Production Entries after items are sold (Bill of Materials)

We manufacture a lot of custom goods and we typically do not know how much raw material is going to be used for any given product code in a week, so we do after-the-fact production entries using Bill of Materials. The issue with this, is that the cost of components can vary significantly week over week, and we get an inaccurate Cost of Goods Sold at the end of the month because of it (valuation of Bills is currently set to Average). 

We essentially let the quantities of the bills go negative and then make production entries for the negative quantity on the weekends. 

Our idea was to change the valuation of the Bills to LIFO and then back-date production entries accordingly, but it seems that if the orders are already invoiced, it will not update the Cost of Good sold after-the-fact. 

Does anyone have any ideas or solutions for this problem? Is BOM just completely unsuitable for manufacturers of custom items? 

Our order fullfillment department does not do production entries, this is something we have an employee do on the weekend. Is invoicing all the orders on Monday (even if they shipped in the prior week) really the only way to get around this? That certainly isn't acceptable. 

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    The BOM module is really more designed for process manufacturing, where you're making the same items over and over and in a relatively short period of time.  There's no container to hold the quantities and costs of materials you've been pulling and using throughout a period of time so you can roll them up later into the finished custom item. 

    The job cost modules is designed that way.  You can issue materials, labor and other such costs into a job and it will hang onto those costs until you're ready to complete the job.  Now, the job cost module is designed to consume inventory, but not produce it.  So if the item you are building needs to go back into inventory when it's done, there's some work you gotta do to make that happen.  

    The work order module is designed to work with the BOM module and is also really more of a tool for process manufacturing.  But it does create a container that you can post materials and labor to as you use them, and it will place the finished item back into inventory.  So this might be a better fit for you.  

    Anytime you're consuming inventory items that you haven't actually received into inventory yet, the system has to just estimate what the cost will be for those items.  That estimate is based on known costs in the past, or the standard cost specified by whoever setup the item. 

    Moving your valuation method to LIFO or FIFO will not alleviate this.  The cost used when you go negative will still be an estimate based on best known costs at the time.  Particularly with the cost of components varying significantly in such a short period of time, changing valuation methods will likely just be trading one inaccurate estimated cost for another inaccurate estimate.

    Do everything you can to match, as closely as possible, the timing of the physical receipt/use of inventory with the entry of transactions that record the receipt/use of the inventory.  Whenever you consume inventory at one time but don't record that use until later, it almost always causes problems with the accuracy of on hand quantities and costs. 

    I would give your reseller a call so they can help you figure out what solution will best fit your situation.  

    Best of luck to you!

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  • 0

    The BOM module is really more designed for process manufacturing, where you're making the same items over and over and in a relatively short period of time.  There's no container to hold the quantities and costs of materials you've been pulling and using throughout a period of time so you can roll them up later into the finished custom item. 

    The job cost modules is designed that way.  You can issue materials, labor and other such costs into a job and it will hang onto those costs until you're ready to complete the job.  Now, the job cost module is designed to consume inventory, but not produce it.  So if the item you are building needs to go back into inventory when it's done, there's some work you gotta do to make that happen.  

    The work order module is designed to work with the BOM module and is also really more of a tool for process manufacturing.  But it does create a container that you can post materials and labor to as you use them, and it will place the finished item back into inventory.  So this might be a better fit for you.  

    Anytime you're consuming inventory items that you haven't actually received into inventory yet, the system has to just estimate what the cost will be for those items.  That estimate is based on known costs in the past, or the standard cost specified by whoever setup the item. 

    Moving your valuation method to LIFO or FIFO will not alleviate this.  The cost used when you go negative will still be an estimate based on best known costs at the time.  Particularly with the cost of components varying significantly in such a short period of time, changing valuation methods will likely just be trading one inaccurate estimated cost for another inaccurate estimate.

    Do everything you can to match, as closely as possible, the timing of the physical receipt/use of inventory with the entry of transactions that record the receipt/use of the inventory.  Whenever you consume inventory at one time but don't record that use until later, it almost always causes problems with the accuracy of on hand quantities and costs. 

    I would give your reseller a call so they can help you figure out what solution will best fit your situation.  

    Best of luck to you!

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