How to set up Production module in AX2009

Setting up Production

The production module is a subsidiary module of Inventory. It tracks the production process of manufactured items. The Inventory items and Bill of materials are set up in the Inventory module. Calendars, working time templates, work centers, and employees are set up in Basic module.

Pre-requisites:

• Administration module
• Basic module
• General ledger
• Inventory
• Vendors created in Account payable module if they are going to be used as Work centers (Subcontractors)

PRODUCTION TERMINOLOGY

BOM: A Bill of material is an item made up of other items. A BOM’s cost is derived from its components and the cost of producing the item. When production is complete, a BOM is a “finished good” that can be sold. The price of the BOM can be manually assigned or calculated by marking up the costs incurred in making it. Bill of materials can be simple and not require any operational costs or complex and require detailed production processes.

Simple BOM: Lamp – Assembly of a lamp & lamp shade

Complex BOM: Car – Made up of hundreds of components and BOM’s. It is possible to have BOM’s within a BOM. This is usually referred to as a sub-assembly or sub-BOM. When a Bill of material has several layers of BOM’s nested within it, it is referred to as having multiple layers. (Example of multi-layer BOM: Carburetor BOM within Engine BOM within car BOM.)

WIP: Work in Process. If costs are posted during the production cycle, they are posted to “Work in Process” accounts in the general ledger. When the production process is completed, the “finished good” inventory account is posted with the total cost of the production and the Work in process accounts are offset. If not using WIP, costs are not posted until the production is completed. This also means that the raw materials’ quantity-on-hand is not reduced until the production is complete.

Operation: A step in the production process. Examples: cutting, mixing, painting, assembly

Work center: The machine, persons, tools, or vendors used to perform the operation. Used for determining capacity when scheduling. Examples: Press machine, Assembly workers, Paint sprayer

Route: The sequence and length of time for operations that produce a Bill of material item. If each item is unique, there might be a route per inventory item; if not, several items can be attached to the same route.

Item consumption: Transferring the cost of the BOM components, also known as raw materials, to the production order and/or WIP accounts. The quantity-on-hand of the component items is reduced. Item consumption can be done automatically in Axapta or manually by entering a picking list journal. The item consumption can occur during the production process (WIP) or when the finished good is completed.

Route consumption: Calculating the cost of a production operation and transferring that cost to the production order and/or WIP Accounts. The cost of operation is made up of labor, tools, machine costs, vendor costs, and overhead. When an operation in the production process is performed, costs are generated. These costs are referred to as consumption. Consumption can be posted automatically in Axapta or manually by entering a route card or job card journal. Hours or quantity can be used to calculate the route consumption. See example of each below:

Example #1: Route consumption based on hourly cost.

Operation: Painting

Work center: Paint sprayer with 1 person running the sprayer.

Costs: $10/hr for 1person,

$0.32/hr for the cost of sprayer (Purchased for $2000 with an estimated life of 3 years. Usage of sprayer estimated to be 40hrs/week)

$0.80 overhead (Calculated based on utilities, rent, etc)

Est. Cost per hour =$11.12

Example #2: Route consumption based on quantity produced

Operation: Assembly

Work center: Assembly workers

Costs: $2 per item assembled per worker (Piecework)

Est. Cost per unit = $2

Production Overview

Steps for processing a Production Order:

1. Creation: An order can be created manually or generated automatically from a Sales order or Master planning schedule.

2. Estimation: Calculates material and (labor) route consumption. Creates inventory transactions (Issue transaction for raw materials with status on-order and Receipt transactions for the BOM being created with status ordered). Creates purchase orders and sub-productions if needed for the production order. Can reserve items (depends on parameter setting), and calculate the price of the finished good (depends on parameter setting).

3. Scheduling: There are two types of scheduling, Operations and Job scheduling.

· Operations scheduling assigns start and end dates to production orders, assigns cost center groups if attached to route operations, and provides a rough planning outline.

· Job scheduling provides a detailed planning outline. Each operation is broken down into jobs with specific dates, times, and work centers. If finite capacity is used, jobs are assigned based on availability. The schedule is outlined in a Gantt chart that can be manipulated.

4. Releasing to production: Production order documents such as the job card, route card, and route job can be printed. The status of the order changes to indicate that production can begin.

5. Starting: Once a production order is started, costs can be posted against the order. Estimated Material and route costs can automatically be allocated to the order when it is started. This is known as “pre-flushing” or “Auto-consumption”. Material can be manually allocated to the order by creating picking list journals. Labor and other route costs can be manually allocated to the order by creating a route card journal if using operations scheduling or by creating a job card journal if using job scheduling.

6. Reporting-as-finished: When a production order is reported-as-finished, the quantity of the finished good completed is updated in the inventory module. If using “Work in Process” accounting, a ledger journal is made to reduce the “WIP” accounts and increase the inventory of the finished good. Standard cost from the item form is used. When a production order is cost calculated, the actual cost of the production is posted and the posting that occurs during reporting-as-finished is reversed. If the material and labor costs associated with the production are not already allocated through a journal or pre-flushing, they can be automatically allocated by “back flushing”. If the production order is complete, it can be marked “End job” to change the remaining status to “Costing”; otherwise it is left open to report additional quantities produced.

7. Cost calculating: The final actual costs of a production run are calculated on the quantity that was produced. All of the previously posted estimated costs for material, labor, and the overhead are reversed and replaced with the actual costs of production. If costing is marked as “End job” the production order is changed to a status of “Ended” and no further costs can be posted against the order. An order can be “reported-as-finished” when costing, if that step is not already completed.

8. Ending: If a production order has a status of “Ended” no costs can be posted to it. The status can be changed by checking the End job box when cost calculating the production order. This status prevents any additional costs from being inadvertently posted to a completed production order.

Setup Check List

This section provides an overview, in the form of a checklist, of all the setup for the Production module. The subsequent sections of this manual provide the details of each of these setup options. The required setup is for basic production capabilities.

REQUIRED SETUP –  Required to operate Dynamics AX in a typical U.S. installation

OPTIONAL SETUP – Not required by Dynamics AX; but may be needed to perform desired business functions

Required setup

• Working time templates Define the time available daily for production scheduling. (Basic module)
• Calendar Define the days of the year available for production scheduling. (Basic module)
• Work center groups Define the apparatus used for capacity planning in the production process. (Basic module) If general ledger postings are based on the work center, then ledger accounts must be specified.
• Journal names Identify the transaction journals to be used in the production module
• Cost categories Define the labor and overhead cost per hour or per unit associated with production
• Routing groups Used to determine default settings for costing and pricing route operations
• Operations Define each step in the production process
• Parameters Define default data and basic settings for the production module

OPTIONAL setup

• Production groups Used to determine ledger accounts for posting or to group orders for reporting
• Production pools Group production orders for processing, deleting, or reporting
• Properties Define characteristics of items that suggest they be produced together to reduce setup time
• Task groups Define alternate work centers used if the suggested work center is at full capacity

We have a very detailed document to guide our customer how to set up the production module as well as the required set up in other modules. Please feel free to send us an email to request it.