In sequential order of Manufacturing scope (a process that is also known as the production life cycle), we have Discrete Manufacturing, Lean Manufacturing, Process, the Manufacturing Execution features (once known as shop floor control), and Master Planning.
Additionally, we also have Mixed mode planning. It combines discrete, process, and lean sourcing and you can model your supply chain based on the material flow.
In this article, I will show you a hands-on experience about discrete, including Site, Warehouse, Production Unit, Cost Group, and Cost categories.
A site shares interrelated transactions
A site is a grouping of business resources which share interrelated transactions, and they’re located at a geographic location. You must specify a site on every inventory transaction, so you must set up at least one for a company.
You also can create multiple sites for a distribution center that serves different geographic markets or to reflect a unique business model, support operations, and process flows.
You could set up a production site with multiple warehouses or multiple production sites with a shared production center or local production sites with a shared production site.
Some mandatory thing you need to know for site setup:
Go to Operations > Inventory management > Setup > Inventory breakdown > Sites
Click new to create a new site. I will create a Phone Production Site:
- The Hierarchy FastTab displays the hierarchy of all sites and warehouses that are setup in the current company.
- The site is not referenced from warehouses, production resources, or other master data.
- There is no on-hand inventory on the site.
Warehouses are one of the system’s inventory dimensions
- When you have several warehouses, you can divide the total on-hand inventory among these warehouses.
- All item transactions can be marked with warehouses, which follow the transactions throughout the system.
- When you create a warehouse, you must specify a warehouse type. The types are Default, Quarantine, and Transit.
- You can use warehouse levels to create a hierarchy that supports inter-warehouse transfer orders. Based on this setup, master scheduling will calculate item requirements at the individual warehouse level and generate planned transfer orders from an assigned source warehouse to fulfill them.
- Within the warehouse management module, you can attach warehouse-management settings to each warehouse and copy locations from one warehouse to another.
Some mandatory things you need to think about for Warehouse setup:
Go to Operations > Inventory management > Setup > Inventory breakdown > Warehouse
Click new to create a new Warehouse. You will have a form like this below:
We should choose the type of warehouse once it’s created, we can’t modify this field.
There are three types of warehouses:
this is just your standard warehouse for primary transactions.
warehouse would have inventory that’s not available for any issues; it needs to stay where it’s at.
is more of a virtual warehouse. It’s just showing that the items are currently in transit or between warehouses.
Production unit reflects the physical layout of production resources
- A production unit can contain multiple resource groups, but a resource group can be assigned to only one production unit.
- A production unit reflects the physical layout of production resources and has no effect on transactions or how they are processed.
- You must associate a production unit with a site.
- You can also assign a picking warehouse and a storage warehouse to a production unit. This is useful for example, if the raw materials for a production line should be sourced from a specific warehouse, or if the finished goods coming off a production line should be stored in a specific warehouse.
- You can use a production unit to consolidate and filter production-related data. For example, a shop floor manager can see an overview of the outstanding workload and the available capacity for a production unit.
Link to production unit Operations >Production control>Setup>Production>Production units
After a Production unit is created, we can create a Resource group and assign it to a Production Unit.
Go to Operations >Organization administration >Resources >Resource groups
Click New to create new resource groups, then assign a production unit to it.
Cost groups provide the basis for segmenting
Cost groups provide the basis for segmenting and analyzing cost contributions in a manufactured item’s calculated cost, such as the cost contributions of material, labor, and overhead. Cost group segmentation has several synonyms within manufacturing environments, such as cost breakdown, cost decomposition, or cost classification.
Cost group segmentation has several purposes, such as the following:
- Segment costs for several types of material, such as ingredients and packaging material for a canned goods product, based on the cost groups that are assigned to the items.
- Segment costs for several types of operations resources, such as several types of labor or machines. These costs are based on the cost groups that are assigned to the cost categories related to operations resources and routing operations.
- Segment costs for setup and run a time in routing operations, based on the cost groups that are assigned to cost categories related to the routing operations.
- Segment costs for several types of overheads, such as labor-related and machine-related overheads, based on cost groups that are assigned to indirect costs in the costing sheet setup.
- Cost group segmentation can act as the basis for calculating various manufacturing overheads in the costing sheet setup. This can include different overheads related to routing information about operations resources or about setup and run time. Manufacturing overheads can also be related to cost contributions of component material, reflecting a lean manufacturing philosophy that eliminates the need for routing information.
Cost groups are classifications of cost contributed by resources.
The cost group types determine the nature of the resources, which can be classified through the cost group.
- Direct material: A cost group designated as the direct material that can be assigned to items.
- Direct manufacturing: Restricted to cost categories for manufacturing operational resources.
- Direct outsourcing: Restricted to service type products.
- Indirect: An indirect cost group can be assigned to indirect costs for surcharges or rates.
- Undefined: A cost group designated as undefined can be assigned to items, cost categories, or indirect costs.
Go to Operations >Production control >Setup >Routes >Cost groups
After Cost Groups are created, link it with a ledge account.
Now that we’re done specifying the posting accounts for cost groups, we can move on to our next step, which is linking the cost groups to a released product
Cost Categories in Cost accounting is equivalent to chart of accounts
The function of a cost category in Cost accounting is equivalent to the function of a chart of accounts in the General ledger. Cost amounts are posted to cost categories through general ledger or cost accounting postings.
Each cost category must have one of the following three cost types assigned to it:
- Primary costs: Primary costs are always posted directly. They can be set up to be identical to the following general ledger accounts: profit and loss, revenue, or costs. When the cost categories are the same as the general ledger accounts, they are created automatically as primary costs.
- Secondary costs: Secondary costs cannot be posted directly. They are used to post allocations. When you set up allocations, cost categories that are secondary costs are mandatory.
- Service categories: Service categories are used to post quantities. They are usually linked with the production cost categories or the project categories. When a cost category is created manually in Cost accounting, the local account option is enabled automatically, and the cost category can be used in cost accounting only. The cost category numbers cannot be used later as account numbers for general ledger accounts
We also can modify Cost price by clicking on Category setup.