We configurate MTO-items. The configurator creates a new Navision Item with cost method FIFO. It also calculates a Unit Cost, based on the lot size (i.e. 10 pcs.) of the item, and a Unit Price, based upon Unit Cost + Mark Up %. The configurator writes the Unit Cost and the Unit Price into the Item card, but the Lot size is not filled. The item has a routing and a BOM (made up by the configurator). We make production orders for these items, and leave the Quantity field in the PO header always empty (we only use the Quantity field on the PO-lines). Our problem is this: when we make one such an order and sell it, there’s no problem. But when our customer orders it a second time, but with a lot size of 100 pcs. instead of 10, we have a problem, because with FIFO, we cannot change the Unit Cost when there are Item Ledger Entries. And the configurator tries to change the Unit Cost, because of the increased quantity (lower fixed cost per item). Solution: use Standard Cost instead of FIFO, let Navision calculate the Unit Cost and write down the actual Lot Size in the Item Card? Yes, I’m already convinced that this is a far better Costing Method for these items, but: If we have the above mentioned scenario (two sales/production orders for the same item, but with different lot sizes) within the period in which we execute the ‘Adjust Cost - Item Entries’ periodic activity, one of the orders will be posted in the Item Ledger Entries with a wrong (Adjusted) Cost! After all, the Unit Cost will be adjusted by the periodic activity, based upon the lot size of 100 pcs. I cannot believe that this isn’t a very common problem in MTO-environments. At this moment, we make/configurate a new item for every change in Lot Size, even if the item is totally equal! As you can imagine, this results in a large quantity of Item No.'s, and our customers, nor we, are happy with the constantly changing Item No. HELP!
As per my understanding the lot size on Item card only affects the Setup cost. When I had entered the Routing and BOM along with lot size on Item card, I calculate the Standard cost say this value comes out to be 100 $. Now when I am producing the item, and if there is any variation from the parameters I had considered while calculating the standard cost, the difference will go into variance account. My inventory will always be updated with the standard cost and there is no need of changing the lot size on item card. Rgs
Hi Michiel I would advise the configurator calculate the cost and populate the sales line. By pass the calculation and updating of the cost and have it set to your parameters. A customer required a similar scenario and we accomplished it in this manner - but we wrote teh front end configurator in this instance, has yours been written for you or is it one of the third party add-ons?
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Originally posted by abhay
My inventory will always be updated with the standard cost and there is no need of changing the lot size on item card.
Hello Abhay, Actually, we do want to have the inventory valued at the Unit Cost belonging to that particular Lot Size. On the other hand, we do not keep the MTO-items on inventory for our customers, so perhaps it wouldn’t be that problematic [:)] But, besides the inventory value part of the problem, we want to be able to have a proper comparison between Standard Cost (calculated by Sales rep.), Expected Cost and Actual Cost. When we do not change the Unit Cost per various Lot Sizes, we cannot compare the Standard and Expected. And third (advise from Steven), when we let our configurator update the Unit Cost Navision assumes it as only Material Cost, whereas it consists of labour and subcontracting cost also!
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Originally posted by SBWEAVER
I would advise the configurator calculate the cost and populate the sales line.
Hi Steven, That is what we do at this moment. But then Navision assumes the Unit Cost to be totally Material Cost. [:(] The configurator is eCon from Watermark, and I can make changes to the front end myself. But still, this doesn’t solve the problem that Navision can post the wrong Cost for certain Lot Sizes (if different lot sizes for the same item occur) between two ‘Adjust Cost…’ periodic activities. After all, Navision always uses the latest Standard Cost for all open Item Ledger Entries [xx(]. [?] I could solve it / decrease the risc by running the ‘Adjust Cost…’ periodic activity more frequent, i.e. daily or weekly. Or am I wrong here?
Hi Michiel You’ll have to excuse me for not being a programmer [:)], but essentially in the one I have been involved with the price is calcualted by the configurator in Navision and put into the sales line as the unit cost, this unit cost is then transferred to the production order (we auto generate the production order from the release of the sales order). As I understand it due to the costing requirements of the customer the code units were modified to push the cost generated against the sales order and production order as standard. I think they suppress the adjust routine to filter out manufactured items, and as they do not post cost to GL nothing will affect the GL - the item card is potentially updated, but as we ignore it it does not matter for these items. I hope this makes sense!
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Originally posted by SBWEAVER
I hope this makes sense!
Eeehhhh, unfortunately I’m just an end user [:D][:D], so I cannot exactly follow your point. I did some further testing in the meantime, and I think the best solution is:- Configurator only updates the Lot Size
- Navision calculates Unit Cost
- Navision updates Unit Cost in Sales Line after calculating
- We run periodic activity ‘Adjust Cost’ on a regular basis
Hi Michiel I think essentially we avoided Navision updating the unit cost, and as inventory was not linked to GL no accounts transactions were affected by the adjust cost entries routine. If you can solve your problem using what you have without changing it and just running the adjust cost routine more regularly I would suggest you do that!