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In a scenario where a raw fabric is issued for CMT based production we exactly dont know how many shirts will be produced of which size. We have to create production order when production is completed. but it is not giving correct picture of WIP. Is there any solution of it. Additionally how we can equally divide the fabric on all production orders.
You should only pay VAT on the value added by the vendor - you are not selling the issues and buying the item back - you are buying the contracted service and any RM used by the vendor - in effect the vendor is just another step on your route. However without knowing what to order you would have to have e.g. have a monthly Order for 1 of the most popular variant and add a lot of byproducts or co product lines for each variant produced for that month.
You will have no visibility on your wip until complete unless the vendor gives you interim feedback .
You could however do a manual process and then try to automate it e.g. daily movement against the vendor stock based on a daily stock return to write it off form stock, and another to receive finished stock . A data load template could streamline that.
The challenge is that mrp does not see demand or supply until it happens and has to be driven by min max settings and regular stock updates.
You should be able to choose appropriate accounts to see what has been 'expensed into wip' and the new value of stock made, and total cogs but it might be tricky to get it by specific variant, and any material scrap loss might have to be allocated based on number of pieces produced or direct COGS.
If we use PO for the same then we cannot consume Raw Material into a Finished Goods unless we use BOM journal and we will have to face tax on purchases of finished goods issues as well.
It takes almost a month to complete our order and it is received partially and after some days the remaining units are received. Actually we are currently moving the Raw Material on a virtual location of Vendor but Finance is not getting the true picture of WIP.
Thanks for the clarification. I forgot about this abbreviation. Not it makes sense. You do own the fabric, but another company is cutting and sewing the shirts? In that case, the WIP might be related to the fabric consumption and expected costs from the CMT vendor.
I had seen a scenario where a company bought the fabric and capacity at a vendor. But at that time, it was not decided to create e.g. skirts, pants or blouses out of it. They did not use the production module for this. All was posted using purchase orders and inventory journals. Your scenario might be a bit more concrete on fabric consumption and the type of product which will be produced. I'm not sure if you can provide different sizes as result of the reporting of finished goods. I never worked with manufacturing in this way. The output was always or just one product or the configuration was known.
If the work is done by sub contract then you have no visibility of wip anyway so maybe try a simpler approach.
Create a vendor location/warehouse and transfer material there, Create BOM journals to put the finished goods received into stock. and to flush the components based on standard bom consumption.
Do a once a month/week stockcheck and update adjustment of the materials held by the vendor. You may want to to allocate the cost of any write offs across the different inventory item posting accounts based on the quantities produced...
CMT stands for Cut, Make and Trim. A term used for outsourced production on some service charges on the premises of vendor with Material provided by the Company.
I have also given the example of Shirts. In case of Men's Shirt manufacturing, we issue fabric to vendor in bulk. An estimated amount of each SKU is ordered to the vendor. SKU is distinguished by different sizes. Actual quantity of each SKU produced may differ than the one ordered. If we create BOM and production orders in advance separately for each SKU, then we will have to edit them later on as per the actual production. Editing of a number of SKUs Production Orders and correction of fabric consumption in each SKU is a cumbersome task. On the other hand if Production Orders are not created and started we cannot have true picture of WIP. We need the solution for this problem.
Second issue is that Fabric is issued to vendor in bulk. We equally divide it on all BOMs. But still there remains some quantity in decimals in stocks. Is there any solution to this problem that whole quantity is divided on the BOMs and there remains no quantity in stocks in decimal.
Can you explain the abbreviation CMT? If you don't know the end result in advance, what do you expect to be the WIP? Can you provide an example?
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