Jim Connett, on December 13, 2023, 03:58 PM
Material Movement Schemes in Manufacturing: A Matter of Priority
One of my favorite events as a child growing up in the 1980s was a trip to the record store. For those born after the baby boomer generation, a record store was a place where one could purchase music on records, tape cassettes, and/or compact discs. For me, it wasn’t so much a choice of the music’s medium. Rather, the choice came down to how much money I had in my pocket and how much music I could purchase with that money. Sometimes, this meant shopping the clearance sections. At other times, this meant purchasing “collections” (a record or CD with various artists performing music in a certain genre or theme). As part of my decision, I also needed to consider if I was going to listen to music portably or not, if I was going to share the music with someone, or if I wanted to purchase it to keep it in pristine condition as a collectible item. Then there was the financial component… I carried with me a limited amount of money, so I had to prioritize my purchase to get the most music for the least amount of money. Working through these questions guaranteed that I would never leave the music store without at least one record, cassette, or CD.
Material Priorities in Manufacturing
Similar to the priorities I practiced as a young connoisseur of music, the material you make at your site likely possesses some type of priority. These priorities may or may not be explicit, but given many materials at a given point of the process, a decision is made (rightly or wrongly) to process one material at this time while leaving all others in the queue in front of the tool for a later time.
Without some level of automation, these material movement decisions are largely uncontrolled and often based on other non-critical priorities, such as manufacturing goals, items closest to the operator, process, or – as with my music purchase decisions – cost. Automation permits some level of control by presenting the end-user with an ordered list, but how can these lists be generated in a way that makes sense at this moment while supporting material movement in the future and your business model in general?
Material Management Schemes
Here are some of the material management schemes employed in manufacturing environments around the world. Some may be familiar to you, while others are a bit more obscure and may only apply in niche manufacturing scenarios. Below is a summary of these schemes and how these schemes might best be used.
This oft-employed time-tested scheme enforces a time-based ordering that promotes the oldest material having arrived at a processing point. FIFO ensures the material waiting for the longest time at a processing point is next to process.
This material management scheme is similar to FIFO and helps to ensure products don't exceed an imposed expiration (good until) date/time. We might see this ordering scheme on display in a supermarket where perishable items contain an expiration date and are moved to the front of the refrigerator. Hence, customers take those items first, ahead of other similar items with more distant expiration dates.
FMFO is very similar to FIFO and, in most cases, can be used interchangeably. FMFO schemes may excel when component materials are combined or constructed into a product, resulting in the birth of a new instance of a product at an associated date and time. The goal of this scheme is to ensure the oldest manufactured material is moved first.
FPFO is similar to FIFO and is often used in situations where finished goods are stored in a warehouse for later distribution. FPFO material management prioritizes the movement of products with older production dates first. In other words, a product produced last year will move before a product produced last week.
LIFO is also time-based and prioritizes material having arrived first at a point of processing.
One might use this ordering scheme to choose a fresher product over a non-expired but less fresh product or choose to pay more for a newer item versus an item created a few days ago. Multiple uses of this scheme can be imagined specific to perishable goods.
LEFO is rarely used and relies on the material to contain a date/time parameter to be evaluated. LEFO does not consider the arrival time of a material at a given point but focuses on ensuring the items with the longest usable life are moved first. Material movement with LEFO may depend primarily on external parameters.
Scheme Benefits & Use Cases
Benefits of FIFO, FEFO, FMFO, and FPFO:
- Inventory is rotated efficiently
- Prevents scrap due to aging
Use cases for FIFO, FEFO, FMFO, and FPFO:
- Any perishable manufacturing or storage (such as in a grocery store)
- Pharmaceutical industry where medications contain a legally binding expiration
- Car dealerships’ “End Of Model Year” sales – clearing the business of this year’s model to make room for the incoming year’s model
Benefits of LIFO and LMFO:
- Helps to ensure the most recent material is sold at a price commensurate with the cost of making the good.
- Can help reduce tax burdens due to a potentially lower profit margin.
Use case for LIFO and LMFO:
- Goods sold in an inflationary environment… the older goods are produced at a lower expense vs. the current goods produced at an elevated expense due to the inflationary pressures.
Benefits of LEFO:
- Maximize the useful life of the material
Use case for LEFO:
- A doctor who is administering a temperature-sensitive vaccine. The process of administering the vaccine to patients makes it difficult to return the vial to the cooler between applications, therefore, the doctor chooses a vial that has been in the cooler the longest to ensure the vaccine is as cold as possible (as opposed to a vial which might have been placed in the cooler a few minutes ago after having been “heated” by the ambient room temperature).
Impact on Manufacturing Automation
Material management schemes positively influence process efficiency, resource allocation, inventory holding costs, supply chain integration, quality control, production scheduling, material handling automation, cost structure, and ERP integration. These strategies ensure that automation systems function optimally, leading to improved manufacturing outcomes, cost-effective processing, and satisfied customers.
Choosing the Right Scheme
The choice of which scheme to implement depends largely on the business model and the intended purpose and outcome. All of these schemes serve as the foundational ordering of work in process and support further granular ordering possibilities such as by product, due dates, resource levels, etc. Whether top-level and general or granular and complex, an ordering scheme helps maximize the throughput and output of your manufacturing environment. For more information on automated material management, please contact us.