In today’s publication, I would like to focus on an important element, which is the calculation of production costs. In this point, the functionality of SAP Business One is very limited. That’s why in our integrated ProcessForce solution dedicated for advanced production, we have created a separate tool. This functionality is called “costing”.
From the very beginning, in the construction of this mechanism, we refer to areas that are the main elements of cost information creation. I am thinking here about the Item valuation methods which define how to settle the value of stock and calculate the value for the quantities on releases for production, as well as in calculating Bill of Materials (BOM) and Manufacturing Order (MO) value. At the moment there are four methods of Item valuation available: Moving Average, Standard, FIFO, and Batch/Serial. The next key element is Cost Categories that determines not only current but also future valuations of Items, including all the BOM details. Thanks to this category it is possible to collect current information as well as to modify it freely. For a full view, it is also possible to add and divide the Overhead Costs in terms of fix and variable.
As you can see in the picture above, the system is very flexible when it comes to cost management. You can both add value and cost to be included in the calculations. An important element is that the system, after setting up a new Item or Resource, creates a standard Cost Category ‘000’ record for it each time. However, it is possible to create any number of Cost Category variants. All Cost Categories created are also generated for each of the Item’s Revisions. It gives even greater possibilities for later management. A similar situation exists for Resources, however, its main determinant is the type of time that the cost will be allocated, ie: Queue Time, Setup Time, Run Time and Stock Time. As far as Resource accounting is concerned, it is also possible to post individual Resource costs by type of time to other accounts.
This gives you the opportunity to freely analyze the Cost of these Resources. In order to collect information on the costs of individual Items or finished products, a tool was created for their roll-up according to the structure of their share. This allows us to prepare our calculations accordingly, taking into account only the information that was to be found there.
In the next part, I would like to go into the BOM and MOR cost. In this area, Cost Categories as well as the cost-sharing structure play a key role. The standard Cost category is the base. As a result, its proper preparation gives a full view of the real cost of production.
Below you can find information about the cost of BOM.
As you can see in the photo, all components such as the Cost of raw materials, Coproducts, Scraps and of course the Resources which was used can be included. The structure is divided into three groups: ATL – At this Level containing the set of costs for raw materials and Resources, LL – Low Level dedicated to the costs of semi-finished products, CA – cost allocation for Coproducts and Scraps. The system also shows the costs in the summary for their type and percentage in the value of the finished product. With the Cost Category tab at the top of the image, you can see the value in time or you can make a valuation according to the previously agreed. Calculation may also take into account the Costing, including Revision and its size. Use of these mechanisms allows you to quickly calculate the cost of production.
The next element is the calculation of the Manufacturing Order, which you can check below.
This view shows discrepancies between the planned cost for a specific Manufacturing Order and the real consumption of materials and the actual time which was used to its realization. After the comparison of these values, the system presents discrepancies as well as all values in detail: in the first tab for all materials that were used. In the second one presented in the picture: for the settlement of the actual time from the Routing and divided into the costs of Operations and Resources. This tool allows you to view the costs of Orders and as a result of their analysis of taking possible corrective actions, in particular, the effectiveness of using all elements.
In conclusion, I would like to show how all the values and mechanisms discussed above can be used in production efficiency reporting. This can be illustrated by the picture below showing a section of the production efficiency report in relation to the planned and current costs for all components and its elements.
The above report is just an example of how the values expected by production can be calculated. However, please note that using the Crystal Reports used to prepare this report, we can build any reports necessary for the analysis and optimization of production in enterprises. A report can also be available to other users with the option to update and it is also possible to build their own view of the contained data in real time.
The main goal of this publication is to show that ProcessForce is not only a solution for advanced production processes, but also for cost-effective and comprehensive production costing. Obviously, the capabilities offered by ProcessForce are far broader, and today’s publication just showed one of its areas.