MS Dynamics AX 2009 & 2012: Basic Understanding of Process Manufacturing in AX...

MS Dynamics AX 2009 & 2012: Basic Understanding of Process Manufacturing in AX...: Basic Understanding of Process Manufacturing In AX Ashish Panth Dated: 26 Feb 2014                 Abstract. Prior to wri...

Basic Understanding of Process Manufacturing in AX

Basic Understanding of Process Manufacturing

In AX

Ashish Panth

Dated: 26 Feb 2014

               

Abstract. Prior to writing this article, it involved consultation with associated domain experienced members and it also includes much effort in understanding the comparison between Discrete and Process Industries. Result of this article is reported to be the getting clear idea of benefits of Process manufacturing in AX and also the related terminologies.

 

                                                Introduction

Process Manufacturing is the manufacturing industry which deals with the Formulas as compared to the Discrete Manufacturing industry which deals with the Bill of materials. Process manufacturing relevant factors are ingredients, not parts; formulas, not bill of materials and bulk, not individual units.

Process Industries for Microsoft Dynamics AX enterprise resource planning (ERP) addresses the needs of life sciences, agri-business, food and beverage, chemical, pharmaceutical food and beverage industries.

By the help of AX in process industries, the manufacturers get complete detailed picture of the entire business in real time.

Process Industries also includes modules for process manufacturing, process distribution and total quality management.

It helps improve operational efficiency by integrating sales, production, inventory, quality control, distribution, and customer service capabilities throughout the process manufacturing life cycle so you can better manage all the variables required to engineer and build products to custom specifications, optimize capacity, comply with regulatory demands, and drive continuous process improvement.

 

                      Benefits of AX for Process Manufacturing Industries

Fast decision-making. Monitor inventory across multiple dimensions, incorporate co-product and by-product management into product planning, and carefully oversee quality control so you can make informed, timely business decisions.

Efficient production and delivery. Gain real-time visibility into relationships between orders, inventory, and distribution to develop production plans based on capacity and customer demand.

Process Industries for Microsoft Dynamics AX helps you to improve operational efficiency and increase product quality while meeting environmental and production safety requirements and achieving your profitability objectives.

Quick ROI- Process Industries for Microsoft Dynamics AX is tightly integrated with other Microsoft products and uses the same interface so you can extend and customize the capabilities of your solution at an overall low total cost of ownership.

Enhances the Speed and flexibility of your process manufacturing operations-

Process Industries for Microsoft Dynamics AX supports the unique requirements of a process manufacturing operation, including:

Multi-dimensional inventory -

Process Industries for Microsoft Dynamics AX helps you to track and manage materials while taking into account the complexities of multiple inventory characteristics such as weight, container type, and expiration date.

In addition, you can define, manage, and cost multiple outputs, including co-products and by-products, from a single production process. Monitor your inventory in various dimensions to improve product delivery rates and enhance customer service.

 Packaging-

With Process Industries for Microsoft Dynamics AX, you can define a single product number and formula for all packaging configurations for an end item to dramatically simplify product codes. A two-level formula structure enables you to maintain unique packaging components for each packaging type assigned to the main formula.

You can even manage multiple customer orders in various packaging configurations and deliver products packaged to meet your customers’ precise requirements, right down to the quality specifications of a specific lot. With the enhanced configuration capabilities of Process Industries for Microsoft Dynamics AX, you can improve customer satisfaction and increase your competitive edge.

 

Enhances connectivity and communication-

With Process Industries for Microsoft Dynamics AX, your employees can share real-time information about specifications, order status, and QC testing across key departments to streamline buying, selling, and production decisions. With access to up-to-date data, managers and employees can make changes and adjustments quickly and reach informed decisions.

 

Real-time information about performance status and costs-

Process Industries for Microsoft Dynamics AX, you can view and manage information at the level of detail you need, when you need it. Get a comprehensive view of overall operations to drive continuous process improvement; or drill down to individual item availability, shop floor activities, and employee performance so that you can match quantities and grades of product to specific customer orders, help ensure on-time deliveries, and manage resources effectively.

   Comparison between Formula and Bill of material

Formula is used in Process industries while Bill of material in the Discrete industries.

 

Concept of Co-products and By-products

As every process manufacturer knows, production processes can yield materials other than the planned end item. These additional outputs, called co-products or by-products, may be reused, sold at a profit, or disposed of at a cost.

Generally, co-products are desirable secondary outputs from the manufacture of the planned product that can be sold or reused profitably.

By-products are unavoidable secondary outputs that may be sellable or usable, or they may be waste that must be disposed of at a cost.

The following figure below shows the Co/by products form.

Planning Item in comparison with Normal Formula

 

A special type of Formula item can be created where the outputs of that formula are only the co-products and optionally, by-products. This type of formula item occurs when its Product Type is set to Planning Item. A Planning Item will not have any inventory transactions or exist in inventory. The Planning Item can be thought of as an artificial grouping of items used to facilitate production, master scheduling and material planning. Those co-products that are assigned to the Planning Item’s formula must have 100% of the production costs allocated to them, which may include any costs associated with the processing of by-products.

 

Normal Formula versus Planning Item Formula-

 

Different Product Type –

 

Item with Type ‘Formula’ is set as a ‘Planning Item’ in the Product Type field on the References tab of the Item Master. Any other Formula will have Product Type set to ‘None’.

 

 

Normal Formula is not required to have additional Co/By Products outputs. Planning Item Formula must have Co-Products outputs.

 

Normal Formula item will share costs with its Co-Products but will typically have the largest allocation of the formula costs. All costs in a Planning Item’s Formula are allocated to the Co-Products.

 

 

 Comparison between Process Manufacturing and Discrete                 Manufacturing

 

Material/routing relationship—In a discrete work order system, materials must be issued in the first operation. In process companies, the materials are often issued only when they are needed at the operation.

Recycles—BOMs cannot manage recycles well because a BOM defines a part (or raw material) as either consumed or produced, but not both. A recycle is an item that is consumed in one operation and produced in another, so it is both consumed and produced.

Scaling— In some formulations some products scale while others do not based on the end-item batch size. An example is a catalyst, in a chemical batch, or a yeast pack in a food example. BOMs have difficulty flagging non-scalable items.

Percentage-based formulations—Most BOMs are designed using quantity per equivalents. In some formulations ingredients are issued based on percentages or hundred weights (baking).

Variable output—Process companies deal with variability, both on input and output. Because there are sometimes reactions, yield can be positive or negative. Discrete work orders are designed to produce fixed quantities based on fixed inputs. Formulations can produce more or less than was planned, and work orders can be closed long or short. This is a key differentiator when comparing discrete work order and batch formulations.

Unplanned co-/by-products—often in meat companies, or life sciences, what was planned on the batch order is not what resulted from production. The ability to add new, unplanned co- and by-products is another key difference between discrete work order and process batch orders.

 

                                                Catch weight items

      

Catch weight items are commonly used in industries where items can vary slightly by weight and/or size, such as the food industry. These items use two units of measure – an inventory unit and a catch weight unit. The inventory unit is the unit of measure in which the item is weighed and invoiced. The catch weight unit is the unit in which the inventory transactions are performed (sold, received, transferred, picked, shipped, and so forth).

Full or partial visibility

The dimension configuration and weight you set up for a catch weight item determines whether the item uses full or partial visibility.

 

Full visibility requires that each piece of inventory be assigned a unique serial number and the specific weight of that inventory identified and recorded. By associating the serial number with the weight of the inventory, the weight for that piece of inventory is always known simply by entering the serial number. For example, assume that five pieces of inventory for a full visibility item are received into inventory. Each piece is assigned a unique serial number and the weight for that specific serialized piece is recorded. Once the serial number and weight are established, any transaction you perform for that particular piece of inventory requires only the entry of the serial number. The system provides the weight by default.

Partial visibility allows one or more pieces of inventory to use the same serial number or batch number. Only the aggregate weight of the inventory is recorded. As a result, the weight of each transaction must be entered as transactions are performed, since the individual weight of each piece is not known. For example, a partial visibility catch weight item consisting of five pieces of inventory is received into inventory. Each piece received may or may not have serial or batch dimension requirements. When a transaction involving some or all of this inventory is performed, the inventory must be weighed and the aggregate weight entered in the system. Only the aggregate weight for the five pieces is identified and recorded.

 

                                                Batch attributes

Batch attributes are characteristics of raw materials and finished goods that make up inventory batches. In process distribution, batch attributes can differ depending on a number of factors, such as environmental conditions or the quality of the raw materials used to produce the batch. The number and types of batch attributes used can vary widely from one industry to another.

Here are two examples of batch attributes that might be used by different industries.

In the cheese industry, milk, which is one of the raw materials used to produce the cheese, may have attributes such as fat content and percent weight. The cheese produced from the milk could have other attributes like moisture and age.

In the steel industry, the iron you produce might have attributes such as the percentages of magnesium content, silver content, and zinc content.

                                              Container items

 A container item is an item that is manufactured, stored, and transported in some type of standard container, such as a bottle or can. In Process Industries for Dynamics AX, you can set up two types of container items – packed items and bulk items.

                                                      Packed Items

A packed (or child) item is an item that has been packaged into either a single container or multiple containers, both of which are considered one inventory unit. For example, a 7 gallon pail, an 8 oz. bottle, or a case of 32 oz. bottles of product is each considered a single packed item unit.

                                                         Bulk Items

A bulk (or parent) item is an item that is consumed by one or more packed items. A bulk item is reported separately, but it is not normally stocked in inventory on a permanent basis. It remains in inventory only long enough to be packaged into one or more packed item containers. While in inventory, a bulk item might be a parent item to a packed item.

           

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Concepts of Transfer Journal, Movement Journal , Proft & Loss Journal and Counting Journal

Transfer Journal:

Transfer Journals are used to transfer inventory quantity from one inventory dimension combination to another.

Inventory Management ->Journals ->Item Transaction ->Transfer

It does not include any costing.

It can be used to transfer inventory from

1. One location to another location.

2. One  batch to another batch.

3. One variant  to another variant

Movement Journal and Proft & Loss Journal:

These journals are used to record item issues or receipts in inventory.

But the difference between these two is of offset accounts.

In case of Movement Journal, while moving inventory you can add cost to an item.Here we have manually add the Ledger account(Not as per the posting profile account setup).

In case of Profit & Loss Journal, while moving invenotry, the cost is automatically added to a particular general ledger as per the item group posting profile setup.

Inventory Counting Journal:

Inventory Management -> Journals ->Item Counting ->Counting

In order to determine, the actual quantity avalaible physically, we will do inventory counting in the warehouse.

We will register the counted quantity in inventory journals. And when we do posting, the system will calculate the difference between the counted quantity and the physical quantity avaliable and will post an item issue/receipt.

We have got 2 options to register inventory counting:

Manual registration and  Create counting lines  automatically.

Manual registration- We have to enter the counting lines manually. In the Counted column, we need to enter the counted quantity.

 

 

 

 

 

Create counting lines automatically-

To create lines for counting exisiting stock automatically,

we have to click on Create/On- hand, Create /Items or Create/Expired Batches

  

Concepts of Inventory Model Group- AX 2009 / Item Model Group -AX 2012

Here i am going to discuss about the basic understanding of Inventory Model Groups/Item Model Group.

The first and the main purpose of the Inventory model group/Item Model Group is to set up the rules for calculating of item cost.

 

Let’s assume that a shopkeeper purchases 6  items for the cost of Rs 50 and 4  items for the cost of Rs 55. So, the total items’ cost is  6*50 + 4*55. The company sells 4 items.

Now, there are 6 + 4- 4 = 6  items in the company warehouse.

So the possible cost of item remained in the warehouse are:

Possible Combinations:

1. (6 - 4) * 50 + 4 *55             = Rs 320        (the company has sold 4 items that cost Rs 50)
2. (6 - 2) * 50 + (4 - 2 ) *55    =  Rs 310     (the company has sold 2 item that costs Rs 50 and 2 item that costs Rs 55)

There will other varaints like 1 from Rs 50 and 3 from Rs 55, 3 from Rs 50 and 1 from Rs 55,etc.

We cannot come to the point exactly about the item's cost that is remaining in the warehouse because we only know that there are 6 items remaining in the warehouse and we don’t know which items are sold.

We can set up the following rules for an inventory models to calculate item’s cost:

FIFO – First in First out. Means that the first purchased item is first sold.     

 So in our case, shopkeeper has 6  items for the cost of Rs 50 first, so these items will be first sold. After the items are sold, the items’ cost in the warehouse will be (6 - 4) * 50  + 4 * 55 = Rs 320

LIFO – Last in First out. Meaning that the first purchased item is last sold.     

So in our case,shopkeeper has purchased 4 items for the cost of Rs 55 last, so these items will be first sold.

After the items are sold, the items’ cost in the warehouse will be 6 * 50 + (4 – 4) * 55 = Rs 300

Weighted avg. – in this case, the average cost is calculated and subtracted from the warehouse items’ cost when the item is sold.

So in our case,shopkeeper  has average cost is (6* 55  + 4 * 50) / 10 =Rs 53 .

After the items are sold, the items’ cost in the warehouse will be (10 – 4) * 53 = Rs 318

Standard cost – this inventory model uses a specific price as cost. The price can be entered manually or calculated automatically. This price is used as cost for purchase and selling.

For example, if the shopkeeper has set the standard cost price of Rs 49. So, we purchase all items for this price Rs 49.

The total items’ cost before the selling is 6 * 49 + 4* 49  = 490. After 4 items are sold, the items’ cost in the warehouse will be (10 - 4 )* 49 =  294.

LIFO date – this model equals to LIFO with the only difference being that purchase and selling dates are taken into account.

For example, a company purchases four items for the cost of Rs 50 on 11th Jan, three items for the cost of Rs 55 on 11th Jan and two items for the cost of Rs 47 on 13th Jan. 

The company sells two items on 11th Jan, but the Sales manager was out of office and didn’t post the sales. The Sales manager came back to the office on 13th Janand posted the sales backdate to 11th Jan.

The sales posting process will decrease the cost of items in the warehouse at 2 * 55 (item’s last cost as of 11th Jan).

If the LIFO inventory model is used, the sales process will decrease the cost of items in the warehouse to 2*47 (because 7$ is the last cost received into the warehouse).

Weighted avg. date. – this model equals to the Weighted avg with the only difference being that the average amount is calculated for a separate day.

For example, a company purchases four items for the cost of Rs 50 on  11th Jan, three items for the cost of Rs 55 on 13th Jan and two items for the cost of Rs 47 on 13th Jan.

The company sells two items on 13th Jan. The average cost price will be (3* 55 + 2 * 47) / (3 +2) = Rs 259 .     

Note : 4 items at the price of   Rs  50  are not included in the average cost price calculation because they have been purchased on another day.

Concepts of On hand Inventory

Dynamics AX gives you in depth information about the inventory items.

It gives you a clear picture about what is in stock, what is reserved, what is ordered and what has been posted /still in transaction.

Inventory Management->Common Forms->Item details->On hand button

OR

Sales Order/ Purchase Order/Inventory Movement/Production Order under Inventory button->On Hand

A. Physical Inventory- It shows you the total avaliable quantity

B. Physical Reserved- It shows the quantity that is reserved in Sales Order.

C. Avaliable Physical -It shows the actual quantity that is avaliable for transactions. It is calculated by subtracting Physical Reserved from Physical Inventory.

C = A - B

D. Ordered in total- It shows the total qty that is open in Purchase order(yet to be received)

E. Ordered Reserved- It shows you the quantities reserved from purchase orders(yet to be received).

F. Avaliable for reservation- It shows you the quantities in open purchase orders avalaible for reservation(yet to be received).

It is calculated by summation of Avaliable Physical with qty left after subtracting Ordered Reserved from Ordered in total.

F = C+ ( D -E )

G. On order in total-  It shows you the quantity in open sales order(yet to be delivered)

H.Total Avaliable - It shows you the net avaliable physical quantities for transaction.

It is calculated by subtracting Onorder in total from Available for reservation.

H = F - G

I. Posted Quantity - It shows you the quantity posted financially.

J. Deducted -It shows you the quantities have physical packing list posted in Sales order.

K. Picked -It shows you the quantities have picking list posted in Sales order.

L. Received- It shows you the quantities have physical updated in Purchase order.

M. Registered- It shows you the quantities registered in Purchased order.

N. Physical Cost Amount- It shows you the amount posted in ledger physically.

O. Financial Cost Amount-  It shows you the amount posted in ledger financially.

P. Cost Price-It shows you the item average cost.