM Demo Script – Batch orders and WMS integration – Overproduction.pdf

Generating put away work when reporting as finished from the Dynamics AX client

This new functionality is available with KB 2999768 and will be included in Microsoft Dynamics AX2012 R3 CU8. To find the HF you can use LCS Issue Search.

What’s new?

In the AX2012 R3 release put away work could only be generated when you used the reporting as finished process on a mobile device for a production or batch order. In CU8 put away work can now also be generated when you use the reporting as finished process for a warehouse-enabled item from the AX client.

In this blog I am going to walk through two scenarios showing how put away work is now created when reporting as finished from the Dynamics AX client. In this example I am going to use item L0101 from the USMF demo data company

Simple scenario : Shannon has completed the assembly of ten speakers in her work cell. She reports the speakers as finished in the route card journal and put away work is generated.

A production order for twenty pieces of mini-speakers exists and is in the status Started:

Shannon completes the assembly of the twenty Mini-speakers and reports the quantity as finished in the route card journal:

Shannon provides the journal line with a license plate number:

When Shannon posts the journal, put away work is generated:

Advanced scenario : Shannon is working on a production order assembling ten Mini-speakers. Shannon has completed the assembly of eight speakers and reports them as finished in the job registration terminal form and put away work is generated. Shannon completes the assembly of the remaining two speakers but does not have time to report them in the terminal, because she has to rush home. Lars promises Shannon that he will take care of reporting the remaining quantity as finished.

A production order for ten pieces of mini-speakers exists and is in the status Started:

Shannon has started the assembly of 10 mini-speakers:

Shannon is now going to report eight pieces as finished from the Job registration form in the manufacturing execution system. In the feedback form Shannon provides a license plate number. This number identifies the goods that Shannon is reporting to the output location of her work cell. The license plate number will be used by the warehouse worker to identify the goods that he is going to put away from the output location to the finished goods locations:

Note: The license plate field is enabled in the feedback form under the following conditions

The item is enabled for the new warehouse processes
The shop floor operator is reporting on the last operation in the production route

After Shannon has confirmed the feedback of eight pieces of mini-speakers, put away work is generated:

As it can be seen this work suggests that the eight Mini-speakers are put away from the production output location to the finished goods location.

In order to report the remaining two Mini-speakers, Lars opens the production order form and selects the Report as finished function. Here he enters the remaining two pieces and the license plate. In this case he uses the same license plate as Shannon did when she reported the first eight speakers:

After confirming the report as finished, put away work has been generated for the remaining two speakers that were reported by Lars:

The different options for reporting as finished is outlined in the table below. All these options now supports the generation of put away work:

Option	Description
Report as finished	Dedicated function on the production/batch order form or list page. Has advanced options to for example back flush materials. Typically used by the shop floor supervisor role
Report as finished journal	Journal to post the quantity reported as finished for production or batch orders. Typically used by the shop floor operator role
Job card journal	Journal to report time and quantity for route operations. Option to report a quantity as finished when reporting on the last operation. Typically used by the shop floor operator role
Route card journal	Journal to report time and quantity for production jobs. Option to report a quantity as finished when reporting on a process job for the last route operation. Typically used by the shop floor operator role
Current operations	List page showing ongoing operations on the shop floor. Option to report a quantity as finished when reporting on the last operation. Used by the shop floor operator role
Report feedback in job registration form	Form that is optimized for manufacturing execution on the shop floor in a kiosk or terminal installation. Option to report a quantity as finished when reporting on the last operation or a process job for the last operation. Used by the shop floor operator role
Hand held device	Menu items on hand held device offering reporting production or batch orders as finished. Used by the shop floor operator role

Summary

In CU8 it is now possible to have put away work generated when reporting quantity on a production or batch order in the Dynamics AX client. For example this can be useful for customers who wants to enable the new warehouse processes offered in the R3 release, but wants to continue to use the shop floor terminal for manufacturing execution, or also want to enable the shop floor supervisor to make corrections.

Setting up the production output location

This new functionality is available with KB 2995954 and will be included in Microsoft Dynamics AX2012 R3 CU8. To find the HF you can use LCS Issue Search.

What’s new?

To support an efficient process for putting away produced products, it is now possible to define an output location specific for a production or a batch order. This will enable the warehouse worker to exactly know where to go, to pick up the goods for put away.

The illustrations below shows the difference between the R3 and the CU8 implementation. The first illustration shows the R3 implementation where it was only possible to define one output location per warehouse:

The second illustration shows the CU8 implementation. In this implementation it is possible to set up an output location per production or batch order. This will give the warehouse worker a better overview of where to pick the finished products for final put away

This blog will explain how this new capability is enabled by using the official demo data released for Microsoft Dynamics AX 2012 R3 CU8 Virtual Machine (VM).

In the company USPI there is a formula for making Pellets. This formula will be used for showing how this feature is enabled and used.

The illustration below shows the Pellets production:

The item numbers for the ingredients (or raw materials) as MW4004 – Polypropylene and MW4005 – Rubber are pre-fixed with MW and the four end items are pre-fixed with PW. PW4000 – Pellets is the formula item, and PW4001 – Chips and PW4002 – Blocks are co-products. PW4003 – Slag is a by-product

Let us take a closer look how to enable this feature. First we need to set up the production output location. Looking at the route for the Pellets formula operation 40 DryFilling is the last operation:

An applicable output location for this operation is found through the Resource requirements for the operation. In the Resource requirements, criteria for finding an applicable resource or resource group during scheduling, is set up:

The output location is specified on the resource group, as it can be seen in the illustration below:

In case no output location is defined on the resource group, then a default production output location is used as a fallback location. This default output location is set up on the warehouse:

In the diagram below the defaulting hierarchy is shown. The diagram shows the rule that applies for finding the production output location when reporting as finished for a production or batch order:

Example

To see how this works, let us report as finished a quantity of the formula item PW4000 – Pellets. The batch order is in status Started and is ready to be reported as finished:

Reporting as finished is done from the mobile device:

Batch order number, Item number, quantity and license plate is entered:

And the process is completed and put away work is generated:

Taking a closer look at the put away work, the pick location for this work is FILL-01. This location is the output location that was set up on the resource group that is applicable for the last operation DryFilling

Let us try to remove the output location from the resource group and then report as finished one of the co-products from the batch order

We report as finished a co-product PW4002 – Blocks and put away work is generated

The put away work will in this case have the default output location OUTPUT. This location is the fallback location set up in the warehouse

The defaulting of the output location is enabled for all the places where the reporting as finished process can be performed. This includes

Using the report as finished function from the batch order
Using the report as finished journal
Reporting as finished from the job or route card journal. This is possible when user reports on last operation and marks the field Report as finished on the journal line
Report as finished from list page Current operations. This is possible when reporting as finished the last operation
Reporting as finished from the Job registration form in the manufacturing execution module (MES). This is possible when the user reports as finished the last operation

Summary

In CU8 it is now possible to set up an output location for the last operation in a production route. This supports a more efficient process for putting away produced products from the shop floor to the warehouse. The output location is set up on the resource group that is applicable for the route operation. A fallback output location set up on the warehouse is used in case no output location is defined on the resource group. Using the output location defined for the last operation in the production route is applicable for all the places where the report as finished process can be performed.

Now available: Cumulative Update 7, featuring the product change case management

With the recent release of Cumulative Update 7 for Microsoft Dynamics AX 2012 R2, the case management functionality of Microsoft Dynamics AX has been enhanced for documenting and releasing product changes to production.

Many manufacturing companies will welcome this simple built in possibility of creating product change cases to document component substitutions in bills of materials or formulas, or changes in the production route, and of being able to visualize the impact of such component changes.

The new product change functionality provides enhanced support for approval and activation of the changes to bills of materials, formulas and routes that are associated with a product change case, which reduces the effort needed for releasing product changes to planning and production. This new capability also offers a new opportunity to integrate changes from an external PLM solution into Microsoft Dynamics AX with the context of the PLM change order with enhanced support for validation, approval and activation in production.

The diagram below illustrates the overall product change process, and highlights those elements (with black outline) that are supported by the new product change features in Cumulative Update 7 for Microsoft Dynamics AX 2012 R2.

Meet me at Convergence EMEA 2013 at the Manufacturing booth if you would like to see the feature in action.

We will soon share more details about this new functionality in this blog.

Download it now!

Microsoft Dynamics AX 2012 R2 Cumulative Update 7 (KB2885603) – build #6.2.1000.4051

Supply chain excellence in manufacturing

Today I had the opportunity to take part at a Master Class on Supply chain management with Professor Martin Christopher from Cranfield University, Bedford, UK. The master class was hosted by Implement Consulting and the attendants were coming from all Industries in Denmark.

Professor Christopher succeeded to draw a relevant picture of the future trends and challenges to global supply chain management and to manufacturing in particular, and I would like to share a couple of quotes and thoughts.

Move from forecast driven to demand driven – Instead of planning to replenish inventory, establish supply chains that allow you to fulfill demand as a single event.
For products, where individuality and responsiveness are relevant, the agile supply chain – and the agile manufacturing process – must be designed for responsiveness, not for the lowest cost. Responsiveness has to be built in the process and comes with a certain cost.
Substitute information for inventory – sharing information on demand and supply chain execution across the supply chain helps reducing or even eliminating inventory.
Flexible capacity – Move from static capacity to flexible capacity models, that allow to scale according to actual demand. Instead of acquiring manufacturing and distribution capacity based on forecast before the fact, a now model of
acquiring capacity options that can be used on specific actual demand is emerging in the markets.
Economics of scale vs. Economics of scope – Instead of the volume of products, the bandwidth of products that can be delivered out of a supply chain drives the economic success.

It was an inspiring morning, leaving me with a lot of thoughts and ideas.

If you are inspired as well about these topics, join Roxana, Sverre and me at our session on Mass customization in a distributed supply chain in Microsoft Dynamics AX 2012 R2 at Convergence EMEA in Barcelona next
week, where we will share our vision on how the combination of product configuration, intercompany planning and lean manufacturing can bring you to the next level of supply chain excellence.

Working with Overlap in Microsoft Dynamics AX

Conducting Dynamics AX Manufacturing training for a class in Malaysia, it became clear that the current documentation on Overlap in Dynamics AX was not telling the full story.
Therefore, I decided to write this blog.

So, what is Transfer batch and Overlap quantity?

In Dynamics AX ‘Transfer batch’ is the field used to control an overlapped schedule. Apics define ‘Overlapped schedule’ as “A manufacturing schedule that overlaps successive operations. Overlapping occurs when the completed portion of an order at one work center is processed at one or more succeeding work centers before the pieces left behind are finished at the preceding work centers.”

Overlapped schedule is also known as lap phasing, operation overlapping, telescoping or send ahead.

‘Overlap quantity’ is a calculated field on the production order – ensuring that we avoid gaps in the schedule, when the successor operation to the operation with a Transfer batch value, has a shorter process time.
The ‘Overlap quantity’ determines the first transfer batch size for the operation; the following transfers to the next operation will use the ‘Transfer batch’ value.

Overlap quantity example

Say you have a production order for 10 pcs and it has two operations 10 and 20, each operation taking 2 minutes per pcs:

Without overlap:

Normally operation 20 will start when the entire quantity (10 pcs) has been processed on operation 10

With overlap:

When you have specified something in ‘Transfer batch’ field, let us say 2 pcs, it means the next operation (in our case 20) can already start when only 2 pcs has been processed on the operation 10. The value from ‘Transfer batch’ is by default copied to the ‘Overlap quantity’, on the production order.

Why does the Overlap quantity sometimes change when I estimate a production order?

The ‘Overlap quantity’ parameter on the production order route is calculated by the system. This is done during the estimation (or scheduling) of the production order, to prevent gaps in situations where a later operation have a shorter process time than the current operation. The fact that the successor would be waiting for the delivery from the predecessor would be causing a gap.
So, the calculation of an optimal ‘Overlap quantity’ is done based on the ‘Transfer batch’ and the operation process durations on the route.

Overlap example with gaps (two operations):

Say you have a production order for 10 pcs and it has two operations 10 and 20, this time the first operation takes more time than the second does:
Opr 10: 20 min per pcs
Opr 20: 10 min per pcs
Again, we have a Production order for 10 pcs and Transfer batch quantity set to 2 pcs

Without any change during Estimation the jobs on the route would have a gapped schedule and look like this:

However, as the first operation in total will take 200 min to complete and the second will take 100 min you will get the following information when estimating:

With the change from 2 to 6 we ensure that there are no gaps between the jobs in the second operation.

Overlap example with gaps (three operations):

Now let us spice it up a bit and add another operation – Opr. 30 with a run time of 5 min per pcs. We will also set a ‘Transfer batch’ = 4 on operation 20

In this case, you get the following information during estimation:

Now the schedule will look like this:

Therefore, by updating the ‘Overlap quantity’ on the production order during the Estimation Dynamics AX ensures that production on the following operation can happen without any gaps – avoiding a gapped schedule.

Christian Rytt, Senior Program Manager at Microsoft Development Center Copenhagen

Kitting in Microsoft Dynamics AX 2012 using product configuration and sales event kanbans

Many Microsoft Dynamics AX users have asked for a solution that supports kitting. To support a kitting solution, two primary components are needed:

Configuration of a kit for the order management
An activity that assembles the kit

Many ERP and SCM solutions support kitting as part of the Warehouse management or logistics functionality. Without having native support for kitting, Microsoft Dynamics AX 2012 offers an approach where it might not have been expected: Using to product configurator to configure kits based on a product configuration model combined with a lean process activity where the kits are built or packaged to order.

So in fact, the kits are built based on sales event kanban’s, with a single kanban per kit.

It all starts with modeling the kit as a configurable product, and then creating a configuration model that represents the products that can be combined in kits, possibly also including the packaging material. In our example we have a configurable speaker set that consists of two front and two rear speakers per kit. This is represented by a simple product configuration model.

The model structure is rather flat, and consists of the front and the rear car speaker set. The products that can be selected in each configuration step are modeled as conditional BOM lines. In our example the configuration model makes sure that while different models of speakers can be selected for the front and rear speaker pairs, all speakers – front and rear – will have the same cover color. Because the assembly of the kit is done by a lean production flow, route operations are not
needed in the configuration of the product model.

Therefore a global attribute of Color is associated to the Car speaker set. This constrains the selection of components to the common color.

Based on the model shown above, a sales order taker can configure the kits based on the customer’s demands, or use pre-configured kits by selecting a specific configuration of the kit.

The individual configuration is done in the sales order line as shown below, by clicking Product and supply > Product model > Configure line.

The Configure line form allows the configuration of the kit to be based on the product model.

Before finishing the configuration, the sales price of the kit can be calculated based on the configuration of the new kit:

After the configuration is done, a new variant of the kit is created with a corresponding BOM version, and the sales line is updated with the new configuration and sales price.

Note that the BOM version is automatically approved and activated.

Once the configuration is final, the order taker can create the kanban that is to assemble the kit on the packaging work cell directly in the order form:

This creates one or more kanbans, depending on the number of packages that are needed, and load them on the kanban board of the packaging work cell.

In our example, Set05 with the new configuration has been added and is now ready to be picked and completed.

On the same work cell, other preconfigured kits (in our example CSS_SS1B) and other products can also be packaged and delivered to order or to stock.

The kanban rule

The magical configuration that enables this process is the kanban rule. A kanban rule uses the activities that are configured for a production flow. Evaluating the possibilities of configuration of the production flow would go too far for this blog entry. To learn more about that, refer to the Whitepaper “Lean manufacturing for Microsoft Dynamics AX 2012 – Production flow and activities.” Assume that for the kitting application, a single activity production flow, as described in the whitepaper, could apply.

In the actual case, the kanban rule is a manufacturing kanban rule with a replenishment strategy event.

The packaging activity is followed by a transfer to a vendor managed warehouse.

Some highlights of the kanban rule configuration should be emphasized in the context of our scenario. Let’s start with the Product selection field in the Details FastTab of the kanban rule.

Notice that product CSS_SS_CUST is a configurable item for which the configuration dimension is mandatory. A configuration is not assigned to the kanban rule, so it is valid for all configurations of this product. In other words, any kit that is configured based on this model by using the product configurator will be supplied using this kanban rule.

The Events FastTab specifies the events that will trigger the creation of a kanban. In this case, Manual is selected in the Sales event field. The event cannot be created automatically when using the product configurator because the configuration of the line must be completed before the event kanbans are created. The dependency to the source requirement – in our case the sales line – ensures that the sales line cannot be shipped before all kits have been assembled and received. However, in the current example, a reservation is not needed. Because every sales line will have a separate configuration it’s unlikely that the wrong kit will be reserved so the lean approach would be to not make a reservation.

The maximum quantity of a kit per kanban is 1. Every kit creates a separate kanban and receives a separate kanban card. The automatic planning quantity of 1 ensures that every
kanban is directly loaded to the schedule, so the picking and packaging can start immediately after the kanban is created from the sales order line.

Depending on the settings of the kanban rule, the kanban card can be printed automatically in two ways:

When the kanban is created,
When the first activity is planned for the kanban and printed on the printer that is associated to the work cell responsible for the picking activity.

The picking list can be automatically added to the kanban card as well. Instead of having to look at the kanban board first, the worker can take the kanban card directly from the printer and start the picking process. When the kit is assembled, the worker can complete the packaging activity by scanning the card ID.

Costing the Kit

In many cases, the cost of a kit is mainly driven by its components. The cost of the packaging activity can be calculated based on the activity time. To enable the full cost support for the kitting solution, the cost price needs to be calculated and activated for each configuration. However, the value of costing the kitting might be really low, especially if this process usually creates no or only low variance. On top of that, the configured kits usually don’t stay in the warehouse for very long because they are assembled to order shortly before the shipment. For this reason, it might be a good idea to configure the kit so that it has only one standard cost activated for all of its configurations. This is done by clearing the Use cost
price by variant check box in the product master.

This configuration will result in material variances because different materials are used in the kits. To avoid manual corrections, the account that is used for material variance could be redirected to the cost of goods sold. Some people might disagree with this, but from the lean perspective, if costing of the kits and the related variances are not an issue then a manual or even an automatic cost calculation and activation should be avoided.

Both Product configuration and Lean manufacturing in Microsoft Dynamics AX 2012 are powerful tools that support manufacturing and the logistics processes required in many industries. When combined, they can support many use
cases in a very flexible way. I hope this example provides insight into the capabilities and opportunities and how they can be used to empower your business.

The approach that is described in this blog might leave open a couple of requirements that a kitting process in your company might require. If that’s the case, we’d very much like to hear more about your scenarios. But without a doubt we would also like to hear from you if this matches your requirements.

What's new in Microsoft Dynamics AX 2012 R2 – Lot inheritance

Process industries often produce items for which certain characteristics, or attributes, of the ingredients need to be transferred or inherited to the manufactured items. These manufactured items may be finished goods and/or co-products. In many cases, only certain characteristics need to be inherited since these characteristics may become diluted when mixed with other ingredients. In some cases, the characteristic may represent an important attribute that needs to be tracked to the end items due to regulatory or other reasons.

Lot Inheritance enables users to configure items in a manner in which the product characteristics and shelf life information of the finished products can be updated by using the ingredients of the formula that is used to produce that item. For shelf life information, this enables users to define items so that the inventory batch that has the earliest shelf life dates updates the finished products, and the shelf life dates of the finished products are inherited from the inventory batch. For product characteristics, this enables users to define batch attributes for both the finished items and their ingredients, and then select the ingredients that pass their characteristics or attribute values to the finished good items. Users can also select to update co-products by using the same information for shelf life and product characteristics on a formula-by-formula basis.

What's new in Microsoft Dynamics AX 2012 R2 – Potency management

With this blog entry, I would like you to familiarize you with the concepts that we have introduced in Microsoft Dynamics AX 2012 R2 to support potency management.

Potency management lets users define products as having a concentration of an active ingredient. The concentration of active ingredient can be used to affect the amount of material that is required in production or the amount that should be paid to a vendor based on the
concentration level.

Process industries often have formulas that contain one or more active ingredients. For each active ingredient there may be one or more compensating ingredients. These compensating ingredients for a single active ingredient may have different effects based on the difference in the concentration level of the reserved inventory batch and the standard level of concentration for that particular active ingredient. In some cases, the requirement of compensating ingredient may increase to offset the increase in the concentration level of the active ingredient. In other cases, the requirement of compensating ingredient may decrease to offset the increase in the concentration level of the active ingredient. These are known as complimentary and opposing effects.

A complimentary effect occurs when the concentration level of the reserved batch for the active ingredient increases and therefore, less of the active ingredient is required and less of the compensating ingredient is required. A complimentary effect
also occurs when the concentration level of the reserved batch for the active ingredient decreases, and more of the compensating ingredient is required. In ice cream manufacturing for example, a formula for ice cream may contain milk that has a potency of 2% milk fat as an active ingredient, and milk powder as a compensating ingredient. If milk that has 4% milk fat is used for that production batch instead, then less milk powder, which compensates for the milk fat, is required.

An opposing effect occurs when the concentration level of the reserved batch for the active ingredient increases, and therefore more of the active ingredient is required and more of the compensating ingredient is required. An opposing effect also occurs when the concentration level of the reserved batch for the active ingredient decreases and less of the compensating ingredient is required. In food production for example, a formula for potato chips may contain potatoes that have a certain level of moisture, as the active ingredient. The compensating ingredient is the oil that is used to fry the potato chips. When the moisture content in the potato chips rises, then more oil is required to boil off the excess moisture. If the potatoes are drier, then less oil is needed.

There can be one or more formula ingredients that are configured as filler ingredients. Filler ingredients are used to fill up or ”top off” the batch quantity to achieve a required amount. Due to the nature of active ingredients and the required amount of compensating ingredients that result from the principle factor, the total amount of the active and compensating ingredients may be less than the estimated quantity totals. When this situation occurs, an adjustment is made to the quantities of filler ingredients to achieve the required quantity of the formula item. When more than one filler ingredient exists in the formula, then the adjustment amount is applied to the filler ingredients based on their relationship to each other.