Inside Columbus’ new guide to better managing co-products you’ll find common problems faced by food and drinks manufacturers.
Page 8 illustrates how an oat processor overcame complex processes to be able to gain a clearer view of its costs.
An oat processor produced several types of finished oats from raw oats, as well as some co-products that included oil and others that varied depending on raw material and eventual end output.
The business generally understood the process, but this was not being reflected in their ERP system due to the complexity of the formula structure.
The production of the finished oats was achieved by taking the oats through a production process that commenced with a feed preparation step, followed by a multiple production process including the pin and hammer mills that ultimately resulted in a finished product bag being irradiated.
A solvent was added to the process between the mills and then reclaimed as a co-product through an oil-stripper step. The usage and then subsequent reclaiming of the solvent could not be reflected correctly in the existing ERP system prohibiting accurate costing and planning.
The crude oil that was also produced as a co-product was refined, packaged and sold. Neither of the co-products was successfully configured as co-products within the product to allow for accurate costing and successful planning. In addition the manual reflection of the co-products back into stock was subject to inaccuracies and time delays.
The co-products are now configured within the formula of the finished produce which allows the costs of co-products to be automatically calculated by Microsoft Dynamics. The planning calculations suggest production orders to generate co-products that meet the expected requirements and allow a full view of the net requirements of the business.
The costs of the co-product in the formula are configured using a total cost allocation method ensuring that the true cost of the final product and the co-products produced are accurately reflected.
The co-products always result in a positive cost allocation and are considered and costed as part of the entire cost of the formula. The total cost allocation is defined, enabling the cost of the co-products to be represented correctly in the finished product of the oats. Basing the cost allocation calculations dynamically on the quantity reported as finished gives the business a more accurate picture of the costs throughout the system.
The co-products are fully tracked through production and into stock, removing the need to manually reflect stock in the system.
The calculated costs of co-products provide a true picture of total product costs, and the coordination of a co-product’s demands and supplies helps achieve production goals to efficiently plan the plant and give visibility of the inbound co-product from production.