Re: Cost at Multiple Production Facilities

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Patrick, I have authored a cost primer called "Cost Accounting Happens In 
MAPICS" which you can order from my www.tenneypubs.com web site.

Given your current setup, I believe that you have two choices--separate item 
numbers or separate environments.

As I see it, using a single environment has some very serious drawbacks.

  a.. MAPICS assumes that there is ONE base (local) currency in an environment. 
If you mix base currencies in an environment really bad things happen (100 USD 
+ 100 P$ + 100 RMB = 300 ???). If adhere to the ONE base currency rule, then 
your people in Mexico and China have to convert amounts into Pesos and RMB to 
satisfy Mexican and Chinese authorities.
  b.. The multiple item number problem is probably the tip of the ice berg. I 
suspect that there are many other duplications to work around the differences 
between the US, Mexican, and Chinese operations.
Using separate environments for each country solves these problems. Each 
country can have its own base currency so you eliminate hassles with the 
authorities,  and you can vary standard costs and other factors within each 
environment to suit the way it does business. Separate environments do have 
downsides:

  a.. Splitting ongoing operations from one environment to three environments 
requires planning.
  b.. You need to add the Inter Site Logistics module to manufacturing activity 
across the three environments.
  c.. You need to translate the Mexican and Chinese amounts into US$ for 
consolidation purposes. IFM and FRx are your best bets.
If you introduce EPDM into your installation, then you can solve the problem by 
having one item with multiple routings.

Bob Tenney, CPA
Bob Tenney Solutions, LLC
828-526-8976

----- Original Message -----
From: "Shrader, Patrick" <pshrader@wkep.com>
To: "Mapics Mailing List" <MAPICS-L@midrange.com>
Sent: Tuesday, September 17, 2002 3:01 PM
Subject: Cost at Multiple Production Facilities


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> Good afternoon, everyone. I need some ideas from you concerning multiple
> costs. I know someone out here is producing the same item at multiple
> locations, which is my problem.
>
> I have PDM/IM. I do not have EPDM, PCC, or PMC installed.
>
> I make the same item at three locations: USA, Mexico, and China. Lead times
> are different for each -- the more expensive the overhead the quicker I can
> deliver it to the customer. In order to accurately record the true cost of
> the product, I have set up different part number for each location
> (30xyz=USA; 40xyz=Mexico; 50xyz=China). I then set up a standard cost for
> each of these part numbers, reflecting the different overhead rates for each
> production facility.
>
> The customer only orders the USA part number (30xyz). So, when the items are
> transported back to the warehouse and all production is recorded, there is
> an IA adjustment that reduces the 40 part number and increases the 30 part
> number. Wa-la! I have 30xyz inventory available to ship/sell.
>
> Now, you can probably imagine the problems I have scheduling and maintaining
> inventory levels to meet customer demands. Not to mention any paperwork
> needed by the customer concerning its device history.
>
> All of this ruckus is designed to keep accurate standard costs for the
> product in production, but it does nothing for me in determining accurate
> profit (the cost of the sold item (30xyz) is substantially higher than the
> true cost of the product).
>
> How are you handling this situation? I need to accurately capture my costs,
> creating a combined single standard cost (too bad there isn't a cost for
> each location), and determine what the true value of my inventory is.
> Additionally, customer service should be able to see one part number and
> tell what the demand is, and when it will be fulfilled.
>
> Perhaps I simply need a cost primer. I am certain that we have to change the
> way we approach costing. Any hints you have will be appreciated.
>
>
> Many thanks!
>
> Patrick Shrader
> White Knight Engineered Products
>
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