Production Variance: Understanding BoMs and Production Orders

After a few weeks of heavy-duty SQL code, let's look into the features of SAP Business One and sometimes the lack of them. Let's spend the following few lessons on one report, using a few techniques you can use everywhere.?

I'm interested in a detailed variance report from production orders. I've covered the basics of production orders in the LinkedIn Learning course SAP Business One: Production and Logistics. I'll dive deeper into a few concepts this week to understand what and where we will be going over the next few weeks.?

Production orders copy a bill of Materials and multiply the quantities by a planned quantity of finished goods, giving you a cost for the finished good. OF course, we'll need to understand a Bill of material first.?

The Bill of Materials is often referred to as a BoM and pronounced like that thing that explodes. It contains the inventory items necessary to make a finished good of a given quantity. For example, there is the LeMon 4029 printer:?

The planned average production size is one, and I need two memory chips and one paper drawer, printer head, power supply, and system board to make one.?

At the bottom, I have an estimated cost for making one of these. the cost comes from the base price list attached to the inventory item.?

In version 9.3 and later of Sap Business one, you can add other things to your Bill of Materials, such as routing and comments. Routing groups the raw material into tasks such as these for Huli Pizza bites.

A routing stage like dispensing has several ingredients, the items from inventory. On the other hand, I also have text that gives me more directions on specific routing stages with and without extra raw materials. For example, I have set up recommendations for the heating and cooling stages of the line and the orientation of the crackers for the operator at the beginning of the line.? You'll find more about routing stages in this video series.

No matter the complexity of the BoM, when a production order gets generated, the current?BoM gets copied and placed onto a production order, including comments and stages.?

Notice I said current BOM. The BoM becomes your template for the production order. If it is changed, any new production orders change with it. A change to a BoM does not affect previous production orders using that Bom. If possible, keep security on the Bill of materials. You don't want just anyone changing it.?

But for now, Let's keep the example simple, and I'll make a production order for the LM4029.

The production order has a Planned quantity on the header.?Suppose I want to make 10 printers. I'd put 10 in the highlighted planned quantity here.?The rows multiply with the changed quantity

In the rows, you'll see four important columns

The base quantity is the quantity from the BoM. That gets multiplied by the header Planned Quantity to give you the Planned quantity on the rows. Then there's the issued quantity, which is zero as this is still a planned Production order.?

The base ratio is usually the same as the base quantity. In effect, we are looking at the base ratio times the Planned Quantity in the header to get the Planned quantity in the rows. Since both are the same, we get the same number as the base quantity on the production order.

However, that changes if you change the base or Planned qty from the quantity of the BoM. Suppose I find one defective power supply, and so my planned quantity changes to 11. The base ratio shows the ratio of the Planned quantity over the Bom Quantity.

This is one way we can see variation, the difference between what we used for a production order and what we are supposed to use as stated on the BOM. In the summary tab, we get totals for all this once a production order closes.

But what if we wanted variation for each line item? that's missing from SAP Business One?

There are two ways to look at the idea of what we were supposed to use. One is by the issued quantity the other is by the planned quantity. Depending on your settings, one or both of these will be accurate. We'll experiment more about the differences in a later newsletter. I'll compute both of them so we can see those differences. In my reports, I'll use these formulas:?

variation1 = BoM Quantity * Planned Quantity Header - Planned quantity row

variation2 = BoM Quantity * Planned Quantity Header - Issued quantity row

?With these formulas, we can go to the next stage and write a query for our report. In the next newsletter, I'll make the basic query and explain the differences between these two formulas.?