Reconcile Physical with WIP

Hey all. Trying to get a feel how everyone else keeps track of their WIP in bins from physical to virtual land. I would like to present a scenario to outline the workflow problem I’m trying to solve.

Say we need to produce 50 cases of product each with 10lbs of paper (qty/parent). Add our 10% scrap factor and the job says we need 550lbs. Cool.

We find a roll of paper and closest we have is 700lbs. We issue that to the job.

We have a ton of setup issues, trouble running the print lots and lots of broke, and we end up consuming all but 30lbs of the roll (at which point we throw it in the scrap bin we can run it anymore) and we have nothing of that roll left.

We reported a final qty of 50 cases so at this point only 550lbs of the parent roll has been relieved from WIP leaving us with 150lbs in WIP of a roll that doesn’t exist.

Enter the problem. An auditor comes along and sees that 150 lbs in WIP can’t find the physical roll because we used it. No biggie they recognize that it was consumed and move on.

We make direct but not everything will ship right away. Say that job sits a few days open and the intellectual property that knew that roll was consumed is not in today or has since forgotten and another super marks it as lost and moves the 150 to our lost bin. Now we are starting to create a mess.

How do others manage that WIP in such a way it doesn’t become a shit show of no idea where it went because it’s there till the job is closed, which could be days or weeks for our make direct.

When the job gets closed, any “orphaned WIP” related to that job converts to a variance.

BTW - How does anyone know that there was 150 lbs of the paper in WIP? I’ve gotten our accounting folks to finally accept that WIP only consists of net dollars. Not qtys x unit costs.

Because we have to closely track the qty to make sure we don’t lose materials or finished goods. If you have the AMM module all of the WIP location stuff is tracked in an inventory-esque fashion but it’s handled and transacted very poorly and with lots of bugs. Lots of BPMs to make it work as you would expect. I know that it sits there until it gets flushed at close, but it shows as physically there yet with AMM as well.

Our Bin Tracker that takes advantage of AMM tracking location

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Ahh… we don’t have AMM. Which might be a good thing for us :wink:

Prior to my starting, we wouldn’t issue any material to a job, until it was about to ship. WIP had to be zero at the end of every month - at least on paper. 1,000 FT of cable could have been “taken” from Inv, cut up and used in a job. But until it was ready to ship, it looked like it was still on the shelf. :frowning: But this did allow the count the “inventory” that was actually in process in production.

Sounds like you need a way to handle WIP better LOL

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The root cause of our problems was due to the fact that Accounting considered Vista “theirs”, and they pretty much wanted to do things that made their job easier. And since valuing WIP was “hard” they decided to do without.

We now actually issue materials when the job starts, and allow WIP to exist at month end.
Crazy, right?

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OPINION TIME: (from my many years of working in Manufacturing:
First… some definitions:

  • Backflushing Automated issuing of material based on the theoretical quantity that was designed into the product… ie… a Bike takes two tires and one handlebar. If you made 10 bikes, you must have consumed 20 tires and 10 handlebars. Good assumption in most cases.
  • Inventory: Stuff you buy or make that is stored in stock - I prefer a “pristine” stockroom where ins and outs are controlled, and therefore all receipts and issues are counted and verified. This Inventory is sometimes sub-divided into additional categories such as “Raw Material”, “Sub-Assemblies”, “Finished Goods”… but in all cases, this “Inventory” can be cycle counted, Physical inventoried and is controlled. If I were king, you would NEVER backflush from the controlled pristine inventory location.
  • Floor Stock: simply a different “Inventory” that is loosely controlled. This is where you would typically backflush from if using backflushing. This location is often less controlled, and harder to verify.
  • WIP AKA “Work In Process”… This should NEVER be confused with Inventory. It is NOT complete. It is neither a raw material nor a finished good. A piece of pipe (part “A”) that is cut into 10 pieces is not a Part “A” anymore, nor is it Part “B” because it is not bent, welded, etc… it is WIP… period. WIP does have value. It has the value of all the material that is issued (or backflushed) to the job, and it also has the labor that has been charged to WIP. Until it is Received or shipped & marked Complete and Closed, the total value remains in the WIP column on the GL.

OK… So, what does all this mean? You BUY Material, Receive it to INVENTORY, you ISSUE the material to a JOB (WIP) and the job OWNS the cost until the job is completed. IT doesnt matter if there is a month end. it doesn’t matter if there is scrap… the job owns the cost.

The JOB is WIP. When doing Physical Inventory you DO NOT count the inventory that is issued to a job. That inventory is now part of WIP.

Jobs that are MTO play a special role, because they hold the WIP cost until the job is shipped… if you have lots of jobs that are “Complete” but not shipped, you may want to have a special dashboard to find all those jobs so that you can analyze then to account for any jobs that have extra costs. One place where I worked, we would look at ALL jobs (not just complete jobs) to see if there was any extra costs applied, and we would do a reversing journal entry to make the accountants happy because we knew that this was going to become variance later. The same could be done for “Complete unshipped WIP” to take anything in this condition at the end of the month and account for that differently than “incomplete WIP”.

As you can tell… this is a complex subject. It is further complicated by additional factors such as your Costing Method (Average/Std/Lot/FIFO), how long you keep WIP open, Production yields, scrap, etc.

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Are you backflushing?
If so, then the “real” inventory location should still hold 150Lbs on hand. Scrap it.

If NOT backflushing, then i believe, the raw materials issued to production should all be consumed when the JOB is closed. No matter how much was issued.

i know it’s AMM, and there are different processes for moving/storing material, but how was the system ‘aware’ enough to issue 700lbs to the job? when only 550 were needed

@amaragni It’s lot tracked, so no backflushy. Also backflushing can only be reasonably used for predictable consumption, our paper usage can wildly vary depending on operator, machine conditions, plant climate conditions, etc. Also wouldn’t fix the issue where we physically don’t have something that the system thinks we have it would exacerbate it.

@timshuwy understood it’s not inventory, but especially when you have a finished good sitting at the assembly level I have to know how many I have and where they are because we can end up sitting on them for up to a couple weeks due to batch shipping. On that same token “inventory” or not I have to know how much of something I have sitting on the floor. The dashboards you mention we have, I have extended the use of WIP considerably so we can try and track it, but the workflow, logic, traceability, and buggy-ness of it in Epicor is absolute crap and I am not alone in that feeling. It should not be the nebulous thing that it is, it’s still physical material and costs that need to be tracked and it’s near impossible out of the box.

My first jobs had locked stock rooms with “counter” to ask for parts. And you wouldn’t get them without the right paperwork (like what job, or dept to expense it to). Very good for inventory control, but as an Engineer, I often wanted to browse our stock, while looking for parts while doing R&D.

i hear you on the lot control - no backflush
So i expect the ENTIRE roll/lot of paper 770 lbs is issued. Must be, no? otherwise why?
and as you say, all but 30lbs are used - and that 30 lbs is scrapped.

and you’re indicating that even if you chose to RETURN MATERIAL the remaining 30lbs - which as it is, is not usable- your WIP balance for this material would show 120lbs?
and it does NOT get relieved when the job is completed or acctng closed?

hmmm…

BTW: are you standard costing? or average costing?

Correct not going to issue a partial roll that would be unrealistic of what is happening in the physical world.
It gets washed when the job closes no problem.
We are standard cost.
The issue is knowing what qty on the floor is real and what is not. So for example if accounting wants to reconcile WIP in Epicor with reality, they would go to the machine with the remaining 120 and not see a 120lb roll of paper because it was physically consumed. Then they question is it lost, has it been consumed, where is it.

We don’t use backflush so I’m not 100% sure on hos that works when material was issued (I mean really issued in E10) to the job at the beginning.

If the Job requires 550 LB (500 LB of Material with 10% scrap, and Mtl is set to backflus), and I issue 700 LB to the Job, What happens when the job is completed?

If there was no initial issue of 700 LB, Id’ expect the backflushing to create a STK-MTL tran of 550 LB.

With the initial 700 LB issued to the job, I’d expect the job completion to not add any more material (since 700 > 550).

If only 300 LB was initially issued, would the job completion create a STK-MTL of 250 LB? (the 550 - 300)

if you are not going to ALWAYS issue the same amount each time, then you should not turn on backflushing for that part. Backflushing is a setting at the PartPlant (site) level, and each part can have its own setting. Typically if you have a part marked as backflushed, then you would not also manually issue, the system simply “flushes” the inventory upon completion of the OPERATION that it is associated with. The system will take the qty completed+scrapped in the operation * material qty each and backflush that qty. Example:
Job is for 100 each of a product… and you need 2 sheets of material per product at operation 10.
On Op 10, you report that you completed 108 units, the system will backflush 216 sheets.
If instead you report that you completed 100 units and scrapped 8 units, it will still backflush 216 sheets. SOOoo… as long as you report how many you attempted to make in total, you should have an accurate backflushing.
But again… as stated above, Lot Control and backflushing are not the best companions. (Although we do support it in KanBan receipts, and I think it was added recently to regular backflushing as well… the system will ask which lots to issue when it backflushes in kanban.

What does happen if material is issued to the job when that material is set to Backflush? Does the back flushing process even look at any qty’s previously issued to that material line?

I believe so… it has been a long time since i tested this.

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I’ve never even tried issuing backflushed items to speak to it.

I just tested it, and back flushing appears to ignore any prior issued Qty’s. On th eplus side, trying to issue materials to a job that are marked as Backflush, warns you with:

image

So maybe I wasn’t clear on @jgiese.wci’s saying

“We find a roll of paper and closest we have is 700lbs. We issue that to the job.”

Was that actually issued via the Issue Material to Job program (creating a STK-MTL part tran)?

Or does “issued” mean “was given to production with the intent for them to use it on the specified job”, and the 700LB was actually still in inventory?

Issued through Issue Material. We have to grab closest sized roll and issue it.

Unless AMM is doing a different algorithm, I’d have guessed that after completing the job there would have been 1250 LB issued to the job.