Business Central / NAV UG
Business Central / NAV UG
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Production Material Variances
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Production Material Variances
@tracyhanson posted on the old forum:
We are struggling to understand our material variances from production orders. When we look at the value entries or the GL for material variances, we are finding that Business Central is only showings us the total variance but not what is driving it (i.e. we used qty 2 of part 1 but the BOM only called for a qty of 1). Outside of pulling the consumption by production order that has generated a material variance and comparing it to the BOM manually, is there a better way to pull this data from business central?
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Tracy Hanson
Finance Business Partner, Operations
Terso Solutions Inc
Madison WI
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18 Replies
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@tracyhanson What costing method are you using?
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@amandamayer – in this scenario we are using standard costing. We do have some specific costing but those are not being questioned. After i posted this i was able to do some more digging and believe our BOM versions are playing a part in this. The BOM version our standard cost was set at is not the BOM version currently being used in production. I was able to identify in one case where there truly was no consumption variance based on the current active BOM version. The material variance posted to our GL and what showed in our value entries was truly the cost difference between the standard cost and the active BOM version. Our BOM versions change frequently throughout the year but we our policy is to only set costing once a year (with very few exceptions).
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I thought I was remembering that correctly and that the items you are looking at your finished goods (i.e. where configuration changes cost). Variance reporting is difficult, especially if your standard cost roll doesn’t match the timing of cost changes, which may certainly be valid. See if @SteveChinsky ‘s BI report works and let us know.
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@amandamayer the components we are looking at in this scenario are not finished goods. these are mostly subassembly level items that are standard costed. However, we use BOM versions to track changes to the BOM (i.e. we removed a component because it was no longer needed or we changed a component because the original was obsoleted). What we are finding is that our material variances are not true consumption variances, they are now a case of standard cost vs bom version cost – so a cost variance.
The system is not looking at the BOM that we set the standard based on. If you look at our stats window on a prod order, the standard cost = the cost of the bom version that we set the cost at (lets say 1,000). but the expected cost = the cost of the current bom (lets say 1,200). when there are truly no consumption variances (based on the current bom version, not what we set the standard on), the material variance that is being recorded is equal to the standard cost – the expected cost (in the example, it would post 200 unfavorable). In the event that there is a true consumption variance (lets say the cost of that component was 9.00 and it was not used), the system will then post a material variance of 191. Without manually digging into the each production order, there seems to be no visible way to determine if that material variance is a true consumption variance or if it is a cost variance.
what is best practice when using bom versions like this? our policy is to only set our standard costing once a year. but it seems the only way to truly see our consumption variance would be to reset the standard every time. Unless there is a way to tell the system to post cost variances different than consumption variances?
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How often are the BOM’s changing? I would normally agree with rolling once a year, but if you are truly trying to see production variances that are not related to BOM changes, you would have to roll more frequently.
If you can accept the small variances that are occurring between standard and expected, then add on the potential of a PowerBI report to capture the true material variances would be the best way to manage.
I would also suggest posting a suggestion here (Categories (dynamics.com)) for better manufacturing variance reporting. My guess is it would get lots of votes.
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Our BOMs are changing more frequently than they have in the past. I did have an internal meeting yesterday and we do agree that we do not want to reset the cost as there is value in seeing the cost variances that are associated with our bom changes. We are exploring how to make it more visible that its a cost variance vs a consumption variance. a couple manual options have been thrown out but i don’t exactly like those for various reasons. Its back on my plate to explore the powerbi reporting more here.
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I’m not sure if you are looking for this or something else, but, you can look at the production lines from the (finished) production order to see Expected Qty and Actual Consumption (Qty).
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@lewisrosenberg i replied to you on the old site as i was not set up yet on this site. Can you guide me on how to find these “production lines” ? if i look at the finished prod order – entries – item ledger entries, i do not see these columns you noted and i do not see them in the personalization pane either.
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If you have JET, you can create a query that brings in all of the information and provide the variance data at run. I export the value Entries directly into Excel from BC…faster than bringing in through JET, then my query brings in the necessary ITEM data and BOM data in two other tabs. The variance entry type lines tie me back to what hit my Production Variance line on the GL monthly. I then have a Pivot table that summarizes the variances by PDR, then I look at the big ones from there. It shows me where they over or under consumed or used different materials.
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One more thing…if you are using STD cost and you do not have a roll up query to find items where the roll up does not equal the STD cost on the item card, you will continue to have variances at every output where they are not equal. We have too many items to roll up costs on all items, so I have a query that I run that shows if any component STD cost changed and/or the BOM route was updated and cost was not rolled up. It used to be a huge issue when accounting did not control all of the changes, hence the query. Now our biggest driver of variances is where STD cost changes on components or changes to BOM/Routes occur in the middle of a run. The variance will post once the PDR is finished. No way around it unless you close out all PDR’s, make changes, roll cost and then create new PDRs. We accept the small variances on the runs for these situations because we try to keep our runs relatively short.
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@tracyhanson – Yes, most BC/NAV users create a Jet Report, COSMOS report, or Power BI report to show variances from the Finished Production Orders. The replies I have read denote that if you are running Standard Cost you need to Roll-up (run Standard Cost Worksheet) each manufactured item. This sets the standard and used when you click Statistics on a Production Order. As for the variances, I am attaching a Jet Report on Production Variances. Just link to your environment.
I know there are Power BI ones I can share but I am sticking with Jet since I’m guessing this is the reporting tool you might be using.
Reach out if you have more questions.
Steve
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@stevenchinsky We have power Bi and do not have JET. I have attempted to create a report here but am not getting any more information than this sum total i mentioned. if you review my response to Amanda, i believe our use of BOM versions are playing into this.
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@tracyhanson – I have used this for Manufacturing in Power BI – https://appsource.microsoft.com/en/product/power-bi/eknowtion.business-central-manufacturing-insights?tab=overview&exp=ubp8
Maybe this will help you. You can load as a Trial to test.
Steve
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@SteveChinsky thanks for sharing this. i am not sure this is going to be the answer for us. As a paid subscription is required. i will share the sample data with my team and see if it is enough to warranty trying the free trial. I do think our main issue is the bom versioning as that is what is causing most of the “untraceable” variances as they are not actually consumption based, but truly standard cost based.
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