What is activity-based work

Activity-based external work

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Dynamics 365 for Finance and Operations has evolved into purpose-built applications that you can use to manage certain business functions. For more information about these changes, see the Dynamics 365 Licensing Guide.

This topic describes how subcontracting activities are used in a production flow for lean manufacturing.

There are two approaches to external work in Microsoft Dynamics 365 Supply Chain Management: production orders and lean manufacturing. In the lean manufacturing approach, external work is modeled as a service that is linked to an activity in a production flow. A special type of cost group called Direct outsourcing was introduced and the external labor services are no longer part of a parts list (BOM). The cost accounting for external work is fully integrated into the cost solution for lean manufacturing.

Production flows that are carried out by external labor

The basic principle of a production flow does not change when activities are passed on. Material still flows between storage locations, process activities convert material into products and move activities, material or products from one storage location to another. You can have the vendor manage storage locations and production cells by assigning the vendor account to a storage location or a resource in a resource group.

Based on these functions, lean management does not require any special functions to support the material and product flow. All possible scenarios that suppliers include as providers of production or transportation services can be based on the architecture of the production flow and activities.

For example, a supplier helps out in a supermarket that is located at the supplier's location. If handling units are emptied at the supplier, the Kanban cards of the assembly cell are returned together with the next delivery. The supermarket at the supplier's is then replenished. No explicit transfer activities can be modeled for transfers to and from the supplier in order to support a delivery and withdrawal process. If explicit recording is not required to support physical transportation, posting profiles can be used to omit the transfer activities.

A supplier can be used for load balancing to balance the overall capacity of the production flow. For example, a production flow is modeled using planned Kanban rules. The planner uses the Kanban planning card to plan and work groups. The planner also monitors the consolidated delivery schedule for the supermarket on the site Provide a schedule. Multiple suppliers can be modeled in one or more production flows, and there may be multiple Kanban rules that can be used to deliver the same product to the same bin through different activities. The planner can convert Kanbans to an alternative Kanban rule to reschedule a Kanban originally created for internal production with an alternative process. Strictly speaking, the type of manufacturing cell has no effect on the production flow. The same functional principle applies to two parallel internal production cells or two subordinate service cells.

Like any other activity in a production flow, subcontracted activities can consume inventoried, non-inventoried (resource in production), and [RIF] and semi-finished materials and products. In all arguments, the processes for planning and execution are identical to those of the regulated activities. In addition, those processes process the same as internal work.

Purchase requisitions for external work activities (services)

The purchasing process for external work activities is based on the physical flow of material, which is recorded by the progress of the Kanban job, for example start or end. The financial flow, for example the cost of external labor, is a secondary flow that follows the physical flow. At the same time, the purchasing process is an independent process that allows manual regulation of orders at every step. Purchase requisitions for external work activities (services):

  1. Create sales contract. The sales contract is drawn up for the service and linked to the activity of the production flow.
  2. Create an order. A release order can be created for the service based on the planned Kanban jobs. Jobs for the same service can be grouped into order lines by day, week, or month. The order lines can be created at any time after the Kanban jobs have been created. Order items can be created even after the fact. This option is typically selected when a supplier provides services without additional notice based on the Kanbans or the Kanban cards that the supplier receives. In this case, deviations between the order and the invoice can be minimized.
  3. Generate Kanban cards, materials, and a picking list to submit to suppliers to prepare for processing. Based on the detailed model of the production flow, the preparation in the Kanban overview for process activities is carried out using the picking list and the preparation function. Alternatively, the preparation in the Kanban overview for transfer jobs is carried out using the picking list and start or close. For inventoried material, both processes can be supported by a WMS withdrawal and delivery process. A waybill can be created if necessary.
  4. Generate kanban handling units and kanban cards. After processing, cards are returned by the supplier. Usually the cards include a delivery note indicating the physical material that was delivered. A reference to the services provided is not required. The receipt of the material and the finished products at the customer is recorded in the Kanban overview, depending on the Kanban cards. (Either the Kanban overview for process activities or the Kanban overview for transfer jobs are used, depending on the activity formed.)
  5. Create an access recommendation. The access recommendation can be used to replace a delivery note document for the received services. Access recommendations can be generated for a selected period of time based on the completed Kanban jobs. For each job receipt, related recommendations are created for the purchase order line. The access recommendation can be printed out and sent to the supplier as confirmation of receipt.
  6. Generate invoice.

The process ends when the supplier is billed in a period. The invoice matching is done for the access recommendations that are created. Since the access recommendations represent the exact physical access of the material, the three-way comparison is simplified.

Configure the activities for the foreign work

The following sections describe how to configure the activities for the sub-contract.

Foreign labor services

The payment item used in activity-based delivery must be a product that has the following properties:

  • Product type: service
  • Stock model group: not stored

This requirement forces the use of the first in, first out (FIFO) storage model. Note: Costing the products requires that the standard cost of the service be defined. A blanket order with the vendor is required. Otherwise, the service cannot be used for activity-based delivery.

Process activities passed on

To configure a processing activity as a third-party work activity, complete the following steps.

  1. Configure a workgroup passed by. To configure a workgroup as external work, you need a resource from the Delivery tpys and assign them to the workgroup (resource group). An expiry cost category of the direct outsourcing cost group type should be assigned to the workgroup. The setup and quantity cost categories are not required.
  2. After a processing activity is created and assigned to a regulatory manufacturing cell, you must configure a service for the activity before the production flow version can be activated. Complete this step on the page activitydetail from. For activities that are assigned to a production cell that is subject to legal regulations, the Service conditions Info tab displayed. On this FastTab you can add a standard service that is valid for all output items. If particular output items require different services or different service calculation parameters (for example, overall layout, different service ratio), you can add other services to the activity.

Transfer Activities Transferred

A transfer activity is configured as a foreign work activity, depending on the settings of promoted by the transfer activity. The following options are available:

  • Shipper - The activity is passed on when the transfer of the from storage location is carried out by a vendor / (according to a property of the storage location). All selected framework orders for services must have the same vendor ID as the storage location.
  • receiver - The activity is passed on if the transfer of the from storage location is carried out by a vendor (according to a property of the storage location). All selected framework orders for services must have the same vendor ID as the storage location.
  • Freight forwarder - The activity is passed on to any vendor that provides the service. To be valid, a warehouse management carrier must be created and have an assigned vendor account.

As for process activities, you must have a standard service for subcontracted transfer activities on the FastTab Terms of service the side activityDetails create.

Service quantity calculation

The whole purchasing process is based on an item reference for a service. This article reference is measured in a unit of measure of a service. Services are usually measured either in number of services (units) or in time. In order to calculate the service amount based on the recorded completion of Kanban jobs, the following methods can be provided:

  • Calculation based on the number of jobs - A Kanban job corresponds n Service units, regardless of how the finished product quantity is procured. In lean manufacturing, a single process corresponds to a handling unit. This calculation method applies to all services that have a fixed price per handling unit. Therefore, this method usually applies to transfer activities. However, this can also apply to process activities that process entire handling units.
  • Calculation based on the product quantity - The service quantity is relative to the product quantity that is planned / procured. When calculating the procured product quantity, scrap quantities can either be included or excluded. This calculation method applies to all inquiries in which the service price is offset per unit of the processed product.
  • Calculation based on activity time - The theoretical activity times are calculated based on the running time of the activity, the processed sum of the quantity and the throughput ratio of the processed product. This calculation method applies to services that are paid for by the hour and deviate in time per processed product.

Cost accounting of external labor services

When the receipt recommendation or a vendor delivery note is posted on a purchase order created for a production flow (that is, an order generated from Kanban jobs for subcontracting activities), the value of the receipt is posted to RIF accounts of the production flow calculated. Deviations from invoices are also assigned to the production flow. A cost category for external work was introduced. This cost category enables transparent tracking of the value of external labor that is allocated in the RIF and consumed per period.

The final costing for production costs for production at the end of a final costing period calculates the actual variances of the products that are produced in the production flow during the final costing period.

Model variables of the transfers as subcontracting activities

People often view transportation as unproductive and think it has no value. When comparing the cost of subcontracting with the cost of in-house production, the cost of additional transportation must be taken into account. A production flow that spans multiple storage locations and requires transportation services must match transportation costs as part of the cost of committing the products to the customer.

With activity-based external work in lean manufacturing, you can integrate freight forwarders and move vendors who move materials and products between storage locations in a production flow. By modeling a transfer activity, you can assign a carrier or vendor. The transfer activity / job is based on a service and a master agreement, and you can create purchase orders and access recommendations based on the actual transfer jobs. These functions are identical to the functionality for forwarding process activities.

Supply Chain Management now supports BOM calculations that include transportation services, purchase order creation, integrated access tracking, and the integration of transportation service costs into production flow costing.