Configuration of Scrap, Waste, and By-Products in Production: Implementation Activity

In the following implementation activity, you will learn how to set up the processing of scrap in the system.

Story

Suppose that the production department of SweetLife Fruits & Jams has decided to record the quantities of juicers that are damaged during assembly as scrapped items, write off scrap costs to a specific GL account, and store (or quarantine) the scrapped juicers in a dedicated location of the production warehouse. Further suppose that the quantity of completed items must exclude the quantity of scrapped items because juicers are usually assembled at the request of customers who expect to receive all the juicers they ordered.

Acting as an implementation manager, you will configure the system according to the requirements for tracking scrap.

Configuration Overview

In the U100 dataset, the following tasks have been performed for the purposes of this activity:

  • On the Chart of Accounts (GL202500) form, the 51600, COGS - Scrap Expense GL account has been created.
  • On the Warehouses (IN204000) form, the WORKHOUSE warehouse has been defined.
  • On the Stock Items (IN202500) form, the CFJFRTSCR, PULPCONT1L, JUICECUP05L, MRBASE, FNSIEVE, and GRDISC01 stock items have been defined.

Process Overview

In this activity, you will do the following:

  1. On the Chart of Accounts (GL202500) form, make sure that the GL account for posting scrap costs has been created.
  2. On the Production Preferences (AM102000) form, review the setting that manages adding of the scrapped quantity to the completed quantity.
  3. On the Reason Codes (CS211000) form, create a reason code for scrap.
  4. On the Warehouses (IN204000) form, create a warehouse location for scrap.
  5. On the Production Order Types (AM201100) form, specify the default settings for scrap storage.
  6. On the Work Centers (AM207000) form, for the work center where the assembly operation is performed, specify the needed scrap action, which will be copied to new bills of materials that include the assembly operation.
  7. On the Bill of Material (AM208000) form, create a bill of material for juicer assembly.

System Preparation

Before you start performing the activity, do the following in a company with the U100 dataset preloaded:

  1. As prerequisites to the current activity, perform the following activities in the specified order:
    1. System Preparation for Manufacturing Implementation: Implementation Activity so that the needed settings have been specified
    2. Configuring Work Centers: Implementation Activity so that the work center for the assembly operation has been created
    3. Production Order Types: To Create a Regular Production Order Type so that the RO production order type has been created
  2. Sign in to this company as a system administrator with the gibbs username and 123 password.

Step 1: Reviewing the GL Account for Scrap Costs

In a production system, you would need to create the GL account that will be used for posting scrap costs; this account has been predefined in the U100 dataset for simplicity. In this step, you will make sure that this account has been created. Do the following:

  1. Open the Chart of Accounts (GL202500) form.
  2. Notice that the 51600, COGS - Scrap Expense GL account is listed in the table.

You will specify this GL account in the settings of a reason code that you will create for scrap.

Step 2: Reviewing a Production Management Setting

You will review the setting that manages addition of scrap quantity to the quantity of completed items in production orders. Do the following:

  1. Open the Production Preferences (AM102000) form.
  2. Make sure that the Include Scrap in Completions check box in the Data Entry Settings section is cleared. This means that the scrapped quantity will not be included in the completed quantity and that shop-floor employees will have to record a quantity of completed items for the assembly operation that is equal to the quantity to produce in the production order.

Step 3: Creating a Reason Code for Scrap

To create a reason code that will provide a GL account for posting scrap costs, do the following:

  1. On the Reason Codes (CS211000) form, add a new record.
  2. Specify the following settings for the record:
    • Reason Code: SCRAP
    • Description: The reason code for scrap in manufacturing
    • Usage: Production
    • Account: 51600
  3. On the form toolbar, click Save.

Step 4: Creating a Warehouse Location for Scrap

To create a warehouse location in the WORKHOUSE warehouse where scrapped items will be stored, do the following:

  1. On the Warehouses (IN204000) form, open the WORKHOUSE warehouse.
  2. In the Location Table table of the Locations tab, click Add Row on the table toolbar.
  3. In the row, specify the following settings:
    • Location ID: SCRAP
    • Description: Location for scrap
    • Active: Selected
    • Sort Location: Cleared
    • Include in Qty. Available: Cleared
    • Cost Separately: Selected
    • Sales Allowed: Cleared
    • Receipts Allowed: Selected
    • Transfers Allowed: Selected
    • Production Allowed: Cleared
    • Inventory Planning: Cleared
  4. On the form toolbar, click Save.

Step 5: Specifying Scrap Storage Settings

Because the company plans to store all scrapped items in a single warehouse location, you will specify the default warehouse and warehouse location for scrap in the settings of a regular production order type on the Production Order Types (AM201100) form. Do the following:

  1. Open the RO order type.
  2. In the Scrap section of the General tab, specify the following settings:
    • Scrap Source: Order Type
    • Scrap Warehouse: WORKHOUSE
    • Scrap Location: SCRAP
  3. On the form toolbar, click Save.

Step 6: Specifying a Scrap Action for a Work Center

In this step, you will specify the Quarantine scrap action in the settings of the work center in which the assembly operation is performed. This scrap action indicates that the system should write off the scrap cost to a specific GL account and move the scrapped items to a specific warehouse location. Do the following:

  1. On the Work Centers (AM207000) form, open the WCR10 work center.
  2. In the Scrap Action Default box of the General tab, select Quarantine.
  3. On the form toolbar, click Save.

Step 7: Creating a Bill of Material

To create a bill of material that includes the assembly operation, do the following:

  1. On the Bill of Material (AM208000) form, add a new record.
  2. In the Summary area, specify the following settings:
    • Revision: A
    • Hold: Selected
    • Inventory ID: CFJFRTSCR
    • Warehouse: WORKHOUSE
    • Start Date: 1/1/2023
    • End Date: Empty
    • Description: A bill of material for the assembly of juicers and quarantined scrap
  3. On the form toolbar, click Save.
  4. Add an assembly operation as follows:
    1. On the toolbar of the Operations table (which is directly below the Summary area), click Add Row.
    2. In the row, specify the following settings:
      • Operation ID: 010
      • Work Center: WCR10
      • Setup Time: 00:30
      • Run Units: 3
      • Run Time: 01:00
      • Backflush Labor: Cleared
      • Scrap Action: Quarantine (copied from the work center settings by the system)
    3. On the Materials tab, add rows for the items listed in the following table, specifying the listed quantity required for each.
      Inventory ID Qty. Required
      PULPCONT1L 1
      JUICECUP05L 1
      MRBASE 1
      FNSIEVE 1
      GRDISC01 1
    4. On the Tools tab, add rows for the tools listed in the following table, specifying the listed settings for each.

      You created these tools in Configuring Production Cost Drivers: Implementation Activity.

      Tool ID Qty. Required Unit Cost
      HAMMER 1 0.02
      SCREWDRIVER 1 0.20
  5. On the form toolbar, click Save.
  6. In the Summary area, clear the Hold check box. The status changes to Active.
  7. On the form toolbar, click Save.