22 May Purchasing a Component Directly to a Manufacturing Order
Within Fourth Shift, purchasing items to receive into inventory is a straightforward process. To start, create a purchase order header that identifies the supplier. Then, add a line for the item to be purchased including the item, quantity, price, delivery date, and line-type ‘P’, the most-commonly used in this situation. However, there are other line-types that can be used on purchase orders. Most buyers are familiar with ‘G’ type lines for expense or general ledger purchases or ‘S’ type lines for sub-contract manufacturing purchases. But, have you ever used the ‘M’ type line for direct purchases to work-in-progress (WIP) for a manufacturing order (MO)? Let’s briefly explore how this works.
After the purchase order header has been created, the steps used to populate it are slightly different for ‘M’–type lines. Instead of entering an item number, the MO the purchase is intended for is entered. A line type of ‘M’ is entered instead of ‘P’, but every other field required for the Purchase Order (PO) line is entered following the same standard process. After the line has been entered, two more fields must be completed on the PO line detail screen:
- The MO line number the purchase is for; and
- The sequence number on the MO-dependent bill of material (BOM).
For M-type PO lines, a receipt for this purchase order will not be placed into inventory but will instead be placed directly into WIP for the manufacturing order.
The more granular the components are identified on BOM’s regarding their sequence number, the easier it will be to identify the sources of WIP on manufacturing orders and understand variances calculated by the OVAR (Order Variance Analysis and Reporting) process. While this type of purchase order isn’t for every business, it has proven to be especially useful for emergency purchases of material needed on the shop floor and infrequent procurement of external resources needed for production.
M-type purchase orders require no advance set-up, whereas S-type (sub-contract) purchase orders require advance configuration to function correctly. Unsure how to use M-type PO’s or need assistance understanding which line-type is the right for your business situation? Let’s talk – our team of experts is here to help.