365FO Formula: Co-product & By-product. Batch attributes. Batch orders. Sponge cake example

 In this blog post, I will try to go over Formulas, Co-Products, and By-Products in Microsoft Dynamics 365 for Finance and Operation using Sponge cake production as an example. We will go through the following topics:

• How to create a formula using sponge cake example
• Co-product & By-product difference using sponge cake example
• We will review the calculation of the formula
• We will configure batch attributes using sponge cake example
• We will create a Batch order and report as finished it
• We will create quality orders, enter results,s and update batch attributes

Our sponge cake will consist of the following ingredients:

In this example, we have Sponge cake that we are going to produce. As the result, Sponge Cake itself will be presented in AX as a Formula that will include ingredients presented on the legend of the diagram. Let’s imagine the following cake:

Keep in mind that the recipe is simplified, and I just want to give you a brief overview of the functionality with the real example but with not so many ingredients.

If you noticed, we have the only eggwhite included instead of whole egg in our recipe. It means that egg-yolk will be produced as a residual material of the production process. We will end up creating egg-yolk as a By-Product since the production of egg-yolk is something unplanned and we don’t want to produce it, but we cannot avoid it. However, in this case, we can estimate how much egg-yolk we generate and then we can reuse it in recycling, in other production processes, or it can be the waste that must be disposed of at a cost or it can be used for any other purposes. That by-product (egg-yolk) will not be planned on its own, but the material(egg) for its manufacture needs to be provided. With this being said, planned order for the by-product will not be created and no replenishment needs for the By-Product. What’s more, we will have not only egg-yolk but also eggshell that can be created as a By-product as well.

If you review the picture carefully, you will notice that the presented cake has sugarcraft cake toppers.

In our production process, we will produce those toppers and we will be using them to decorate our cake.  Sugarcraft cake toppers can have different designs as presented below:

Based on our example we will produce just stars toppers. Let’s switch back to AX functionality…

Toppers will be produced upon the manufacturing process of the cake, but those can be also planned and sold separately. For instance, some client wants to decorate somehow his own cake and he orders only toppers without the whole cake. Toppers in our case will be manufactured together with the cake. They also can be used as ingredients in other production processes (for example another type of cake). In the system, these toppers will be created as Co-Products. Further, Co-product will trigger a supply because it produces the demand.

We have Purchase price for each of the item and this price will be used for the formula calculation.

Keep in mind that Production type defaulted to BOM but can be overridden on the Engineer tab.

Create a formula

Navigate to Product information management >  Bills of materials and formulas > Formulas

Click New button.

Switch to the header view and fill in the following fields:

Formula code, formula name, site, and item group.

Add our Sponge Cake item into Formula version.

Switch back to the Lines and add ingredients to the formula lines.

Switch back to the Header and click Co-products button to select co-products/by products used within this formula.

In the Co-products form, add a line for the by-product. The Production type must be By-product.

In the By-product cost allocation field, select Recycled. For the Recycled, it should have Standard cost model. Recycling will cost another 1 $ of the production order so it will increase the overall cost of the production. In our case we will not Recycle it, we will keep it as is.

In the Co-products form, add a line for the co-product. The Production type must be Co-product.

We have nothing that will absorbe the cost of the production, that is why we will keep Co-product cost allocation as None.

Approve and activate the Formula using Approve and Active buttons.

Once you click Approve button, set ‘Do you also want to approve the formula’ flag. It will approve not only the version but the formula itself.

Click Active button and check the flags on formula version.

We are done with the structure of the cake.

Formula calculation. Sponge cake example

Next, I would like to calculate the cost of the sponge cake

I will need to assign Calculation group into items. Calculation group is presented below:

Go to the Formula and click Calculation button.

Select Costing version. In our case, we selected version with the Planned cost type.

Review costing version setup.

The result of the calculation is below:

Click View calculation details button.

Review the calculation details.

Here is an idea of how the system calculates the Cost per lot size:

Look at the Cake flour:

1 kg of the Cake flour costs 5 USD (this price we set on the item)

1 gr of the Cake flour costs 0.005cents

In our formula we have 100 g, it means that the cost will be 100g * 0.005 = 0.5 cents

Next, you will notice the 2 lines that represent By-product:

Burden By-product amount is taken from the Formula > Co-products.

Create batch order

Navigate to Production control > Production orders > All production orders

Click New Batch order button.

The production order has been created.

Estimate it by clicking the Estimate button.

Status has been changed to Estimated.

Next, release it by clicking the Release button.

Status has been changed to Released.

Next, start it by clicking the Start button.

On the General tab of the Start form, untick Post picking list now.

Status has been changed to Started.

Go to the Picking list on the View tab in the Journals section.

Check the Inventory dimensions of the lines and click Post.

Journal has been posted.

Go back to Production order and click Report as finished button.

Don’t forget to assign a Batch number group on item for co-products/by products if they are batch-controlled items or populate batch number while reporting as finished.

I will do it through Registration. Once I am done with the Registration and I go ahead and click OK.

Status has been changed to Reported as finished.

Next, end it by clicking the End button.

Status has been changed to Ended.

Check the On-hand.

Batch attributes

Our sponge cake will have several additional characteristics/properties. We will track them against the batch.

We will divide our properties with the following criteria.

Rheological characteristics

Viscosity which is measured by viscosimeter

Physico-chemical characteristics

• Moisture
• Protein
• Fat
• Carbohydrate
• Volume
• Density

Color measurement

Crumb color which is measured by HP Scanner

Textural properties

Texture which is measured by texture analyzer

You hope you got the idea.

Let’s switch back into AX.

We will need to complete the following configuration:

Configure tracking dimension group

It is obvious that for batch attributes, Batch number tracking dimension should be active in the Tracking dimension group assigned to the item.

Configure Inventory and warehouse management parameters

Update inventory batch attribute flag means that batch attributes will be updated upon Quality order validation. Bear in mind that this setup can be overridden in the quality test group.

Create a batch attribute

Navigate to Product information management > Setup > Categories and attributes > Batch attributes

Create batch attribute that needs to be updated within a quality order.

Assign the batch attribute to an item

Navigate to Product information management > Products > Released products > Manage inventory tab > > Product specific button

Keep in mind that button is enabled if the Batch number is active in tracking dimension group assigned to the item.

Select the batch attributes that will be handled for a particular item.

Setup quality test group

Navigate to Inventory management > Setup > Quality control > Test groups

In the Attribute field for the test, select the required batch attribute that applies to the test.

Activate “Update inventory batch attribute”. It is defaulted from Inventory and management parameters but can be overridden. This flag means that inventory batch attribute will be updated with the result value of the quality order.

Test value determination configuration determines what should be recorded into batch attribute if you have many test results in the quality order in the test.

If you create Quality order for 5 pieces and for the Viscosity test you insert 2 results:

line 1: Result quantity 2, Test result 100

line 2: Result quantity 3, Test result 150

Batch attribute value will be (2*100+3*150)/5= 130 – Average value of your results

Min will be 100

Max will be 150

Create a quality order

The quality order can be created manually or automatically by using quality associations. In this example, a quality order is manually created.

Specify quality test results:

In the quality orders form, click on the Results button and populate quality test results.

Validate the quality order:

Click on the Validate button to validate quality order. Quality order test results will be inherited to the inventory batch attribute of the batch number.

To review the results, go to Inventory management > Inquiries and reports > Tracking dimensions > Batches > Inventory batch attribute button.

As you can see, the system recorded attribute value and captured a quality order number from where the result was inherited.