Microsoft Dynamics AX 2012 Manufacturing – Project Primer (Part3)

Microsoft Dynamics AX 2012

Manufacturing – Project Primer (Part3)

 

Purpose: The purpose of this document is to illustrate project manufacturing approach in Microsoft Dynamics AX 2012 on simplified example of process manufacturing of car tires. This document will focus on project batch order with Posting method = Finished, 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 note that project batch orders functionality is not provided in standard Microsoft Dynamics AX 2012 and in order to enable project batch orders functionality I needed to do custom development. Please review other documents in the series to compare process 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 including 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. Please note that for process manufacturers or mixed-mode manufacturers being able to use project batch orders makes a lot of sense. Project batch orders can also help with scenarios like disassembly and inverse BOMs (multiple outcomes from the production process represented as co-products) which are applicable for discrete manufacturers. Process manufacturing in Microsoft Dynamics AX 2012 has introduced number of new concepts such as formulas, co-products, by-products, etc. Please note that project batch orders functionality is not provided in standard Microsoft Dynamics AX 2012 and in order to enable project batch orders functionality I needed to do custom development. 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 Car tires manufacturing provides context for better understanding of manufacturing processes and their implementation in Microsoft Dynamics AX. In particular we will be dealing with single level formula, co-product and by-product, as well as 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 tire will be manufactured using process approach. Car tire ingredients will be put together in order to manufacture finished product. One team will be responsible for Car tire manufacturing.

 

Formula	Route

 

One of the requirements defined in this scenario could be that all products are Standard cost controlled. However please note that Standard cost controlled products are not supported in Project production orders, that's why I'll have to change them to be FIFO controlled 

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 Standard cost 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 Formula calculation for Formulas). Please note that in process industries we deal with Batch controlled products however for the sake of simplicity I didn't introduce Batch as Tracking dimension in this scenario.

 

For Car tire (AlexTire) manufacturing we will need the following ingredients: Rubber, Carbon and Zink oxide. Please note that as the result of Car tire (AlexTire) manufacturing we will also have Co-Slag co-product and By-Slag by-product.

 

Released product: Tire (AlexTire)

 

Car tire (AlexTire) released product will be created using decentralized approach

 

 

Cost price for Car tire (AlexTire) is 75$

 

 

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

 

 

Car tire (AlexTire) will be manufactured that's why Production type = "Formula"

 

 

Released product: Rubber

 

Rubber released product will be created using decentralized approach

 

 

Cost price for Rubber is 3$/Lbs

 

 

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: Carbon

 

Carbon released product will be created using decentralized approach

 

 

Cost price for Carbon is 4$/Lbs

 

 

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: Zink oxide

 

Zink oxide released product will be created using decentralized approach

 

 

Cost price for Zink oxide is 50$/Lbs

 

 

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: Co-Slag

 

Co-Slag released product will be created using decentralized approach

 

 

Cost price for Co-Slag is 1$/Lbs

 

 

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

 

 

Please note that Production type = Co-product for Co-Slag product

 

 

Released product: By-Slag

 

By-Slag released product will be created using decentralized approach

 

 

Cost price for By-Slag is 2$/Lbs

 

 

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

 

 

Please note that Production type = By-product for By-Slag product

 

 

Released products

 

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

 

 

Please note that Car tire (AlexTire) has Production type = Formula, Co-Slag has Production type = Co-product and By-Slag has Production type = By-product

Car tire (AlexTire) will be manufactured using 3 operations routes. Before we can define routing we will need to define the list of operations in the system

 

Operations

 

 

Car tire (AlexTire) will be manufactured by one team

 

Resource group: AlexTire

 

Car tire (AlexTire) will be manufactured by Alex Tire Team 1

 

 

Resource: AlexTire1

 

Alex Tire Team 1 will consists of 1 worker: David Ahs

 

 

Please note that Alex tire Team 1 will be responsible for Car tire (AlexTire) 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

 

 

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

 

 

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

 

 

Sales price per Quantity will be 4$

 

 

Costing sheet

 

The structure of manufacturing costs will be defined in Costing sheet

 

 

Please note that Costing sheet is also used to define and calculate different types of overheads such as material overhead, labor overhead and plant overhead

Car tire (AlexTire) formula will consist of Rubber, Carbon and Zink oxide ingredients. Please note that the formula also defines Co-Slag co-product and By-Slag by-product as secondary outcomes from production process.

 

Formula: AlexTire – Designer view

 

Designer view provides a visual representation of Car tire (AlexTire) formula

 

 

Please note that Co-Slag co-product and By-Slag by-product are listed under Co-products in Designer view

 

Formula: AlexTire – Lines view

 

Designer view provides a grid representation of Car tire (AlexTire) formula

 

 

Formula: AlexTire – Co-Products

 

You can define secondary outcomes from production process such as co-products and by-products on Co-products screen. In the case of Car tire (AlexTire) formula they are Co-Slag co-product and By-Slag by-product

 

 

Car tire (AlexTire) route will consist of Mixing, Building and Curing operations which will be executed sequentially

 

Route: AlexTire

 

 

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

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Please note that Curing operation requires Queue time before (0.25 hours) and Queue time after (0.25 hours) as well as Run time (1 hour)

 

 

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 > Batch order* checkbox)

 

 

Please note that I added "Batch order" checkbox in Cost commitments section in Cost control area in Project management and accounting parameters to enable Committed cost functionality for Project batch orders

 

This is how Project management and accounting parameters form looked like before modification

 

 

This is how Project management and accounting parameters form looks like after modification

 

Section B: Creation

 

In Make to Stock scenario we will create Batch order for Car tire (AlexTire) manually

Please note that Project batch order option is not available in standard Microsoft Dynamics AX 2012

Project > Manage > New > Item task > Production order

 

 

Project > Manage > Related information > Item task > Production order

 

 

And in case you try to create Project production order and specify Formula product

 

 

You will see the following infolog

 

 

That's why I added Project batch order option on Project > Manage > New > Item task

 

 

As well as Project > Manage > Related information > Item task > Batch orders

 

 

After this modification Create batch order screen will look like this

 

 

Batch order: AlexTire

 

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

 

Now let's create Project batch order. In Make to Stock scenario we will create Project batch order for Car tire (AlexTire) manually

 

Batch order: AlexTire

 

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

 

 

Please note that Standard cost items are not allowed on project production orders

 

 

That's why I had to change products to be FIFO controlled

 

Production orders

 

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

 

 

 

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

 

Batch order: AlexTire – Production Formula

 

Production Formula is a list of ingredients to be used for this particular Batch order

 

 

Please note that you can change Batch Formula to meet specific requirements for particular Batch order without affecting product's active Formula

 

Batch order: AlexTire – Production Co/By-products

 

Production Co/By-products represent secondary outcomes from production process

 

 

Please note that you can change Batch Co/By products to meet specific requirements for particular Batch order without affecting product's standard Co/By products defined on the formula if you allow for Co-products variations

 

Batch order: AlexTire – Production cost

 

You can also define a cost distribution between your formula and co-products as well as burden related to disposal of by-products

 

 

Batch order: AlexTire – Production Route

 

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

 

 

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

 

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

 

Inventory transactions

 

Section C: Estimation

 

The next step in Car tire (AlexTire) batch order life cycle is to estimate batch order

 

Batch order: AlexTire – Estimate

 

It's important to mention that during estimation the system will create inventory issue transactions for Formula ingredients, create inventory receipt transactions for Co/By products, calculate estimated cost of manufactured product and create related Batch orders for manufactured sub-ingredients if needed

 

 

Once estimation is finished you can see the list of batch orders on Production orders list page

 

Production orders

 

 

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

 

Batch order: AlexTire – Price calculation

 

 

Please note that the system segregates consumption of materials from consumption of labor on Overview estimation tab. Also different types of overhead costs were added based on Costing sheet setup

 

 

However on Costing sheet tab you can also see an aggregated Total as well as breakdown based on Cost groups defined in Costing sheet

 

You can also review Price calculation details for co-products

 

 

In this particular example no cost will be allocated to co-product. Please see Appendix A for different examples of cost allocation

 

After estimation the system created all necessary issue inventory transactions for Formula components for Car tire (AlexTire) and receipt inventory transactions for Co/By products

 

Inventory transactions

 

 

Please note that because we have multiple outcomes from production process the system also creates inventory profit/loss transactions for Co-products (Co-products and By-products) in order to consume these products to project

 

At this point because of project production order Posting method = Finished  you can review Project committed costs related to finished product as estimated

 

Project – Committed costs

 

 

Please note that because we have multiple outcomes from production process the system creates Committed cost transactions for Formula product as well as Committed cost transactions for Co-products (Co-products and By-products) 

 

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

 

Project – Cost control

 

Section D: Scheduling

 

The next step in Car tire (AlexTire) batch order life cycle is to schedule batch order

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

 

Batch order: AlexTire – Job Scheduling

 

 

Production orders

 

Once Job scheduling is finished you can see the list of batch orders and their statuses on Production orders list page

 

 

Please note that the system scheduled batch order and generated number of jobs based on times defined on route operations

 

Batch order: AlexTire – Jobs

 

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

 

 

Batch order: AlexTire – Gantt chart

 

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

 

 

 

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

 

 

Please see the continuation of this article here: http://ax2012manufacturing.blogspot.com/2013/05/microsoft-dynamics-ax-2012_2143.html