Material Requirements Planning/Raw Materials, Intermediate Items & Products

Raw Materials
Some Definitions:
 * A material which is purchased from a supplier (vendor) and used directly or indirectly in producing a product.
 * A manufacturing item which has had no processing done since it was acquired, i.e. it is Raw (uncooked)

Learn by examples Now I am going to use a manufacturing example to show readers the concept of Raw Materials more clearly. There is a factory whose major work is to produce 3-Shelf Bookcase. Every week they buy 3cm Plank, 2cm Ply, 2cm Plank, Varnish,Stain,Panel Pin,Glue and some other materials from other companies or suppliers. They use professional machines to cut those Plank or Ply into Roughcut shelf,side, back or Front Panel. Then the next stage is to turn these roughcut items into finished state or grooved. After these intermediate items are finished, Assembled 3-shelf Bookcase can be made with those items and some others like Panel Pin and Glue. Finally, after the work with Varnish and Stain, a 3-shelf Bookcase product is complete. Here is a product structure diagram to show the above progress:

As we know,those roughcut or finished items as well as the grooved ones are made by this factory themselves from the wood materials bought from others. So they are not Raw Materials( They are Intermediate Items ) The Raw Materials in this manufacture process are those 3cm Plank, 2cm Plank, 2cm Ply. And also those Panel Pin,Glue,Varnish and Stain. Following are some pictures to show some of these Raw Materials:

Plank

Plywood

Intermediate Items
Some Definitions:
 * Any manufacturing item which is neither a Raw Material nor a Product.
 * Any manufacturing item which has had some processing done but is not yet a finished product.

Learn By Examples Let's take an example in a certain real manufacture to have a detailed look at Intermediate Items.

Uncle John is a famous company of producing food sauce for family cooking. In supermarkets, you can find many different kinds of Uncle John food sauce packed in small glass bottles. For instance,a bottle Uncle John curry sauce has the following four stages in its producing process:

1. Buy Raw Materialsfrom other suppliers: these materials includes curry powder, green peppers, sweet chili, condiment, tomato, or even water.These above are necessary ingredients for making curry sauce which are not produced by Uncle John itself.

2. Preparing the ingredients: prepare these Raw Materialsto make them ready for cooking. For example: cut the peppers, chili and tomato into pieces or slices.

3. Complete curry sauce: mix ingredients and cook the curry sauce.

4. Packing: Package those completed curry sauce into labelled glass bottles after cooling.

Now a bottle of Uncle John curry sauce is ready for market. For more detail, here is a product structure diagram:

It is clear to see, sliced pepper, cut chili, sliced tomato are not Raw Materials, they are produced from raw materials. They are also not Products, Uncle John never sells them. They are items which contribute towards the making of the end Product, so they are Intermediate Items. Then what about the "completed curry sauce"? Is it an Intermediate Item as well or a Products?

Even though it is curry sauce seems the same as what we get from a bottle of Uncle John Curry sauce, it is not a Product. A clear reason is it can not be sold directly unless it get packed in glass jars. For most manufactured products, there should be a proper measurement standard. For instance, people may sell soft drinks by bottles or by tins, however they may not use something like pots to contain those drinks and sell them. Nowadays, each industry has its standard for selling. Go back to our example, those finished curry sauce are contained in a big container with pipes which are used to pack them into bottles. Customers can not buy those curry sauce directly from the big container (even if it could be, i think nobody would do that), the way to purchase them is to buy a bottle of such products in a supermarket. So it is Intermediate Items as well and together with glass bottle and labels, a end Product can be made.

The next two images show more clearly the difference between Intermediate item "completed curry sauce"

and Product "A bottle of Uncle John curry sauce" (in the Product section)

Products
Some Definitions:
 * Any manufacturing item which is marketed or sold to customers.
 * Also called an End-Product or End-Item

Some Examples
 * Car.
 * Cell Phone.
 * Home Computer.
 * Jar Of Curry Sauce.

A Jar of Uncle John curry sauce

From the above example, readers can have a clear idea of what is an Intermediate Item and its relationship to Raw Materials and Products.

Links

 * Enterprise Resource Planning
 * BoM Product Structure
 * Continuous versus Discrete Manufacturing in ERP
 * Materials Requirements Planning
 * Manufacturing Resource Planning
 * Master Production Schedule