System Preparation for Manufacturing Implementation: General Information

Before you start implementing the manufacturing functionality in MYOB Advanced, you need to prepare the system—that is, specify the general settings that will be used by particular manufacturing processes—as described in the following sections.

Learning Objectives

In this chapter, you will learn how to do the following:

• Enable the needed set of features before you start implementing manufacturing
• Specify the required settings to prepare the system for implementing manufacturing
• Create stock items involved in manufacturing

Applicable Scenarios

You configure general settings for manufacturing in either or both of the following cases:

• When you are initially implementing MYOB Advanced and the Manufacturing feature is included in your license
• When you have purchased the Manufacturing feature, and you need to configure manufacturing in the existing MYOB Advanced system

Prerequisites

Before you start preparing the system to implementing manufacturing, you should make sure that the following criteria have been met:

1. The general ledger functionality has been configured, as described in General Ledger: General Information.
2. Order and inventory management functionality have been configured. For details, see Configuration of Order Management: Implementation Activity.
3. For integration with projects, the project management functionality has been configured, as described in Basic Project Configuration: General Information.

System Preparation for Manufacturing Implementation

To implement the general configuration of manufacturing in MYOB Advanced, you perform the following steps:

1. On the Enable/Disable Features (CS100000) form, you make sure that the Manufacturing feature and all nested features that you will use in your system are enabled. For the list of the manufacturing-related features, see Preparing an Instance: MYOB Advanced Features.
   Note: In a production environment, after the features are enabled, you have to activate the MYOB Advanced license by using the Activate License (SM201510) form. Each particular feature may be subject to additional licensing; please consult the MYOB Advanced sales policy for details.
2. On the Numbering Sequences (CS201010) form, you create the numbering sequences for manufacturing batches and entities.
3. On the Companies (CS101500) form, you specify the number of decimal places for quantities and for prices and costs.
4. On the Chart of Accounts (GL202500) form, you create the GL accounts to be used in manufacturing processes. For details, see System Preparation for Manufacturing Implementation: General Ledger Accounts.
5. On the Posting Classes (IN206000) form, you create the posting classes to be used for the inventory items involved in manufacturing.
6. On the Availability Calculation Rules (IN201500) form, you specify the availability calculation rules for the stock items to be involved in manufacturing.
7. If the Inventory Replenishment feature (in the Inventory and Order Management group of features) is enabled on the Enable/Disable Features form, on the Replenishment Classes (IN208800) form, you create replenishment classes for items to be manufactured and purchased. If the feature is disabled, you specify replenishment settings for item classes or particular stock items.
8. On the Warehouses (IN204000) form, you define the warehouses and locations that will be involved in manufacturing.
9. On the Item Classes (IN201000) form, you create the item classes that will provide the default settings for the stock items involved in manufacturing.
10. On the Stock Items (IN202500) form, you create the stock items to be used in manufacturing.
11. On the Item Warehouse Details (IN204500) form, for items involved in manufacturing that can be stored in multiple warehouses, you specify the item settings that are specific to a particular warehouse.
12. On the Employees (EP203000) form, you specify the needed setting for employees that will be involved in production.
13. On the Order Types (SO201000) form, you configure the sales order types that will be used in production management.
14. On the User Roles (SM201005) form, you assign user roles dedicated for manufacturing functionality to users involved in production.

Posting Settings

A variety of GL accounts must be created in the system on the Chart of Accounts (GL202500) form and then specified on the forms that provide posting settings for transactions related to manufacturing processes. You need to create specific GL accounts and specify them in the system as follows:

• You need to create the Work in Progress (WIP) account and the WIP Variance account, which are required for users to create production orders. The Use WIP Account from field on Posting Classes (IN206000) form determines which form WIP Accounts will use during the creation of a production order for items of that class by default:
  • Inventory Item: Newly created production orders will use the WIP account specified on the Stock Items (IN202500) form for the produced item. If an account is not specified, then the WIP Account for the Order Type will be used.
  • Warehouse: Newly created production orders will use the WIP account specified on the Warehouses (IN204000) form for the production warehouse. If an account is not specified, the WIP Account for the Order Type will be used.
  • Posting Class: Newly created production orders will use the WIP account specified on the Posting Classes (IN206000) form for the produced item. If an account is not specified, the WIP Account for the Order Type will be used.
  • Null / Blank: Newly created production orders will use the WIP account for the Order Type specified on the Production Order Types (AM201100) form.
• You need to create a specific Labor account for labor expenses to be reported. Then you create a labor code by using the Labor Codes (AM206500) form and specify the corresponding account in the settings of this code. Labor codes are required when you create work centers on the Work Centers (AM207000) form. If indirect time will be reported according to the manufacturing processes of your organization, you can also create a GL account for indirect labor expense or you can use the same account as you use for direct labor. If you create a separate GL account for indirect labor expense, you also need to create a separate labor code.
• If overhead, tooling, machine, or scrap costs are to be charged to production orders then you need to create a separate expense account to track each of these types of costs. The forms where you specify these accounts are the following:
  • Overhead (AM202500): On this form, you specify the overhead GL account for each overhead.
  • Machines (AM204500): On this form, you specify a GL account used for machine costs.
  • Tools (AM205500): On this form, you specify a GL account used for tool costs.
  • Reason Codes (CS211000): On this form, you create a reason code specifically for scrap and specify the GL account that will be used for scrap costs.

Warehouse Settings

You need to define each warehouse and its locations where the stock items involved in manufacturing will be stored by using the Warehouses (IN204000) form. You may use an existing warehouse or create a separate one.

You define a warehouse involved in manufacturing as follows:

1. On the Locations tab, you define the locations that will be involved in manufacturing as follows:
   • For each warehouse location that is used for planning purposes within material requirements planning (MRP), you select the MRP check box.
   • For each location used for storing materials, you select the Sales Allowed and Production Allowed check boxes to indicate that this location can be used to issue items to production orders.
   • For each location used for storing manufactured items, you select the Receipts Allowed and Production Allowed check boxes to indicate that this location can be used to receive items from production orders.
2. On the GL Accounts tab, you specify the Work in Progress and WIP Variance accounts.
3. In the General section of the Manufacturing tab, you select check boxes for the entities or documents to indicate which supply and demand are considered for this warehouse during material requirements planning. We recommend that all check boxes be selected in a production system.

For more information about warehouses and warehouse locations, see Warehouses: General Information and Warehouse Locations and Single-Step Transfers: General Information.

Availability Calculation Settings

For each item to be added to manufacturing transactions, you need to specify whether it will be available for issuing. For this purpose, on the Availability Calculation Rules (IN201500) form, you create or modify an availability calculation rule, in which you also select or clear check boxes for plan types related to manufacturing. You can include or deduct the quantities of items added to production orders in the available quantities of items.

For details about availability calculation, see Availability Calculation Rules: General Information.

Replenishment Settings

To indicate that a stock item is manufactured and must be included in material requirements planning, you specify replenishment settings as follows:

• If you use the replenishment functionality in MYOB Advanced—that is, the Inventory Replenishment feature is enabled on the Enable/Disable Features (CS100000) form—on the Replenishment Classes (IN208800) form, you create two replenishment classes: one for a source of Purchase and another for a source of Manufacturing, because these are the two key source types material requirements planning will use. Then you will specify the appropriate replenishment class, which depends on whether the item will be manufactured or purchased, in the replenishment settings of particular item classes, items, or both.
• If the Inventory Replenishment feature is disabled, you select the needed replenishment source in the Replenishment Source box of the General tab on the Item Classes (IN201000) for the item class or in the Source box on the Manufacturing tab of the Stock Items (IN202500) form for the item.

Settings of Items Involved in Manufacturing

Items involved in manufacturing can be purchased (these items are usually components used in the production process) or manufactured (these items are usually the finished goods to be sold to customers). To provide default settings for groups of similar items, you create item classes on the Item Classes (IN201000) form. For each item class, you specify the following settings:

• The posting class with the Work in Progress and WIP Variance GL accounts specified
• The default warehouse where the items of the class will be stored
• The availability calculation rule, which provides information for calculating the availability of items involved in manufacturing
• Replenishment settings that indicate if items of the class will be produced or purchased

For more information about item classes, see Item Classes for Stock Items: General Information.

Then on the Stock Items (IN202500) form, you create stock items; this process unfolds somewhat differently depending on whether the item is manufactured or purchased. For items being manufactured, you perform the following general steps:

1. You select an item class that was created for items being manufactured.
2. If the Inventory Replenishment feature is enabled on the Enable/Disable Features (CS100000) form, on the Replenishment tab, you make sure that a replenishment class with the Manufacturing replenishment source has been added, and you specify the value of the Safety Stock box. This will set a certain level of inventory in the system to be planned for within material requirements planning.
3. If the Inventory Replenishment feature is disabled, in the Planning Settings section of the Manufacturing tab, you make sure that the Manufacturing replenishment source is specified, and you add the value in the Safety Stock box.
4. In the General and Scheduling sections of the Manufacturing tab, you specify the needed settings.

For items being purchased, you perform the following general steps:

1. You select an item class that was created for items being purchased.
2. On the Vendors tab, you specify the vendors from which the item will be purchased and make sure that the lead time is specified. The specification of the lead time is important so that during the material requirements planning process, personnel can consider this time when planning the supply.
3. On the Warehouses tab, you make sure that at least one warehouse is specified.
4. On the Price/Cost tab, specify the cost as follows, depending on the valuation method: For items with the Standard method, specify the cost in the Pending Cost box; for items with all other methods, specify the cost in the Last Cost box.
5. If the Inventory Replenishment feature is enabled on the Enable/Disable Features form, on the Replenishment tab, you make sure that a replenishment class with the Purchase replenishment source has been added.
6. If the Inventory Replenishment feature is disabled, in the Planning Settings section of the Manufacturing tab, you make sure that the Purchase replenishment source is specified.
7. In the General and Scheduling sections of the Manufacturing tab, you specify the needed settings.

For each item that has warehouse-specific settings, on the Item Warehouse Details (IN204500) form, you also need to do the following:

1. You make sure that warehouse locations are specified in the Default Receipt To and Default Issue From boxes, to make data entry easier for users.
2. If an item cost depends on the warehouse where the item is stored, on the Price/Cost tab, you enter a warehouse-specific cost for the item.
3. If the Inventory Replenishment feature is enabled on the Enable/Disable Features form, on the Replenishment tab, you make sure that the replenishment class and the replenishment source are specified correctly in the Replenishment Class and Replenishment Source boxes respectively.
4. If the Inventory Replenishment feature is disabled, on the Replenishment tab, you make sure that the needed replenishment source is specified in the Replenishment Source box.

Settings of Employees Involved in Manufacturing

To record the labor expenses for employees involved in manufacturing, on the Employees (EP203000) form, you select the Production Employee check box on the General Info tab.

If you want to post labor transactions by using the employee cost, on the Labor Rates (PM209900) form, you create the needed cost rates and then specify a cost rate for each employee involved in manufacturing.

Settings of Sales Documents

If the business process of your organization involves users creating production orders directly from sales orders, you must configure this functionality for each order type you use as follows: On the General tab of the Order Types (SO201000) form, you select either or both of the following check boxes: Allow Production Orders - Approve (which provides users with the ability to create production orders from sales orders that have the Approved status) and Allow Production Orders - Hold (which provides users with the ability to create production orders from sales orders that have the On Hold status).

Order types that typically used to create production orders are SO (a regular sales order), TR (a transfer order), and QT (a quote). For quotes, you can also select the Allow Estimating check box to allow users entering estimate data in sales orders of the type.

Predefined User Roles for Manufacturing

When you configure user access to manufacturing-related forms, you can use the predefined user roles that provide access to the forms needed in the everyday work of particular employees. You can modify the role permissions to meet the organization's access policies. You can also apply multiple roles to the same user who takes over multiple duties.

In the following table, you can view the details of the predefined user roles dedicated for manufacturing.

The following forms and reports show details about access to forms:

• Access Rights by Role (SM201025)
• Access Rights by Screen (SM201020)
• Access Rights by Role (SM651500)