Backflush accounting is a certain type of "postproduction publishing", this is a product pricing approach, used in the Just-In-Time (JIT) operating environment, where costs are put on hold until the goods are completed. Backflush accounting delays the recording of costs until after the event occurs, the standard cost is used to work backwards to 'cost' manufacturing costs. The result is a detailed tracking of costs omitted. Journal entries to inventory accounts may be delayed until the product completion time or even the time of sale, and the standard cost is used to assign charges to the unit when journal entries are created. The backflushing transaction has two steps: one step from the transaction report of the manufactured section that serves to increase the quantity in the hand of the manufactured part and the second step that reduces the inventory of all component parts. Part component number and quantity per taken from standard material bill (BOM). This is a substantial savings on traditional methods a) removing component parts one by one, usually into discrete work sequences, b) receiving finished parts into inventory, and c) returning unused components, one by one, back into inventory.
It can be argued that backflush accounting simplifies costs because it ignores both labor variations and work processes. Backflush accounting is used where the overall business cycle time is relatively short and inventory levels are low.
Backflush accounting is not appropriate when the production process is long and it has been linked as a major flaw in the design of the concept. It may also be inappropriate if the bill of materials contains not only items but also many parts with fewer variable consumption. If parts with variable consumption are only a few, such as the fat or ink used to print product labels, the amount consumed can be given to the product-independent cost center on withdrawal from the store (preproduction publishing) and finally can be described. thereafter for certain product or group of products, just like indirect costs or other overheads. The difficulty of maintaining the correct inventory on the shop floor can also arise if it is a normal practice to use alternative materials and/or quantities without the need for humiliation. Therefore, in the case of more complex production systems, it is a better approach to using a Manufacturing Execution System (MES) that collects real production data and is able to provide appropriate data to accounting software or enterprise resource planning systems where goods problem noted. Thus, the variance in consumption, compared to standard bill of materials, is taken into account and assigned to the correct product, production order and workplace. Another advantage of using MES is to apply the Production Track & amp; Ongoing track and work status is also known in real-time. The disadvantage of MES is that it is not suitable for small series or prototype production. Such types of production should be separated from serial production and mass production.
Video Backflush accounting
The meaning of backflushing
From the perspective of financial accounting, backflushing is a perpetual inventory system technique. Small businesses that have a wide range of goods in their inventory still use periodic inventory management. The periodic inventory system does not require daily physical inventory tracking. Purchases, cost of goods sold and inventory in hand can not be traced until the end of the accounting period when the physical inventory is performed and the final inventory is compared against the initial inventory and purchase amount. The cost of ending inventory can be calculated using LIFO or FIFO inventory accounting methods, or other less common methods. The end of the accounting period is usually regarded as the end of each month because otherwise, some taxes such as VAT (value added tax) can not be charged. Monthly stock taking is a major disadvantage of the periodic inventory system. Another disadvantage is that it also requires a monthly reconciliation between management accounting records and financial accounting.
The main difference between periodic inventory and perpetual inventory is that perpetual inventory does not maintain inventory balance by using inventory accounts, whereas all inputs are directly booked on the cost account. The principle is as follows: output = initial inventory input - ending inventory
At the end of the inventory accounting period is assessed by taking stock: inventory asset account = expense account
At the beginning of the accounting period, the shares are canceled using the reverse order: expense account = inventory asset account
During the accounting period, each input is ordered directly to the cost account. For example, if we purchase ordering materials are:
material account = supplier account
account material cost = material account
At the end of the accounting period, at the time of taking the ordering stock will be a material account = material expenditure account
The development of more sophisticated computer inventory scans has enabled the perpetual inventory system to be regularly used by companies. According to generally accepted accounting principles (GAAP), a company may use a perpetual inventory system or a periodic inventory system. Inventory Inventory Management is a system in which inventory store balances are recorded after each transaction. This eliminates the need for stores to seal continuously for stock-taking inventory as a lasting inventory system allows for ongoing stock pickup. The permanent inventory system stores accounts that run from the company's inventory. The perpetual inventory system involves more recording than the periodic inventory system. Each inventory item is stored in a separate ledger. This inventory ledger contains information on cost of goods sold, purchases, and inventory at hand. The perpetual inventory management system allows for a high degree of control over the company's inventory by management. Inventory inventory management is commonly used by companies that have the ability to scan inventory items.
In the context of perpetual inventory, backflushing is an automated calculation of materials consumed for production, upon confirmation of production, eg. when the 4-wheel car is launched from the assembly line, 4 wheels and tires are considered consumed and issued for production orders automatically by rinsed back by the system. Usually the assembly line has its own limited stock of materials as a work in progress. This inventory is replenished by transferring materials from a warehouse (store) to a self-determined location assembly line, such as a supermarket. On receipt of the goods, the consumed materials are posted automatically from the designated location for the issued production line. In other words, watering back only refers to material that has been pulled from the warehouse inventory (store) and sent to the shop floor. Sections are issued from the store to Work-In-Process inventory, but not on the basis of a job order or for a particular production order. They are issued in an estimated amount to cover the requirements of individual work centers and production lines. Publishing can be used to cover a period of time or to fill a fixed-sized container. But unlike traditional approaches, it is also known as "preproduction publishing" where fees are assigned to product orders on the withdrawal of materials from stores and upon completion of excess material production is given back to the store, backflushing of the delay until receipt of the finished product or the assembly is removed. The remaining quantity of unused materials remaining in stores is still stored in the system as floor stock and so the material will not be ordered incorrectly through the Manufacturing resource planning (MRP). By eliminating work-in-process accounts, backflush costs simplify the accounting process. However, this simplification and other deviations from traditional costing systems mean that backflush costs may not always be in accordance with generally accepted accounting principles (GAAP). Another disadvantage of this system is the lack of a sequential audit trail. The main advantage of postproduction publishing, not necessarily backflushing, is that it is not necessary to update inventory storage balances on withdrawing materials from stores and recording excess material through inverted posts (storno). This is very useful in series or mass production where there is no need to return excess material to the store as it is used for subsequent production orders. Even if the excess material given back to the stores does not involve updates to inventory balances in financial accounting (stock accounts). It only involves the transfer of shares in inventory management or warehouse management. Only the material reported consumed via the backflushing method or by MES implies an update to the inventory balance:
material account = material expenditure account
Back flush is used for the material needed for the product and has a fixed relationship with it. Depending on how backflushing is implemented in the accounting software used and depending on organizational rules, reprocessing can create an error record that needs to be analyzed by someone responsible for cost accounting. One possible reason for the creation of this error note is that there is not enough supply of books available at the specified rearing location (shop floor). By simply deleting the error records, without completing them, may mean that the costs are not properly set for the product and/or even that the expenditure in financial accounting (inventory account) is not recorded. Such error records are not specific consequences of rinsing. It may also exist when the MES system is in use when no rinsing is required. The reason is that any error in transmitting and/or interpreting data sent by the MES system to the ERP system is submitted and needs to be done. When using replanting, any piece, variety of material use (using more or less than specified in the BOM) or substitution must be reported separately to maintain acceptable inventory accuracy. This is usually applied as an unplanned transaction. The downside of unplanned transactions is that they are prone to error. Unplanned inventory transactions must be removed and replaced creatively with planned transactions because even a very low percentage of misreported transactions will make the inventory accuracy quickly to an unacceptable level. That is why backflushing is recommended only if 2 conditions are met: Low I/O Variation and Low Lead Production Time. Without low I/O variation through low scrap, non-standard use, and substitution, the system inventory level becomes unreliable. Exception transactions can not come quickly or accurately enough to tame the animal. Loss of confidence in the system occurs. Without a short manufacturing lead time, the components move into production but not directly free from the ERP inventory. This causes confusion. The obvious difference between the amount of physical inventory and the system leads to frustration and lack of confidence in the system. Without an accurate and timely inventory level, internal production plans and external purchase orders can not be scheduled effectively, causing a shortage of inventory and excess inventory. Lack of inventory leads to disruptions to production schedules, forced additional arrangements, forced replacements, overtime, premium freight charges, lost shipments and lost capacity. Excess inventory increases obsolescence, and depletes valuable cash flows and shelf space. Both excess inventory and indirect deficiency can lead to poor quality. A manufacturer can not calculate its travel cycle to accurate inventory. Cycle count is not timely enough to be useful. And the number of cycles is more likely to introduce errors than to fix them.
Maps Backflush accounting
Alternative for backflushing
If the nature of the manufacturing process is such that the variation in component use is natural and unavoidable, and/or long production waiting times, ERP implementation design that requires a different methodology than backflushing of store floor stock is required. There are two strategies used to deliver materials to the shop floor: Press and Drag, see Push-Pull strategy. Depending on the strategy used and depending on how it is applied, backflushing can be completely eliminated.
Alternative to Backflushing when using push-strategy
The traditional way of removing the consumed ingredients is to use multiple issues and return to work orders. Components are calculated when issued to a production order from the Shop when the production order is opened. The components produced and the remaining components are counted when returned to the store when the work order is closed. In conjunction with a tightly controlled store. Store with discrete storage, this can provide extremely high inventory accuracy without the need for additional transactions to report memos, material substitutions, and non-standard use separately. This obviously requires more transactions than backflushing. But this can be automated in many ways, especially since most transactions take place in restricted areas (Stores) and not throughout the factory. Accountability for component usage and operator time/efficiency at work-order level by operator/shift/cell is greatly improved in this method through backflushing. The work order also provides the potential for higher quality control measurements, substitution management (via modified work order BOM) and higher parts and accuracy of customer container bar-coding. Store floor stock in this case uses a discrete storage area, identical to the number of production orders but no backflushing required when the part produced is calculated. Remnant components are returned to the store and all components of different storefront store disks are issued against production orders (post-production issuing), in the same way as backflusing, but not based on bill of materials (BOM) but on real stocks consumed (transferred from stores ) for a particular production order.
The disadvantage of this method is that it may not be suitable for more complex and repeatable production because it requires the perfect dispute of WIP (raw materials and assemblies) on the shop floor: materials issued for production orders should not interfere with other production orders or sequences the next production of the same type. This can be done only if all the necessary work steps to complete production orders are limited to more or less for one workplace. That is why such an approach can be applied to complex products using only push strategies. The push strategy means that the complex finished product is divided into many smaller assemblies and even assemblies can contain smaller assemblies and so on. All of these assemblies will receive their own production orders. This production order is usually made automatically by the MRP system \ ERP -. The ERP system uses the Manufacturing resource planning (MRP) for production order planning. Usually only production planning for finished products is done manually by the production planner, the assemblies are planned automatically based on backward scheduling. This is especially useful if assemblies are produced in other production lines, workshops or factories. The weakness of MRP and Push's strategy is that it usually leads to larger shares in the supply chain. That is why Push is considered the opposite of lean production because lean production involves a Pull strategy which means that each section should only be produced if there is a specific demand for it and therefore WIP will be small. The push strategy is when the MRP is also used to schedule production orders for semi-finished products (assemblies) on the expected demand of the finished product. These assemblies are incorporated into the stores without reference to a particular production order of the finished product. The finished product may not have a production order released at the time the assembly is delivered to the store. That is why using MRP to schedule production order execution is by definition of push system because release is made according to master production schedule regardless of system status. Therefore, there is no limit to WIP a priori . However MRP can be designed in such a way that it has explicit WIP restrictions. That means that the assembly is not produced further if a certain supply level is reached. MRP with WIP constraints can be regarded as a pull system. However, even if WIP constraints are implemented, push strategies generally mean that the time, which is required from the first operation or assembly until the finished product is obtained, is longer than the pull strategy. This is due to the lead-time required for each assembly and can be analyzed using a technique called value stream mapping. Usually there is also more handling: put assemblies into stores, take assemblies from store to next production step (order) using assemblies to make assemblies or other finished products. In fact, most companies use both strategies. For example: You can use MRP (push) without WIP constraints to schedule assemblies produced in other workshops, factories or external suppliers and Kanban (pull) in your own factory. You can also use Kanban to schedule assemblies in a workshop or other factory, but it is usually not done when the assembly is manufactured on a large machine because the MRP of several days' demand can consist of many larger production order sizes of the same type. in such a way that the scheduling system workshop itself (MES) can then use the available machine capacity better by bringing the production order to the optimal order using the appropriate algorithm. This usually happens when machines are expensive, their numbers are relatively small and they have large output capacity and expensive setup time. Implementing Kanban in such cases would need to use a large number of smaller, cheaper machines dedicated to a particular production line, to react more flexibly to demand. Another requirement is that the transport frequency from \ to the factory becomes higher and the distance to the plant becomes relatively small. However, this requirement can not be met in every case. On the other hand, workshops (suppliers) that produce assemblies may very well use a push strategy or pull strategy to deliver the required materials to each of their own machines.
As described above, this backflushing alternative has self-correcting properties: store floor stocks are always associated with a particular production order, in which all consumed ingredients are actually excluded. On the other hand, backflushing with a very definition can never self correct and should only be used when correction is rarely needed. Objections can be made with the alternatives described above that the memo is not reported with a reason code, or breaks apart from other forms of non-standard use. But how accurate is the scrap report in the environment without inventory accuracy? It's better to complete the inventory accuracy and worry about the memo later as a separate issue. Option: apply a separate memo analysis protocol that is not related to inventory transactions. The cut section is separated for subsequent inspection, recording of quality data and possible rework. In both cases, the removed part has been removed from the inventory at the end of the manufacturing cycle (perhaps by returning fewer components to the store). Therefore, inventory transactions are only required when parts are deemed acceptable upon inspection, or after rework operations are performed. Scrap reporting can also be done using data from Process control systems and/or Manufacturing Execution Systems. Usually such systems exist to some extent in any company, even if they are not called PCS or MES and even if they are used ultimately to store data on the performance of personnel and piecework, as a basis for calculating workers' salaries. Such a system can be extended so that each worker reports the discarded parts as well.
More technical requirements like Track & amp; Trace, Overall Equipment Efficiency, Production Performance Analysis or display production progress of a production order in real time should always be implemented as part of MES. This is a poor approach to implement such a system more or less just for the sake of inventory accuracy. The accuracy of the inventory shall be accomplished through a much simpler means, as described above and should not depend on the example on the quality of scrap reporting. The same is true on the contrary: for example if you need Track & amp; Trace (which components include lots entered into products with specific serial numbers) You should not rely solely on components that are issued as consumed for a particular production order, especially when using backflushing would be a bad idea.
The same goes for production scheduling: ERP \ MRP can be used to schedule production orders (to set deadlines for their shipments) as well as to schedule receipt of goods from suppliers. It is also a very useful tool for offering data for internal use of medium to long term demand and/or planning or estimates for external suppliers based on BOM explosions. But ERP \ MRP is usually not very useful for store-scheduling operations on store-floor. Production planners using ERP can oversee total gross capacity demand for all or for certain types of operations but may not see congestion on individual machines or workplaces. It is the task of the scheduling system (MES) to send production orders received from the ERP to individual machines \ workplaces. When lean production is used (Drag), see next chapter, production orders received from ERP usually refer to the finished product or to more complex assembly. In this case, the scheduling system is even more important because it has to deliver parts of the production order to the individual workplace.
Alternative to Back watered when using Pull Strategy
The pull strategy means that the work center requests the materials needed for a particular production order from the store or from the upstream workplace (demand driven). Usually this means that semi-finished products (assemblies) are produced for specific production sequences of finished products and therefore stocks stored in the supply chain are better managed (usually smaller). This can be done using Kanban. Kanban is basically a production scheduling system. It can be used in conjunction with the Process control system to create a Manufacturing Execution System. A process control system collects data from the workplace in which the production sequence is executed. It accepts individual workloads assigned by the scheduling system to the individual workplace. The purpose of the scheduling system is to optimize the use of resources. To schedule the production of individual workplaces, Kanban can only be used or more elaborate optimization software is required. Usually scheduling systems based on the optimization software are required if production is run on the machine and it is not easy to decide which machine to reserve specifically in order to use the resources optimally. This type of scheduling problem is known as a Job shop scheduling or Flow shop scheduling. Job shop scheduling means that every production order must run on only one machine for completion and the problem is to obtain an optimal order order for a given machine and, if we have multiple machines that can execute the same command, to assign an order to a machine that has a source power available. Flow shop scheduling means that production orders must pass through several types of work centers (machines) in a pre-determined order. This is a more complex issue than "job shop scheduling" because after completing a single step of work, the system must set the available machine for the next type of operation until all operations for the given production sequence are completed. Regardless of the type of scheduling problem, the algorithm required to complete this task has n! complexity (n factorial). There is a similar type of problem known as the Traveling Salesman problem. Only a very small problem of this kind can be solved by using Brute-force search. Simple example: Let's assume that we have only one machine and 20 production orders. Due date is not important. We want to place these 20 production orders in optimum order so that the overall setup time is minimal. All time settings required to switch from one order to another are known and may be different: machine settings up from order1 to order2 may take 1 minute, but from order 2 to time order1 may differ from 1 minute. So we have a 2 size permutation for 20 identical objects with 320 different setup pairs. But there are 20! = 2,432 * 10 ^ 18 different possibilities to place 20 orders in sequence. Counting any possibilities is not feasible because there are 2,432 * 10 18 possibilities. Therefore, the Heuristic algorithm is used to solve such problems. These algorithms do not guarantee to find the optimal solution, but they usually find solutions around the optimal solution in a fairly short time. So the meaning of MES is to be able to use a heuristic algorithm in such a way as to comply with business policy. Business policy defines how antagonistic restrictions are weighed, which is more important. These antagonistic restrictions are: delivery deadlines, machine setup time, and machine usage. The scheduling system knows everything about the machine's capabilities, the tools available and so on, and therefore can make optimal decisions, which the workplace (machine) must execute which parts of the production order and when. Of course the operator should be able to refuse the order if something unexpected has happened (the tool does not exist or is not operational etc.) And the system should be able to reschedule the order automatically or with the help of the planner or the production supervisor. A MES must be a dynamic system that can react to real and unexpected events.
In such an environment, where production orders are accepted to form the ERP \ MRP software scheduled to use MES or Kanban and materials assigned to the shop floor on withdrawal from the stores, no need to use backflushing. Materials are usually removed from store to supermarket on the shop floor without being associated with a specific production order but in the amount required to cover the demand for a production order already released. This number is dynamic and we call it "Kanban-quantity". This should be calculated in realtime by MES. The supermarket itself can be regarded as an affront to the principles of lean production, especially from the concept of "One Piece Flow", as it represents the ongoing work, WIP, which has not been assigned to a particular production order executed or that has been released for production. Stock at the supermarket has been issued for store floor stock. The use of a supermarket is usually required when not all individual work steps required for completion of a production order have the same execution time and therefore a small buffer is required to avoid a workplace waiting for the upstream workplace for complete work. These buffers are usually maintained using 2 containers at the supermarket where such assemblies are stored. If there is no empty container, no more assemblies are produced. If one container is empty, the remaining containers are exchanged for the empty (FIFO) and assembly production is continued according to the quantity of kanban calculated by MES. Another supermarket's goal is to enable rapid refilling of the workplace with the required raw materials without the need to take these materials from the shop for each production order as opposed to the above-described push strategy in which each material must be issued for each production order on withdrawal from the store. In other words, the amount of assembly or raw material stored in the supermarket is very limited, there is an explicit WIP limit. Usually supermarkets are placed near the workplace, so the workplace has quick access to the required materials. Each material has its own storage location in the supermarket (coordinates) so it can be easily found when needed. The materials to be consumed are assigned by each workplace to a production order either by scanning them in the withdrawal from the supermarket (prepublishing publishing) or by reporting them through MES and Process control systems (postproduction publishing).
Usually the first approach (scanning at withdrawal) is used for material that is a piece of goods. If the material is not a piece of goods (bulk material, yard), then the workplace should report the amount consumed after completing its work on a particular production order. If a process control system is in use then the process control system will report the ingredients consumed directly to the ERP \ MRP- System or to the MES and then report the MES to the ERP. If no process control system is used, typically cases where manual work is being performed, the amount consumed must be manually reported from each workplace by using a terminal (scanner, PC, etc.). Usually, when using bulk materials, the workplace reports the amount consumed at the handling unit level (HU). The handling unit is the number assigned to cartons, pallets or other types of packing units. So the handling unit is assigned to the workplace, the amount consumed from the HU is issued and HU, otherwise it is no longer required to be returned to the supermarket. As a direct consequence, partial withdrawal from the handling unit is issued as consumed also in the ERP \ MRP system. HUs that are physically empty are reported using different transactions. That means that the amount of residual book inventory that may exist in the ERP system, assigned to the shop floor and to specific HUs is reportedly consumed and issued to different cost centers. Conversely, if a workplace reports the consumption of an HU that does not have a book supply in store floor stock (already empty in the ERP system), the error is generated as a guarantee in removing the consumed material, see chapter "The meaning of backflushing". What type of unplanned transactions used to handle these errors is an internal company policy issue.
The reason why waste book inventory may exist in the MRP/ERP system may have many causes. Some of them are: - the quantity in the original packaging is not entirely appropriate (eg the supplier shows a quantity of 10,000 meters per roll, but some rolls have only 9500 meters); - The workplace has used some materials to adjust the machine without being able to properly report the quantity; - the operator has neglected to assign a new handling unit to the workplace or has established a false handling unit. Such errors can be avoided if the system has good data validation. For example, the machine does not start processing the work until all the handling units required for the job are assigned to the workplace or machine.
It is important to design the interface between MES and MRP \ ERP correctly: reporting the amount consumed must be processed consistently, in the correct order, in other words all recorded/reported consumption of the handling unit must be removed in the ERP before removing the handling unit as empty. Otherwise, a large number of false errors will fall into the backlog error because the book supply is zero as a consequence of removing the handling unit as empty before removing all consumption referring to the special handling unit.
These two alternatives to backflushing based on tensile strategy (preproduction/postproduction publishing) also have self-correcting properties: real amounts reported from each workplace (not based on bill of materials) and each unitized packaging (handling unit), when empty, reportedly empty and any remaining book supplies on the shop floor are discarded.
References
Source of the article : Wikipedia
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