Costing for Lean Manufacturing Part 1
By Mike Gooding in Lean, Production on Friday, February 24th, 2012
If you are like me, then costing of any type is a bit of a black hole to use a lean term. I’d rather focus on the actual manufacturing, but in today’s world, costs have to be considered and understood.
So, this is step one in understanding how costing is applied in Ax2012, for lean manufacturing!
There are four types of costs involved in Lean Manufacturing:
• Material Costs
• Manufacturing, or labor costs
• Indirect costs
• Outsourcing (subcontracting) costs
A costing version, cost categories, cost groups and the costing sheet must still be set up prior to calculating the item’s cost and activating the costing version.
To create a Kanban Rule, for a product, the product must be assigned to an Inventory Model Group that uses Standard Cost. The only exception to this “rule” is withdrawal Kanbans, and they require the” update on-hand pick and receipt” parameters are both set to yes.
The above cost types can be replicated through cost categories to give you the cost breakdown. The rules are established in the Cost Sheet and the specific ledger accounts for posting, are defined via cost categories
Direct manufacturing costs are applied when you report completed quantities to the system and use the cost category rate applied to the production flow.
You also need to assign a cost category to the lean work cell, for run time. Set up and quantity cost categories are not required for lean manufacturing. You also, do not need a cost category for subcontracting activities in lean manufacturing, as the cost group assigned to the active service is used instead.
Indirect manufacturing costs are applied when work in progress is credited or debited, depending on how the cost sheet is defined.
Production variances for both capture the difference between the applied conversion costs for the production flow and the product’s standard cost conversion cost.
The ledger accounts for posting the transactions are defined on the production group.
If you don’t define the accounts on the production group, then Ax will default to the accounts specified in ‘postings”, set up in inventory management.
Standard cost for products produced within a production flow is calculated with the cost calculation based on the BOM and either the production flow and Kanban rules or the route.
AX 2012 allows you to use the production flow, which is similar to a standard production route, in order to calculate the costs based on the actual production flow for the product, but to do this, you must have the Kanban rule that defines how the product is supplied and which of the activities in the production flow should be used to calculate the cost.
Did that grab your interest? Want more? Then watch this space!
About Mike Gooding
Senior AX Consultant with IBIS Inc. Married to Ann, with 3 daughters and 4 grandchildren. Microsoft certified in AX2009 Production, Finance & Trade & Logistics.
Posted in Lean, Production
