Product Configuration and Costing in ERP Systems
One of the most important objectives of manufacturing companies in using ERP software is the need to display their costs properly because a company that cannot display its costs properly cannot set proper prices for its products and cannot compete in the market.
At the core, all ERP systems can easily determine product costs if data are available. Thus, the most important issue here is to ensure that product is recorded to the system properly instead of calculating the cost.
The correct entry of product to the system involves the process starting from the proper formation of smart product codes of products, semi-finished products, commodities and raw materials to the creation of product trees and routes. It is crucial to enter them without error and in a systematic manner.
Product diversity changes by the industry. It is impossible to configure all products individually especially in furniture and textile industries where product diversity can reach to hundred thousands. Thus, variant feature in routes and recipes is a ‘must’ rather than a requirement for such types of industries.
In this writing, we will try to examine together how Integrated Product Configurator by Login Software develops a solution to these requirements.
Login offers a system solution where companies making tailored production can manage all of their business processes effectively. It achieves this by integrating “configurator” feature developed as a result of long R&D activities with all production, stock, sale and cost processes within Login ERP.
With Login ERP, a product can be easily designed to the needs of customer with a few simple clicks at the moment of order. Product tree of the product to be manufactured can be “instantly” created from the dynamic product tree that has been pre-defined to the system. Thus, it is no longer necessary to save product tree or static product codes, the number of which can reach to millions, in the system.
When variant features of product are selected, (if any) extra labor can be taken into account and actual cost can be viewed at the moment of order. Whether product can be manufactured or not can be controlled depending on the status of stocks and workshops and actual cost and delivery date can be notified to the customer.
By means of another application in Login ERP, wholesales of tailored products or detailed cost analyses, manufacturability controls, bid preparation and revisions can be achieved in a short span of time during the tender preparation phase.
Parameter Variables and Groups
All features and assignable values that can be configured for products are defined for parameter variables. As parameter groups, which variables will be asked during information entry, which variables will determine the price, which features will be available on the barcode label to be affixed on the product, whether extra price will be charged for other size requests (except standard size) such as width, depth etc. and information entry order are determined based on extra price list code.
Dependent Variable definitions ensure to find component code to be used in the product
tree depending on any property of product.
Product Tree Pattern
If components to be used for a product and their quantities are always the same as a standard,component code and quantity are directly inserted. If component code to be used and quantity depend on any property (such as color, model, width, height, depth etc.), component code and quantity to be inserted in relevant fields are determined by formula.
The screen that displays variable features of product appears at the moment of order for products that allow configuration. Questions to appear on the screen are retrieved from pre-defined patterns in the product stock card. On this screen, product configuration is determined by selecting alternatives of product variable features. This selection can be either manual or retrieved from standard pre-defined configuration table. Thus, entry phase is accelerated.
It is possible to make fast entries by defining possible product configurations.
Automatic Pricing at Order Entry
Features for which extra price will be charged can be determined from product variable feature screen.
If product width is wanted to be 140 cm while standard width is 150 cm, system displays on the screen the extra price to be charged for reducing the product width. Extra price that appears on the screen and product list price are summed up and row sum is calculated by multiplying it with product quantity. Which variable will be chargeable is determined from Product Configuration Parameter Group pattern definition screen.
Validity date of extra price, foreign currency type of price and how much will be charged for which products are defined on extra price definition screen.
A00% refers to all product codes with prefix ‘A00’.
Entries that do not overlap with pre-defined configurations are prevented when configurations to be used on product basis are determined.
When MRP is run, product trees are automatically created in the system with the use of product configuration and pattern definitions.
Barcode label to be affixed on the product based on product configuration features can be sent by the system to barcode printer.