A complete beginner-to-advanced guide. Learn how to set up work centres, create BOMs, run MRP, manage work orders, and track production from raw material to finished good.
Production Management (also called Manufacturing Management) is the process of planning, executing, and tracking the transformation of raw materials into finished goods.
In an ERP system, production management answers critical questions:
Consider a company called "Ishan Electronics" that makes speakers:
| Without Production Mgmt | With Production Mgmt |
|---|---|
|
|
Production management helps you:
| # | Concept | Question it answers | Example |
|---|---|---|---|
| 1 | Work Centre | Where/How is it made? | CNC Machine, Assembly Line, Packing Station |
| 2 | BOM | What ingredients are needed? | Speaker = 1 Driver + 1 Cabinet + 2 Wires + 1 Box |
| 3 | Work Order | Make how many? | Produce 100 speakers by Friday |
| 4 | Production Entry | What was actually made? | Produced 98, Rejected 2 = 96% yield |
| 5 | MRP | What do I need to order? | Need 100 drivers, have 40, order 60 more |
Production management doesn't work in isolation — it connects to inventory, purchasing, and costing:
| Step | Action | Stock Impact |
|---|---|---|
| 1 | Create BOM for Speaker (1 Driver + 1 Cabinet + 2 Wires) | — |
| 2 | Create Work Order for 100 speakers | — |
| 3 | MRP calculates: need 100 drivers, 100 cabinets, 200 wires | — |
| 4 | Purchase Order for 60 drivers (had 40 in stock) | Stock: 40 → 100 drivers |
| 5 | Release Work Order | — |
| 6 | Production Entry: produced 98, rejected 2 | -100 drivers, -100 cabinets, -200 wires, +98 speakers |
A Work Centre is a machine, team, or station where production happens. It defines capacity (how much can be made per day) and cost rate (cost per hour of operation).
| Name | Cost/Hour | Capacity/Day | Unit | Linked CC |
|---|---|---|---|---|
| CNC Machine | ₹500 | 8 | hours | CC-PROD |
| Assembly Line | ₹200 | 8 | hours | CC-PROD |
| Testing Station | ₹150 | 8 | hours | CC-PROD |
| Packing Station | ₹100 | 10 | hours | CC-PROD |
A Bill of Materials (BOM) is a structured list of all raw materials, components, and sub-assemblies needed to manufacture one unit of a finished product.
| Field | Description |
|---|---|
| Finished Item | The product being made (e.g., Speaker) |
| Output Qty | How many units this BOM produces (default: 1) |
| Output UOM | Unit of measure for output (PCS, KG, LTR) |
| Components | List of raw materials with quantities |
| Scrap % | Expected waste per component (e.g., 5% wire cutting loss) |
| Component | Qty | UOM | Scrap % | Effective Qty |
|---|---|---|---|---|
| Speaker Driver | 1 | PCS | 0% | 1.00 |
| Plastic Cabinet | 1 | PCS | 2% | 1.02 |
| Audio Wire | 2 | MTR | 5% | 2.10 |
| Packing Box | 1 | PCS | 0% | 1.00 |
| Total Components | 4 items | |||
Effective Qty = Qty × (1 + Scrap%) → accounts for expected waste.
If you need 2 meters of wire per speaker and 5% is lost in cutting:
Effective Qty = 2 × (1 + 0.05) = 2.10 meters
This means you actually consume 2.10 meters per speaker produced, not just 2.
A Work Order is a production instruction: "Make X units of Product Y using BOM Z." It drives the entire production process.
When production is done, you record a Production Entry against the Work Order:
| Field | Description |
|---|---|
| Produced Qty | How many good units were made |
| Rejected Qty | How many were defective |
| Date | When production happened |
| Metric | Value |
|---|---|
| Planned Qty | 100 |
| Produced Qty (good) | 98 |
| Rejected Qty | 2 |
| Yield % | 98% |
| Status | Completed |
What happens automatically:
Material Requirements Planning (MRP) answers: "If I want to make X units of Product Y, what raw materials do I need, and what's the shortfall?"
MRP takes 3 inputs and produces a requirements list:
| Input | What it provides |
|---|---|
| Finished Item | Which product to make |
| Quantity | How many to make |
| Warehouse | Where to check current stock (optional) |
| Component | Per Unit | Required | In Stock | Shortfall | Recommendation |
|---|---|---|---|---|---|
| Speaker Driver | 1.00 | 100 | 40 | 60 | Order 60 |
| Plastic Cabinet | 1.02 | 102 | 102 | 0 | Sufficient |
| Audio Wire (MTR) | 2.10 | 210 | 150 | 60 | Order 60 mtr |
| Packing Box | 1.00 | 100 | 200 | 0 | Sufficient |
A Stock Transfer moves inventory from one warehouse to another. Useful when raw materials arrive at a central store but production happens at a different location.
| From | To | Item | Qty |
|---|---|---|---|
| Main Store | Production Floor | Speaker Driver | 100 |
Result: Main Store stock -100, Production Floor stock +100. Total company stock unchanged.
Opening Stock sets the starting inventory balance for items. Use this when you first implement the ERP to enter your current physical stock levels.
Here's the entire production flow from setup to execution:
Follow these steps in order. Each step builds on the previous one.
Before creating BOMs, ensure all items exist in the system: raw materials (drivers, cabinets, wires) and finished goods (speakers). Set standard_cost on each item for cost estimation.
Go to Masters → Items to create items.
Go to Production → Work Centres. Create one per machine or team:
CNC Machine — ₹500/hr, 8 hrs/dayAssembly Line — ₹200/hr, 8 hrs/dayOptionally link each to a Cost Centre for Management Accounting integration.
Go to Production → BOM. Click "+ New BOM":
Go to Production → MRP Planning. Select the finished item, enter planned quantity. This shows you exactly what materials are needed and what's the shortfall. Use this to plan your purchases.
Go to Production → Work Order. Create a new work order:
Click "Release" on the Work Order to start production. When done, click "Record Production" and enter:
Stock updates automatically.
Production management connects directly to the Management Accounting (CO) module for product costing:
| Production Data | CO Module Uses |
|---|---|
| BOM Component Costs | → Material Cost in Cost Estimate |
| Work Centre Rates × Hours | → Labour Cost in Cost Estimate |
| Overhead Rates | → Overhead Cost in Cost Estimate |
| Total Cost ÷ Output Qty | → Standard Cost Per Unit |
After production, the CO module compares:
| Metric | Source | Example |
|---|---|---|
| Standard Cost | Cost Estimate (from BOM) | ₹450 per speaker |
| Actual Cost | Work Order actual_cost | ₹470 per speaker |
| Variance | Actual − Standard | +₹20 (unfavourable) |
| Variance % | Variance / Standard × 100 | +4.4% |
A positive variance (actual > standard) means production was more expensive than planned. A negative variance (actual < standard) means production was cheaper — good!
FastOneBusiness supports SAP-style Industry Configuration — select your manufacturing type to automatically enable the right modules and business switches.
| Preset | For | Key Features |
|---|---|---|
| Discrete Manufacturing | Electronics, Automotive | Routing, Tooling, sequential work centre steps |
| Process Manufacturing | Food, Pharma, Chemicals | Batch Tracking, QC Mandatory, By-Products, Potency/Scaling |
| Project Manufacturing | Aerospace, Defense, Heavy Machinery | All switches ON — Routing, QC, Batch, Subcontract, ECN Strict |
| Job Shop / Custom | Custom fabrication, job work | Routing, Tooling, Subcontracting |
A Routing defines the sequence of operations (work centre steps) needed to produce a finished good. It tells the system which machines/teams process the item and in what order.
| Seq | Operation | Work Centre | Setup (min) | Run (min/unit) |
|---|---|---|---|---|
| 1 | Driver Assembly | CNC Machine | 30 | 2.5 |
| 2 | Cabinet Fitting | Assembly Line | 15 | 1.0 |
| 3 | Testing & Packing | Testing Station | 10 | 3.0 |
Quality Control (QC) ensures produced goods meet quality standards before they're released to stock. When SF_QC_MANDATORY is ON, Work Orders cannot be completed without a PASS inspection.
| Component | Purpose |
|---|---|
| QC Rules | Define what to inspect, pass criteria, and inspection method per item |
| QC Inspections | Record actual inspection results (PASS/FAIL/HOLD) per Work Order |
| Step | Action |
|---|---|
| 1 | Create QC Rule: "Visual + Audio test" for Speaker item |
| 2 | Work Order completed → QC Mandatory blocks completion |
| 3 | Inspector records QC Inspection → result: PASS |
| 4 | Work Order can now be marked Complete |
Batch/Lot Tracking assigns lot numbers to produced goods for traceability. Serial Numbers track individual units. Essential for pharma, food, and electronics industries.
| Field | Description |
|---|---|
| Batch Number | Unique lot identifier (e.g., "LOT-2026-001") |
| Item | Which product this batch belongs to |
| Quantity | Units in this batch |
| Manufacturing Date | When the batch was produced |
| Expiry Date | Shelf life (for food/pharma) |
| Field | Description |
|---|---|
| Serial Number | Unique per-unit ID (e.g., "SN-00142") |
| Item | Which product |
| Status | Available, Reserved, Sold, Defective |
SF_BATCH_TRACE is ON, the system reminds you to assign batch numbers during production.
Subcontracting is when you outsource a processing step to an external vendor. You send raw materials, they perform the operation, and return finished/partial goods.
When producing a main product, you may also get secondary outputs:
| Type | Definition | Example |
|---|---|---|
| By-Product | Secondary output with no/few value (scrap) | Wood shavings from carpentry |
| Co-Product | Secondary output with significant value | Molasses from sugar refining |
When SF_BYPRODUCT_YIELD is ON and you record a Production Entry, the system automatically creates stock entries for by-products/co-products based on the yield % defined in the BOM's by-product rules.
| Main Product | By-Product | Yield % | Type |
|---|---|---|---|
| Sugar (1000 kg) | Molasses | 5% | Co-Product |
| Sugar (1000 kg) | Bagasse | 15% | By-Product |
When 1000 kg sugar is produced: +50 kg molasses auto-added, +150 kg bagasse auto-added.
Tooling tracks specialized tools, dies, moulds, and gauges used in production. Each tool has a cost-per-use and a total life-hours budget.
| Field | Description |
|---|---|
| Name | Tool identifier (e.g., "CNC Drill Bit #42") |
| Tool Code | Internal code for quick reference |
| Tool Type | Drill, Mould, Die, Gauge, Fixture, etc. |
| Cost Per Use | Cost charged each time the tool is used |
| Life Hours | Total rated life in hours |
| Current Hours Used | Running total of hours used |
SF_TOOLING is ON, the system tracks tool usage during production.
An Engineering Change Notice (ECN) is a formal request to modify a BOM or Routing. When SF_ECN_STRICT is ON, BOM changes cannot be activated until the ECN is approved.
| Field | Value |
|---|---|
| ECN Number | ECN-001 |
| Title | Change audio wire from 22AWG to 20AWG |
| Linked BOM | Bluetooth Speaker BOM v1.0 |
| Change Type | Component Specification |
| Old Value | 22AWG wire |
| New Value | 20AWG wire |
With SF_ECN_STRICT ON, the Speaker BOM cannot be reactivated until this ECN is approved and implemented.
The 8 business switches control advanced production logic. When a switch is ON, the system enforces the corresponding rule in the relevant module.
| Switch | Category | What It Controls | Enforcement Point |
|---|---|---|---|
SF_ROUTING | Production | Sequential work centre steps | WO Release — returns routing info + operations |
SF_QC_MANDATORY | Quality | Mandatory inspection before completion | WO Complete — blocks if no PASS inspection |
SF_BATCH_TRACE | Quality | Lot numbers, expiry dates | Production Entry — batch tracking reminder |
SF_BYPRODUCT_YIELD | Production | Secondary output capture | Production Entry — auto-creates by-product stock |
SF_ECN_STRICT | Production | Revision control on BOM/routing | BOM Activate — blocks if unapproved ECN exists |
SF_SUBCONTRACT | Planning | Outsource processing to vendors | Work Order view — subcontract badge indicator |
SF_TOOLING | Production | Tool/die tracking per work centre | Work Order view — tooling badge indicator |
SF_POTENCY_CALC | Production | Dynamic formulation calculation | Process manufacturing — potency scaling |
When you open the Work Order screen, colored badges appear at the top showing which switches are active:
A: Yes. BOMs only define components. Work Centres are used for labour/overhead costing. You can have a BOM with just material costs.
A: You can produce any quantity. The system consumes raw materials based on what you actually produced (not planned). If you produce 105 speakers instead of 100, it consumes materials for 105 + scrap.
A: Yes, but it only affects future Work Orders. Existing Work Orders keep the BOM version they were created with.
A: Scrap % increases the effective quantity consumed. If you need 100 drivers at 5% scrap, the system consumes 105 drivers (100 × 1.05). This accounts for expected waste during production.
A: Yes. You can record multiple Production Entries against the same Work Order until the planned quantity is met. For example, produce 50 on Monday, 50 on Tuesday.
A: Run MRP first to see the shortfall. Then create Purchase Orders to buy the missing materials. Once received, release the Work Order and produce.
A: Yes. Link Work Centres to Cost Centres. When production happens, costs flow into the CO module for departmental tracking and profitability analysis.
A: A BOM is a recipe (what goes into the product). A Work Order is a production instruction (make this many units now). Multiple Work Orders can use the same BOM.
A: Yes. Each Work Order shows its production entries, dates, quantities, and status. You can see what was produced, when, and the yield percentage.
A: Record rejected quantity in the Production Entry. Rejected items are still added to stock (as rejected/rework) but not counted as good production. You can write them off later via a Journal entry.
A: Industry Configuration lets you select your manufacturing type (Discrete, Process, Project, Job Shop). This automatically enables the right production modules and configures business switches. You can also toggle individual switches manually.
A: When ON, Work Orders cannot be completed without a PASS quality inspection. You must record a QC Inspection with result "PASS" before the system allows the WO to be marked as Completed.
A: When ON, a BOM cannot be activated if there's an unapproved Engineering Change Notice (ECN) for that BOM. This ensures all BOM changes go through a formal approval process.
A: Define by-product rules on the BOM (yield % and item). When SF_BYPRODUCT_YIELD is ON and you record production, the system automatically creates stock entries for the by-products based on the yield %.
A: A Routing defines how to make a product (which operations, which work centres, in what sequence). A Work Order is the instruction to actually make a specific quantity. A Work Order can reference a Routing for standardised production steps.
A: Yes. Subcontracting is independent of Routing. You can create subcontract orders to outsource any processing step, regardless of whether routings are configured.