This chapter provides a basic understanding of least cost formulation. It includes information on using the formulation specification workbench, entering a new formulation specification, and a new requirement. Material, compositional, and technical requirements are discussed, and use of the formulation specification summary is presented. You are shown how to generate and optimize a formula.
This chapter covers the following topics:
Following are some requirements that customers have for least cost formulation in Product Development:
Yes. A formulator can enter a complete product specification that represents target properties of a product that must be met as part of the least cost formulation. Individual ingredient requirements are listed that define the specific requirements such as minimum and maximum ingredient quantities allowable.
Use the New Formulation Specification Window to Define the Product Specification
The New Formulation Specification window lets you define targets for each product, including technical parameters, formulation specifications, and the minimum and maximum physical quantities of an item or item group. You can define the effective dates for this specification.
Yes. The application processes the minimum and maximum ingredient requirements to deliver a formulation that meets product specifications while targeting the lowest possible cost.
View Material, Compositional, and Technical Requirements to Evaluate a Proposed Least Cost Formulation
The application generates least cost formulas that meet the requirements defined within the product specification. You can display the material, compositional, and technical requirements for the proposed formulation.
Yes. Generate a least cost batch that meets the product specification from a formulation with the lowest cost.
Generate Least Cost Batches
Validity rule windows display the least cost validity rule at the beginning of lists. You can create batches using one of these validity rules.
Yes. Generate a batch without predefined formulas. The application models the percent composition of ingredients from the set of predefined parameters entered. Use this model formulation to create a batch without prior creation and approval of a formula.
Generate a Batch Directly from the Generate/Optimize Formulation Window
Use the Material View of the Generate/Optimize Formulation window to display least cost formulation results. Then click OK to navigate to the Simulator where you can create the batch.
Yes. You can specify which costs to use in the optimization equation. You can recall the standard, actual, and lot costs for the optimized formulation. You can compare costs of the standard formula to the proposed least cost formula, and import external costs.
Select the Cost Method to Use for Evaluating the Optimized Formulation
Cost methods and external costs are considered as part of the optimization process. You can compare the actual cost of the input materials to the standard cost of the materials specified for a batch prior to its release.
Least cost formulation is a cost saving optimization method that responds to the demands of food, beverage, and metals formulation industries to satisfy several of their key business processes:
Formulas and recipes are developed and optimized based on targets and constraints.
Formulation targets can include properties such as fat, moisture content, nutrient requirements, or other parameters that are unique to each industry. Specific formulation constraints can require identification of the maximum contribution of a single ingredient type.
Substitute ingredients can be used to optimize formulations for cost, or to meet product weight and volume requirements.
Least cost formulation is frequently used to generate formulations that are not reused. By yielding products that meet the predefined product specification at the lowest possible cost, this tool maximizes profits, minimizes waste, and reduces the time and complexity involved in new formula creation. Least cost formulation eliminates many of the manual processes previously required to find proper materials to produce a batch.
Prior to running a least cost formulation, you must set up the following:
Create a new laboratory organization, define inventory items in that laboratory and assign these items to the laboratory organization. Enter accounting and inventory information for this organization.
Refer to the Oracle Inventory User's Guide for the procedures to set up items.
Set up the key flexfield structure for the least cost formulation item category. Create new least cost formulation item categories and category sets. Assign the items to the category sets.
Refer to the Oracle Inventory User's Guide for the procedures to set up item categories and category sets.
Create technical parameters under the laboratory organizations to use. Enter technical parameter sequences to associate the technical parameters to items. Enter item technical data for each item created. Verify that the proper mass to volume conversions are entered.
Create a Derived Cost Technical parameter by selecting the cost source and designating the default cost parameter. Add the cost parameter to the item technical data for each ingredient in order to calculate costs appropriately when you generate the least cost formulation.
Set up standard, actual, or lot costs for least cost formulation items.
Create a new formulation specification using the Formulation Specification Workbench with material, compositional, and optional technical components.
Use the Change Status window to change the formulation specification status to Approved for Laboratory Use.
Use the Formulation Specification Workbench to query the approved formulation specification. Review the effective date, minimize or maximize objective, and optimization parameter. You can also review the material, compositional, and technical views prior to generating a least cost formulation. From the Actions menu click Formulate to open the Generate/Optimize Formulation window. Click Generate. The least cost formulation engine generates the material and compositional views based on the formula. Review each of the tabs. Final output of ingredient quantities appears on the Material tab. Click OK to display the formula in the Simulator where you can adjust formula quantities to meet your needs.
Use the Formulation Specification Workbench to display formulation specifications by specification name, product, laboratory, or status.
To display the Formulation Specification Workbench
Navigate to the Formulation Specification Workbench.
Select View By as:
Specification to view by formulation specification name.
Product to view by the product that is associated to each formulation specification.
Laboratory to view by the formulation specification owner laboratory.
Status to view by formulation specification approval status.
Expand nodes to display material, compositional, and technical requirements entered for individual formulation specifications.
See:
Click individual nodes to display each of the compositional, material, or technical requirements
See:
Additional Information: Choose Find from the View menu to display the Find Formulation Specification window. Enter appropriate fields to narrow your search, and click Find.
Use the New Formulation Specification window to enter a new set of requirements to run a least cost formulation. You must enter and use process enabled items in Oracle Inventory. To enter new formulation specifications:
Select the organization to serve as the owner laboratory.
Identify the parameter to optimize.
To enter a new formulation specification
Navigate to the New Formulation Specification window.
Enter Name as new formulation specification name and its Version. Required.
Enter Owner Laboratory as the name of the laboratory that owns this formulation specification. Required.
Enter Product as the name of the product that is associated to this formulation specification. Required.
Enter Std Qty and UOM. Required.
Enter Start Date Active as the date to start the new formulation specification. This field defaults to the system date. Required.
Enter End Date Active as the date to end the new formulation specification. Leave this field blank if there is no end date.
Enter Min Ingredients as the minimum number of ingredients to use in the optimization of the formulation.
Enter Max Ingredients as the maximum number of ingredients to use in the optimization of the formulation.
Select one of the following for Ingredient Selection:
Compositional Requirement to base the formulation optimization on a group of items. Use this selection to minimize or maximize the compositional percentages of ingredients within the same category sets.
Material Requirement to base the formulation optimization on a set of required ingredients with a defined range of quantities. If the materials are set up with a specified range of materials, then the application attempts to meet the requirements while generating the least cost formula.
Optionally, enter the process Routing and its Version associated to this formulation specification. The routing can be used in creating a formula or batch in the Simulator based on the least cost formulation and in creating a recipe if the automatic recipe generation rules are enabled.
Select the Objective and its coordinating technical Parameter for the formulation specification when it is used in least cost formulation. The objective entered can be Minimize or Maximize, depending on the technical parameter entered.
Click OK to save the new formulation specification.
Note: You must redisplay the Formulation Specification Workbench to view a newly saved formulation specification.
After entering all relevant information and saving the formulation specification with the default status of New, return to this window if you need to change the formula specification status by choosing Change Status from the Actions menu. Depending on whether workflow is enabled, a different set of statuses is available.
Use the New Requirement window to create a new requirement for a formulation specification you have entered. You can add technical compositional or material requirements that were not previously entered in the New Formulation Specification window.
To enter a new requirement
Navigate to the New Requirement window.
Enter the new Requirement as:
Material to enter a material requirement.
Compositional to enter a compositional requirement.
Technical to enter a technical requirement.
Note: The list of requirements you can enter is limited to those not previously entered.
The Product, Std Qty, and UOM fields default based on the formulation specification. Tabs are enabled based on the requirement entered.
Save your work.
Use the Material Requirements window to enter a list of ingredients for the formulation specification. If the range type selected is Percentage, then minimum and maximum values displayed are percentages of the total product standard quantity. If the range type selected is Quantity, then the minimum and maximum values displayed are quantities in the UOM displayed. To enter material requirement, determine minimum and maximum ranges of ingredients to enter.
To enter material requirements
Navigate to the Material Requirement window.
The following fields are display only:
Product is the with its description.
Std Qty is the quantity of material produced for the product with its UOM.
Item lists each ingredient item in the product with the item Description. You can edit the Item field.
Range Type indicates whether the minimum and maximum range type listed is a Percentage or by Quantity. If a quantity range type is selected, then the UOM displays.
If you edit the item or minimum and maximum ranges, then save your work before exiting.
Use the Compositional Requirements window to display and modify requirements for a group of ingredients on the formulation specification. The group is called a category set. For example, you can create a DAIRY category set. Individual categories are added to the category set. For example, in the DAIRY category set you can have PROTEIN, FAT, and VITAMIN categories. To enter compositional requirements, determine minimum and maximum percents of each ingredient category set and category.
To enter compositional requirements
Navigate to the Compositional Requirement window.
The following fields are display only:
Product is the with its description.
Std Qty is the quantity of material produced for the product with its UOM.
Order determines the rank of the percentage of the Category (or Category Set) that is present in the final product composition. For example, an order of 1 represents a higher percentage of a category in the product than an order of 2. You can edit these fields.
Min% and Max% are the minimum and maximum percentages that are allowable for each category. The application constrains the composition to the range entered.
If you edit the order, category set, category, or minimum and maximum ranges, then save your work before exiting.
Use the Technical Requirements window to enter minimum and maximum technical parameters to be used in constraining the least cost formulation The parameter composition includes each technical parameter requirement, the parameter description and a minimum and maximum value to guide the least cost formulation. To enter technical requirement, determine minimum and maximum ranges of parameters to enter.
To enter technical requirements
Navigate to the Technical Requirement window.
The following fields are display only:
Product is the with its description.
Std Qty is the quantity of material produced for the product with its UOM.
Enter Parameter as a technical parameter to use for the least cost formulation. The technical parameter Description displays. Required.
Enter Min Value as the minimum value to use for constraint of the listed parameter in least cost formulation.
Enter Max Value as the maximum value to use for constraint of the listed parameter in the least cost formulation.
Save your work.
The Formulation Specification Summary window displays a summary of the formulation specification selected from the Formulation Specification Workbench. This window displays the information entered and saved on the New Formulation Specification window.
Navigate to the Formulation Specification Summary window.
The following fields are display only:
Specification is the name of the formulation specification and its Version.
Status is the status of the formulation specification.
Product is the name of the product that is associated to this formulation specification.
Owner Lab is the name of the laboratory that owns this formulation specification.
Std Qty is the standard quantity of material produced by this formulation specification.
Start Date is the date the formulation specification was started.
End Date is the date to end the formulation specification. If this field is empty, then there is no assigned end date.
Min Ingredients is the minimum number of ingredients to use in the optimization of the formulation on the Generate/Optimize Formulation window.
Max Ingredients is the maximum number of ingredients to use in the optimization of the formulation on the Generate/Optimize Formulation window.
Ingredient Selection is the basis for selecting ingredients and displays:
Compositional Requirement when you entered a compositional requirement as a constraint for the formulation.
Material Requirement when you entered a material requirement as a constraint for the formulation.
Routing and its Version are optional associations to this formulation specification. The routing can be used in creating a formula or batch in the Simulator based on the least cost formulation and in creating a recipe if the automatic recipe generation rules are enabled.
Objective is the optimization objective for the target Parameter displayed.
The Generate/Optimize Formulation window generates a formula that meets a defined formulation specification based on ingredients entered with their requisite item technical data. The formulation specification name and version default when this window is displayed from the Formulation Specification Workbench. The formula number and version, or batch number display on the window title when this window is called from the Simulator for an existing formulation or batch.
The Generate button starts the formulation routine. After a formula is generated, the results display on the Material View and Compositional View tabs. Technical parameters defined in the technical requirements and other defined requirements are displayed in the Material View. Category sets and category values defined under the compositional requirements are displayed in the compositional view. The minimum and maximum values displayed are based on data set up in each technical requirement.
The formulation routine generates the same results each time you run it unless you change the formulation specification. After displaying results that meet the formulation specification criteria, you can fine tune components on the Simulator or Optimizer windows.
To generate a formulation
Query the desired Formulation Specification on the Formulation Specification Workbench.
From the Actions menu, choose Formulate to display the Generate/Optimize Formulation window.
Enter the Cost Effective Date for the formulation specification.
Note: The Cost Effective Date defaults to the system date and is used to retrieve the current costs of ingredients as listed in the material requirements.
The following fields are display only:
Formulation Specification is the name and Version of the formulation specification entered for the desired product.
Objective is the goal for the optimization parameter entered on the New Formulation Specification window to minimize or maximize the parameter displayed.
Click Generate.
Material View
Following fields are display only:
Ingredient displays each ingredient with its Qty and, UOM and Description.
Each technical Parameter associated with the ingredients and product are listed next to the item.
Compositional View
Following fields are display only:
Ingredient displays the ingredient Description, Qty and UOM.
The Category Set type for each ingredient appears as a selected indicator to the right of the ingredient line for each of the category set column names. A single ingredient can be assigned to more than one category set type.
Product Details displays the product Description, Product Qty, and UOM with the achieved quantities and percentages listed directly above each of the Min and Max target values.
Click OK to navigate to the Simulator window. The new formulation displays. You can save this formulation as a new formula or create a new batch from it.
Note: When a batch is created, the formula used to create the batch is not saved in the formula tables. The only record of the formulation is the batch itself.
Important: When costs are retrieved to generate a formula, the cost is based on the effective date of the formulation specification. When the generated formula is loaded into the Simulator, then the current system date is used to retrieve the costs. The effective date for the formulation specification should be less than or equal to the current system date, or costs displayed can be different. For example, if the Cost Effective Date for the formulation specification is in the future, then costs displayed for the least-cost formulation can differ from the cost displayed in the Simulator.
Use the Simulator window to save a simulation, create a formula, or create a batch based on the least cost formulation generated by the formulation specification. You can also associate a routing and enhanced processing instructions to the new formula, or a new batch, if automatic recipe generation is set for the organization. This association enables you to view the enhanced processing instructions for the batch steps in the Operator Workbench of the MES for Process Manufacturing application.
When you generate a least cost formulation, costs are based on the effective date of the formulation specification. Once the generated formulation is loaded into the Simulator window, the current system date is used to retrieve the costs. In general, the effective date for the formulation specification should be less than or equal to the current system date, otherwise the costs displayed in the Simulator will be different in the generated formulation.
To generate a formulation
Navigate to the Formulation Specification Workbench.
Query formulation specifications. In the View By Specification mode, you can query and view by formulation specification name.
Expand nodes, and select one of the nodes. The Formulation Specification Summary window appears. You can view summary data.
Change any applicable Quantity, Dates, and Ingredient Selection values. This enables you to display and enter data on the Material Requirement, Technical Requirement, and Compositional Requirement windows for formulation specifications.
In the Actions menu, select Formulate.
The Generate/Optimize Formulation window appears.
Select Generate to generate a formulation specification based on ingredients and associated item technical data.
You can view the formulation for the product in the Material View or Compositional View tabs. Both of these views display values in the Ingredient, Quantity, Unit of Measure, and Description fields.
Select OK to navigate to the Simulator window.
The Simulator window enables you to save a simulation, and create a formula or batch based on the least cost formulation generated by the Formulation Specification Workbench. The window displays each ingredient, product, and by-product in a formula with the quantity and technical parameter values for each.
In the Actions menu on the Simulator, select either Create Formula or Create Batch.
If creating a formula, enter values in the Create Formula window for the fields:
Formula name
Version
Description
Organization
Routing and Version to associate to the recipe created.
Enhanced Processing Instructions to associate the existing processing instructions from the routing to the recipe created.
Note: If automatic recipe generation is set for the organization, then the routing and enhanced processing instructions selected are associated to the recipe created.
If creating a batch, enter values in the Create Batch window for the fields:
Organization
Document Number
Description
Laboratory Batch
Update Inventory to create inventory transactions for the batch.
Routing and Version
Enhanced Process Instructions to associate the existing processing instructions from the routing to the batch.
Planned Start Date
Planned Completion Date
Click OK to create the formula or batch.
For batches, the batch is created without a formula or recipe. The only record of the formulation is the batch itself.
Important: See Entering a New Formulation Specification and topics that follow it for the procedures used in this example.
Following is an example that illustrates the use of least cost formulation. In this example, a manufacturer must create a fruit juice blend that consists of several inventoried fruit juices and water. Liquid sugar is added as needed to give the juice a consistent sweet-sour taste balance.
The manufacturer creates a new formulation specification for Fruit Juice.:
| Field | Enter |
|---|---|
| Product | Fruit Juice |
| Version | 1 |
| Ingredients Based On | Compositional Requirements or Material Requirements |
| Standard Quantity | 1000 gallons (GL) |
| Minimize | Cost |
Compositional requirements are:
| Category | Enter |
|---|---|
| JUICES | Minimum: 80% Maximum: 90% |
| WATER | Minimum 10% Maximum 20% |
Material requirements are:
Apple Juice
Apricot Juice
Grape Juice
Grapefruit Juice
Orange Juice
Peach Juice
Pear Juice
Pineapple Juice
Water
Juices can range in quantity between one and 500 gallons.
Water can range in quantity between one and 200 gallons.
Technical requirements are:
| Parameter | Enter |
|---|---|
| SWEET (Measure of sweetness) |
Minimum: 50% (of volume) Maximum: 60% (of volume) |
| MOISTURE | Minimum: 70% (of volume) Maximum: 80% (of volume) |
| BRIX
Note: BRIX is a measurement used by the food and beverage industry to indicate the mass ratio of dissolved sucrose to water in a liquid. |
Minimum: 20% (of volume) Maximum: 30% (of volume) |
Technical parameters are entered as volume or weight percent. The Derived Cost technical parameter is linked to either standard or actual cost as maintained in the Oracle Process Manufacturing Cost Management application. This cost is used to optimize the formula based on the lowest cost.
Change the Status of the New Formulation Specification to Approved for General Use. Choose Formulate from the Actions menu. When the Generate/Optimize Formula window displays, click Generate.
Based on the technical parameters entered for each juice ingredient and water, the generated formula is:
| Ingredient | Qty (GL) | Moisture | BRIX | Sweetness | Cost |
|---|---|---|---|---|---|
| Apple Juice | 30 | 70 | 28 | 30 | 8 |
| Apricot Juice | 10 | 70 | 28 | 30 | 10 |
| Grape Juice | 10 | 70 | 28 | 30 | 8 |
| Grapefruit Juice | 10 | 70 | 28 | 30 | 8 |
| Orange Juice | 10 | 70 | 28 | 30 | 8 |
| Peach Juice | 10 | 70 | 29 | 50 | 10 |
| Pear Juice | 10 | 70 | 28.5 | 60 | 8 |
| Pineapple Juice | 710 | 71 | 27 | 80 | 6.6 |
| Water | 200 | 100 | 0 | 0 | 1 |
The resulting FRUIT JUICE formula is:
| Formula | Qty (GL) | Moisture | BRIX | Sweetness | Cost |
|---|---|---|---|---|---|
| Fruit Juice | 1000 | 76.71 | 21.71 | 60 | 5.646 |
This formula contains water and all of the juices included in the JUICE item category. It meets the technical requirements listed in the Formulation Specification, and simultaneously optimizes the ingredients for the least cost.
You can modify this formula using the Simulator or Optimizer tools, and then save the resulting formula. You can also modify the formulation specification, and generate other formulas.
For example, if the list of required juice ingredients changes to Apple Juice, Grape Juice, and Pear Juice, then you can enter only those ingredients as Material Requirements. The Material Requirements are modified to list only the required ingredients:
Apple Juice
Grape Juice
Pear Juice
Sugar (Liquid)
Water
Sugar is added to adjust for some properties, so it is added to the Compositional Requirements. Other Compositional Requirements are adjusted as indicated:
| Parameter | Enter |
|---|---|
| JUICES | Minimum: 70% Maximum: 80% |
| WATER | Minimum 10% Maximum 25% |
| SUGAR | Minimum: 5% Maximum: 10% |
Technical Requirements are adjusted to:
| Parameter | Enter |
|---|---|
| SWEET | Minimum: 40% (of volume) Maximum: 50% (of volume) |
| MOISTURE | Minimum 70% (of volume) Maximum 80% (of volume) |
| BRIX | Minimum: 20% (of volume) Maximum 30% (of volume) |
The resulting formula is:
| Ingredient | Qty (GL) | Moisture | BRIX | Sweetness | Cost |
|---|---|---|---|---|---|
| Apple Juice | 10 | 70 | 28 | 30 | 8 |
| Grape Juice | 10 | 70 | 28 | 30 | 8 |
| Liquid Sugar | 50 | 67 | 33 | 67 | 100 |
| Pear Juice | 680 | 70 | 28.5 | 60 | 8 |
| Water | 250 | 100 | 0 | 0 | 1 |
The new FRUIT JUICE formula generated has these characteristics.
| Formula | Qty (GL) | Moisture | BRIX | Sweetness | Cost |
|---|---|---|---|---|---|
| Fruit Juice | 1000 | 77 | 22 | 45 | 10.85 |