Microsoft Dynamics AX 2012 Manufacturing – Project Primer (Part 1)

Microsoft Dynamics AX 2012

Manufacturing – Project Primer (Part 1)

Purpose: The purpose of this document is to illustrate project manufacturing approach in Microsoft Dynamics AX 2012 on simplified example of discrete manufacturing of car frames. This document will focus on project production order with Posting method = Consumed, and it will outline end-to-end functional flow for the scenario which includes setup (Section A), creation (Section B), estimation (Section C), scheduling (Section D), execution (Section E) and costing (Section F) aspects. Please review other documents in the series to compare traditional manufacturing approach to other manufacturing approaches in Microsoft Dynamics AX 2012.

Challenge: Microsoft Dynamics AX 2012 out-of-the-box enables mixed mode manufacturing including traditional approach and other approaches such as project manufacturing. Project manufacturing functionality in Microsoft Dynamics AX 2012 allows you to create project production orders, track production costs and invoice the customer for incurred production costs. When traditional manufacturing approach is applied to production process itself, the challenge is to understand interrelations between production control and project accounting modules in Microsoft Dynamics AX 2012. The idea is that the reader with understanding of traditional manufacturing approach will be able to apply and "extend" this knowledge in order to implement project manufacturing scenarios in Microsoft Dynamics AX 2012.  

Solution: The simple but at the same time descriptive real-world example of discrete manufacturing of car frames provides context for better understanding of manufacturing processes and their implementation in Microsoft Dynamics AX. In particular we will be dealing with single level bill of materials and straightforward sequential route in order to implement Make to Stock scenario. Make to Stock scenario was implemented for the sake of simplicity, however we can also apply this knowledge to implement Make to Order scenario if needed.

Scenario

In this scenario Car frame will be manufactured using traditional approach. Car frame components will be welded together. One team will be responsible for Car frame manufacturing. Time and material project in Microsoft Dynamics AX 2012 will provide costing context and will be used for invoicing the customer for incurred production costs based on consumed material and labor

Bill of materials	Route
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One of the important requirements in this scenario was that all products are Standard cost controlled. However for project production orders with Posting method = Consumed we can only use Non-standard cost controlled products, that's why I used FIFO costing model instead of Standard cost

Section A: Setup

 

Let's review the setup which is required to implement this scenario

Number of released products will be created in Microsoft Dynamics AX 2012 which will have similar characteristics for the sake of simplicity. All of them will be FIFO controlled, Site and Warehouse will be used as Storage dimensions, default Site and Warehouse settings will be defined for released products and finally cost price will also be defined for all released products (not using BOM calculation for BOMs)

Car frame (AlexFrame) will have the following components: Floor, Roof and 2 Sides

Released product: Car frame (AlexFrame)

Car frame (AlexFrame) released product will be created using decentralized approach

Cost price for Car frame (AlexFrame) is 250$

Site "1" will be used as default Site for Purchase, Inventory and Sales

Please also note that Default order type = Production

Within Site "1" Warehouse "11" will be used as default Warehouse for Purchase, Inventory and Sales

Car frame (AlexFrame) will be manufactured that's why Production type = "BOM"

Released product: Floor

Floor released product will be created using decentralized approach

Cost price for Floor is 150$

Sales price for Floor is 300$

Site "1" will be used as default Site for Purchase, Inventory and Sales

Within Site "1" Warehouse "11" will be used as default Warehouse for Purchase, Inventory and Sales

Released product: Side

Side released product will be created using decentralized approach

Cost price for Side is 50$

Sales price for Side is 100$

Site "1" will be used as default Site for Purchase, Inventory and Sales

Within Site "1" Warehouse "11" will be used as default Warehouse for Purchase, Inventory and Sales

Released product: Roof

Roof released product will be created using decentralized approach

Cost price for Roof is 100$

Sales price for Roof is 200$

Site "1" will be used as default Site for Purchase, Inventory and Sales

Within Site "1" Warehouse "11" will be used as default Warehouse for Purchase, Inventory and Sales

Released products

When all released products are created you can see them on Released products list page

Please note that Car frame (AlexFrame) have Production type = BOM

Car frame (AlexFrame) will be manufactured using Welding operation. Before we can define routing we will need to define the operation in the system

Operations

Car frame (AlexFrame) will be manufactured by one team

Resource group: AlexFrame

Car frame (AlexFrame) will be manufactured by Alex Frame Team 1

Resource: AlexFrame1

Alex Frame Team 1 will consists of 1 worker: Ahmed Barnett

Please note that Alex Frame Team 1 will be responsible for Car frame (AlexFrame) manufacturing

From costing perspective the cost prices for different types of labor will be defined through Cost categories

Cost category: Setup

Cost price for Setup labor will be 18$

The corresponding Shared category should be enabled for use in Project

Cost category itself will also be enabled for use in Project

Sales price for Setup labor will be 36$

Cost category: Run time

Cost price for Process labor will be 15$

The corresponding Shared category should be enabled for use in Project

Cost category itself will also be enabled for use in Project

Sales price for Process labor will be 30$

Cost category: Quantity

Cost price per Quantity manufactured will be 2$

The corresponding Shared category should be enabled for use in Project

Cost category itself will also be enabled for use in Project

Sales price for per Qty labor will be 4$

Costing sheet

The structure of manufacturing costs will be defined in Costing sheet

Please note that in the case of project production order Posting method = Consumed the costing sheet should be empty 

Car frame (AlexFrame) bill of materials will consist of Floor, Roof and 2 Sides

Bill of materials: AlexFrame – Designer view

Designer view provides a visual representation of Car frame (AlexFrame) assembly

Bill of materials: AlexFrame – Lines view

Designer view provides a grid representation of Car frame (AlexFrame) assembly

Car frame (AlexFrame) route will consist of Welding operation only

Route: AlexFrame

Please note that different Cost categories are specified for Setup, Run time and Quantity for all route operations

Please note that Resource requirements are specified for all route operations

Customer

Customer will be defined and linked to project

Project contract

Project contract will be defined and linked to project

Project

Time and material project will be created in order to provide costing context for production process

Please note that time and material project is linked to the customer and project contract defined earlier

Project parameters

In order to track production costs under project via Cost control functionality we need to make sure that it is enabled in Project accounting parameters (Cost control tab > Cost commitments section > Production checkbox)

Section B: Creation

 

In Make to Stock scenario we will create Project Production order for Car frame (AlexFrame) manually

Production order: AlexFrame

Production order is a document which in traditional scenario controls manufacturing process of certain quantity of goods within defined timeframe

Please note that Costing sheet should not exist in case of Posting method = Consumed, otherwise you will see the following message upon project production order creation

Please note that Standard cost items are not allowed on project production orders with Posting method = Consumed

Production orders

When project production order is created you can see it on Production orders list page

Please note that Project fast tab will contain details related to Project such as Project number, etc

When project production order is created the system will copy product's active BOM and active route in order to create production BOM and production route

Production order: AlexFrame – Production BOM

Production BOM is a list of components to be used for this particular project production order

Please note that you can change Production BOM to meet specific requirements for particular Project production order without affecting product's active BOM

Production order: AlexFrame – Production Route

Production Route is a list of operations to be used for this particular Project production order

Please note that you can change Production Route to meet specific requirements for particular Project production order without affecting product's active Route

At this moment we will have inventory receipt transaction representing production order receipt for Car frame (AlexFrame) as well as auto loss/profit inventory issue transaction representing consumed to the project Car frame (AlexFrame)

Inventory transactions

Please note that we intend to consume to the project the result of production for Car frame (AlexFrame), that's why the system applies marking for inventory receipt and issue transactions for Car frame (AlexFrame)

Section C: Estimation

 

The next step in Car frame (AlexFrame) production order life cycle is to estimate project production order

Production order: AlexFrame – Estimate

It's important to mention that during estimation the system will create inventory issue transactions for BOM components and calculate estimated cost of manufactured product

Once estimation is finished you can see project production order on Production orders list page

Production orders

From costing perspective after estimation the system calculated estimated cost of project production order based on production BOM and production route

Production order: AlexFrame – Price calculation

Please note that the system segregates consumption of materials from consumption of labor on Overview estimation tab

After estimation the system created all necessary issue inventory transactions for BOM components for Car frame (AlexFrame) 

Inventory transactions

At this point because of project production order Posting method = Consumed you can review Project committed costs related to consumed material and labor

Project – Committed costs

You can do extended project cost control analysis using Cost control screen

Project – Cost control

Section D: Scheduling

 

The next step in Car frame (AlexFrame) project production order life cycle is to schedule project production order

In this particular scenario I'll execute Job scheduling which will generate number of jobs and provide exact dates and times for them

Production order: AlexFrame – Job Scheduling

Production orders

Once Job scheduling is finished you can see project production order and its status on Production orders list page

Production order: AlexFrame – Jobs

As the result of Job scheduling based on Production Route the system generated a number of jobs 

Production order: AlexFrame – Gantt chart

Gantt chart provides visual representation of production schedule, ability to reschedule for the user by dragging and dropping bars and much more

Please note that Gantt chart provides 2 views: Order view and Resource view

At this moment no changes happened to inventory transactions, however by the result of scheduling the system did appropriate capacity reservation for resources involved

Inventory transactions

Section E: Execution

 

The next step in Car frame (AlexFrame) project production order life cycle is to release project production order which releases project production order from top floor to shop floor and indicates that project production order can be started

Production order: AlexFrame – Release

Production orders

Once release is finished you can see project production order and its status on Production orders list page

At this moment no changes happened to inventory transactions

Inventory transactions

The next step in Car frame (AlexFrame) production order life cycle is to start production order

Production order: AlexFrame – Start

In this case I'll pre-flush materials and labor consumption which means that material and labor consumption will be posted up-front. I'll mark "Post picking list now" and "Post route cad now" checkboxes on General tab. I assume that there's enough on-hand for the components to be consumed in production process.

Please note that you can also back-flush materials and labor consumption which means that material and labor consumption may be posted at the time when you report your project production order as finished 

Infolog

As the result the following message will be displayed informing that Picking list journal and Route card journal have been posted for the consumption of material and labor 

Production orders

At this moment Project production order for Car frame (AlexFrame) is in Started status

Picking list journal is used to post material consumption

Production order: AlexFrame – Picking list journal

Picking list journal header references Project production order for Car frame (AlexFrame)

Picking list journal lines have details of what components have been picked for Car frame (AlexFrame) production

Route card journal is used to post labor consumption

Production order: AlexFrame – Route card journal

Route card journal header references Production order for Car frame (AlexFrame)

Route card journal lines have details of what operations have been performed for Car frame (AlexFrame) production

Production order: AlexFrame – Jobs

Please note that Job status for Welding (Process) job changed to Waiting

At this moment the system physically updated issue inventory transactions for Car frame (AlexFrame) BOM components. By other words components for Car frame (AlexFrame) have been used in production process

Inventory transactions

Please note that issue inventory transactions for Car frame (AlexFrame) BOM components changed their statuses to Deducted

Production order: AlexFrame – Production posting

The result of material and labor consumption for Car frame (AlexFrame) project production order is reflected in Production posting details

Please see details of Production posting for Car frame (AlexFrame) project production order in the table below

Material consumption   Material consumption is 150$ based on cost of Floor BOM component                                                *Inventory transactions   Inventory issue transactions for Floor BOM component will be displayed on Voucher transactions screen for material consumption     *Voucher transactions   Ledger voucher provides details on which account was credited for "Production, picking list", which account was debited for "Production offset picking list"     Material consumption   Material consumption is 100$ based on cost of Roof BOM component                                                *Inventory transactions   Inventory issue transactions for Roof BOM component will be displayed on Voucher transactions screen for material consumption     *Voucher transactions   Ledger voucher provides details on which account was credited for "Production, picking list", which account was debited for "Production offset picking list"     Material consumption   Material consumption is 100$ (2x50$) based on cost of Sides BOM components                                                *Inventory transactions   Inventory issue transactions for Sides BOM components will be displayed on Voucher transactions screen for material consumption     *Voucher transactions   Ledger voucher provides details on which account was credited for "Production, picking list", which account was debited for "Production offset picking list"     Route consumption   Route consumption is 17$ based on cost of operations for Process and per Quantity for Car frame (AlexFrame)   *Inventory transactions   Inventory receipt transaction for Car frame (AlexFrame) will be displayed on Voucher transactions screen for route consumption     *Voucher transactions   Ledger voucher provides details on which account was credited for "Production WIP issue", which account was debited for "Production - WIP"     *Route transactions   Route transactions show the details of labor consumption postings for Process job (15$) and per Quantity (2$) which rolls up to 17$

 

At this point you can review Project committed costs related to consumed material and labor

Project – Committed costs

 

Please note that the system reversed project committed costs for material and labor after material and labor have been actually consumed in production process. The only open committed cost transaction left is for labor Process job because the job itself is not yet Ended 

You can do extended project cost control analysis using Cost control screen

Project – Cost control

The system reversed committed cost transactions and posted real item and hour project transactions representing material and labor consumption into the project

Project transactions

Please see details of project transactions below

Project item transaction – Floor (General)

Project item transaction – Floor (Cost)

Please note that cost price for Floor is 150$ as defined on the product

Project item transaction – Floor (Sales)

Please note that sales price for Floor is 300$ as defined on the product

Project item transaction – Floor (Voucher)

Ledger voucher provides details on which account was credited for "Production, picking list" and which account was debited for "Project – cost"

Project item transaction – Floor (Ledger updates)

Project item transaction – Roof (General)

Project item transaction – Roof (Cost)

Please note that cost price for Roof is 100$ as defined on the product

Project item transaction – Roof (Sales)

Please note that sales price for Roof is 200$ as defined on the product

Project item transaction – Roof (Voucher)

Ledger voucher provides details on which account was credited for "Production, picking list" and which account was debited for "Project – cost"

Project item transaction – Roof (Ledger updates)

Project item transaction – Side(s) (General)

Project item transaction – Side(s) (Cost)

Please note that cost price for Side(s) is 100$ (2x50$) as defined on the product

Project item transaction – Side(s) (Sales)

Please note that cost price for Side(s) is 200$ (2x100$) as defined on the product

Project item transaction – Side(s) (Voucher)

Ledger voucher provides details on which account was credited for "Production, picking list" and which account was debited for "Project – cost"

Project item transaction – Side(s) (Ledger updates)

Project hour transaction – Process (General)

Project hour transaction – Process (Cost)

Please note that cost price for Process labor is 15$ as defined on the cost category

Project hour transaction – Process (Sales)

Please note that sales price for Process labor is 30$ as defined on the cost category

Project hour transaction – Process (Voucher)

Ledger voucher provides details on which account was credited for "Project – payroll allocation" and which account was debited for "Project – cost"

Project hour transaction – Process (Ledger updates)

Project hour transaction – Quantity (General)

Project hour transaction – Quantity (Cost)

Please note that cost price for Per quantity labor is 2$ as defined on the cost category

Project hour transaction – Quantity (Sales)

Please note that sales price for Per quantity labor is 4$ as defined on the cost category

Project hour transaction – Quantity (Voucher)

Ledger voucher provides details on which account was credited for "Project – payroll allocation" and which account was debited for "Project – cost"

Project hour transaction – Quantity (Ledger updates)

The next step in Car frame (AlexFrame) project production order life cycle is to report project production order as finished

Production order: AlexFrame – Report as finished

Infolog

As the result the following message will be displayed informing that Report as finished journal has been posted for the receipt of finished goods into inventory 

Once you reported project production order as finished you can see project production order on Production orders list page

Production orders

Report as finished journal is used to record finished good receipt into inventory

Production order: AlexFrame – Report as finished journal

Report as finished journal header references project production order for Car frame (AlexFrame)

Report as finished journal lines have details of what finished goods have been received into inventory

Production order: AlexFrame – Jobs

Please note that Job status for Welding (Process) job changed to Ended

Inventory transactions

At this moment the system physically updated receipt inventory transaction for Car frame (AlexFrame). By other words Car frame (AlexFrame) assembly has been produced. Please also note that the system also physically updated auto loss/profit issue inventory transaction for Car frame (AlexFrame) to automatically reduce on-hand because Car frame (AlexFrame) has been consumed to the project

Production order: AlexFrame – Production posting

The result of reporting Car frame (AlexFrame) project production order as finished is reflected in Production posting details

Please see details of Production posting for Car frame (AlexFrame) project production order in the table below

Report as finished   Report as finished amount is 250$ based on cost of Car frame (AlexFrame)   *Inventory transactions   Inventory receipt transaction for Car frame (AlexFrame) will be displayed on Voucher transactions screen for Report as finished   *Voucher transactions   <Empty voucher>

 

At this point you can review Project committed costs related to consumed material and labor. Please note that all committed costs transactions are closed. After reporting project production order as finished and ending Process job the system also reversed and closed committed cost transaction for Process job

Project – Committed costs

You can do extended project cost control analysis using Cost control screen

Project – Cost control

At this moment no changes happened to project transactions

Project transactions

Section F: Costing

 

The next step in Car frame (AlexFrame) project production order life cycle is to end project production order

Production order: AlexFrame – End

Once you ended project production orders you can see project production order on Production orders list page

Production orders

From costing perspective after ending project production order the system calculated actual cost of project production order based on actual material and labor consumption

Production order: AlexFrame – Price calculation

Please note that the system segregates consumption of materials from consumption of labor on Overview costing tab

Inventory transactions

At this moment the system financially updated all receipt and issue inventory transactions related to Car frame (AlexFrame) production

Please note that the system recorded financial costs for inventory transactions according to immediate weighted average cost because all products are FIFO controlled

Production order: AlexFrame – Production posting

The result of ending Car frame (AlexFrame) project production order is reflected in Production posting details

Please see details of Production posting for Car frame (AlexFrame) project tproduction order in the table below

Costing   Costing amount 367$ reflects the actual cost of project production order which includes material consumption and labor consumption   *Inventory transactions   Inventory transactions related to Car frame (AlexFrame) will be displayed on Voucher transactions screen for costing. This includes original receipt inventory transaction and auto loss/profit issue inventory transaction     *Voucher transactions   Please note that the system recorded 0 (Zero) voucher transaction in order to account for product receipt after the product was consumed to the project and subsequent financial activity will happen in project accounting module

 

At this point no changes happened to committed cost transactions

Project – Committed costs

You can still do extended project cost control analysis using Cost control screen

Project – Cost control

Since the time when project item and hour transactions have been posted against the project, they are ready to be included into Project invoice proposal in order to invoice the customer 

Project transactions

 

Summary: This document describes a primer of project manufacturing approach to Car frame production in Microsoft Dynamics AX 2012. The scenario operates with single level BOM. Production order is a main document in traditional approach which controls manufacturing process and provides a context for cost accounting. However in project manufacturing scenario the project itself provides cost context as well as extended committed costs and cost control capabilities. In this scenario I highlighted all aspects of manufacturing process including setup, creation, estimation, scheduling, execution and costing as well as project accounting functionality related to costing. Most importantly I'm giving a detailed practical example of how to implement typical manufacturing scenario using project approach in Microsoft Dynamics AX 2012. This provides a foundation for comparison between traditional approach and project approach in Microsoft Dynamics AX 2012. Please review other documents in the series to compare traditional manufacturing approach to other manufacturing approaches in Microsoft Dynamics AX 2012.

Version: Microsoft Dynamics AX 2012 FPK Demo VM (CEU)

Author: Alex Anikiev, PhD, MCP

Tags: Microsoft Dynamics ERP, Microsoft Dynamics AX 2012, Manufacturing, Project, Production, Project Manufacturing, Traditional Approach, Project Accounting, Production Order, Setup, Creation, Estimation, Scheduling, Execution, Costing.

Note: This document is intended for information purposes only, presented as it is with no warranties from the author. This document may be updated with more content to better outline the concepts and describe the examples.