6/26/2014. Manufacturing to Finance Costing The Bridge Foundation Manufacturing Abutment. Finance Profit. Manufacturing. Sales Revenue. Who Am I?

Transcription

1 Manufacturing to Finance Costing The Bridge Foundation Manufacturing Abutment Standard Cost in the Non Standard World Gary Creasy, Director of Cost Accounting Lang-Mekra NA, LLC 1 Manufacturing /Industrial Engineering, Materials Planning, Purchasing/ Procurement Manufacturing Sales Revenue Final Assembly: Cost Accounting Crossing the Bridge is Inventory Valuation, Variances, and all the records that cost the product and inventory Controller, General Accounting, AP, AR. Financial Analysis Finance Profit Who Am I? BS-IEOR (Industrial Engineering and Operation Research) and MS-IEOR (both from Va Tech) 40 Years In Manufacturing at OEM levels, Mack Trucks, Volvo, and Komatsu Equipment (Construction and Fork Lifts) 2 Years at Lang-Mekra (Tier1 Supplier) 35 Years starting as an Industrial Engineer and thru more than we want to talk about in IE/ME Management and Project Management to Manager. Started the Cost Control Department at Komatsu Newberry, merged into Accounting and did a mix of Cost Accounting, General Accounting, and Asset Management. SAP and other ERP systems all the way back to Keypunch data entry days Became a QAD user in 2012; arriving at Lang-Mekra in September for the late November GoLive; 2012EE On Demand. Want to know more? > Go to 1

2 Focus Key Setup Issues Item Site Master Relationship / Codes PO s Routings / BOM Primary Focus this Presentation Purchasing and Manufacturing Overhead Sub Contracted Processes Routing and Manufacturing Rates DRP and Independent Sites Just Like Bridge Construction Start at the same point A Disclaimer All examples have a reality basis but created in a Test Environment and are 4 strictly to that slide Item Master /Item Planning Data Master Plan Item Master is the REAL START FOR EVERYTHING Failure is not an option Item Number, Description, Site Using it, Purchasing Site, etc... Unit of Measure for use in the Inventory and Costing Product Line assignment A key in Costing Choices & Analysis Item Type Freight Codes for regional based costing possible Group Enter such grouping as Raw, Supplies, Subcon, etc... Purchase/Manufacture D, L, M, or P P Purchased Material L Manufactured Using Advanced Repetitive M Manufactured Material Using Discrete Work Orders D Indicates received from another company plant Site, Network Code structure DRP Used for planning and shipping + Receiving Site Supply Site (01-02 is Site 01 from Site 02) 5 Enter Master Item Master Setup Controls Cost per unit Unit of measure used in costing, inventory, MRP, not PO s Freight Costing using QAD vs entered manually Other Cost tied to Materials cost for such items as Handling and Storage or Scrap. DRP (Distributed Requirements Planning) Cost Routing Requirements Sub Contracting It controls how QAD provides Item Details Item Cost Inventory and how it can be separated using the system It makes life easier for Costing 6 2

3 Matrix Product Lines This is the Tie to GL s and Critical that Manufacturing areas assure its integrity Accounting/Cost Accounting are the drivers in this creation KEY FUNCTION Item Type and Group Control many other elements, especially Inventory Valuation and Costing Pur/Manu one unique item is the L Manufacturing on Sub Contract, yet it is Purchased 7 Work Center Two Definitions Classic Manufacturing Machine Group that performs Assembly Line for Work Area doing a common function Commonly Have Labor Rates Burden Rates In the GL (Accounting World) Production Labor and Burden Rate costs area Product Line Codes related to Products or Customers Customer Codes to Trace Outbound Freight Supplier Codes to Trace Inbound Freight 8 Two Definitions Example 9 3

4 A Peek Across the Bridge at Accounting Example Only Example of a GL for Freight Out. The DR Debit means it is an expense, for non accountants. The invoice number shows as well as the months booked. Note three of the shipments were to three different Customer Codes, but all on the same invoice. Classic Logistics Sourcing where a 3PL is used and Invoice must be Line Item coded for AP. The Exp-Accri is a Accrual, Accounting for it is an expense for a current month s books but will be actually paid next month. 10 Coding for Tracking and Performance - Recap Assign Customer Specific Codes to track Outbound Freight, Warranty, etc.. to Customers Assign Suppliers Specific Codes to track Inbound Freight, Warranty, etc. by Supplier Primarily for Invoices coding that Accounting for the most part has to rely on Manufacturing to do or advise of correct codes While appearing that an Item has two PROD LINEs, Not so Item will carry one that is product and/or product use, CUSTOMER SUPPLIER will carry one to gather data for the Supplier Item has a Prod Line of ROPE, Material costing and Outbound It is Purchased from JUMP MANUFACTURING Code JUMP Materials Receipts would be Glmaterial# - SubAct# - ROPE Inbound Freight Invoice would be Glfreight# - SubAct# - JUMP All items purchased from Jump Manu would have freight total available 11 PO Material Purchasing Unit Cost: PURCHASE PRICE Per PURCHASE ORDER UNIT OF MEASURE Pur Acct: GL# Purchases Sub Account: 0100 Site 01 Material Prod Line: AA00 From Material Master DRIVES Accounting Example Only Unit of Measure: FT PURCHASE ORDER Currency: USD PURCHASE ORDER Unit of Measure: FT UM Conversion: Purchase Order Ft to Material Master Ft Is a 1 for

5 PO Material Units not Matching Unit Cost: 1.65 PURCHASE PRICE Per PURCHASE ORDER UNIT OF MEASURE Example Only Unit of Measure: LB PURCHASE ORDER Currency: USD PURCHASE ORDER Pur Acct: GL# Purchases Sub Account: 0200 Site 02 Material Prod Line: AR00 From Material Master $1.65/lb is divided in QAD to the $ /oz in Standard Cost and Inventory Valuation Unit of Measure: LB UM Conversion: Purchase Order LB to Material Master OZ Is a 1 for 16. PO could be in KG (Kilograms) KG to OZ is UM Conversion: Conversion Table Conversion Table is what controls the PO to Inventory Units Conversion as the PO is received. The UM is the Inventory Units and the Alternate UM is the Purchasing Units. Just putting a units conversion on the PO will not function without this table. PURCHASING check Conversion Table before you explore a new one. EA and say per 100 are common EA and X100 with Factor PO? Sub Contracting Not Totally a Material It is a Manufacturing Process It has a Routing, must have cost Commonly it s BOM has the Child Levels Item master will have the Freight Code Overhead is treated the same as Material Freight commonly out and back The PO has to be coded as Sub Contracting 15 5

6 Set up in Item Master Group is SUBCON is a good approach Purchase/Manufacturing is L which requires a Routing and drives all the Supplier Costs to Routing control. Manual Entry of Sub Contracting Cost using Item (Site) Cost Maintenance ( ). COST will be Changed if Routing is Rolled at Standard Cost. Critical that ME, Purchasing, and Accounting (Costing) all on the same page of the PROCESS to cost Sub Contract items. 16 PO Sub Contractor Process Routing Maintenance (Rate Based) Example Only Work Center has LOAD capability Sub Contract PO s are a specific Type Operation Links it to the Routing Subcontract LT is Critical on the Routing Purchasing and the ME or other group doing the Routing have to work together, PO PRICE does not Feed 17 Routings Manufacturing Labor and Burden costs are controlled by the Routing and QAD has some unique attributes. Using Routing Maintenance (Rate Based) Example Only Using Routing Maintenance Crew is Reference Only Using Rate QAD calculates Run Time at Crew of 1. Work Center is home of Labor and Burden Rates. 18 6

7 Handling the Unique Issues of Routings Crew Is Reference Entering the correct crew will download in a Browse Excellent source for a Production manning Playbook All QAD calculations are using crew of 1 If you use the Rate Based Routing Maintenance QAD will calculate Run Time without regard to Crew side Generates incorrect labor cost Generates incorrect burden cost Calculating the Run Time and entering it solves that issue Crew of less than 1.0 such as 0.5 for running two independent machine operation is not so easy 19 Multi Machine Standards and Burden Rates Burden Rate Stored in the Work Center and entered in Work Center Maintenance 14.5 Calculated for costing using the Run Time Machine Rate normally is for the Machine running per hour Multi Machine Standard will have Run Time to earn LABOR Labor and Machine times don t equal Solutions A common one is Take the Average of run time Why not be Exact and it easier than you think, and not in the Book. 20 Take an example Auto or Semi Auto Machine Auto or Semi Auto Machine 5101 and 5201 are in affect the same machine operated in two mode is the operator only runs that machine for every hour of labor is an hour of machine time is the operator is running two independent operations, separate Run Times Each will earn 0.5 hours of Labor (base of Burden) while each machine runs ONE hours Having the two Work Centers is one the Two Machine Standard have Normal Burden Rate X2 fixes it Work Center Loading also has to be considered in Planning and is now manning id s also. 21 7

8 Detail Example Note the Machine Loading: QAD uses the QAD Rate times Run Time to get Load Setting the Run Time at the proper Standard Labor Time and using the QAD Production Rate to consider the crew gives proper loading. 22 Detail Example Continues This is a Line or Team based area where Crew is a critical part. Hourly rate of output is always to be 100/Hr but Crew changes. QAD is always Crew of 1.0 This one has the BURDEN RATE as a Labor Hours Base. Creating the QAD Production Rate as OUTPUT/CREW will give proper Run Time 23 The Costed BOM What does it COST TO MAKE? What we have PO pricing at Inventory and PO units Sub Contractor Routings and Costing Routing for the Labor and Burden What we need Freight Handling and Storage Waste Scrap Method to put it all together efficiently, Magic Wang 24 8

9 Setting it all up Cost Accounting is Primary Player BUT Purchasing/Logistics has to assure Item Master Freight Coding Routings and Purchase orders for Sub-Contracted Material and the Freight Coding ME/Maintenance to determine Machine Burden Rate elements such as the square footage, utilities usage of various processes, repair cost, and the many other items that must be merged to Burden Rates Quality to identify scrap concerns ETC, ETC its not just Accounting/Cost Accounting Burden Rate Details That is a story in its own right for now they were Created 25 Cost Elements critical Bridge Component Cost Element Browse ( ) and the Simulation Cost Element Browse ( ) are shown here for several periods. The yellow areas are elements added to better define Material Overhead (P Purchased Material) The blue areas are elements added to better define Sub Contracting (L Outside Manufacturing SubContract) Costing will be adding these to provide the details necessary to build the strongest bridge in Final Assembly. Manufacturing Sales, Purchasing, Procurement, Production, ME, QA, Maintenance, HR all have the responsibility to provide the input that makes ups the data used to create the rates used of all of the Elements of Overhead. Accounting historical records are only the starting point called BUDGETING 26 Compliment of Elements for Material Total Cost All the carry Overhead and roll to Overhead Cost This Group will use Material as Base This Group will use Sub Contract as Base This is the ability available and Manufacturing can now provide the details that Accounting counts into the areas and Operation Performance is measured. 27 9

10 Having separate elements? The WHY Income Statements usually separates Labor and Other Manu Expense but the Details of WHY are deeper Freight, H&S, and Scrap are Key elements Manufacturing has to explain; not commonly large sums but specifics The HOW COGS, GL, and even the standard Cost Browse only give OVERHEAD total but a Browse to pick the details in a Browse is one idea Material/Sub Contract Purchased for the period are KEY, if you want actual vs a Sales Based analysis Purchases of RAW Waste at rate Purchases of all materials at Scrap rate Freight by vendor based Regions vs cost from the Regions And so on and so on; all available 28 Behind the Elements of Overhead Percentage Based common calculation Freight Ranging from 0% thru variations for regions based on actual costs from the regions from GL Freight H&S Handling and Storage is defined as a percentage of purchased items (based on purchased materials/sub contracting being they re the largest cost vs value added). Costs should be GL Actual or Planned Budget Indirect labor cost (including Procurement/Purchasing) Lease of equipment or depreciation on equipment Cost of floor space All elements that make up material purchase to end user in Production should be covered 29 Behind the Elements of Overhead (cont.) Percentage Base on types of Material ResWas Classic scrap and the percentage based back to Material/Sub Contract PO costing (an allocation method based on the larger percentage that these items are to total cost of goods as any point in the process); but this is only one method, others are possible such as Machining OH RawRes Unique to RAW classed materials, Raw Materials that have an inherit loss such as cutting lengths of tubes or wood; resins, paints, steel plate, etc... that must be purged between types, etc... Sub Contract items have SC----- Overhead codes and can have totally different percentages 30 10

11 Material to Product Build a BOM Costed The Parent Item is for specific customer so its Prod Line can be a CUSTOMER Non FG Labor and Burden are Hours/Unit based from Routings. A major mix of issues Crew and Machine Relationships Inventory Value of Parent 701 is Prod Line AR00 A RAW Material Inventory Units OZ Material Cost Per Unit Extended for the 24.33OZ $ Overhead Total of all Elements I picked this example to lead into another twist. Note this as a Site 02 and it moves to a Site 02 via DRP. 31 DRP / Sub Contract Example Became the Child part of a Subcon Item 133 Receiving Site - Shipping Site Material Labor Burden Overhead Subcon Total Other options are Sales with use of PO s with or without Mark-Up Additional Overhead (Freight) is necessary on a distance site; however this will hit Transfer Variance on Price and must be a Reclass 32 Benefits This is one assembly run out of Product Structure Cost Report (Element) All the details show Example Only 33 11

12 Closing Summary How it s setup controls the accuracy and detail analysis QAD will provide for not only Manufacturing Performance details and the Financial analysis to assist. QAD is an extremely powerful tool when setup Precisely as Needed, Fine Tuned, and allowed to Grow. Any Questions? 34 12