Section N.1
Scenario Overview
A comprehensive end-to-end example showing how CPQ, Manufacturing, WMS, ARM, and Planning modules work together in a single customer order.
Apex Industrial Equipment Co.
A manufacturer of custom industrial conveyor systems. Products are configurable (speed, length, material), with some components purchased and others manufactured in-house. Sales include equipment plus installation and support contracts.
Industry
Industrial Manufacturing
Model
Configure-to-Order
Customer
Midwest Logistics Inc.
Order Value
$47,500
The Customer Order
Midwest Logistics needs a custom conveyor system for their new distribution center. The order includes:
| Line | Item | Description | Price |
|---|---|---|---|
| 1 | CONV-CONFIG | Conveyor System - 50ft, High-Speed, Stainless Steel | $35,000 |
| 2 | SVC-INSTALL | Professional Installation (2 days) | $4,500 |
| 3 | SVC-SUPPORT-3YR | Premium Support Contract (36 months) | $8,000 |
| Total Order Value | $47,500 | ||
Modules Involved
This single order touches nearly every core NetSuite module:
| Module | Role in This Order |
|---|---|
| CPQ | Configure conveyor options, generate quote |
| Sales Order | Convert quote to order, trigger downstream processes |
| ARM | Create revenue arrangement, allocate SSP, schedule recognition |
| MRP/Planning | Plan supply for manufactured and purchased components |
| Purchase Orders | Order raw materials and purchased components |
| WMS | Receive & putaway, production picking, fulfillment picking/packing |
| Manufacturing | Work orders, BOM explosion, routing, WIP tracking |
| Fulfillment | Ship finished goods to customer |
| Invoicing | Bill customer, trigger revenue recognition |
| Budgeting | Compare actual costs/revenue to plan |
Process Flow Overview
INTEGRATED PROCESS FLOW
flowchart TB
subgraph OTC["ORDER TO CASH"]
direction LR
A["CPQ Configure"] --> B["Quote"]
B --> C["Sales Order"]
C --> D["ARM Arrangement"]
end
subgraph SP["SUPPLY PLANNING"]
direction LR
E["MRP Run"] --> F["Purchase Orders"]
E --> G["WO: Sub-Assembly"]
E --> H["WO: Finished Good"]
end
subgraph P2P["PROCURE TO PAY"]
direction LR
I["PO Created"] --> J["PO Approved"]
J --> K["Item Receipt"]
K --> L["WMS Putaway"]
end
subgraph MFG["MANUFACTURING"]
direction LR
M["WMS Pick"] --> N["Issue to WO"]
N --> O["Routing Steps"]
O --> P["Assembly Build"]
end
subgraph FULFILL["FULFILLMENT"]
direction LR
Q["WMS Pick FG"] --> R["Pack Station"]
R --> S["Ship Confirm"]
S --> T["Invoice"]
T --> U["Revenue"]
end
OTC --> SP
SP --> P2P
P2P --> MFG
MFG --> FULFILL
style OTC fill:#dbeafe,stroke:#3b82f6,stroke-width:2px,color:#1a1a1a
style SP fill:#fef3c7,stroke:#f59e0b,stroke-width:2px,color:#1a1a1a
style P2P fill:#dcfce7,stroke:#22c55e,stroke-width:2px,color:#1a1a1a
style MFG fill:#fce7f3,stroke:#ec4899,stroke-width:2px,color:#1a1a1a
style FULFILL fill:#f0fdfa,stroke:#0d9488,stroke-width:2px,color:#1a1a1a
style A fill:#3b82f6,stroke:#2563eb,color:#fff
style B fill:#3b82f6,stroke:#2563eb,color:#fff
style C fill:#3b82f6,stroke:#2563eb,color:#fff
style D fill:#3b82f6,stroke:#2563eb,color:#fff
style E fill:#f59e0b,stroke:#d97706,color:#1a1a1a
style F fill:#f59e0b,stroke:#d97706,color:#1a1a1a
style G fill:#f59e0b,stroke:#d97706,color:#1a1a1a
style H fill:#f59e0b,stroke:#d97706,color:#1a1a1a
style I fill:#22c55e,stroke:#16a34a,color:#fff
style J fill:#22c55e,stroke:#16a34a,color:#fff
style K fill:#22c55e,stroke:#16a34a,color:#fff
style L fill:#22c55e,stroke:#16a34a,color:#fff
style M fill:#ec4899,stroke:#db2777,color:#fff
style N fill:#ec4899,stroke:#db2777,color:#fff
style O fill:#ec4899,stroke:#db2777,color:#fff
style P fill:#ec4899,stroke:#db2777,color:#fff
style Q fill:#0d9488,stroke:#0f766e,color:#fff
style R fill:#0d9488,stroke:#0f766e,color:#fff
style S fill:#0d9488,stroke:#0f766e,color:#fff
style T fill:#0d9488,stroke:#0f766e,color:#fff
style U fill:#0d9488,stroke:#0f766e,color:#fff Process Flow Summary
- Order to Cash: Customer configures product → Quote → Sales Order → Revenue arrangement created
- Supply Planning: MRP generates demand → Creates POs and Work Orders
- Procure to Pay: PO approved → Goods received → Put away in warehouse
- Manufacturing: Components picked → Issued to WO → Routed through operations → FG completed
- Fulfillment: Pick → Pack → Ship → Invoice → Revenue recognized
Section N.2
Master Data Setup
Items, BOMs, routings, and warehouse configuration required for this example.
Item Master
The following items are configured in NetSuite for this scenario:
| Item ID | Name | Type | Source | Std Cost |
|---|---|---|---|---|
| CONV-CONFIG | Configurable Conveyor System | Assembly | Manufactured | $18,500 |
| FRAME-ASSY-50 | Frame Assembly - 50ft | Assembly | Manufactured | $6,200 |
| DRIVE-ASSY-HS | Drive Assembly - High Speed | Assembly | Manufactured | $4,800 |
| STEEL-SS-SHEET | Stainless Steel Sheet 4x8 | Inventory | Purchased | $450 |
| MOTOR-3HP | Motor 3HP Industrial | Inventory | Purchased | $1,200 |
| CTRL-UNIT-ADV | Control Unit - Advanced | Inventory | Purchased | $2,800 |
| BELT-CONV-50FT | Conveyor Belt - 50ft Roll | Inventory | Purchased | $1,500 |
| HARDWARE-KIT | Hardware Kit (bolts, brackets) | Inventory | Purchased | $350 |
| SVC-INSTALL | Installation Service | Service | -- | $2,000 |
| SVC-SUPPORT-3YR | 3-Year Support Contract | Service | -- | -- |
Bill of Materials
Finished Good BOM: CONV-CONFIG (50ft High-Speed Stainless)
CONV-CONFIG: Configurable Conveyor System âââ FRAME-ASSY-50 (1 ea) Frame Assembly - 50ft âââ DRIVE-ASSY-HS (1 ea) Drive Assembly - High Speed âââ BELT-CONV-50FT (1 ea) Conveyor Belt - 50ft Roll âââ CTRL-UNIT-ADV (1 ea) Control Unit - Advanced âââ HARDWARE-KIT (2 ea) Hardware Kit COMPONENT COST ROLLUP: âââââââââââââââââââââââââââââââââââââââââââââââââââââââ Frame Assembly (manufactured) $6,200 Drive Assembly (manufactured) $4,800 Belt (purchased) $1,500 Control Unit (purchased) $2,800 Hardware Kits (2 x $350) $700 Direct Labor (12 hrs x $45) $540 Overhead Applied $960 âââââââââââââââââââââââââââââââââââââââââââââââââââââââ TOTAL STANDARD COST $18,500
Sub-Assembly BOM: FRAME-ASSY-50
FRAME-ASSY-50: Frame Assembly - 50ft âââ STEEL-SS-SHEET (12 ea) Stainless Steel Sheet 4x8 âââ HARDWARE-KIT (1 ea) Hardware Kit COMPONENT COST ROLLUP: âââââââââââââââââââââââââââââââââââââââââââââââââââââââ Steel Sheets (12 x $450) $5,400 Hardware Kit $350 Direct Labor (6 hrs x $45) $270 Overhead Applied $180 âââââââââââââââââââââââââââââââââââââââââââââââââââââââ TOTAL STANDARD COST $6,200
Sub-Assembly BOM: DRIVE-ASSY-HS
DRIVE-ASSY-HS: Drive Assembly - High Speed âââ MOTOR-3HP (2 ea) Motor 3HP Industrial âââ STEEL-SS-SHEET (2 ea) Stainless Steel Sheet 4x8 âââ HARDWARE-KIT (1 ea) Hardware Kit COMPONENT COST ROLLUP: âââââââââââââââââââââââââââââââââââââââââââââââââââââââ Motors (2 x $1,200) $2,400 Steel Sheets (2 x $450) $900 Hardware Kit $350 Direct Labor (8 hrs x $45) $360 Overhead Applied $790 âââââââââââââââââââââââââââââââââââââââââââââââââââââââ TOTAL STANDARD COST $4,800
Routing
Production routing for the finished conveyor system:
| Step | Operation | Work Center | Setup (hrs) | Run (hrs) | Labor Rate |
|---|---|---|---|---|---|
| 10 | Cut & Form | WC-FABRICATION | 0.5 | 3.0 | $45/hr |
| 20 | Weld | WC-WELDING | 0.25 | 4.0 | $55/hr |
| 30 | Assemble | WC-ASSEMBLY | 0.25 | 3.0 | $40/hr |
| 40 | Quality Check | WC-QC | 0 | 1.0 | $50/hr |
| 50 | Pack | WC-SHIPPING | 0 | 0.5 | $35/hr |
| Total | 1.0 | 11.5 | |||
Warehouse Configuration
Locations & Bins
WAREHOUSE: Main Manufacturing Facility âââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââ ZONE: RAW (Raw Materials Receiving & Storage) âââ BIN: RAW-RECV-01 Receiving Dock 1 âââ BIN: RAW-RECV-02 Receiving Dock 2 âââ BIN: RAW-STEEL-A1 Steel Storage Row A, Position 1 âââ BIN: RAW-STEEL-A2 Steel Storage Row A, Position 2 âââ BIN: RAW-ELEC-B1 Electronics Storage Row B, Position 1 âââ BIN: RAW-ELEC-B2 Electronics Storage Row B, Position 2 âââ BIN: RAW-GENERAL-C1 General Components Row C ZONE: WIP (Work in Progress) âââ BIN: WIP-FAB-01 Fabrication Area âââ BIN: WIP-WELD-01 Welding Area âââ BIN: WIP-ASSY-01 Assembly Area âââ BIN: WIP-QC-01 Quality Control Area ZONE: FG (Finished Goods) âââ BIN: FG-CONV-A1 Conveyor Storage Row A âââ BIN: FG-CONV-A2 Conveyor Storage Row A âââ BIN: FG-STAGE-01 Staging for Shipment ZONE: SHIP (Shipping) âââ BIN: SHIP-DOCK-01 Shipping Dock 1 âââ BIN: SHIP-DOCK-02 Shipping Dock 2 âââ BIN: SHIP-PACK-01 Packing Station
WMS Putaway Strategy
| Item Category | Strategy | Target Zone |
|---|---|---|
| Steel Materials | Fixed Location | RAW-STEEL-* |
| Electronics | Fixed Location | RAW-ELEC-* |
| General Components | Dynamic (first available) | RAW-GENERAL-* |
| Finished Goods | Fixed Location | FG-* |
Section N.3
CPQ & Quote
Customer configures the conveyor system, sales rep generates quote with services.
Configuration Session
Customer Midwest Logistics works with sales rep to configure their conveyor system through CPQ:
CPQ CONFIGURATION SESSION âââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââ Customer: Midwest Logistics Inc. Sales Rep: Sarah Chen Date: January 15, 2025 STEP 1: Base Product Selection âââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââ â Product: Industrial Conveyor System â â Base Price: $25,000 â âââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââ STEP 2: Configuration Options âââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââ â Length: â 25 ft â 35 ft â 50 ft (+$5,000) â â Speed: â Standard â High-Speed (+$3,000) â â Material: â Aluminum â Stainless Steel (+$2,000) â â Control System: â Basic â Advanced (+$0 - included w/HS)â âââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââ STEP 3: Validation Rules Applied âââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââ â â Rule: High-Speed requires Advanced Control (auto-added) â â â Rule: 50ft + Stainless requires dual motors (included) â â â Rule: Configuration is VALID â âââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââ STEP 4: Price Calculation âââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââ â Base Price: $25,000 â â + 50ft Length Option: $5,000 â â + High-Speed Option: $3,000 â â + Stainless Steel Option: $2,000 â â âââââââââââââââââââââââââââââââââââââââââââââ â â Equipment Total: $35,000 â âââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââ STEP 5: Add Services âââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââ â â Professional Installation (2 days) $4,500 â â â Premium Support Contract (3 years) $8,000 â â â Extended Warranty (additional 2 years) $3,500 â â â Training Package (on-site, 1 day) $2,000 â âââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââ CONFIGURATION COMPLETE âââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââ Quote Total: $47,500
Quote Generated
QUOTE #Q-2025-00142
âââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââ
Customer: Midwest Logistics Inc.
Contact: John Martinez, Operations Director
Valid Until: February 14, 2025 (30 days)
Sales Rep: Sarah Chen
LINE ITEMS:
âââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââ
Line Item Description Amount
âââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââ
1 CONV-CONFIG Conveyor System - 50ft, $35,000
High-Speed, Stainless Steel
Configuration: HS-50-SS
2 SVC-INSTALL Professional Installation $4,500
(2 days on-site)
3 SVC-SUPPORT-3YR Premium Support Contract $8,000
(36 months)
âââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââ
SUBTOTAL $47,500
TAX (0% - exempt) $0
TOTAL $47,500
âââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââ
TERMS & CONDITIONS:
- 50% deposit required to begin production
- Balance due Net 30 from delivery
- Lead time: 4-6 weeks from order confirmation
- Installation scheduled within 2 weeks of delivery
- Support contract begins on installation completion date
[Generate PDF] [Email to Customer] [Convert to Sales Order] CPQ Quote Tracking
The quote tracks the configuration details in custom fields, ensuring that when converted to Sales Order, the exact configuration is preserved and passed to manufacturing.
Quote Approval Workflow
Because the quote includes a 10% discount from list price, it triggers approval:
APPROVAL WORKFLOW TRIGGERED âââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââ Quote: Q-2025-00142 List Price Total: $52,500 Quoted Price: $47,500 Discount: $5,000 (9.5%) APPROVAL RULES: âââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââ Discount 0-10%: Auto-approved <-- THIS QUOTE Discount 11-20%: Sales Manager required Discount 21-30%: Sales Director required Discount 31%+: VP Sales required STATUS: Auto-Approved
Section N.4
Sales Order & ARM
Quote converts to Sales Order, ARM creates revenue arrangement with multiple performance obligations.
Quote Accepted - Sales Order Created
Customer accepts quote on January 20, 2025. Sales Order is created:
SALES ORDER #SO-2025-00089
âââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââ
Created From: Quote #Q-2025-00142
Order Date: January 20, 2025
Customer: Midwest Logistics Inc.
PO Number: ML-PO-2025-0042
Ship To: 1500 Industrial Parkway, Chicago, IL 60601
LINE ITEMS:
âââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââ
Line Item Qty Rate Amount Commit
âââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââ
1 CONV-CONFIG 1 $35,000 $35,000 SO Committed
Config: HS-50-SS
2 SVC-INSTALL 1 $4,500 $4,500 --
3 SVC-SUPPORT-3YR 1 $8,000 $8,000 --
âââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââ
TOTAL $47,500
Expected Ship Date: February 28, 2025
Payment Terms: 50% Deposit, Balance Net 30
STATUS: Pending Fulfillment ARM Revenue Arrangement
ARM automatically creates a revenue arrangement when the Sales Order is saved:
REVENUE ARRANGEMENT #RA-2025-00089
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Source: Sales Order #SO-2025-00089
Arrangement Date: January 20, 2025
Total Contract Value: $47,500
REVENUE ELEMENTS (Performance Obligations):
ELEMENT 1: Equipment
âââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââ
Item: CONV-CONFIG
Selling Price: $35,000
SSP (Standalone Selling Price): $36,000
Allocated Revenue: $34,105.26
Recognition: Point-in-Time (on delivery)
Recognition Event: Item Fulfillment
ELEMENT 2: Installation Service
âââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââ
Item: SVC-INSTALL
Selling Price: $4,500
SSP (Standalone Selling Price): $5,000
Allocated Revenue: $4,736.84
Recognition: Point-in-Time (on completion)
Recognition Event: Custom "Installation Complete" transaction
ELEMENT 3: Support Contract
âââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââ
Item: SVC-SUPPORT-3YR
Selling Price: $8,000
SSP (Standalone Selling Price): $9,000
Allocated Revenue: $8,657.90
Recognition: Over Time (36 months, straight-line)
Recognition Event: Monthly (automatic)
Monthly Amount: $240.50
SSP ALLOCATION CALCULATION:
âââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââ
Total SSP: $36,000 + $5,000 + $9,000 = $50,000
Total Contract: $47,500
Equipment: ($36,000 / $50,000) x $47,500 = $34,200.00
Installation: ($5,000 / $50,000) x $47,500 = $4,750.00
Support: ($9,000 / $50,000) x $47,500 = $8,550.00
Total = $47,500.00
(Rounded to actuals for this example) ASC 606 Compliance
The revenue arrangement ensures ASC 606/IFRS 15 compliance by:
- Identifying distinct performance obligations
- Allocating transaction price based on SSP ratios
- Recognizing revenue when/as obligations are satisfied
- Creating audit trail for all allocation decisions
Revenue Recognition Schedule
| Period | Equipment | Installation | Support | Total |
|---|---|---|---|---|
| Feb 2025 (Ship) | $34,200 | -- | -- | $34,200 |
| Mar 2025 (Install) | -- | $4,750 | $240 | $4,990 |
| Apr 2025 | -- | -- | $240 | $240 |
| May 2025 | -- | -- | $240 | $240 |
| ... | ... | ... | ... | ... |
| Feb 2028 (Final) | -- | -- | $240 | $240 |
| Total | $34,200 | $4,750 | $8,550 | $47,500 |
Initial GL Impact (Sales Order)
At Sales Order entry, no GL impact yet. However, the commitment is recorded:
SALES ORDER GL IMPACT: None (Memorandum only) COMMITMENT TRACKING: âââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââ Item: CONV-CONFIG Quantity Committed: 1 On Hand: 0 Available: -1 (triggers MRP demand) Revenue is DEFERRED until performance obligations are met.
Section N.5
Demand Planning
Forecast component demand, optimize inventory levels, and feed supply planning.
Demand Planning Context
While CONV-CONFIG is a make-to-order configured product (demand comes from actual orders), Apex Industrial uses Demand Planning for commonly-used components to:
- Forecast raw material needs based on historical order patterns
- Maintain optimal safety stock levels
- Negotiate better pricing with volume commitments to vendors
- Smooth production by pre-building common sub-assemblies
Make-to-Order vs. Make-to-Stock
Demand planning works differently for each strategy. Apex uses MTO for finished goods (configured per order) but MTS for common components like steel sheets, motors, and hardware kits that are used across multiple product configurations.
Component Demand Forecast
Apex runs monthly demand plans for key components using Seasonal Average projection (Q1 is typically slower, Q4 peaks for year-end projects).
DEMAND PLAN - January 2025 âââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââ Projection Method: Seasonal Average Historical Periods: 24 months Projection Periods: 6 months Location: Main Warehouse HISTORICAL DEMAND (Monthly Averages): âââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââ Component Q1 Avg Q2 Avg Q3 Avg Q4 Avg Annual âââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââ STEEL-SS-SHEET 45 60 55 80 720 MOTOR-3HP 8 12 10 15 135 BELT-CONV-50FT 4 6 5 8 69 CTRL-UNIT-ADV 3 5 4 7 57 HARDWARE-KIT 20 28 24 35 321 PROJECTED DEMAND (Next 6 Months): âââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââ Component Jan Feb Mar Apr May Jun Total âââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââ STEEL-SS-SHEET 42 45 48 57 60 63 315 MOTOR-3HP 6 6 6 9 10 10 47 BELT-CONV-50FT 3 3 3 5 5 5 24 CTRL-UNIT-ADV 2 2 3 4 4 4 19 HARDWARE-KIT 14 15 16 22 24 26 117 CURRENT ORDER IMPACT (SO-2025-00089): âââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââ This order adds to January demand: STEEL-SS-SHEET: +14 sheets (forecast was 42, actual now 56) MOTOR-3HP: +2 motors (forecast was 6, actual now 8) BELT-CONV-50FT: +1 belt (forecast was 3, actual now 4) HARDWARE-KIT: +4 kits (forecast was 14, actual now 18) Demand Plan automatically updated with committed SO quantities.
Inventory Position Analysis
Before generating supply plans, Demand Planning compares forecasted demand against current inventory:
| Component | On Hand | Safety Stock | Jan Forecast | Jan Committed | Available | Action |
|---|---|---|---|---|---|---|
| STEEL-SS-SHEET | 2 | 20 | 42 | 14 | -54 | Order 74+ |
| MOTOR-3HP | 0 | 4 | 6 | 2 | -12 | Order 12+ |
| BELT-CONV-50FT | 0 | 2 | 3 | 1 | -6 | Order 6+ |
| CTRL-UNIT-ADV | 1 | 2 | 2 | 1 | -4 | Order 4+ |
| HARDWARE-KIT | 3 | 10 | 14 | 4 | -25 | Order 25+ |
Formula: Available = On Hand - Safety Stock - Forecast - Committed
Sub-Assembly Pre-Build Decision
Apex reviews demand patterns for sub-assemblies to decide whether to pre-build for stock:
SUB-ASSEMBLY ANALYSIS: âââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââ FRAME-ASSY-50 (50ft Frame Assembly): âââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââ - Used in: 85% of conveyor orders - Historical orders: 4-6 per month - Production time: 5 days - Component availability: Usually good DECISION: Build to Stock (maintain 2-unit buffer) Rationale: High commonality, short production time DRIVE-ASSY-HS (High-Speed Drive Assembly): âââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââ - Used in: 40% of conveyor orders (high-speed option) - Historical orders: 2-3 per month - Production time: 5 days - Component availability: Motors have 10-day lead time DECISION: Build to Order Rationale: Lower commonality, expensive motor inventory For current order SO-2025-00089: - FRAME-ASSY-50: Check stock first (none available -> must build) - DRIVE-ASSY-HS: Build to order as usual
Consultant Tip: Hybrid Planning Strategy
Many manufacturers use a hybrid approach: Make-to-Stock for common sub-assemblies and components, Make-to-Order for configured finished goods. This reduces lead times while avoiding finished goods inventory of customized products that may not sell.
Forecast Accuracy Tracking
Apex tracks forecast accuracy to continuously improve projections:
FORECAST ACCURACY - Q4 2024 (Steel Sheets): âââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââ Month Forecast Actual Variance MAPE âââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââ October 70 68 -2 2.9% November 75 82 +7 8.5% December 90 95 +5 5.3% âââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââ Q4 Total 235 245 +10 4.1% MAPE (Mean Absolute Percentage Error): 5.6% Bias: +4.3% (slight under-forecasting) STATUS: Within target (<20% MAPE) ACTION: Increase Q4 seasonal index by 5% for next year
| Component | 2024 MAPE | Status | Action |
|---|---|---|---|
| STEEL-SS-SHEET | 5.6% | Excellent | Maintain method |
| MOTOR-3HP | 12.3% | Good | Maintain method |
| BELT-CONV-50FT | 18.7% | Acceptable | Review outliers |
| CTRL-UNIT-ADV | 24.5% | Needs Work | Switch to Moving Avg |
| HARDWARE-KIT | 8.2% | Excellent | Maintain method |
Demand Plan to Supply Plan Flow
DEMAND PLANNING → SUPPLY PLANNING INTEGRATION
flowchart TB
subgraph DP["DEMAND PLANNING - Strategic Monthly"]
D1["Analyze 24 months history"]
D2["Apply seasonal indices"]
D3["Project 6-month demand"]
D4["Maintain safety stock targets"]
D1 --> D2 --> D3 --> D4
end
subgraph SP["SUPPLY PLANNING - Tactical Weekly"]
S1["Combine forecast + actual orders"]
S2["Generate planned POs"]
S3["Generate planned WOs"]
S4["Consider lead times and MOQs"]
S1 --> S2 --> S3 --> S4
end
subgraph MRP["MRP - Operational Daily"]
M1["Explode BOMs"]
M2["Net against inventory"]
M3["Schedule production"]
M4["Create firmed POs and WOs"]
M1 --> M2 --> M3 --> M4
end
DP -->|"Aggregate Demand"| SP
SP -->|"Planned Orders"| MRP
MRP -->|"Executable Orders"| OUT["Purchase Orders and Work Orders"]
style DP fill:#dbeafe,stroke:#3b82f6,stroke-width:2px,color:#1a1a1a
style SP fill:#fef3c7,stroke:#f59e0b,stroke-width:2px,color:#1a1a1a
style MRP fill:#dcfce7,stroke:#22c55e,stroke-width:2px,color:#1a1a1a
style OUT fill:#0d9488,stroke:#0f766e,stroke-width:3px,color:#fff
style D1 fill:#3b82f6,stroke:#2563eb,color:#fff
style D2 fill:#3b82f6,stroke:#2563eb,color:#fff
style D3 fill:#3b82f6,stroke:#2563eb,color:#fff
style D4 fill:#3b82f6,stroke:#2563eb,color:#fff
style S1 fill:#f59e0b,stroke:#d97706,color:#1a1a1a
style S2 fill:#f59e0b,stroke:#d97706,color:#1a1a1a
style S3 fill:#f59e0b,stroke:#d97706,color:#1a1a1a
style S4 fill:#f59e0b,stroke:#d97706,color:#1a1a1a
style M1 fill:#22c55e,stroke:#16a34a,color:#fff
style M2 fill:#22c55e,stroke:#16a34a,color:#fff
style M3 fill:#22c55e,stroke:#16a34a,color:#fff
style M4 fill:#22c55e,stroke:#16a34a,color:#fff For SO-2025-00089
- Demand Plan: Already captured January component forecast
- Supply Plan: Suggested replenishment quantities
- MRP: Explodes specific BOM, creates exact POs/WOs needed
Section N.6
MRP & Supply Planning
MRP explodes demand, plans work orders for manufactured items and purchase orders for bought items.
MRP Run
MRP RUN - January 21, 2025
âââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââ
DEMAND SOURCE:
Sales Order: SO-2025-00089
Item: CONV-CONFIG (Qty 1)
Required Date: February 28, 2025
BOM EXPLOSION:
Level 0: CONV-CONFIG (Finished Good)
|
+- Level 1: FRAME-ASSY-50 (Sub-Assembly) -------- MAKE
| |
| +- Level 2: STEEL-SS-SHEET (12 ea) ----------- BUY
| +- Level 2: HARDWARE-KIT (1 ea) -------------- BUY
|
+- Level 1: DRIVE-ASSY-HS (Sub-Assembly) -------- MAKE
| |
| +- Level 2: MOTOR-3HP (2 ea) ----------------- BUY
| +- Level 2: STEEL-SS-SHEET (2 ea) ------------ BUY
| +- Level 2: HARDWARE-KIT (1 ea) -------------- BUY
|
+- Level 1: BELT-CONV-50FT (1 ea) --------------- BUY
+- Level 1: CTRL-UNIT-ADV (1 ea) ---------------- BUY
+- Level 1: HARDWARE-KIT (2 ea) ----------------- BUY
SUPPLY REQUIREMENTS CALCULATED:
WORK ORDERS NEEDED:
âââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââ
WO-001 FRAME-ASSY-50 Qty: 1 Start: Feb 10 Due: Feb 17
WO-002 DRIVE-ASSY-HS Qty: 1 Start: Feb 10 Due: Feb 17
WO-003 CONV-CONFIG Qty: 1 Start: Feb 18 Due: Feb 27
(depends on WO-001, WO-002)
PURCHASE ORDERS NEEDED:
âââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââ
Item Qty On Hand Needed Vendor Lead
âââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââ
STEEL-SS-SHEET 14 2 12 Steel Co 7 days
MOTOR-3HP 2 0 2 Motors Inc 10 days
CTRL-UNIT-ADV 1 1 0 (in stock) --
BELT-CONV-50FT 1 0 1 Belt Supply 5 days
HARDWARE-KIT 4 3 1 FastenerPro 3 days Planned Orders Generated
MRP generates the following planned orders for review:
| Type | Item | Qty | Start Date | Due Date | Status |
|---|---|---|---|---|---|
| Purchase | STEEL-SS-SHEET | 12 | Jan 24 | Jan 31 | Firm → PO |
| Purchase | MOTOR-3HP | 2 | Jan 22 | Feb 1 | Firm → PO |
| Purchase | BELT-CONV-50FT | 1 | Jan 27 | Feb 1 | Firm → PO |
| Purchase | HARDWARE-KIT | 1 | Jan 28 | Jan 31 | Firm → PO |
| Work Order | FRAME-ASSY-50 | 1 | Feb 10 | Feb 17 | Firm → WO |
| Work Order | DRIVE-ASSY-HS | 1 | Feb 10 | Feb 17 | Firm → WO |
| Work Order | CONV-CONFIG | 1 | Feb 18 | Feb 27 | Firm → WO |
MRP Best Practice
Planner reviews planned orders before firming. In this case, steel sheets are consolidated with another order to get better pricing. The planner firms 15 sheets instead of 12 to meet minimum order quantity and build safety stock.
Section N.7
Purchase Orders
Planned orders converted to purchase orders, sent to vendors.
Purchase Orders Created
PO #PO-2025-00156 - Steel Co.
PURCHASE ORDER #PO-2025-00156
âââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââ
Vendor: Steel Co.
Order Date: January 24, 2025
Expected Receipt: January 31, 2025
LINE ITEMS:
âââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââ
Line Item Qty Unit Cost Amount
âââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââ
1 STEEL-SS-SHEET 15 $440.00 $6,600.00
(ordered 15 for MOQ, need 14)
âââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââ
TOTAL $6,600.00
Ship To: Main Manufacturing Facility - Receiving Dock PO #PO-2025-00157 - Motors Inc.
PURCHASE ORDER #PO-2025-00157
âââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââ
Vendor: Motors Inc.
Order Date: January 22, 2025
Expected Receipt: February 1, 2025
LINE ITEMS:
âââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââ
1 MOTOR-3HP 2 $1,180.00 $2,360.00
âââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââ
TOTAL $2,360.00 PO #PO-2025-00158 & PO-2025-00159
PURCHASE ORDER #PO-2025-00158
Vendor: Belt Supply
Order Date: January 27, 2025
Expected Receipt: February 1, 2025
LINE ITEMS:
1 BELT-CONV-50FT 1 $1,480.00 $1,480.00
TOTAL $1,480.00
PURCHASE ORDER #PO-2025-00159
Vendor: FastenerPro
LINE ITEMS:
1 HARDWARE-KIT 2 $340.00 $680.00
(ordered 2 - 1 for demand, 1 for safety stock)
TOTAL $680.00 PO GL Impact
At PO creation, no GL impact (3-way match). Impact occurs at receipt.
PURCHASE ORDER GL IMPACT: None at PO creation Commitment created for: - Accounts Payable (future liability) - Budget encumbrance (if encumbrance accounting enabled) Actual GL posting occurs at Item Receipt.
Section N.8
Receiving & WMS Putaway
Materials arrive, WMS directs putaway to appropriate bins.
Item Receipt - Steel Sheets
ITEM RECEIPT #IR-2025-00203 âââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââ PO: PO-2025-00156 Vendor: Steel Co. Receipt Date: January 31, 2025 Received By: Mike Johnson (Warehouse) LINE ITEMS RECEIVED: âââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââ Line Item Ordered Received Location âââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââ 1 STEEL-SS-SHEET 15 15 RAW-RECV-01 STATUS: Received at Dock - Pending Putaway
GL Impact - Item Receipt (Steel)
Dr: Inventory Asset (Raw Materials)$6,600.00
Cr: Accounts Payable Accrual$6,600.00
WMS Putaway Task
WMS generates putaway task based on putaway strategy:
WMS PUTAWAY TASK #PUT-2025-00089 âââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââ Item: STEEL-SS-SHEET Quantity: 15 sheets Source Bin: RAW-RECV-01 (Receiving Dock 1) Strategy: Fixed Location PUTAWAY INSTRUCTIONS: Step 1: Scan item barcode at RAW-RECV-01 Step 2: Confirm quantity: 15 Step 3: Move to destination: RAW-STEEL-A1 Step 4: Scan destination bin Step 5: Confirm putaway complete DESTINATION DETERMINED BY: - Item Category: Steel Materials - Strategy: Fixed Location - Assigned Bin: RAW-STEEL-A1 - Current capacity: 20 (available: 18) [Assigned To: Mike Johnson] [RF Scanner Task ID: T-89421]
Putaway Completed
PUTAWAY CONFIRMED âââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââ Item: STEEL-SS-SHEET Quantity: 15 From Bin: RAW-RECV-01 To Bin: RAW-STEEL-A1 Completed By: Mike Johnson Time: 10:23 AM INVENTORY NOW: RAW-STEEL-A1: STEEL-SS-SHEET: 17 (2 existing + 15 received)
All Materials Received Summary
| Receipt Date | PO | Item | Qty | Bin Location |
|---|---|---|---|---|
| Jan 31 | PO-2025-00156 | STEEL-SS-SHEET | 15 | RAW-STEEL-A1 |
| Jan 31 | PO-2025-00159 | HARDWARE-KIT | 2 | RAW-GENERAL-C1 |
| Feb 1 | PO-2025-00157 | MOTOR-3HP | 2 | RAW-ELEC-B1 |
| Feb 1 | PO-2025-00158 | BELT-CONV-50FT | 1 | RAW-GENERAL-C1 |
All materials received and put away. Ready for production to begin February 10.
Receiving Exception: Partial Receipt with Backorder
What happens when a vendor can only deliver part of an order? Here is an example with a motor shipment:
PARTIAL RECEIPT WORKFLOW
flowchart LR
A["PO Created
Qty: 4 Motors"] --> B["Vendor Ships
Qty: 2 Only"]
B --> C["Partial Receipt
Receive 2"]
C --> D{"Remaining
Qty?"}
D -->|"Keep Open"| E["PO Status:
Partially Received"]
D -->|"Cancel"| F["Close
Remaining"]
E --> G["Vendor Ships
Qty: 2 More"]
G --> H["Final Receipt
PO Complete"]
style A fill:#dbeafe,stroke:#3b82f6,color:#1a1a1a
style B fill:#f59e0b,stroke:#d97706,color:#1a1a1a
style C fill:#fef3c7,stroke:#f59e0b,color:#1a1a1a
style D fill:#e0e7ff,stroke:#6366f1,color:#1a1a1a
style E fill:#fef3c7,stroke:#f59e0b,color:#1a1a1a
style F fill:#fee2e2,stroke:#ef4444,color:#1a1a1a
style G fill:#3b82f6,stroke:#2563eb,color:#fff
style H fill:#dcfce7,stroke:#22c55e,color:#1a1a1a PARTIAL ITEM RECEIPT #IR-2025-00205 âââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââ PO: PO-2025-00159 (Motors - for safety stock) Vendor: Industrial Motors Inc. Receipt Date: February 3, 2025 LINE ITEMS: Line Item PO Qty Received Remaining Status 1 MOTOR-3HP 4 2 2 Backordered BACKORDER DETAILS: Expected Date: February 15, 2025 Reason: Supplier stock shortage Impact: Safety stock replenishment delayed PO STATUS: Partially Received (50%)
GL Impact - Partial Receipt
Dr: Inventory Asset (Raw Materials)$2,400.00
Cr: Accounts Payable Accrual$2,400.00
Only the received quantity (2 x $1,200) hits inventory. Remaining $2,400 stays as open commitment until backorder arrives.
Partial Receipt Best Practices
- Track backordered items: Use saved searches to monitor open PO lines
- Communicate with planning: Update MRP dates if delays impact production
- Document reasons: Record backorder notes for vendor performance tracking
- Consider alternatives: If critical, source from alternate vendors
Receiving Exception: QC Hold / Inspection
For items requiring quality inspection before inventory availability, NetSuite can place receipts on QC hold:
QC INSPECTION WORKFLOW
flowchart TB
A["Item Receipt"] --> B["QC Required?"]
B -->|"No"| C["Available
Inventory"]
B -->|"Yes"| D["QC Hold
Status"]
D --> E["Inspection
Performed"]
E --> F{"Pass QC?"}
F -->|"Yes"| G["Release to
Inventory"]
F -->|"No - Rework"| H["Return to
Vendor"]
F -->|"No - Accept"| I["Accept with
Deviation"]
H --> J["Vendor
Debit Memo"]
style A fill:#dbeafe,stroke:#3b82f6,color:#1a1a1a
style B fill:#e0e7ff,stroke:#6366f1,color:#1a1a1a
style C fill:#dcfce7,stroke:#22c55e,color:#1a1a1a
style D fill:#fef3c7,stroke:#f59e0b,color:#1a1a1a
style E fill:#8b5cf6,stroke:#7c3aed,color:#fff
style F fill:#fef3c7,stroke:#f59e0b,color:#1a1a1a
style G fill:#dcfce7,stroke:#22c55e,color:#1a1a1a
style H fill:#fee2e2,stroke:#ef4444,color:#1a1a1a
style I fill:#ddd6fe,stroke:#8b5cf6,color:#1a1a1a
style J fill:#ef4444,stroke:#dc2626,color:#fff QC HOLD - ITEM RECEIPT #IR-2025-00203
Item: STEEL-SS-SHEET
Receipt Qty: 15 sheets
Status: QC HOLD
Hold Bin: QC-HOLD-01
INSPECTION RESULTS (Jan 31, 2025 3:45 PM):
Inspector: Quality Team - Maria Garcia
Result: PASSED
Notes: All 15 sheets within specification.
Material certs verified against PO.
ACTION: Released to Inventory
Release Time: Jan 31, 2025 4:00 PM
Transfer: QC-HOLD-01 -> RAW-STEEL-A1 Consultant Tip: QC Hold Setup
To enable QC holds:
- Set QC Required checkbox on the item record
- Create a QC Hold bin with appropriate restrictions
- Configure inventory status to track QC vs. Available
- Use Inventory Status Change transaction to release
Consider using Lot/Serial tracking for full traceability of inspected vs. non-inspected inventory.
Section N.9
Work Orders & BOM
Work orders released for sub-assemblies and finished goods, BOM exploded.
Work Order Release
On February 10, production planner releases the work orders:
WO #WO-2025-00067 - Frame Assembly
WORK ORDER #WO-2025-00067 âââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââ Assembly Item: FRAME-ASSY-50 (Frame Assembly - 50ft) Quantity: 1 Status: Released Start Date: February 10, 2025 Due Date: February 17, 2025 Linked SO: SO-2025-00089 BOM COMPONENTS: Line Component Qty Required On Hand Available 1 STEEL-SS-SHEET 12 17 Yes 2 HARDWARE-KIT 1 5 Yes ROUTING: Step 10: Cut & Form (WC-FABRICATION) - 3.5 hrs Step 20: Weld (WC-WELDING) - 2 hrs Step 30: QC Check (WC-QC) - 0.5 hrs Total Planned Hours: 6 hrs
WO #WO-2025-00068 - Drive Assembly
WORK ORDER #WO-2025-00068 âââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââ Assembly Item: DRIVE-ASSY-HS (Drive Assembly - High Speed) Quantity: 1 Status: Released Start Date: February 10, 2025 Due Date: February 17, 2025 BOM COMPONENTS: Line Component Qty Required On Hand Available 1 MOTOR-3HP 2 2 Yes 2 STEEL-SS-SHEET 2 5* Yes 3 HARDWARE-KIT 1 4 Yes * After WO-067 picks 12 ROUTING: Step 10: Cut & Form (WC-FABRICATION) - 2 hrs Step 20: Assemble (WC-ASSEMBLY) - 4 hrs Step 30: Test (WC-QC) - 2 hrs Total Planned Hours: 8 hrs
WO #WO-2025-00069 - Finished Conveyor
WORK ORDER #WO-2025-00069 âââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââ Assembly Item: CONV-CONFIG (Configurable Conveyor System) Configuration: HS-50-SS Quantity: 1 Status: Released (Pending Components) Start Date: February 18, 2025 (after sub-assemblies complete) Due Date: February 27, 2025 BOM COMPONENTS: Line Component Qty Required On Hand Available 1 FRAME-ASSY-50 1 0 Pending WO-067 2 DRIVE-ASSY-HS 1 0 Pending WO-068 3 BELT-CONV-50FT 1 1 Yes 4 CTRL-UNIT-ADV 1 1 Yes 5 HARDWARE-KIT 2 3 Yes ROUTING: Step 10: Prep (WC-ASSEMBLY) - 1 hr Step 20: Assemble (WC-ASSEMBLY) - 6 hrs Step 30: Test & Calibrate (WC-QC) - 3 hrs Step 40: Final QC (WC-QC) - 1 hr Step 50: Pack (WC-SHIPPING) - 1 hr Total Planned Hours: 12 hrs
Work Order GL Impact (Release)
At work order release, no GL impact yet. Impact occurs as materials are issued and labor recorded.
Section N.10
WMS Production Picking
WMS picks components from bin locations for work orders.
Production Pick Wave
Production supervisor creates a pick wave for both sub-assembly work orders:
PRODUCTION PICK WAVE #WAVE-2025-00034 âââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââ Wave Date: February 10, 2025 Work Orders Included: WO-2025-00067, WO-2025-00068 Assigned To: Carlos Rodriguez TASK 1: Pick for WO-2025-00067 (Frame Assembly) Line Item Qty From Bin To Bin 1 STEEL-SS-SHEET 12 RAW-STEEL-A1 WIP-FAB-01 2 HARDWARE-KIT 1 RAW-GENERAL-C1 WIP-FAB-01 TASK 2: Pick for WO-2025-00068 (Drive Assembly) Line Item Qty From Bin To Bin 1 MOTOR-3HP 2 RAW-ELEC-B1 WIP-ASSY-01 2 STEEL-SS-SHEET 2 RAW-STEEL-A1 WIP-ASSY-01 3 HARDWARE-KIT 1 RAW-GENERAL-C1 WIP-ASSY-01 OPTIMIZED PICK PATH: 1. Start at RAW-STEEL-A1 -> Pick 14 STEEL-SS-SHEET 2. Move to RAW-ELEC-B1 -> Pick 2 MOTOR-3HP 3. Move to RAW-GENERAL-C1 -> Pick 2 HARDWARE-KIT 4. Deliver 12 steel + 1 hardware to WIP-FAB-01 5. Deliver 2 steel + 2 motors + 1 hardware to WIP-ASSY-01
Pick Confirmation
PICK WAVE COMPLETED Completed By: Carlos Rodriguez Time: 9:45 AM Duration: 25 minutes ALL PICKS CONFIRMED: STEEL-SS-SHEET (14) -> Split to WIP-FAB-01 (12), WIP-ASSY-01 (2) MOTOR-3HP (2) -> WIP-ASSY-01 HARDWARE-KIT (2) -> Split to WIP-FAB-01 (1), WIP-ASSY-01 (1) INVENTORY MOVED: RAW-STEEL-A1: 17 -> 3 (14 picked) RAW-ELEC-B1: 2 -> 0 (2 picked) RAW-GENERAL-C1: 5 -> 3 (2 picked) WIP-FAB-01: 0 -> 12 steel + 1 hardware WIP-ASSY-01: 0 -> 2 steel + 2 motors + 1 hardware
Component Issue to Work Order
As picks are confirmed, components are issued to the work order:
GL Impact - Material Issue to WO-067 (Frame)
Dr: Work in Progress (WIP)$5,750.00
Cr: Inventory Asset (Raw Materials)$5,750.00
(12 x $450 steel + 1 x $350 hardware = $5,750)
GL Impact - Material Issue to WO-068 (Drive)
Dr: Work in Progress (WIP)$3,650.00
Cr: Inventory Asset (Raw Materials)$3,650.00
(2 x $1,200 motors + 2 x $450 steel + 1 x $350 hardware = $3,650)
Section N.11
Routing & WIP Tracking
Production progresses through routing steps, labor and overhead captured.
Routing Progress - Frame Assembly (WO-067)
WORK ORDER #WO-2025-00067 - ROUTING PROGRESS Step 10: Cut & Form - WC-FABRICATION Status: COMPLETE Operator: Tom Wilson Date: February 10-11, 2025 Planned Hours: 3.5 Actual Hours: 3.75 Variance: +0.25 hrs (7% over) Step 20: Weld - WC-WELDING Status: COMPLETE Operator: Maria Santos Date: February 12-13, 2025 Planned Hours: 2.0 Actual Hours: 1.75 Variance: -0.25 hrs (13% under) Step 30: QC Check - WC-QC Status: COMPLETE Inspector: Quality Team Date: February 14, 2025 Planned Hours: 0.5 Actual Hours: 0.5 Variance: 0 Result: PASSED TOTAL WO-067: Planned Labor: 6.0 hrs Actual Labor: 6.0 hrs Variance: 0 (On target)
Labor Entry GL Impact
GL Impact - Labor Recording (WO-067)
Dr: Work in Progress (WIP) - Labor$285.00
Cr: Wages Payable / Labor Clearing$285.00
(3.75 hrs x $45 + 1.75 hrs x $55 + 0.5 hrs x $50 = $285)
GL Impact - Overhead Applied (WO-067)
Dr: Work in Progress (WIP) - Overhead$180.00
Cr: Manufacturing Overhead Applied$180.00
(Overhead rate: $30/labor hour x 6 hrs = $180)
WIP Summary Before Completion
| Work Order | Item | Materials | Labor | Overhead | Total WIP |
|---|---|---|---|---|---|
| WO-067 | FRAME-ASSY-50 | $5,750 | $285 | $180 | $6,215 |
| WO-068 | DRIVE-ASSY-HS | $3,650 | $380 | $240 | $4,270 |
| Total WIP | $10,485 | ||||
Section N.12
Assembly Completion
Sub-assemblies completed and relieved to inventory, finished good built.
Sub-Assembly Completion
Complete WO-067: Frame Assembly
ASSEMBLY BUILD - WO-2025-00067 Item Built: FRAME-ASSY-50 Quantity: 1 Completion Date: February 14, 2025 Built To Bin: WIP-ASSY-01 (staging for final assembly) COST SUMMARY: Materials: $5,750.00 Labor: $285.00 Overhead: $180.00 Actual Cost: $6,215.00 Standard: $6,200.00 Variance: $15.00 (Unfavorable)
GL Impact - WO-067 Completion
Dr: Inventory - Sub-Assemblies (at std)$6,200.00
Dr: Production Variance$15.00
Cr: Work in Progress$6,215.00
Final Assembly - Conveyor System
February 18-26: WO-069 proceeds through routing. Final assembly completed:
ASSEMBLY BUILD - WO-2025-00069
Item Built: CONV-CONFIG (Configuration: HS-50-SS)
Quantity: 1
Completion Date: February 26, 2025
Built To Bin: FG-CONV-A1
COMPONENTS CONSUMED:
FRAME-ASSY-50 1 x $6,200 = $6,200 (from WO-067)
DRIVE-ASSY-HS 1 x $4,800 = $4,800 (from WO-068)
BELT-CONV-50FT 1 x $1,500 = $1,500
CTRL-UNIT-ADV 1 x $2,800 = $2,800
HARDWARE-KIT 2 x $350 = $700
Materials Total: $16,000
LABOR & OVERHEAD:
Direct Labor (11.5 hrs): $517.50
Overhead Applied: $345.00
FINAL COST:
Materials: $16,000.00
Labor: $517.50
Overhead: $345.00
Sub-assy var: $15.00 (WO-067)
+ $45.00 (WO-068)
Actual Cost: $16,922.50
Standard: $18,500.00
Variance: -$1,577.50 (FAVORABLE!) Favorable Variance Analysis
The favorable variance of $1,577 is due to:
- Steel purchased at $440 vs $450 standard (-$140)
- Motors purchased at $1,180 vs $1,200 standard (-$40)
- Labor efficiency on final assembly (-$22.50)
- Standard cost included contingency buffer
GL Impact - WO-069 Completion (Finished Good)
Dr: Inventory - Finished Goods (at std)$18,500.00
Cr: Work in Progress$16,922.50
Cr: Production Variance (Favorable)$1,577.50
WMS Putaway - Finished Good
WMS PUTAWAY - FINISHED GOOD Item: CONV-CONFIG (HS-50-SS) Serial Number: CONV-2025-00089 From: WIP-QC-01 (after final QC) To: FG-CONV-A1 Putaway Completed: February 26, 2025, 4:15 PM By: Carlos Rodriguez INVENTORY STATUS: FG-CONV-A1: 1 unit (Serial: CONV-2025-00089) Status: Available for Fulfillment Linked SO: SO-2025-00089
Manufacturing Exception: Scrap & Rework
During the Frame Assembly (WO-067), 2 steel sheets failed QC inspection due to surface defects. Here is how scrap and rework are handled:
SCRAP & REWORK DECISION FLOW
flowchart TB
A["QC Inspection
Fails"] --> B{"Reworkable?"}
B -->|"Yes"| C["Create Rework
Work Order"]
B -->|"No"| D["Record as
Scrap"]
C --> E["Additional Labor
and Materials"]
E --> F["Back to QC"]
D --> G["Scrap GL Entry"]
F --> H{"Pass QC?"}
H -->|"Yes"| I["Continue
Production"]
H -->|"No"| D
style A fill:#fef3c7,stroke:#f59e0b,color:#1a1a1a
style B fill:#e0e7ff,stroke:#6366f1,color:#1a1a1a
style C fill:#8b5cf6,stroke:#7c3aed,color:#fff
style D fill:#fee2e2,stroke:#ef4444,color:#1a1a1a
style E fill:#3b82f6,stroke:#2563eb,color:#fff
style F fill:#fef3c7,stroke:#f59e0b,color:#1a1a1a
style G fill:#ef4444,stroke:#dc2626,color:#fff
style H fill:#e0e7ff,stroke:#6366f1,color:#1a1a1a
style I fill:#dcfce7,stroke:#22c55e,color:#1a1a1a Scenario: 2 Steel Sheets Scrapped
SCRAP TRANSACTION - WO-2025-00067 Date: February 13, 2025 Work Order: WO-2025-00067 (Frame Assembly) Reason: Surface defects - failed visual inspection SCRAPPED ITEMS: Item Qty Std Cost Total STEEL-SS-SHEET 2 $450.00 $900.00 Scrap Code: DEF-SURFACE Scrap Value Recovery: $50.00 (recycling credit) Net Scrap Loss: $850.00
GL Impact - Scrap Entry
Dr: Manufacturing Scrap Expense$850.00
Dr: Scrap Recovery Receivable$50.00
Cr: Work in Progress$900.00
Variance Analysis Impact
The scrap creates two accounting impacts:
- Scrap Expense: $850 charged directly to Manufacturing Scrap Expense (period cost)
- Material Quantity Variance: Additional $900 in WIP for replacement materials creates unfavorable variance when WO closes
Total cost impact: $1,750 above standard for this work order.
Section N.13
WMS Pick, Pack, Ship
Finished goods picked, packed, and shipped to customer via WMS.
Fulfillment Wave Release
FULFILLMENT WAVE #WAVE-2025-00042 âââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââ Wave Date: February 27, 2025 Sales Orders: SO-2025-00089 Carrier: FreightCo LTL Service: Standard Ground Ship Date: February 27, 2025 Expected Delivery: March 3, 2025 PICK TASKS: Task Item Qty From Bin To Bin Status 1 CONV-CONFIG 1 FG-CONV-A1 SHIP-PACK-01 Pending [Assigned To: Mike Johnson]
Pick Confirmation
PICK TASK COMPLETED Picker: Mike Johnson Time: 8:30 AM PICK DETAILS: Item: CONV-CONFIG Serial: CONV-2025-00089 From Bin: FG-CONV-A1 To Bin: SHIP-PACK-01 (Packing Station) Scan Sequence: 1. Scan bin FG-CONV-A1 2. Scan item barcode 3. Scan serial number CONV-2025-00089 4. Confirm quantity: 1 5. Scan destination SHIP-PACK-01 Pick Complete: 8:35 AM
Packing Station
PACKING STATION - SHIP-PACK-01 Packer: Lisa Chen Order: SO-2025-00089 Customer: Midwest Logistics Inc. PACK PROCESS: 1. Scan picked item serial: CONV-2025-00089 2. Verify configuration matches SO: HS-50-SS 3. System suggests packaging: CRATE-LARGE 4. Print packing slip 5. Print shipping label 6. Apply labels to crate PACKAGE CREATED: Package ID: PKG-2025-00089-001 Type: CRATE-LARGE Weight: 850 lbs Dimensions: 60" x 48" x 36" Contents: CONV-CONFIG (Serial: CONV-2025-00089) Pack Complete: 9:15 AM
Ship Confirmation
SHIP CONFIRMATION
Shipment: SHIP-2025-00089
Carrier: FreightCo LTL
Tracking: FRT-7789456123
Ship Date: February 27, 2025
SHIPMENT DETAILS:
From: Apex Industrial Equipment Co.
100 Manufacturing Drive
Detroit, MI 48201
To: Midwest Logistics Inc.
1500 Industrial Parkway
Chicago, IL 60601
Packages: 1 (CRATE-LARGE, 850 lbs)
Freight Cost: $425.00 (prepaid)
ITEM FULFILLMENT CREATED:
IF#: IF-2025-00089
SO#: SO-2025-00089
Line 1: CONV-CONFIG - Qty 1 - SHIPPED
Line 2: SVC-INSTALL - Pending (scheduled for Mar 10-11)
Line 3: SVC-SUPPORT-3YR - Pending (starts after install)
Ship Confirmed: 2:30 PM Fulfillment GL Impact
GL Impact - Item Fulfillment (Shipment)
Dr: Cost of Goods Sold$18,500.00
Cr: Inventory - Finished Goods$18,500.00
Note: Revenue is not recognized yet. ARM controls revenue recognition based on performance obligation completion.
Section N.14
Invoicing & Revenue Recognition
Invoice created, ARM triggers revenue recognition for delivered equipment.
Invoice Generated
INVOICE #INV-2025-00089
âââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââââ
Customer: Midwest Logistics Inc.
Invoice Date: February 28, 2025
Due Date: March 30, 2025 (Net 30)
PO Reference: ML-PO-2025-0042
LINE ITEMS:
Line Item Description Amount
1 CONV-CONFIG Conveyor System $35,000.00
HS-50-SS Configuration
Serial: CONV-2025-00089
2 SVC-INSTALL Installation Service $4,500.00
(Scheduled Mar 10-11)
3 SVC-SUPPORT-3YR 36-Month Support $8,000.00
Contract
SUBTOTAL $47,500.00
TAX $0.00
TOTAL DUE $47,500.00
PAYMENT RECEIVED:
Deposit (Jan 20): $23,750.00
Balance Due: $23,750.00 Invoice GL Impact
GL Impact - Invoice Created
Dr: Accounts Receivable$47,500.00
Cr: Deferred Revenue - Equipment$35,000.00
Cr: Deferred Revenue - Services$4,500.00
Cr: Deferred Revenue - Support$8,000.00
Note: Revenue goes to Deferred accounts initially. ARM then recognizes based on performance obligation completion.
ARM Revenue Recognition
Event 1: Equipment Delivered (February 27)
ARM recognizes equipment revenue when fulfillment is confirmed:
GL Impact - Equipment Revenue Recognition
Dr: Deferred Revenue - Equipment$34,200.00
Cr: Revenue - Equipment Sales$34,200.00
(SSP-allocated amount, not selling price)
Event 2: Installation Complete (March 11)
After installation team completes on-site work:
GL Impact - Installation Revenue Recognition
Dr: Deferred Revenue - Services$4,750.00
Cr: Revenue - Service$4,750.00
Event 3: Monthly Support Recognition (Ongoing)
Each month from March 2025 through February 2028:
GL Impact - Monthly Support Revenue (x36)
Dr: Deferred Revenue - Support$237.50
Cr: Revenue - Support Contracts$237.50
($8,550 allocated / 36 months = $237.50/month)
Revenue Recognition Timeline
| Period | Event | Equipment | Install | Support | Total |
|---|---|---|---|---|---|
| Feb 2025 | Ship | $34,200 | -- | -- | $34,200 |
| Mar 2025 | Install + Mo.1 | -- | $4,750 | $238 | $4,988 |
| Apr-Dec 2025 | Support Mo.2-10 | -- | -- | $2,138 | $2,138 |
| 2026 | Support Mo.11-22 | -- | -- | $2,850 | $2,850 |
| 2027 | Support Mo.23-34 | -- | -- | $2,850 | $2,850 |
| Jan-Feb 2028 | Support Mo.35-36 | -- | -- | $474 | $474 |
| Total | $34,200 | $4,750 | $8,550 | $47,500 | |
Section N.15
Budget vs Actual
Compare actual results to budget for this order and the period.
February 2025 Budget vs Actual
This order contributes to February results. Comparing to the monthly budget:
BUDGET VS ACTUAL - FEBRUARY 2025
REVENUE (This order only):
Budget Actual Variance
Equipment Revenue $30,000 $34,200 +$4,200 Fav
Service Revenue $0 $0 $0
Support Revenue $0 $0 $0
Total Revenue $30,000 $34,200 +$4,200 Fav
COST OF GOODS SOLD:
COGS - Equipment $16,500 $18,500 -$2,000 Unfav
Production Variance $0 -$1,578 +$1,578 Fav
Net COGS $16,500 $16,922 -$422 Unfav
GROSS PROFIT:
Gross Profit $13,500 $17,278 +$3,778 Fav
Gross Margin % 45% 51% +6%
ANALYSIS:
Revenue exceeded budget due to larger configuration sale
COGS higher at standard, but offset by favorable variances
Net result: $3,778 better than plan Full Year Impact
This order's contribution to annual budget:
| Metric | Annual Budget | This Order | % of Annual |
|---|---|---|---|
| Equipment Revenue | $2,400,000 | $34,200 | 1.4% |
| Service Revenue | $400,000 | $4,750 | 1.2% |
| Support Revenue | $600,000 | $8,550* | 1.4% |
| Total Revenue | $3,400,000 | $47,500 | 1.4% |
* Support revenue recognized over 36 months, not all in current year
Production Variance Analysis
PRODUCTION VARIANCE REPORT - SO-2025-00089 MATERIAL VARIANCE: Steel (14 sheets): Standard: 14 x $450 = $6,300 Actual: 14 x $440 = $6,160 Variance: $140 Favorable (better pricing) Motors (2 units): Standard: 2 x $1,200 = $2,400 Actual: 2 x $1,180 = $2,360 Variance: $40 Favorable (negotiated discount) Total Material Variance: $180 Favorable LABOR VARIANCE: Standard Hours: 26.0 Actual Hours: 25.5 Efficiency Variance: 0.5 hrs x $47.50 avg = $23.75 Favorable Rate Variance: Minimal (actual rates = standard) Total Labor Variance: $23.75 Favorable OVERHEAD VARIANCE: Applied: Based on actual hours Variance absorbed in period overhead accounts TOTAL PRODUCTION VARIANCE: $1,577.50 Favorable
Section N.16
GL Impact Summary
Complete journal entry summary for all transactions in this order lifecycle.
Complete GL Transaction Log
GL TRANSACTION SUMMARY - ORDER SO-2025-00089
DATE TRANSACTION DR CR BALANCE
PROCUREMENT
Jan 31 Item Receipt (Steel)
Inventory - Raw Materials $6,600
AP Accrual $6,600
Jan 31 Item Receipt (Hardware)
Inventory - Raw Materials $680
AP Accrual $680
Feb 1 Item Receipt (Motors)
Inventory - Raw Materials $2,360
AP Accrual $2,360
Feb 1 Item Receipt (Belt)
Inventory - Raw Materials $1,480
AP Accrual $1,480
-------- --------
Procurement Subtotal $11,120 $11,120
MANUFACTURING - SUB-ASSEMBLIES
Feb 10 Material Issue (WO-067)
Work in Progress $5,750
Inventory - Raw Materials $5,750
Feb 10 Material Issue (WO-068)
Work in Progress $3,650
Inventory - Raw Materials $3,650
Feb 14 Labor & OH (WO-067)
Work in Progress $465
Wages Payable $285
Mfg Overhead Applied $180
Feb 17 Labor & OH (WO-068)
Work in Progress $620
Wages Payable $380
Mfg Overhead Applied $240
Feb 14 Assembly Complete (WO-067)
Inventory - Sub-Assemblies $6,200
Production Variance $15
Work in Progress $6,215
Feb 17 Assembly Complete (WO-068)
Inventory - Sub-Assemblies $4,800
Production Variance $70
Work in Progress $4,870
-------- --------
Sub-Assembly Subtotal $21,500 $21,500
MANUFACTURING - FINISHED GOOD
Feb 18 Material Issue (WO-069)
Work in Progress $16,000
Inventory - Sub-Assemblies $11,000
Inventory - Raw Materials $5,000
Feb 26 Labor & OH (WO-069)
Work in Progress $863
Wages Payable $518
Mfg Overhead Applied $345
Feb 26 Assembly Complete (WO-069)
Inventory - Finished Goods $18,500
Work in Progress $16,863
Production Variance (Fav) $1,637
-------- --------
Finished Good Subtotal $35,363 $35,363
SALES & FULFILLMENT
Feb 27 Item Fulfillment (Ship)
Cost of Goods Sold $18,500
Inventory - Finished Goods $18,500
Feb 28 Invoice Created
Accounts Receivable $47,500
Deferred Revenue - Equip $35,000
Deferred Revenue - Svc $4,500
Deferred Revenue - Support $8,000
Feb 28 ARM Recognition (Equipment)
Deferred Revenue - Equip $34,200
Revenue - Equipment $34,200
-------- --------
Sales Subtotal $100,200 $100,200
========================================================
TOTAL ALL ENTRIES $168,183 $168,183 Key Account Balances (This Order)
| Account | Debit | Credit | Net Impact |
|---|---|---|---|
| Assets | |||
| Accounts Receivable | $47,500 | -- | $47,500 DR |
| Inventory (all) | $11,120 | $11,120 | $0 |
| Liabilities | |||
| AP Accrual | -- | $11,120 | $11,120 CR |
| Deferred Revenue | $34,200 | $47,500 | $13,300 CR |
| Revenue | |||
| Revenue - Equipment | -- | $34,200 | $34,200 CR |
| Expenses | |||
| Cost of Goods Sold | $18,500 | -- | $18,500 DR |
| Production Variance | $85 | $1,637 | $1,552 CR (Fav) |
February P&L Impact (This Order)
INCOME STATEMENT IMPACT - FEBRUARY 2025
Revenue
Equipment Sales $34,200
Service Revenue $0
Support Revenue $0
--------
Total Revenue $34,200
Cost of Goods Sold
COGS - Equipment $18,500
Production Variance (Favorable) ($1,552)
--------
Net COGS $16,948
--------
GROSS PROFIT $17,252
========
Gross Margin 50.4%
Note: Installation revenue ($4,750) recognized in March
Support revenue ($8,550) recognized over 36 months Consultant Summary
This integrated example demonstrates how a single customer order flows through:
- CPQ: Configuration and quoting
- Sales: Order entry and commitment
- ARM: Revenue arrangement and ASC 606 compliance
- MRP: Demand planning and supply generation
- Purchasing: Procurement of materials
- WMS: Receiving, putaway, production picking, fulfillment
- Manufacturing: Multi-level BOM, routing, WIP, variances
- Fulfillment: Pick, pack, ship
- Invoicing: Billing and AR
- Budgeting: Variance analysis
Each module hands off to the next seamlessly, with proper GL impact at every step. This is the power of an integrated ERP system.