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I know this message was intended for the user community to participate and provide examples of their own use. However I wanted to throw in some information around this use case and how we intended the product to be used.
We intended for this use case to be answered with Referenced Outputs. For example, if you currently purchase peanut paste you would create a material specification to represent it. Lets say that you now acquire a new product line that already manufactures peanut paste. You could create a formulation to represent that manufacturing process and link the existing raw material peanut paste to the formulation as an output. Now the original peanut paste specification is a raw material and a formula output. You'll see both of these listed as the material type. Now when a user consumes the peanut paste material in a formula they can choose at that moment to select the "context" formulation that created it. If they don't choose a context you can assume they are using the paste off the shelf regardless of how it was obtained. They could also choose the actual formulation that created it to indicate that this is an inline process and "formulation A" is the process that is used to create it.
In cases where the peanut paste has different or could have different material attributes like nutrition, compliance, composition breakdown you would want to keep those specifications separate so that the theoretical attributes will be calculated accurately based on what material was used.
Topics that could influence your decision include the volatility of the product and/or manufacturing processes, how you handle the sourcing relationship to specification record and in general the volatility of the specification record. For example, if you have one team that is managing raw materials and they always up issue a specification when a new supplier is added. If you have another team that manages outputs, they will now have to be involved when that raw material is up issued. This could be avoided using the get latest revision feature in the application but you will need to make sure you have an established change management procedure in place. This is just one example to help illustrate how your decision could depend on how you have implemented your system, your approval/change management process and how your teams interact with one another.
Hope this helps further the discussion.