Over-Allocation during Production Process

[Former Member]

Hi Friends,

This is a normal scenario but could not find a solution. Hoping to get some ideas to handle it.

The client is on SAP Cloud. SAP Business One 9.1 PL08.

There are some backflush Non Inventory component items in the production order. These non inventory items are managed at warehouse level and has standard cost at warehouse level. The client has third party manufacturers who carries out the production process. The GL setting is at item level for these backflush Non-Inventory Items and the expense account used for booking A/P Purchase at the time of receipt of the invoice from the third party manufacturer is used in the Item master to allocate the expense to the production. This GL is mentioned in the column - "Expense Account".

During the production process there are some final parent item quantity which is rejected due to either quality check or some reason. The third party manufacturer do not charge some of their service charge for the rejected quantity. The invoice received from them for a particular production order will be only for the completed and accepted quantity of produced parent item quantity.

The scenario here is that since these non-inventory items are set as backflush , there is no option to control and update quantity equal to the completed/accepted quantity of the parent item. While posting the Receipt from Produciton, the full quantity of these backflush non inventory items will be issued and posted. The result is that the total cost ( inventory component item + backflush non inventory Items ) are updated for the full planned production quantity ( completed accepted quantity + rejected quantity). In this scenario since the third party manufacturer is not charging the non inventory components for the rejected quantity, the backflush process issues and updates the item cost of rejected quantity with full cost. After the bill is received from the third party manufacturer only for the completed accepted quantity, there is a resultant over allocation in the GL used for these non inventory items. At the end of year this will result in a big balance which is incorrect.

I'm looking for options to handle this scenario. Since its a backflush process, doing anything inside the production order is not available.

Please share your solutions if any.

Thanks.