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Since it is a dairy industry mostly OPM will be used so you need to keep in mind that
a) Dual UOM should be configured properly.
b)The ingredients and products in SLA correct account codes to be defined for procurement process related to ingredients.
c) If it is lot controll define the exact lot cost type and adjustments overheads accordingly.
d) If U have landed costing do the required set up for OPM landed costing to add in procurement flow.
As first answers of this forum rightly said that OPM perfectly fit for Dairy industry. And you can very well go with Procurement module using various purchase types available in Std functionality
Since Milk is the Primary item to use in Dairy industry, you can also use
Lot controll/shelf life/Lot expiry and many more Item attributes to make use in your firm.
You can very well use Costing using SLA (R12) where it can never allow to create Variance accounts.
There are many challenges in using purchasing for Dairy Industry.
Challenge 1: While you procure 'Raw Milk', the cost of the milk is based on the % of Fat and SNF (Solids Non-Fat). So the costing of Raw Milk is a significant challenge.
Challenge 2: There are many suppliers (Farmers), multiple receipts of Small Quantities in a day, with different levels of quality (water)
Challenge 3: You will not know the price of the milk at the time of purchase. The purchase price is known only at the end of the month based on the quality of milk procured
Challenge 4: For the same total quantity of milk purchased. you will need many Purchase Orders. For total quantity of Milk purchased you will need a PO for costing purposes. In addition, you will need to create many POs/Invoices to make payments to the milk supplier.
Challenge 5: Unlike other businesses where the supplier supplies the materials at your warehouse (esp. for local supplies), in dairy industry, the Company has to go to each supplier to collect the Raw Milk.
Challenge 6: Since the Farmer needs about 4 months to increase the supply of Milk (by buying new cows), the procurement planning duration is quite long.
Challenge 7: Since procurement planning duration is very long, you will need to hold significant buffer of milk powder to handle short term demand / supply fluctuations.
Challenge 8: Since the demand planning duration is about 6 weeks and the supply planning duration is about 4 months (Ref Challenge 6 above), traditional planning process of MRP do not apply in dairy industry
Challenge 9: Since each supply from Supplier will have different content of Fat and SNF, identifying the purchase price for the supplier is fraught with many challenges.
Challenge 10: Since this is a food processing industry, ensuring hygienic conditions at a Farmer location is very challenging. Even a single damaged lot of Milk can damage the truckload of milk.