Basic Production Process

SAP Business One Version 9.3

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Welcome to the Basic Production Process training topic.

In order to take this course, you should first complete the Bill Of Materials training topic.

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 Objectives

At the end of this topic, you will be able to:

▪ Add a Production Order

▪ Complete a basic production process

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At the end of this topic, you will be able to:

▪ Add a Production Order

▪ Complete a basic production process
 Production Process Concept

Create Issue Report

Release to
Production Components Completion
Shop Floor
Order and Resources

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The production process starts with creating a Production Order. This is the main document in the
production process. It records the progress of the production process for each item produced.
Before work can begin, the Production Order status must be changed to Released. At this point, the
Production Order can begin collecting the costs of production.
Components used in the production process can then be released to the shop floor (depending on the
issuing method).
When all work is done, you report completion of the production order. At this point, the finished
items are received in the warehouse.
Note that when the automatic method for issuing components to the shop floor is selected, the
components and resources are reported as issued as soon as you report completion.
When the production process is over, the Production Order is closed. This closure creates a journal
entry for balancing inventory accounts at perpetual inventory-managed companies.

We will have a closer look at the Production Order and the production process in the next slides.

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 Production Order Concept
Production Order

Production Order:

Decorative Wooden Door X 6

Due Date: 31.09.2016

Item: Wooden Door

Item: Handle
Resource: Machine Operator
Resource: Lathe Machine

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A Production Order is a command to produce (or repair) a production item.

A Bill of Material (BOM) is copied into the Production Order document. Then the needed quantity of
finished item is entered together with the desired due date of production and other relevant data.
The Production Order also tracks all the material transactions and costs that are involved in the production
process.

Note that production orders can be generated in the MRP and Pick and Pack and Production processes as
well. These topic are covered in details in the MRP and Picking Process course topics.

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 Production Order – Header Information

Once you choose the bill of materials item, all data from the Bill of Materials master data is copied to the
Production Order.
→ Indicate the planned quantity for production.
→ Use the Priority field to manually determine the priority of this production order.
→ Enter start and end dates for production.

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This is the header of a Production Order for a Decorative Wooden Door BOM (Bill of Materials).
Once you select the item to produce in the Products No. field, the data is copied from the Bill of Materials
document to the Production Order.
At the header of the document, in the Planned Quantity field, the production manager indicated that he
wants to produce 10 Decorative Wooden Doors. The Base Quantity of components in the rows is
multiplied by this Planned Quantity.
Use the Priority field to manually determine the priority of a production order for example set the value 1
for the highest priority. By default the value is set to 100. OC WoodTrend gives higher priorities to large
orders. The priority field is displayed in the Pick Pack and Production window and in the Open Items List
report.
When opening a Production Order, the status of the order is set to Planned. In this status, you cannot issue
components or report completion of the Production Order. However, you can make changes to the data in
the Production Order. Later on, to proceed to the next step in the production process, the production
manager changes the status to Released.

Look at the dates on the right hand of the image. The Order Date is the date the Production Order was
posted and the Start date and end date are the planned date range for this production process.
By default, the due date equals the start date + lead time of the produced item if it exists. This lead time is
defined in the item master data, in the planning tab and is used in production and MRP process to define
the expected time for purchasing or manufacturing an item.

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The Start Date can provide additional flexibility for the production manager in scheduling production
orders.

Note that header information is also used as a basis or default for the production order rows. Let us
examine the production order rows in the next slide.

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 Production Order Rows

→ Row data is copied from the BOM and the planned quantity in the rows is multiplied according to planned
quantity in the header.
→ Production Time field = total calculated resource time in the row  planned quantity X resource time.

Header planned
quantity = 10

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You can see that row data was also copied to the production order but changes can still be applied.
Use the arrows on the right to define the correct sequence of the rows or change data in the rows.
The Production Time field indicates the total calculated resource time in the row.
The Base Quantity was copied from the BOM and the Planned Quantity was calculated according to the
header planned quantity that the production manager entered.
There is also a status in the row level. This status can be adjusted manually. It is not affected by the status
in the header and it is used for information only.
You can see date fields in the rows as well. By default, the Start Date and End Dates in the rows are copied
from the Start Date and Due Date of the header respectively. When you change a date in the header you
can choose to apply the changes to the rows. In this basic scenario, the decorative wooden door is
manufactured in one day so the start date and end date are the same in all rows.
In the next slides you will learn about multiple route stages scenario where the start and end dates may
very in the different stages.

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 Create a Production Order and Release It

Create Production Order  Release to shop floor

Status: Planned  Released

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Let us start the production process for the Decorative Wooden Door.
Once the production order is entered, the following happens:
- The quantity of the item components of the production order is subtracted from the
Available quantity of the items and became a Committed quantity (we can see it in the
Item Master Data  Inventory tab).
- The capacity of the resources of the production order is subtracted from the Internal
Capacity and became a Committed Capacity (More about resource capacity in the
Resource Capacity training).

The production manager changes the status of the order to Released to start the production process.
Once the status has been set to Released, we can:
issue components (depending on the issue method),
receive the produced item into inventory and
report completion for the production order.
You still have the option to add or change components and resources that have not yet been issued.

Since OC WoodTrend manages the shop floor area as a separate warehouse, the production manager
transfers the components from the main warehouse to the shop floor. He does this by creating an
inventory transfer from the context menu of the production order.

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 Issue Components and Issue Methods
Manual Method Backflush Method

▪ Manually creation of Issue for ▪ An Issue for Production

Production document document is added
▪ Precise timing possible automatically
Issue Components ▪ Control of quantity issued ▪ Not possible for items
and Resources with S/N or batches

The default issue method is defined in the master data of the item and resource

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The Issue for Production document subtracts the components from inventory and changes the capacity of
the resource from Committed to Consumed.
Component items and resources can be issued using either the Manual or the Backflush method. The
default issue method is defined in the master data of the item and resource. Then, this default is copied to
the Bill of Materials document and can be changed at the row level. When the Bill of Material document is
copied to the Production Order, the Issue Method in the rows is copied but can be changed again.

With the Backflush method – once a Receipt from Production is created (reporting completion), SAP
Business One automatically issues the needed component items.

With the Manual method – the items and resources are not automatically issued. This enables you to post
components issued to a production order precisely when they are required in the production process and
also issue a partial quantity if needed, even before reporting completion.

Choose the context menu of the Production Order to add an Issue for Production document. Alternatively
go to Production  Issue for Production.

Note: 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

▪ Choose the context menu in the Production Order to report completion

▪ Alternatively add a Receipt from Production document

Report
Completion

When you report completion, the system automatically:

▪ Receives the finished product into inventory
▪ Issues backflushed components
▪ Calculates the cost of producing the item

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At the end of the process, the production manager reports completion of production.
From the context menu he chooses Report Completion.
When reporting completion, the system automatically:
• Receives the finished product into inventory by adding a Receipt from Production document.
• Issues backflushed components by adding an Issue for Production document.
• Calculates the cost of producing the item.

Note: a Receipt from Production document can be issued also from the Production menu entry.
 Inventory Changes in the Production Process

In Inventory - Committed + Ordered = Available

Status: Planned
Components + -
Finished Product + +
Completion reported
Components - -
Finished Product + -

+ Indicates increase in quantity

- Indicates decrease in quantity

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This slide summarizes the changes made in the inventory data during the production process.
When the production status is planned, a commitment is created for the components and the ordered
quantity of the produced item increases.
When the Production Order is completed, the finished product is received in inventory.
Remember that components may be issued in different stages in the production process according to
their issue method (manual or backflush).

Note that it is possible to view inventory changes (and the costing) of each component by production
order, by entering the Variance Report from the Summary tab of the order.

To learn more about the Variance Report please refer to the Accounting of Production training.
 Summary

Here are some key points about the production process:

▪ The Production Order is based on the Bill of Materials.

▪ A Production Order is in a planning state until its status changes to Released. When the
production order is released to the shop floor, components (items and resources) can be issued
to production and work can begin.
▪ Components are issued when Issue for Production document is added.
▪ Components can be issued using either the Manual or the Backflush method.
▪ With the Backflush method, once a Receipt from Production is created, the items are
automatically issued for production.
▪ The manual issue method allows you to issue the components precisely when they are required
in the production process and also issue a partial quantity, even before reporting completion.
▪ When you report completion, the system automatically receives the finished product in inventory
and issues backflushed components.

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Here are some key points about production process to take away from this session:
▪ The Production Order is based on the Bill of Materials.
▪ A Production Order is in a planning state until its status changes to Released. When the
production order is released to the shop floor, components (items and resources) can be issued
to production and work can begin.
▪ Components are issued when an Issue for Production document is added.
▪ Components can be issued using either the Manual or the Backflush method.
▪ With the Backflush method, once a Receipt from Production is created, the items are
automatically issued for production.
▪ The manual issue method allows you to issue the components precisely when they are
required in the production process and also issue a partial quantity, even before reporting
completion.
▪ When you report completion, the system automatically receives the finished product in
inventory and issues backflushed components

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