Manage Manufacturing with ERPNext

ERPNext facilitates Business Flows such as manufacturing, inventory management, Sales Strategy, and Supply Chain Management. Manufacturing is a critical process that transforms raw materials into finished goods. ERPNext provides you with a well-structured Workflow for manufacturing, making it easier to Optimize and streamline your Manufacturing Process. This blog will give you a detailed summary of how to set up the Manufacturing Process in the ERPNext.

What is Manufacturing?

Manufacturing refers to the process of transforming raw materials or components into finished goods through the use of labor, machinery, tools, and chemical or biological processing. This transformation adds value to the raw materials, enabling businesses to sell the final products at a higher price than the cost of the raw inputs.

The transformation or conversion of raw materials into finished products involves performing various operations to produce final products.

But Manufacturing is a whole process of not just performing those operations but also having a way of creating a structured procedure of all the processes.

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❖ Let us discuss some Key Features of Manufacturing in ERPNext:

1. Bill of Materials

BOM is the main prerequisite and backbone of any Manufacturing Process. ERPNext allows you to define multi-level BOMs, specifying raw materials, quantities, and operations required to produce finished goods. This hierarchical structure ensures clarity and accuracy in production planning.

2. Production Plan

It includes the optimized manufacturing schedule details and resource tracking to manage production efficiently. It is created to manage the in-house manufacturing as well as subcontracting manufacturing in a well-structured format.

3. Work Order

Work Order is a directive issued to the manufacturing floor, instructing the production of a specified quantity of an item which acts as a detailed guide for the manufacturing process, outlining the necessary materials, operations, and resources. It plays an important role to efficiently track inventory levels and ensures that the manufacturing process is well-planned and organized. Its primary function is to convert production plans into actionable tasks.

4. Job Card

Job Cards are created automatically on submission of work orders to the manufacturing floor and are used to manage and record key aspects of the manufacturing process on the shop floor. Each Job Card records details such as labor assigned, time taken, and material consumption. It helps monitor the status of operations, supports accurate costing, and ensures real-time visibility into the manufacturing workflow.

5. Routing

Routing is created to specify the sequence of operations and workstations required to produce the finished product.

6. Quality Inspection 

Quality inspections can be applied in the manufacturing process, ensuring that the produced goods meet predefined quality standards.

7. Subcontracting Module

Enables seamless coordination with subcontractors by managing the material transfer and availability of the cost and vendor communication.

Check out our blog to learn more about: Subcontracting in ERPNext

8. Material Resource Planning

It is used to manage and control inventory, and production processes by determining the materials and components needed to meet production schedules. It helps to plan and manage the materials required for production. It ensures that the right quantity of raw materials is available at the right time to meet production and sales demands, while avoiding overstocking.

These were the Prerequisites before diving into the Manufacturing Process of ERPNext.

Before going further, we should also know that various types of manufacturing processes are categorized into three types:

Type of Manufacturing Processes

Make to Stock (MTS)

Generally, in this type of manufacturing, products are produced in advance and stocked in inventory. Production is based on forecasts or historical demand rather than on customer orders in advance.

Make to Order (MTO)

In this type of manufacturing, products are produced when the order has been placed, products are made specifically for the customers, thus the manufacturing process is triggered based on the order details.

Engineer to Order

ETO manufacturing process is done to produce or design the product that is designed on the customer demand, or we can say that the products are designed or manufactured according to the specific engineering requirements of the customer, the process often requires the custom designs, which are created after receiving the order.

Lets understand this with an Example

Let us take a scenario where we receive an order for a bicycle and we need to manufacture the bicycle in the house but we do need to have some of its components subcontracted. 

How are we going to manage this process in our ERPNext?

Let us understand each step in details:-

❖ Finished Good- Bicycle

❖ Raw Material (Sub Assembly) - Handlebar (In-House)

❖ Raw Material (Sub Assembly) - Frames (Subcontracted)

❖ Raw Material - Wheel

Step 1: Item Creation

Log in to the ERPNext Account.

• Navigate to the Stock Module,
• Click on the item and click on the + Add item Button in the upper right corner.
• When creating the item you need to mention important details such as item name, item code, and Enable “maintain” checkbox to maintain the inventory of this item in the warehouse.
• Enable the “Include Item in Manufacturing” checkbox for the item to be used in manufacturing. If this is not checked, the item will not appear in the BOM (Bill of Materials).

❖ We will also create the item that is needed to be sent for subcontracting.

●In subcontracting two items are created, for instance, you have subcontracting frames that you are using in the manufacturing process of a bicycle.

● So you will create two items such as Subcontracted item Frame Assembly and Finished good Frames.

● You will send Frame assembly to the subcontractor and you will receive frames as the finished goods that can be used for the manufacturing of bicycles.

● The item you are sending for Subcontracting should be created as a Service item as we are not maintaining its inventory in our warehouse.

● We also need to enable the Supply Raw Material for Purchase checkbox for the finished goods we will receive from the subcontractor.

Step 2: BOM Creation

● Navigate to the Manufacturing module, and click on the Bill of Material.

● You can also access BOM  from your shortcuts

● On clicking on Bill of Materials you will land on the page where you can see the list of BOMs.

● You can add a new BOM by clicking on the + Add BOM button.

● While creating BOM, you will see various statuses on BOM.

● Default: primary and preferred BOM for specific items.

● Active: Ensures that the BOM is valid and available to use in manufacturing.

● Canceled: Specifies the BOMs that are no longer active and being used for manufacturing.

● BOM consists of the details of the finished good and its quantity to be manufactured.

● It also has the list of raw materials along with the quantity required for the manufacturing of the finished good.

● BOM also has the main requirement of the manufacturing process, which are the operations required to fulfill the procedure.

● BOM also has an operation table and routing, it is created to have a sequence of operations for the assembly of a particular item.

● In routing, we create the operations the workstation and we also set the operation time along with the rate per hour.

● Creating BOM for the Subcontracting item will be different from the

● usual BOM.

● The BOM will be created for subcontracting items that do not consist of the operations, as they are not being produced in our workstation.

● They only record the raw material, the quantity to be manufactured, and the finished goods details.

Step 3: Production Plan Creation

● Navigate to the Manufacturing Module, and click on the Production Plan.

● You can add a new Production Plan by clicking on the + Add Production Plan.

● You can fetch the sales order against which you are creating a production plan.

● You can also fetch the sub-assemblies on the production plan and their link BOMs.

●You will also mention the manufacturing type of the sub-assemblies, whether they are in-house manufacturing or subcontracted.

● For the subcontracted manufacturing, you need to mention the supplier’s name.

● Adding manufacturing type in the production plan can create draft work orders and purchase receipts for the subcontracted manufacturing.

Step 4: Work Order Creation

●You can directly access the work order from the connection in the Production Plan.

● Or navigate to the manufacturing module, under the Production tab click on the Word order

● You can also add a work order by clicking on the + Add Work Order.

● Fill out the essential details in the work order and mention the warehouses.

● Operations specified in BOM will be fetched in the work.

● Clicking on Start, you will create a stock entry to transfer the raw material from the source warehouse to the work-in-progress warehouse.

● Once the stock entry is submitted, go back to the work order and navigate to the connections.                                         

● Click on the Job Card and complete the task by assigning an employee.

● Start the Job Card by selecting an employee and clicking on the Start Job.   

● And after the completion of the Job card, click on the Complete Job.

● Click on submit after completing the Job.

● You can also Pause the Job by clicking the Pause Job button next to the Complete Job Button.

● After the Job Card is completed, the Completed operations assembly line will be finished.

● Then click on the Finish Button to finish the work order.

●A stock entry is created for the manufactured item to transfer to the finished goods warehouse.

● Then from our Production Plan, we will create the Purchase Order for the subcontracting.

Step 5: Purchase Order

● While creating a purchase order, mention the supplier’s warehouse (virtual to monitor the stock movement), enable is subcontracted checkbox, and mention the supplier name.

● When creating the purchase order for the subcontracting, always mention the service item you have created.

● You will also mention the finished goods item in the item table by clicking on the icon on the item table.

● After submitting the Purchase order, create the subcontracting receipt.

● Once the subcontracting receipt is submitted, create a stock entry.

● This stock entry will be created to transfer the material for subcontracting. Once the item is manufactured, create the subcontracting receipt to receive the items in the warehouse.

● Once received the items in the warehouse proceed with the manufacturing process.

● Navigate to the Production Plan click on the work order and follow the same procedure of in-house manufacturing as explained above and complete the manufacturing process.

●After the completion of the manufacturing process, the green line indication will be visible.

● Which also states that the process has been completed.

● You can also view the production Plan summary.

● You can also raise a Material Request based on your Production plan.

Conclusion

Thus, from the process, we can understand that ERPNext is a versatile and integrated solution for managing the manufacturing process from planning and resource allocation to execution and quality control. The system brings together all essential components into a cohesive platform.

With ERPNext, Businesses can streamline their processes, adapt to changing demands, and focus on delivering high-quality demand.           

Still wondering how ERPNext can help your manufacturing unit? Kanak Infosystems has the answers—reach out now!