Chapter 9 The Production Business Process

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Chapter 9The Production Business Process
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Presentation Outline

1. Files and Reports in a Production System
2. Production Control Application System
3. Property Accounting Applications
4. Quick-Response Manufacturing Systems

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I. Files and Reports in a Production System

1. Production Order
2. Bill of Materials
3. Master Operations List
4. Materials Requisitions
5. Job Time Cards
6. Resource Availability Reports
7. Production Status Reports

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A. Production Order
We are ready to begin this order.

• Production control issues production orders to
  authorize production departments to make certain
  products.

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B. Bill of Materials
What materials do we need to make this product?

• A bill of materials is a listing of the
  ingredients that go into making a product. It
  lists of all the required parts and their
  descriptions.

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C. Master Operations List

• A master operations list specifies the sequencing
  of all labor and/or machine operations that are
  necessary to produce a product.

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D. Materials Requisitions

• Production control prepares materials
  requisitions to authorize the release of raw
  materials from inventory for use in production.

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E. Job Time Cards

• Job time cards are used to document the amount of
  labor time that is spent on each production order
  or job.

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F. Resource Availability Reports
We have the materials, but may have to schedule
some overtime for this job.

• Inventory status reports detail the material
  resources available in inventory for production.
• Factor availability reports communicate the
  availability of labor and machine resources for
  production.

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G. Production Status Reports

• Production status reports detail the work
  completed on individual production orders as they
  move through production. Open production orders
  are monitored and departmental production
  schedules are revised as necessary.

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II. Production Control Application System

1. The Role of Production Control
2. Accounting for the Factors of Production
3. Completion of the Production Order
4. Inventory Control
5. Just-In-Time Production

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A. The Role of Production Control
1 Production Order
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B. Accounting for the Factors of Production
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C. Completion of the Production Order
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D. Inventory Control
The EOQ must balance the total carrying cost
against the total ordering cost. Once the EOQ is
determined, the reorder point must be
decided Reorder point lead time x average
inventory usage rate
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E. Just-In-Time Production

• Just-in-time (JIT) production describes a
  production system in which parts are only
  produced as required in subsequent operations.
• JIT systems differ from conventional production
  systems in that inventories of work-in-process,
  raw materials, and finished goods are minimized
  or totally eliminated.

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III. Property Accounting Applications

• Fixed Assets
• Maintain adequate records that identify assets
  with description cost, and physical location.
• Provide for appropriate depreciation and/or
  amortization calculations for book and tax
  purposes.
• Provide for reevaluation for insurance and
  replacement-cost purposes.
• Provide management with reports for planning and
  controlling the individual asset items.

• Investments
• A common control practice with respect to the
  physical handling of investment securities is to
  require two people to be present when the firms
  safe deposit box or other depository is entered.

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IV. Quick-Response Manufacturing Systems

1. Defining Quick-Response Manufacturing Systems
2. The Physical Manufacturing System
3. The Manufacturing Resource Planning (MRP) System
4. MRP II versus MRP
5. Advanced Integration Technologies
6. Internal Control Considerations
7. Activity-Based Costing

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A. Defining Quick-Response Manufacturing Systems

• A computer integrated manufacturing CIM system
  integrates the physical manufacturing system and
  the manufacturing resource planning (MRP II)
  systems.
• A quick-response manufacturing system is a CIM
  system that is integrated with advanced
  integration technologies.

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B. The Physical Manufacturing System

1. Computer-Aided Design and Drafting (CADD)
2. Computer-Aided Manufacturing (CAM)

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1. Computer-Aided Design and Drafting (CADD)

• CADD uses computer software to perform
  engineering functions.
• Designers can store product designs on computer.
  These designs can be recalled and manipulated as
  needed.
• Solids modeling is the mathematical
  representation of a part as a solid object in
  computer memory.
• Finite element analysis is a mathematical model
  used to determine mechanical characteristics,
  such as stresses of structures under load.

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2. Computer-Aided Manufacturing (CAM)

• CAM systems are useful in planning and obtaining
  feedback from the manufacturing process.
• Statistical process control considers whether
  process outputs are within acceptable variations
  from engineering specifications.
• A type of CAM known as a flexible manufacturing
  system is a programmable production process that
  can be quickly reconfigured to produce different
  products.

There seems to be a problem with the stamping
process.
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C. The Manufacturing Resource Planning (MRP)
System

• MRP systems include the following four
  subsystems
• Production Planning
• Production Scheduling
• Cost Accounting
• Reporting

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1. Production Planning
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Marketing
Production Planning
Bill of Materials
Master Operations List
1. Production requirements for manufactured
inventory depend on sales forecasts developed as
a part of the budget process.
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1. Production Planning
Marketing
1
2
Production Planning
Inventory Control
Bill of Materials
Master Operations List
2. The sales forecast must be related to the
amount of each product that is already held in
finished goods inventory.
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1. Production Planning
Marketing
1
2
Production Planning
Inventory Control
3
Bill of Materials
Master Operations List
3. Raw materials available for production are
communicated through raw materials status reports.
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1. Production Planning
Marketing
1
2
4
Production Planning
Inventory Control
3
Production Departments
Bill of Materials
Master Operations List
4. Labor and machine resources available for
production are communicated through a factor
availability report.
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1. Production Planning
Marketing
1
2
4
Production Planning
Inventory Control
3
5
Production Departments
Bill of Materials
Master Operations List
5. The processing of production orders results in
a master production schedule.
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2. Production Scheduling

• Routings (RTGs) indicate the sequence of
  operations required to manufacture a product and
  contain information about the work center, length
  of time, and tooling required to perform each
  task.
• Each RTG contains a production order number. As
  tasks are completed information is input into the
  computer system to update the production status
  file.
• A scheduling application program uses linear
  programming and other techniques to determine the
  optimal assignment of available resources to
  production.

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3. Cost Accounting

• The central feature of the cost-accounting
  application is the updating of the
  production-status (Work-in-Process) file.
• As orders are completed, the related
  work-in-process record is closed and a record is
  created to update the finished inventory file.

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4. Reporting

• The completed production-order file lists all
  cost data for completed production orders.
  Outputs of processing this file include an
  updated finished goods inventory file and a stock
  status report.
• Variances between standard and actual costs are
  determined to assist in control of production.

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D. MRP II versus MRP

• An MRP II system includes the major processing
  modules of MRP. Some extensions added with MRP
  II include
• Extensions to bill-of-materials processing might
  include maintenance of engineering/product
  drawings from a CADD system.
• Extensions to routings filings might include
  expanded information concerning work center
  capacity data and maintenance of machine tooling
  data.

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E. Advanced Integration Technologies

• 1. Automatic identification enhances integration
  
• by putting machine-readable codes on
  products
• and materials.
• 2. EDI enhances integration by integrating the
• systems of suppliers and customers.
• 3. Distributed processing enhances integration
  by
• combining geographically dispersed resources
  
• into a single system.

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F. Internal Control Considerations

• In quick-response manufacturing systems, internal
  control can become a problem because transactions
  can be completed with no human intervention.
  Since it is not feasible to install controls
  after implementation, controls must be
  implemented during systems design and
  implementation .

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G. Activity-Based Costing

• CIM integrates the physical manufacturing system
  and manufacturing resource planning (MRP II)
  systems. Activity-based costing (ABC) is
  particularly well suited to a CIM environment
  because
• both ABC and CIM consider the processes that go
  into making a product, and
• CIMs use of technology results in a less
  labor-intensive manufacturing environment. This
  can increase the need for more accurate overhead
  allocations.

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Summary

• Production System Forms and Reports
• The Production Application System
• Physical Manufacturing System
• Material Requirements Planning (MRP)
• Advanced Integration Technologies
• Internal Control Considerations
• Computer-Integrated Manufacturing and
  Activity-Based Costing