Lean Manufacturing - Dynamics AX 2012

Microsoft Dynamics AX 2012 Lean Manufacturing

Purpose: The purpose of this document is to illustrate traditional manufacturing approach in Microsoft Dynamics AX 2012 on simplified example of discrete manufacturing of cars. This document will outline end-to-end functional flow for the scenario which includes setup (Section A), creation (Section B), estimation (Section C), scheduling (Section D), execution (Section E) and costing (Section F) aspects. Please review other documents in the series to compare traditional manufacturing approach to lean manufacturing approach in Microsoft Dynamics AX 2012.

Challenge: Microsoft Dynamics AX 2012 out-of-the-box enables mixed mode manufacturing including traditional approach and lean approach. Lean manufacturing in Microsoft Dynamics AX 2012 has significantly evolved since Microsoft Dynamics AX 2009. The challenge is to understand how lean manufacturing in Microsoft Dynamics AX 2012 is different from lean manufacturing in Microsoft Dynamics AX 2009 and how lean manufacturing approach is different from traditional manufacturing approach in general. The idea is that the reader with understanding of traditional manufacturing approach will be able to apply and "translate" this knowledge in order to implement lean manufacturing scenarios in Microsoft Dynamics AX 2012. 

Solution: The simple but at the same time descriptive real-world example of discrete manufacturing of cars provides context for better understanding of manufacturing processes and their implementation in Microsoft Dynamics AX. In particular we will be dealing with 2 level bill of materials (assembly and sub-assembly) and straightforward sequential routes in order to implement Make to Stock scenario. Make to Stock scenario was implemented for the sake of simplicity, however we can also apply this knowledge to implement Make to Order scenario if needed.

Scenario

In this scenario Car will be manufactured using traditional approach. Car components will be assembled together and then assembled car will be painted. But before this happens one of components will have to be manufactured on its own and this is Car frame which is welded from parts. One team will be responsible for Car assembly and another team will be responsible for Car frame welding

Bill of materials	Route

                           

One of the requirements defined in this scenario is that all products are Standard cost controlled

Section A: Setup

Let's review the setup which is required to implement this scenario

Number of released products will be created in Microsoft Dynamics AX 2012 which will have similar characteristics for the sake of simplicity. All of them will be Standard cost controlled, Site and Warehouse will be used as Storage product dimensions, Default Site and Warehouse settings will be defined on released product level and finally cost price will also be defined for all released products (not using BOM calculation for BOMs)

Car (AlexCar) will be assembled from Car frame (AlexFrame), Engine and Transmission

Released product: AlexCar            

Car (AlexCar) released product will be created using decentralized approach

Cost price for Car (AlexCar) is 2500$

Site "2" will be used as default Site for Purchase, Inventory and Sales

Please also note that Default order type = Kanban

Within Site "2" Warehouse "21" will be used as default Warehouse for Purchase, Inventory and Sales

Car (AlexCar) will be manufactured that's why Production type = "BOM"

Released product: Engine

Engine released product will be created using decentralized approach

Cost price for Engine is 1000$

Site "2" will be used as default Site for Purchase, Inventory and Sales

Within Site "2" Warehouse "21" will be used as default Warehouse for Purchase, Inventory and Sales

Released product: Transmission

Transmission released product will be created using decentralized approach

Cost price for Transmission is 500$

Site "2" will be used as default Site for Purchase, Inventory and Sales

Within Site "2" Warehouse "21" will be used as default Warehouse for Purchase, Inventory and Sales

Car frame (AlexFrame) will be welded from Floor, Roof and 2 Sides

Released product: AlexFrame

Car frame (AlexFrame) released product will be created using decentralized approach

Cost price for Car frame (AlexFrame) is 250$

Site "2" will be used as default Site for Purchase, Inventory and Sales

Please also note that Default order type = Kanban

Within Site "2" Warehouse "21" will be used as default Warehouse for Purchase, Inventory and Sales

Car frame (AlexFrame) will be manufactured that's why Production type = "BOM"

Released product: Floor

Floor released product will be created using decentralized approach

Cost price for Floor is 150$

Site "2" will be used as default Site for Purchase, Inventory and Sales

Within Site "2" Warehouse "21" will be used as default Warehouse for Purchase, Inventory and Sales

Released product: Side

Side released product will be created using decentralized approach

Cost price for Side is 50$

Site "2" will be used as default Site for Purchase, Inventory and Sales

Within Site "2" Warehouse "21" will be used as default Warehouse for Purchase, Inventory and Sales

Released product: Roof

Roof released product will be created using decentralized approach

Cost price for Engine is 100$

Site "2" will be used as default Site for Purchase, Inventory and Sales

Within Site "2" Warehouse "21" will be used as default Warehouse for Purchase, Inventory and Sales

Released products

When all released products are created you can see them on Released products list page

Please note that Car (AlexCar) and Car frame (AlexFrame) have Production type = BOM

Car (AlexCar) and Car frame (AlexFrame) will be manufactured by different teams

Resource group: Work cell – AlexCar

Car (AlexCar) will be manufactured by Alex Car work cell

Resource: AlexCar1

Alex Car Team 1 will consists of 1 worker: Arnie Mondloch

Please note that Alex Car Team 1 will be responsible for Car (AlexCar) manufacturing

Resource group: Work cell – AlexFrame

Car frame (AlexFrame) will be manufactured by Alex Frame work cell

Please note that Alex Frame Team 1 will be responsible for Car frame (AlexFrame) manufacturing

Resource: AlexFrame1

Alex Frame Team 1 will consists of 1 worker: Ahmed Barnett

From costing perspective the cost prices for different types of labor will be defined through Cost categories

Cost category: Setup

Cost price for Setup labor will be 18$

Please note that Lean manufacturing functionality disregards Setup time, and takes into account only Process time (Run time)

Cost category: Run time

Cost price for Process labor will be 15$

Cost category: Quantity

Cost price per Quantity manufactured will be 2$

Please note that Lean manufacturing functionality disregards Per Quantity, and takes into account only Process time (Run time)

Costing sheet

The structure of manufacturing costs will be defined in Costing sheet

Please note that Costing sheet is also used to define and calculate different types of overheads such as material overhead, labor overhead and plant overhead

Car (AlexCar) bill of materials will consist of Car frame (AlexFrame) sub-assembly, Engine and Transmission components

Bill of materials: AlexCar – Designer view

Designer view provides a visual representation of Car (AlexCar) assembly 

Bill of materials: AlexCar – Lines view

Designer view provides a grid representation of Car (AlexCar) assembly

Please note that Car frame (AlexFrame) BOM Line type = Pegged supply. This is because we want to trigger automatic Kanban creation in order to produce Car frame (AlexFrame) sub-assembly

Car frame (AlexFrame) bill of materials will consist of Floor, Roof and 2 Sides

Bill of materials: AlexFrame – Designer view

Designer view provides a visual representation of Car frame (AlexFrame) sub-assembly

Bill of materials: AlexFrame – Lines view

Designer view provides a grid representation of Car frame (AlexFrame) sub-assembly

Before we can introduce Kanban flows and Kanban rules in Lean scenario we have to define Production flow model

Production flow model: AlexModel

Once Production flow model is defined now we can introduce Production flows. AlexCar production flow will be used for Car (AlexCar) manufacturing and AlexFrame production flow will be used for Car frame (AlexFrame) manufacturing

Production flow: AlexCar

AlexCar production flow will provide costing context for Car (AlexCar) production process

AlexCar production flow will consist of Assembly and Painting activities which will be executed sequentially

Please note that Takt unit = Hr (Hours) for AlexCar production flow

Production flow: AlexCar – Assembly Activity

Please note that Assembly activity has Activity type = Process

Please note that Assembly activity requires Run time (1 hour). Also it's important to mention that in order to organize kanban flow with 2 or more Process activities we'll have to use activities working with semi-finished products (please pay your attention to Semi-finished section on Process details fast tab)   

On Assembly activity we'll also define default picking activity

To create new plan activity for Assembly you can use Create new plan activity Wizard. Please see detailed step-by-step walkthrough in the table below 
 

Create new plan activity Wizard *Welcome *New activity   Please select Activity type = Process *Create process activity   Please specify Work cell = AlexCar and define Semi finished product settings as follows -           Pick up: Unmarked -           Receive: Marked *Assign picking activities   Please define default picking activity *Assign activity time   Please specify Runtime = 0.50 Hr (Hours) *Wizard completed   As the result of Wizard completion Assembly activity will be created

Production flow: AlexCar – Painting Activity
 

Please note that Painting activity has Activity type = Process

Please note that Painting activity requires Run time (1 hour), Queue time before (0.25 hours) and Queue time after (0.25 hours). Also it's important to mention that in order to organize kanban flow with 2 or more Process activities we'll have to use activities working with semi-finished products (please pay your attention to Semi-finished section on Process details fast tab)   

No picking activities will be defined on Painting activity

To create new plan activity for Painting you can use Create new plan activity Wizard. Please see detailed step-by-step walkthrough in the table below
 

Create new plan activity Wizard *Welcome *New activity Please select Activity type = Process *Create process activity Please specify Work cell = AlexCar, mark Update on hand receipt checkbox and define Semi finished product settings as follows -           Pick up: Marked -           Receive: Unmarked *Assign activity time Please specify Runtime = 1 Hr (Hours), Queue time before = 0.25 Hr (Hours) and Queue time after = 0.25 Hr (Hours) *Wizard completed   As the result of Wizard completion Painting activity will be created

Production flow: AlexFrame

AlexFrame production flow will provide costing context for Car frame (AlexFrame) production process

AlexFrame production flow will consist of single Welding activity

Please note that Takt unit = Hr (Hours) for AlexFrame production flow

Production flow: AlexFrame – Welding Activity

Please note that Welding activity has Activity type = Process

Please note that Welding activity requires Run time (1 hour)

On Welding activity we'll also define default picking activity

To create new plan activity for Welding you can use Create new plan activity Wizard. Please see detailed step-by-step walkthrough in the table below 
 

Create new plan activity Wizard *Welcome *New activity Please select Activity type = Process *Create process activity Please specify Work cell = AlexFrame and mark Update on hand receipt checkbox *Assign picking activities Please define default picking activity *Assign activity time Please specify Runtime = 1 Hr (Hours) *Wizard completed As the result of Wizard completion Welding activity will be created

Once all production flow activities are defined we can create required kanban rules

Kanban rule: AlexCar – Fixed

Kanban rule for Fixed Manufacturing kanbans will be created to handle production of Car (AlexCar)

Please note that Product = AlexCar

For the sake of simplicity Default quantity = 1 and Fixed kanban quantity = 1

In order to produce Car (AlexCar) we'll use kanban flow which consists of 2 activities

First activity is Assembly and last activity is Painting

Kanban flow can be generated on Choose kanban flow screen 

Kanban rule: AlexFrame – Event

Kanban rule for Event Manufacturing kanban will be created to handle production of Car frame (AlexFrame) sub-assembly

Please note that Product = AlexFrame

For the sake of simplicity Default quantity = 1 and Fixed kanban quantity = 1

In order to produce Car frame (AlexFrame) we'll use single activity. Please note that Kanban line event = Manual for Car frame (AlexFrame) kanban rule, this will allow generating event kanbans for Car frame (AlexFrame) sub-assembly production

First and the only activity is Welding

Section B: Creation

In Make to Stock scenario we will create Fixed Kanban for Car (AlexCar) manually 

Kanban: AlexCar

Kanban is a document which in lean scenario controls manufacturing process of certain quantity of goods within defined timeframe

When kanban is created you can see it on Kanbans tab for particular Kanban rule

Please see the details of created kanban below

Please note that 2 jobs (Assembly and Painting) are in Not Planned status for Car (AlexCar) production

Kanban: Pegging tree overview

Pegging tree overview screen shows what is required for Car (AlexCar) production

Please note that 3 components are required for Car (AlexCar) production. One of these components is Car frame (AlexFrame) which is sub-assembly to be produced on its own

At this moment we only have 1 inventory receipt transaction for Car (AlexCar) and 3 inventory issue transactions for Car (AlexCar) BOM components

Inventory transactions

Kanban: Create event kanbans

In order to generate event kanban for Car frame (AlexFrame) sub-assembly we'll manually execute "Create event kanbans" function from kanban for Car (AlexCar)

Please note that you can also automatically create required event kanbans if you specify Kanban line event = Automatic for Car frame (AlexFrame) kanban rule 

Kanban rule: AlexFrame

When kanban is generated you can see it on Kanbans tab for particular Kanban rule

Please see the details of created kanban below

Pegging tree overview – AlexFrame

Pegging tree overview screen shows what is required for Car frame (AlexFrame) production

Pegging tree overview – AlexCar

After event kanban for Car frame (AlexFrame) production was generated the system also updated Pegging tree for Car (AlexCar) kanban to reflect the fact that Car frame (AlexFrame) is sub-assembly which will be produced using separate kanban

After event kanban was created for Car frame (AlexFrame) the system created receipt inventory transaction for Car frame (AlexFrame) and all necessary issue inventory transactions for BOM components for Car frame (AlexFrame) 

Inventory transactions

Section C: Estimation

Please note that products must be Standard cost controlled in order to be used in Lean manufacturing in Microsoft Dynamics AX 2012. And in lean scenario there's no direct comparison to traditional estimation stage 

Section D: Planning (Scheduling)

Once all necessary kanbans have been created we can plan them for execution. This is easy to do by using Plan entire pegging tree function on particular kanban

Kanban: AlexCar – Plan entire pegging tree

I executed Plan entire pegging tree function from Car (AlexCar) kanban which planned both Car (AlexCar) kanban jobs as well as Car frame (AlexFrame) kanban job

Kanban: AlexCar

Please note that 2 jobs (Assembly and Painting) are in Planned status for Car (AlexCar) production

Kanban: AlexFrame

Please note that job (Welding) is in Planned status for Car frame (AlexFrame) production

Kanban schedule board: AlexCar

Kanban schedule board for AlexCar work cell shows the results of planning for Assembly and Painting jobs

Please note that you could plan these jobs manually on Kanban schedule board initially

Kanban schedule board provides visual representation of production schedule, ability to reschedule for the user by dragging and dropping bars and much more

Kanban schedule board: AlexFrame

Kanban schedule board for AlexFrame work cell shows the results of planning for Welding job

Please note that you could plan this job manually on Kanban schedule board initially. Small clock icon on kanban means that this job is overdue

Kanban schedule board provides visual representation of production schedule, ability to reschedule for the user by dragging and dropping bars and much more

Section E: Execution

In order to proceed with Car frame (AlexFrame) kanban execution we’ll use Kanban board for process job which shows all process jobs and their statuses

Kanban board for process jobs: AlexFrame

For selected AlexFrame work cell Welding job is planned now

Kanban board for process jobs: AlexCar

For selected AlexCar work cell 2 jobs (Assembly and Painting) are planned now

Kanban board for process jobs: AlexFrame – Prepare (Welding)

The next step in Car frame (AlexFrame) kanban execution is to prepare kanban job

Picking list tab shows the availability of components for production. On preparation step the system will consume BOM components required for Car frame (AlexFrame) production

Kanban board for process jobs: AlexFrame

Once you prepare kanban job its status changes to Prepared

At this moment the system physically updated issue inventory transactions for Car frame (AlexFrame) BOM components. By other words components for Car frame (AlexFrame) have been used in production process

Inventory transactions

Please note that issue inventory transactions for Car frame (AlexFrame) BOM components changed their statuses to Deducted

Production flow: AlexFrame - Costing

The result of material consumption for Car frame (AlexFrame) kanban is reflected in Standard cost transactions details. Please note that labor consumption didn’t happen at this time

Standard cost transactions

Please see details of Standard cost transactions for Car frame (AlexFrame) kanban in the table below

*Floor Inventory issue transactions for Floor will be displayed on Lot transactions screen *Roof Inventory issue transactions for Roof will be displayed on Lot transactions screen *Side Inventory issue transactions for Sides will be displayed on Lot transactions screen *Voucher transactions Ledger voucher provides details on which account was credited for “Production, picking list”, which account was debited for “Production offset picking list” as well as on additional postings happened because of material overhead applied

Indirect cost transactions

Indirect cost 6.13$ represents material overhead applied to material consumption based on Costing sheet setup. Please note that plant overhead (2.63$) is calculated based on material overhead and contributes to the indirect cost sum

*Voucher transactions Ledger voucher provides details on which account was credited for “Estimated indirect absorption”, which account was debited for “Estimated indirect absorption offset” in regards with material overhead applied

Current WIP balance

Current WIP balance screen provides an overview of WIP (Work in process) cost amount at this moment

Please note that material consumption is segregated from material overheads applied

However if you want to see aggregated picture you can do that Costing sheet tab (Mode = WIP in). This screen shows you manufacturing costs broken down by cost group

Kanban board for process jobs: AlexFrame – Start (Welding)

The next step in Car frame (AlexFrame) kanban execution is to start kanban job

Kanban board for process jobs: AlexFrame

Once you start kanban job its status changes to In progress

At this moment no changes happened to inventory transactions

Inventory transactions

Kanban board for process jobs: AlexFrame – Complete (Welding)

The next step in Car frame (AlexFrame) kanban execution is to complete kanban job

Kanban board for process jobs: AlexFrame

Once you complete kanban job its status changes to Completed

At this moment the system physically updated receipt inventory transaction for Car frame (AlexFrame). By other words Car frame (AlexFrame) assembly has been produced and is available now

Inventory transactions

Production flow: AlexFrame - Costing

The result of finished good receipt for Car frame (AlexFrame) kanban is reflected in Standard cost transactions details.

Standard cost transactions

Please see details of Standard cost transactions for Car frame (AlexFrame) kanban in the table below

*AlexFrame Inventory receipt transactions for Car frame (AlexFrame) will be displayed on Lot transactions screen *Voucher transactions Ledger voucher provides details on which account was credited for “Production offset account, report as finished” and which account was debited for “Production, report as finished” because of finished good receipt Please note that at this moment the system posted labor consumption for 15$ because of Welding job (Run time). And Ledger voucher also provides details on which account was credited for “Production WIP issue”, which account was debited for “Production - WIP” as well as on additional postings happened because of labor overhead applied

Indirect cost transactions

Indirect cost 2.50$ represents labor overhead applied to labor consumption based on Costing sheet setup. Please note that plant overhead (0.11$) is calculated based on labor overhead and contributes to the indirect cost sum

*Voucher transactions Ledger voucher provides details on which account was credited for “Estimated indirect absorption”, which account was debited for “Estimated indirect absorption offset” in regards with labor overhead applied

Route transactions

Route transactions show the details of labor consumption posting for Process job Welding (15$)

*Voucher transactions Ledger voucher provides details on ledger postings because of labor consumption as well as labor overhead applied

From costing perspective at this moment you can review realized consumption and realized cost amounts related to material consumption, labor consumption and various overheads applied

Price calculation

The system represents material consumption, labor consumption and various overheads applied separately

However if you want to see aggregated picture you can do that Costing sheet tab (Mode = WIP in). This screen shows you manufacturing costs broken down by cost group

Kanban board for process jobs: AlexCar – Prepare (Assembly and Painting)

The next step in Car (AlexCar) kanban execution is to prepare kanban jobs

Please note that I selected both jobs to be prepared at once

Picking list tab shows the availability of components for production. On preparation step the system will consume BOM components required for Car (AlexCar) production

Kanban board for process jobs: AlexCar

Once you prepare kanban jobs their statuses changes to Prepared

Please note that Car frame (AlexFrame) is available after we completed Car frame (AlexFrame) production

At this moment the system physically updated issue inventory transactions for Car (AlexCar) BOM components. By other words components for Car (AlexCar) have been used in production process

Inventory transactions

Please note that issue inventory transactions for Car (AlexCar) BOM components changed their statuses to Deducted

Production flow: AlexCar – Costing

The result of material consumption for Car (AlexCar) kanban is reflected in Standard cost transactions details. Please note that labor consumption didn’t happen at this time

Standard cost transactions

Please see details of Standard cost transactions for Car (AlexCar) kanban in the table below

*AlexFrame Inventory issue transactions for Car frame (AlexFrame) will be displayed on Lot transactions screen *Engine Inventory issue transactions for Engine will be displayed on Lot transactions screen *Transmission Inventory issue transactions for Transmission will be displayed on Lot transactions screen *Voucher transactions Ledger voucher provides details on which account was credited for “Production, picking list”, which account was debited for “Production offset picking list” as well as on additional postings happened because of material overhead applied

Indirect cost transactions

Indirect cost 30.63$ represents material overhead applied to material consumption based on Costing sheet setup. Please note that plant overhead (13.13$) is calculated based on material overhead and contributes to the indirect cost sum

*Voucher transactions Ledger voucher provides details on which account was credited for “Estimated indirect absorption”, which account was debited for “Estimated indirect absorption offset” in regards with material overhead applied

Current WIP balance

Current WIP balance screen provides an overview of WIP (Work in process) cost amount at this moment

Please note that material consumption is segregated from material overheads applied

Kanban board for process jobs: AlexCar – Start (Assembly)

The next step in Car (AlexCar) kanban execution is to start Assembly kanban job

Please note that I start only Assembly kanban job. This is because Painting kanban job can’t be set to status In progress before all previous jobs in kanban flow are completed

Kanban board for process jobs: AlexCar

Once you start Assembly kanban job its status changes to In progress

At this moment no changes happened to inventory transactions

Inventory transactions

Kanban board for process jobs: AlexCar – Complete (Assembly)

The next step in Car (AlexCar) kanban execution is to complete Assembly kanban job

Kanban board for process jobs: AlexCar

Once you complete Assembly kanban job its status changes to Completed

At this moment no changes happened to inventory transactions because we yet have to complete Painting kanban job which represents the last activity in kanban flow

Inventory transactions

Kanban board for process jobs: AlexCar – Start (Painting)

The next step in Car (AlexCar) kanban execution is to start Painting kanban job

Kanban board for process jobs: AlexCar

Once you start Painting kanban job its status changes to In progress

At this moment no changes happened to inventory transactions

Inventory transactions

Kanban board for process jobs: AlexCar – Complete (Painting)

The next step in Car (AlexCar) kanban execution is to complete Painting kanban job

Kanban board for process jobs: AlexCar

Once you complete Painting kanban job its status changes to Completed

At this moment the system physically updated receipt inventory transaction for Car (AlexCar). By other words Car (AlexCar) assembly has been produced and is available now. This is because we have completed the last activity in kanban flow

Inventory transactions

Kanban board for process jobs: AlexCar – Costing

The result of finished good receipt for Car (AlexCar) kanban is reflected in Standard cost transactions details.

Standard cost transactions

Please see details of Standard cost transactions for Car (AlexCar) kanban in the table below

*AlexCar Inventory receipt transactions for Car (AlexCar) will be displayed on Lot transactions screen *Voucher transactions Ledger voucher provides details on which account was credited for “Production offset account, report as finished” and which account was debited for “Production, report as finished” because of finished good receipt Please note that at this moment the system posted labor consumption for 22.50$ because of Assembly and Painting jobs (Run time). And Ledger voucher also provides details on which account was credited for “Production WIP issue”, which account was debited for “Production - WIP” as well as on additional postings happened because of labor overhead applied

Indirect cost transactions

Indirect cost 3.75$ represents labor overhead applied to labor consumption based on Costing sheet setup. Please note that plant overhead (0.17$) is calculated based on labor overhead and contributes to the indirect cost sum

*Voucher transactions Ledger voucher provides details on which account was credited for “Estimated indirect absorption”, which account was debited for “Estimated indirect absorption offset” in regards with labor overhead applied

Route transactions

Route transactions show the details of labor consumption postings for Assembly and Painting Process jobs (22.50$)

*Voucher transactions Ledger voucher provides details on ledger postings because of labor consumption as well as labor overhead applied

From costing perspective at this moment you can review realized consumption and realized cost amounts related to material consumption, labor consumption and various overheads applied

Current WIP balance

The system represents material consumption, labor consumption and various overheads applied separately

However if you want to see aggregated picture you can do that Costing sheet tab (Mode = WIP in). This screen shows you manufacturing costs broken down by cost group

Section F: Costing

Production flow provides a costing context in Lean manufacturing in Microsoft Dynamics AX 2012

Backflush costing calculation

Backflush costing executes the following steps:

>-           Determines production flow unused quantities as of the period end date

<-           Calculates the production flow's net realized usage over the period.

<-           Clears the work in process from the realized resource consumptions and products

<-           Calculates production variances to standard cost for the period

<-           Calculates the production variances to standard cost. The variance is calculated per cost group

Please note that in backflush costing all production flows of the legal entity are used in the same batch run

At this moment the system financially updated all receipt and issue inventory transactions related to Car frame (AlexFrame) and Car (AlexCar) production

Inventory transactions

Please note that the system recorded financial costs for inventory transactions according to standard costs predefined for products. The variance will be posted separately onto production flow based on the difference between actual material and labor consumption as well as all applied overheads against predefined standard costs. There's a discrepancy between standard costs for manufactured goods versus actual costs because initially I didn't use BOM calculation to calculate cost price of manufactured products and specified their cost prices manually.

Kanban board for process jobs: AlexCar – Costing

The result of backflush costing calculation for Car (AlexCar) kanban is reflected in Standard cost transactions details

Standard cost transactions

You can also review calculated variances per cost group

-679.83

Please see details of Standard cost transactions for Car (AlexCar) kanban in the table below
 

*AlexCar Inventory receipt transactions for Car (AlexCar) will be displayed on Lot transactions screen *AlexFrame Inventory receipt transactions for Car frame (AlexFrame) will be displayed on Lot transactions screen *Engine Inventory issue transactions for Engine will be displayed on Lot transactions screen *Transmission Inventory issue transactions for Transmission will be displayed on Lot transactions screen *Voucher transactions Ledger voucher provides details on which account was credited for "Production issue" and which account was debited for "Production receipt". Production substitution variance is reflected in "Production substitution variance" posting  Please note that when production order was ended the system reversed all previous postings for WIP (Work in process) including material consumption, labor consumption and all applied overheads

Kanban board for process jobs: AlexFrame – Costing

The result of backflush costing calculation for Car frame (AlexFrame) kanban is reflected in Standard cost transactions details

Standard cost transactions

You can also review calculated variances per cost group

126.36

Please see details of Standard cost transactions for Car frame (AlexFrame) kanban in the table below
 

*AlexFrame Inventory receipt transactions for Car frame (AlexFrame) will be displayed on Lot transactions screen *Floor Inventory issue transactions for Floor will be displayed on Lot transactions screen *Roof Inventory issue transactions for Roof will be displayed on Lot transactions screen *Side Inventory issue transactions for Sides will be displayed on Lot transactions screen *Voucher transactions Ledger voucher provides details on which account was credited for "Production issue" and which account was debited for "Production receipt". Production substitution variance is reflected in "Production substitution variance" posting  Please note that when production order was ended the system reversed all previous postings for WIP (Work in process) including material consumption, labor consumption and all applied overheads

Summary: This document describes a primer of traditional manufacturing approach to Car production in Microsoft Dynamics AX 2012. The scenario operates with 2-level BOM with manufactured sub-assembly. Production order is a main document in traditional approach which controls manufacturing process and provides a context for cost accounting. In this scenario I highlighted all aspects of manufacturing process including setup, creation, estimation, scheduling, execution and costing. Most importantly I'm giving a detailed practical example of how to implement typical manufacturing scenario using traditional approach in Microsoft Dynamics AX 2012. This provides a foundation for comparison between traditional approach and lean approach in Microsoft Dynamics AX 2012. Please review other documents in the series to compare traditional manufacturing approach to lean manufacturing approach in Microsoft Dynamics AX 2012.