Subcontracting and Material Scrap (Waste)

Need help with two scenarios. We’re in the middle of an implementation and are struggling with two very important processes. The first is a job with one operation that is a subcontracting operation to slit steel coils. We purchase master coils from a steel mill and have them dropped shipped to a processor who then slits the masters to the final widths that we use in our roll forming process. This is currently presenting two issues for us. The first issue is that we need to track the scrap that naturally results as a part of the slitting process and there doesn’t seem to be standard functionality to do this. Now this isn’t scrap in the sense that someone made a mistake. It’s essentially a byproduct of the process/waste. Now I know I can just build this into the BOM as either estimated scrap (it’s approximately 2%) or even into the Qty/Parent field (1.02 pounds of master coil equals 1 pound of slit coil instead of a 1:1 to ratio), but the problem is that it’s truly just an estimate, which is why we need to track it (if it’s significantly over 2% we need to contact our slitting supplier for a credit if it’s their fault or our mill supplier if it’s theirs). Since there doesn’t seem to be native functionality to enter the scrap, I figured I could write a BAQ to calculate the difference between the estimated quantity of the material for the job and what was actually issued/received directly to it from the PO, but I wanted to see if there was a better way to capture what we’re trying to.

Now we’re onto issue two with the first scenario. Our supplier who performs the subcontracting operation bills us for the total weight of the coils they process (total weight of the master coils), not the total weight of the slit coils (which is the total weight of the master coils minus the total weight of the scrap), which as you can imagine poses significant problems when we try to do the receipt of subcontracting and AP invoicing for the subcontracting. One option is to do a PO receipt for the total weight of the master coils for the subcontracting process so that the AP invoice matches appropriately and then do a Job receipt to inventory of the weight of the slit coils. However, this leaves a significant variance on the job. I’ve also considered using a co-part to represent the scrap (originally I figured it would kill two birds with one stone by allowing me to report scrap and accurately match the AP invoice), but it seems convoluted and after some initial research, I don’t think it’s going to work the way I need it. Additionally, I thought about sending the material through non-conformance and DMR processing. I haven’t even tested this module yet, so I’m sure I’m overlooking some other pitfalls, but the biggest one I see is that the scrap cost would have to go to expense and wouldn’t be capitalized in inventory with the slit coils. Has anyone else encountered a similar situation and have a solution? Basically what I’ve come up with is to just receive the weight of the slit coil on the PO receipt and then just manually override the quantity on the AP invoice. Not ideal but it works.

Alright. While you’re chewing on that, let’s talk about scenario 2: the process which uses the slit coils. We take these coils and roll form them into a variety of parts. Again, there is scrap that occurs naturally as a result of this process. We track this scrap for two reasons: to see if it’s excessive and to help us calculate the thickness of the coil to see if it’s excessive as well. The coil varies in thickness and has specified tolerances. We monitor the coil thickness to verify it’s within tolerance. One way we do that is by calculating the average coil thickness. We multiply the length of the pieces by the quantity of the pieces and add the scrap length to get the total length of the coil. A little algebra and some dimensional analysis and we’re able to get the average coil thickness. I just don’t know where to capture the scrap quantity. I don’t think it makes sense to do it in labor reporting because the scrap quantity there (to my understanding) is in terms of the part produced on a job. I tossed around co-parts again, but I think it’s going to be convoluted and I still don’t think it’ll allow me to do what I want to do. Is using the non-conformance and DMR an option for capturing this? And then could I run a BAQ later to calculate the average coil thickness? I’m not experienced enough yet in Epicor to know the best way to do this. Any help would be greatly appreciated.

Check out Salvage.
On the material line for the master coil place a part number for the scrap that will come from the job.
At the end of the job perform Salvage to Stock to pull the cost of the scrap out of the job and into inventory.

I think that would be a great solution for capturing the scrap from the roll forming process, but if I use that for the slitting process I wouldn’t be able to capitalize the cost of that material into inventory with the slit coils.