Manufacturing

Overview

Manufacturing - simply the combination of items to make other items can be implemented effective from webERP version 3.06.
It has been possible to build bills of material for manufactured items for some time but the functionality that allows the materials to be issued from stock and manufactured items received into stock was introduced with 3.06. This is the purpose of the work order.
Functionality to add labour items to work orders and post recovery amounts to a profit and loss account for issues of labour to a work order was added after 3.09 (Sept 2008).

Bills of material now allow components to be defined as "auto-issue". Components set up to auto-issue, automatically create the issue transactions against the work order based on the bill of material quantities on the entry of receipts of a finished item against the work order. This decreases the administration of work orders for those components with relatively low value and limited possibility for any usage variance. It is not recommended that this feature be used on components where the final requirement for it could vary with for example yield differences between work orders. Work orders take the value of components and materials issued and divide this total cost between the output items to arrive at a cost per unit for all output items. The process for performing this calculation is called "closing" the work order.

The sequence of events in manufacturing an item is as follows:

General Ledger Integration Issues

When the "Create GL entries for stock transactions (at standard cost)" option in the company preferences form is set to "Yes", then GL journals are created as a result of work order transactions. When a work order is created there is no GL impact. The ways the GL is impacted as a result of manufacturing processes are as follows:

Work Order Entry

The Work Order is the medium for issuing components/raw materials to. A running total of the costs issued to the work order is maintained. Work orders can be created that have any number of output items. Output items are restricted to only "manufactured" items as defined in the item entry form. The work order tracks the quantity of the output items received against the work order and checks that no more than the work order quantity originally set up, with an allowance including the over-receive proportion as defined for purchase orders, is received.

Setting up a work order is performed from the Manufacuting tab -> transaction entry -> Work Order Entry. The work order number is automatically maintained and defaulted for new work orders as is the start date defaulted to the date the work order was created. Other data required includes: With the above information completed then the items to be manufactured on the work order need to be selected. Normally this should just be a single item but it is possible to have multiple outputs against a single work order which is useful for by-products or processes with several output products. There are search facilities in the work order entry screen - only items flagged as manufactured in the item definition screen (Stocks.php) will show for selection. For each item selected the quantity required defaults to the EOQ - (Economic Order Quantity) defined in the item definition (Stocks.php) screen. If no EOQ is defined for th item then the quantity defaults to 0 and must be entered manually. The quantity required can be over-ridden and changed at any stage.

The quantity received of the item is maintained automatically against the work order items. The balance of the work order yet to be manufactured and received shows as "on order" in the stock status inquiry. Similarly the quantity required of components as extended by the bill of material for work order items is shown as quantity demanded against component items stock status inquiries.

Closing Work Orders

The selection of work orders allows the costing to be viewed. The work order costing shows all the issues of materials and components against the work order as compared against the bill of material requirments - as they were when the first reciept of manufactured stock was received against the work order. The variances on the work order in terms of the usage of components and the expected cost of materials/components issued to the work order are displayed. Closing the work order takes these variances and if general ledger integration to inventory is enabled then journals are created to write back the work in progress balance. Of course if there are several manufactured output items on the work order then the variances are apportioned between the items based on the quantity of the item received multipled by the expected cost as a proportion of the total expected cost of all items received on the work order. The detail of how the postings created depends on whether weighted average costing is used or standard costing.