Engineering designs the product, from the finished goods item down to the purchased components. They assign item numbers and specific item attributes such as item description, status and make/buy code. They establish multilevel engineering bills of material with quantity per assembly and effectivity dates. Management approves the new product structures off-line. Engineering transfers the engineering items and structure to the BOM module for full production use.

Manufacturing Engineering determines the process to build the product. They setup the operational routings that specify each manufacturing step along with machine and labor resources required to produce the specific product. They review the BOM’s from Engineering and check for compatibility with the manufacturing process. They add manufacturing data to the item master such as leadtimes, planner codes, and planning order modifiers.

Cost Accounting is responsible for developing new product standard costs as well as periodically reviewing and updating existing product standard costs. Purchasing determines material cost for purchase items based on historical purchase price history. Cost Accounting determines material overheads such as in-bound freight, usually a rate on the total material standard cost or a flat cost per unit. Cost Accounting determines resource rates, usually expressed as a standard labor rate per hour. Industrial engineers conduct time studies and update standard hours for the operation resources for the product. Cost Accounting determines the types of manufacturing overhead codes such as fixed and variable. The overhead costs are usually expressed as a flat cost per unit, percentage of resource hours, or percentage of value. After responsible users determine the cost elements (material, material overhead, resource (labor), manufacturing overhead, and outside processing) they update them into the pending cost type. Then Cost Accounting runs the assembly cost rollup to establish total assembly pending cost. Cost Accounting runs the standard cost update program to move the pending costs into the frozen standard cost.

After product design, the next phase in our generic business process is to plan expected production and material requirements. Sales establishes forecasted quantities and dates for our end item products. Our company schedules the series of planning programs to run weekly. The MDS load program copies the forecast into the master demand schedule (MDS). Master schedulers review the results and make changes if necessary. The master production schedule (MPS) creates new planned recommendations for the end product. Master production schedulers review and adjust the plan to consider capacity restraints and smooth production levels. The material requirement plan (MRP) recommends new planned orders for subassembly and component material. In addition MRP recommends changes to existing production and purchase orders. Planners review and revise the MRP recommendations via the planner’s workbench. The planner’s workbench creates discrete jobs and purchase requisitions based on planner actions.

After planning, the next and last phase in our generic business process is to execute the plan, from the placing of customer orders, through manufacturing, to shipping products to customers, and the supporting administrative functions. Many of these steps generate accounting entries.

The first step in order processing is to perform customer maintenance. Order Administration adds new customers for customer quotes and orders and accepts most defaults from system setup options. Order Administration negotiates global, distributor and customer specific pricing and discounts and sets up price lists. Order Administration enters sales orders and initiates on-line credit checking. If required they route orders for on-line approval. They print and forward sales order acknowledgments to customers when needed. A background process interfaces sales order demand to the planning system. This in turn causes sales forecast consumption. When the next planning cycle occurs, the production (MPS) and material (MRP) plans reflect new customer demand information.

The first step in inventory procurement is to perform supplier maintenance. Buyers add new approved suppliers as needed for purchase orders and accept most defaults from system setup options. Typically requisitions for material purchases come from the MRP plan via the planner’s workbench. The system automatically approves MRP requisitions which makes them available to be placed on purchase orders. Requestors enter other requisitions on-line for supplies needed and the system routes these requisitions for on-line approval.

Buyers review the pool of approved requisitions, negotiate with suppliers, and subsequently autocreate purchase orders from the requisition pool. Buyers print and forward purchase order acknowledgments to suppliers when needed.The Receiving department records the receipt of goods. If the item requires inspection, the Receiving department routes the goods through the Receiving/Inspection department. Inspectors document results of the inspection and route accepted goods to the stockroom for delivery, marking any rejected goods for return to vendor. Receivers route items that are designated direct delivery directly to the stockroom, bypassing Receiving/Inspection.