PRODUCTION PROCES

 The production order is the main document in the production process. It records the
progress of the production process for each item produced.
 The production order supports the planning and assembly of a production item. It also
tracks all the material transactions and costs that are involved in the production process.
 Production orders can come from recommendations in MRP or be created manually.
 Before work can be done, they must be released. At this point, the production order
can begin collecting the costs of production.
 Components used in the production process can be issued manually as used or back
flushed at the end of production.
 When all work is done, you report completion of the production order. At this point, the
finished items are received into the warehouse.
 Then change the Status to Closed.
 Even after the production order is closed, details on the production order costs can be
found on the summary.
TYPES OF BILL OF MATERIALS (BOMs)

1. Production. This BOM is used in the production order. The parent item is a finished
material, and the children are the components. You can add labor as one of the
components; this will be a non-inventory item with a standard cost. During the
production process, you turn the components into the finished product. The Production
BOM is the only type used in the MRP run and it is always used in standard production
orders. The item at the head of the Production BOM has its own price.
2. Sales. This BOM is used in sales documents. The parent item must be a sales item only.
For example, if you sell a gift package that contains multiple products, this could be set
up as a sales bill of materials. The parent item will be the package name, and the
children will be the inventory items inside the package. Once you selected the parent in
a sales document, all its children appear as sub-items. You can update the quantities of
the parent or the children; however you cannot delete children or add new sub-items to
the package in the sales document. When you set up the BOM, you can select the Hide
BOM Components in Printout option, so that when you print the document, only the
parent appears.
3. Assembly – This BOM is similar to the sales bill of materials. It represents a collection
of individual items in a set with a specific price. Unlike the sales bill of materials, only
the finished product appears in the sales order document; the components do not
appear as sub-items.
a. For both the sales BOM and the assembly BOM, you do not manage the finished
product as an inventory item, but rather as a sales item. The components can be
sales items and stock items at the same time.
4. Template. This BOM has no restrictions. Both the parent and the children can be any
type of items. It can be used in sales and purchasing document. Once you select the
parent item, all its children appear. You can delete, add or duplicate rows and make any
modification as necessary.
 You have to create item master records for the finished products in the system.
These are represented by the parent item in the bill of materials.
 Depending on the BOM Type you must have a certain category maintained in the
item master record of the finished product:
 For the assembly and sales BOMs the finished product has to be a Sales
Item.
 For the production BOM the finished product has to be an Inventory Item.
If you also want to purchase this item, you can define it as a Purchased
Item. If you also want to sell it, you can also define it as a Sales Item. If
you produce it for stock, as a component of another parent item, then do not
define it as a sales item so it will not appear as a choice in a sales document
list of items.
 One tip for defining items in an implementation: Define items in a multi-level
bill of materials from the bottom up. First the children then the parent item.
 Templates can have each of the three attributes (Purchased, Sales, and
Inventory Items).
 The components can also have each of the three categories (Purchased, Sales,
and Inventory Items), and can also be purchased or sold individually.
 The components for Sales BOMs and Assembly BOMs must be sales items.

 A phantom item is a sub-assembly in the BOM that does not actually exist in
inventory. It is used to simplify the BOM. Although the phantom item appears in the
BOM, the Production Order will show the components needed to make the phantom
item rather than the phantom item itself.

 An item can be defined as a phantom item in the Item Master Data.

 MRP: The MRP will explode the phantom items and create recommendations for its
components. The phantom item will be displayed in the MRP result window without
recommendations, for information only.

 Production Order: The Production order will explode the phantom BOM and display
its components in the required order. In the example above, in the production order,
the Components tire, rim, and screws will appear, but not the wheels.

 The BOM requirements of different departments in the same company can be

different. The engineering department could create a multi-level BOM to define an
engine .The manufacturing department could then include this BOM as single
phantom item.
PRODUCTION PROCESS

PRODUCTION ORDER

 Description: Production Order is a command to produce or repair a production item.

The production order supports the planning and assembly of a production item. It also
tracks all the material transactions and costs that are involved in the production process.
 The production order document records the finished material to be produced, its
components and their issue method.
 In some cases, a finished product is the result of an entire production process. In other
cases, though, a finished product might simply be a collection of items sold as a unit
rather than the output of a production or assembly process. SAP Business One has three
types of production orders to support the variations in production. The three types
(standard, special and disassembly) are discussed in more detail on the next page.
 In all cases, a production order must list the items involved in the production process.
With the standard and disassembly production orders, a production bill of materials is
used to describe the items used during production.
 Production orders can be created automatically by MRP or created manually. In the
make to order process, a production order is created manually for each sales order that
creates a demand.
 Before any further transactions can be associated with the production order, such as
goods issues, the production order must be released by an authorized user.
 When components are issued to the production order or when finished products are
received into inventory, an accounting document will be created automatically to
document the costs associated (as long as you are using perpetual inventory).
 Create production orders either automatically from MRP recommendations, or manually.
The Status of the production order is Planned. At this point in the process,
components are committed to the production order but no items can be issued until the
order is released .

 Once you have initiated the production order, change its Status to Released. At this
stage, you can begin reporting transactions for the production order. Components can
be issued, finished products can be received, and the production order can be
completed.

 Issue the components using either the Manual, or the Backflush method.

 Use the Manual issue method to issue individual component items to the
production order. That enables you to precisely post all components issued to a
production order as it is used in the production process. Open the production
order in Status Released and choose Go to (or right mouse click)  Issue
Components

 When you report the completion of the production, backflushed components are
issued automatically.

 At the point you start to report the completion of the production order. You can report
the partial or full completion of the production order or you can cancel the order.
  For the standard and special production orders, you post the finished product to
the stock. For the disassembly production orders, you post the components to
stock. There are two ways to report completion: Choose Production 
Receipt from Production or open the production order in Status Released
and choose Go to (or right mouse click) Report Completion .

 Once the manufacturing is over, close the production order. You change the Status to
Closed. The Summary tab sums up the order; you can refer to the tab to review the
production order details.

 SAP Business One supports three types of production orders: Standard production order,
Special production order and Disassembly production order.

 The Standard production order is based on the production BOM; you use it to
produce a regular production item. You manage material transactions of the regular
production process. In addition, you can change components at the production stage.
When you open a new standard production order, all the components fill in
automatically. You issue components from inventory to the production order. After
production is completed, you receive the finished parent product into inventory.

 Use the Special production order to produce and repair items or to perform activities
that are not necessarily bill of material items, for example, repair order for customer
equipment cards, or repair order for rejected assemblies. You create special production
order components manually. You issue components from inventory to the production
order, and ultimately receive the finished parent to the inventory. The parent can be any
inventory item.

 Use the Disassembly production order to disassemble a parent item of the regular
product into its components. You disassemble the product into separate parts that can
then be put into stock and sold. For example, you can purchase a used car, take it
apart, and sell the individual components. In this case, the parent item is issued to the
production order, and the disassembled sub-items are received into inventory at the end
of production.

RELEASE TO SHOP FLOOR

 A newly created production order has the status Planned. In this status, you cannot
issue components or report completion of the production order. However, you can make
changes to the information in the production order.
 Once the production process begins, open the production order and change its status to
Released.
 You can release both manual and automatic production orders.
 Once the status has been set to Released, you can:
 issue components.
 change components that have not yet been issued.
 add components to the production order.
  receive the finished item into inventory
 report completion for a production order.
 As long as the status is Planned or Released, you can manually cancel a production
order.

ISSUE COMPONENTS

 Components can only be issued when the status of the production order is set to
Released.
 You issue component items using either the Manual or the Backflush method.
 Manual – You issue individual component items to the production order. This enables
you to post components issued to a production order precisely when they are required
in the production process. Manual issue is always used for serialized or batch-managed
items.
 Backflush – SAP Business One automatically issues item transactions for the needed
component items (as defined in the Components tab) when a product is reported as
completed. Items that are set to backflush are issued automatically when you choose
Report Completion.
 Items that are managed with serial numbers or batch numbers cannot be backflushed;
therefore, they are automatically set to a manual issue method.

REPORT COMPLETION

 At the end of the process, you report completion of production. This will receive the
finished item into inventory and calculate the cost of producing the item.
 Use the context menu to choose Report Completion.
 For Standard and Special production orders, reporting completion posts the finished
product to the inventory.
 For Disassembly production orders, reporting completion posts the components to the
inventory.
 At this stage, you could also reject items.
 Serial numbers and batches can be assigned at this point.

 In a standard or a special production order, components are issued out of inventory.
When the production order is completed, the finished product is received into stock.
The details of the stock movements are shown above.
 For disassembly production orders the stock effect is reversed. The disassembled
finished product is removed from stock and the components are added into the
inventory.
 On the Summary tab page you have the information that summarizes the production
order. The tab displays the information on the released and closed production orders.
 Actual Component Cost: Displays the total value of all components issued to the
production order.
 Actual Additional Cost: Displays the actual additional costs that occur when a component
is defined in the Item Master Data as a non-inventory item. This can be, for example, a
service or labor cost. If there is more than one additional cost for the item, the cost
displayed is the sum of all additional costs.
 Actual Product Cost: Displays the total value of all products assembled for this
production order.
 Total Variance: Displays the value that is the result of the actual components value
subtracted from the actual products value. Variance Per Product: Displays the value
that is the total variance divided by the planned quantity value. Variance %: Displays
the percentage of the variance per product value.
 Journal Remark: Displays the product number by default. The value is saved in the
General Ledger and is displayed during the General ledger transactions and reports. You
can modify the value of the field.
 Quantities - Planned Quantity: Displays the total planned quantity of the production
order. Completed Quantity: Displays the total completed quantity after you report the
production completion. Rejected Quantity: Displays the total rejected quantity of the
production order.
 Dates - Due Date: Displays the due date of the production order. Actual Close Date:
Displays the date when the production order was closed. Overdue: Displays the number
of days that the actual close date exceeded the due date.
 Several journal entries are posted during a production process:
 When you issue the components for the production either manually or
automatically (backflush), the system posts the value of the components to the
debit side of the WIP account and to the credit side of the stock account of the
components.
 When you complete the production order, the system creates a receipt from
production document and a journal entry that posts the value of the finished
product to the debit side of the stock account of the product and to the credit
side of the WIP account.
 If any variances occur, the system posts these when you close the production
order. The system posts the variance as a negative value on the debit side of the
WIP account and on the credit side of the WIP variance account.
 The system retrieves the WIP account and the WIP variance account from the WIP
Account field and the WIP Variance Account field on the Inventory tab of the item
master record.
 The WIP-accounts used for components can either can be set to use the WIP-accounts
for the parent item or the WIP-accounts for the component item, depending on a
parameter in the document settings for the production order.