By Stephanie Elsen
Imagine your warehouse full of products. Sometimes you sell the products on your shelves as they are, and other times you put several of your items together to make another item. When you do this, how do you enter that information into your accounting software? It seems like a small question. But your answer can make a big difference to your company, for a variety of reasons. The term ‘assembly’ refers to an item that is sold from inventory and built from other items. The assembly process creates the finished product from various other items (components) from your inventory.
First, be sure you have components and assemblies set up as items in your inventory. Once you have both items set up in your software, you can begin using and building assemblies. Move forward with production as necessary, and when you go to enter the information into your accounting software, simply enter the finished item or assembly into the system and it pulls all the components out of inventory. The assemblies function helps you stay profitable, efficient and accurate! Here’s how.
Know costs and increase profits.
Since you have entered your component items along with their costs, you will be able to know the cost of your finished item. Knowing your cost is the first step in controlling your cost and becoming more profitable. Some accounting systems also allow for the inclusion of labor and overhead expenses, which can help you understand complete product cost. If any of the components within your finished item seem out of line, you will be able to see it and adjust accordingly. This can help you become more profitable.
Streamline order management.
Imagine the time you will save by entering only the finished item into your accounts receivable or order entry of your accounting software, rather than entering every single component that makes up the finished item. You will save time and become more accurate in the entry of data. Some assemblies functions allow for the ability to run a production plan, and a ‘shortage report’, so you know ahead of time which components need to be ordered before production begins.
When using assemblies, a bill of materials report can keep you and your staff organized. It can include necessary information, such as the items that will be needed for the production plan, which unit of measure they are needed in, how many of that item are currently on-hand and how many are required. This way it is easier to pull the correct items from the warehouse, and to know which ones are available.
Using the assemblies function within your inventory and accounting software can help you increase profits and stay organized. Many companies still handle these function by hand which can be tedious, tiring and inaccurate. Production plans are written by hand, and there is no way of telling which components are needed and which are available.
Does your accounting staff spend excessive time entering each component of a finished good into your software, in order to take the item out of inventory? Does your warehouse staff struggle with which items to pull in order to begin a manufacturing run? Are you in the dark about your true manufacturing costs and profitability? These are just some of the question that may be solved if you start to use assemblies within your manufacturing management software. Learn more about the terms associated with assemblies, and how they can work together to help your manufacturing business become more organized, operate more efficiently, and increase profitability.
Assemblies Maintenance is the process of defining which components or parts make up your finished item. The finished item is known as an assembly. Most manufacturing management software will let you create an assembly with all of its components as well as labor (often set up as a ‘service’ inventory item), so that true costs may be calculated. The system may also allow you to include costs from outside services, such as sending out an item to have it painted, which can be helpful if the components require other services before being included in an assembly. Once the assembly for a standard assembly item has been created and saved within your software system, that assembly can be used again and again. You may choose to copy a previously saved assembly and customize it for a different customer, saving significant time.
A production plan is a sequential list of assemblies to be built, one at a time. During this ‘building’ process, components are removed from inventory. Many systems will also allow for ‘un-building’, which put components back in inventory, helpful when an assembly was not completed or an order was cancelled. This eliminates the need to remove (or return) individual item components from your software system, as all components are simultaneously removed when the build is completed. Prior to the creation of a production plan, a shortage report can be generated to verify whether all needed items are available in stock. Once the actual physical building of the item is completed on the shop floor, the assembly is then built within the software.
Serial and Lot Numbered Items
Some components within an assembly may contain lot or serial numbers. If you record and track the numbers for each of these components as you receive them into inventory, you may also be able to select which serial/lot number is being used as a component within the assembly you are building. This is an important feature for those who wish to keep tracking the number of the component, even after it has been built into an assembly. If this is a feature you require for your manufacturing operation, be sure to choose a system that allows for that capability.
Bill of Materials
The bill of materials is a document that shows all of the information about a production plan, including its assemblies and required components. This document can be created by the software system once a production plan has been created within the system. The bill of materials typically shows the quantity of components that are needed, and also the quantity that is currently on hand, so that missing components can be put on order. The bill of materials is also useful for warehouse staff, as it provides a comprehensive list of items that need to be pulled for a product run.
Setting up assemblies within your manufacturing management software can greatly help increase efficiency and profits for your manufacturing operation.