SAP Business One supports three types of production orders.
· Standard –The Standard production order is based on the bill of materials and 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 are filled in automatically.
· Special – Use the Special production order to produce and repair items or to perform activities that are not necessarily bill of materials items. For example, repair order for customer equipment cards, or repair order for rejected assemblies. You create special production order components manually.
· Disassembly – Use the Disassembly production order to explode a parent item of the regular product to its child items. You disassemble the product into separate parts, which can then be put into stock and sold. For example, you can purchase a used car, take it apart, and sell the individual components.
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.
· Backflush – SAPBusiness One automatic issues item transactions for the needed component items (as defined in the components tab) when a product is reported as completed.
There are three statuses of the production orders.
· Planned – SAP Business One initiates the production orders with Planned status. The production order is not released to the shop floor for the manufacturing. Therefore, you cannot issue items or report completion of the production order yet. You can update the production order when it has Planned status.
· Released – You change the production order status to Released when you release the production order to the shop floor for production. At that stage, you can report transactions for the production order and issue of the components. You can update the component items as long as there are no transactions for the selected component. You can also add a new component.
· Closed – The production order is Closed when you cannot add any new transactions to it. You close the production order when production is completed.
You can manually cancel the production order. You cancel the production order in status Planned or Released only. The cancelled production order is removed from the list.
The cost of FIFO or Moving Average products is the sum of its component costs and additional costs (such as labor and overheads). To ensure accurate calculations of product cost, even if the components were already issued manually, SAP Business One uses the cost of the items issued to production order and not the cost of the items currently in inventory. This ensures that there is no difference between the actual cost of components used in the order and the value of the product.
The cost calculation method described here is relevant only for companies managing perpetual stock.
The cost calculation described here is relevant for standard and special production orders, but not for disassembly. In the case of disassembly the components enter the inventory with the same cost as the items currently there. If the component is managed by FIFO, the cost of the oldest layer is used.
The cost of returned components does not change. When returning a component, its cost is the cost of the last that was issued.
The product cost calculation is determined by the item management method.
· Standard – When the product is managed by standard cost, no calculation is made, and the cost is copied from the item master data upon report completion.
· Moving Average – When the product is managed by moving average, two figures are required for products receipt into the inventory: receipt quantity and total value added to the inventory. The total value is the product cost, which is the sum of all component costs used for those products.
· FIFO – When the product is managed by FIFO, each report completion will open a new cost layer for the product in the inventory. The quantity in the layer is the quantity of the products just reported as completed. The cost of the products is the sum of all component costs used for the completed products divided by the quantity of the products.
On every report completion, the system will check out the following three quantities for each manually issued component:
· Issued Quantity – The quantity already issued to the production order.
· Used Quantity – The quantity already used for the completed products (completed products multiplied by the base quantity of the component).
· Needed Quantity – The quantity needed for the products that were just reported as completed (quantity of products reported as completed multiplied by the base quantity of the component).
If the Used Quantity is greater than or equal to the Issued Quantity, this means that all items issued for the production order have already been used, and the Needed Quantity is yet to be reported as issued from the warehouse. Since the cost of the items that were actually used for the products is unknown, SAP Business One takes the current prices from the inventory.
If the Issued Quantity is greater than the Used Quantity, SAP Business One will find the cost of the components that were issued and not used, and will use them in the calculation of the product cost. When finding those components, the issuing order of the components is taken into account, meaning that the first components to be issued are the first to be used. The components following those that were used will be the first to be used for the cost calculation.
If the sum of Needed Quantity and Used Quantity is greater than the Issued Quantity, meaning that not all Needed Quantity was issued, SAP Business One needs to make an assumption for those items’ costs, so takes the current prices from the inventory.