Work orders for small factories: from BOM to finished goods in one screen

What is a work order in manufacturing?

A work order is a record that says: make this quantity of this product, from these materials, in this warehouse. It is the link between the recipe on paper and the stock on the shelf.

In a 10 person unit, one work order is usually one natural unit of work: a batch of 50 chairs, one kiln load of bricks, one shift on the moulding machine, one day of sweets. Big plants split work orders by machine and stage. A small factory does not need that. It needs to know three things after every batch: what went in, what came out, and what each unit cost.

• The bill of materials (BOM) is the recipe: components and quantities for a fixed output, plus scrap and a cost per batch for labour and overhead.
• The work order is one use of that recipe for a real quantity on a real date.
• The completion is the moment stock moves: materials out, finished goods in.

What are the stages of a work order?

A work order moves through five states, and only the last real step, completion, touches stock or the books.

Keeping stock still until completion is deliberate. Half-built goods do not sit in stock as a guess, and a cancelled batch leaves no trail of movements to undo.

Why does the work order copy the BOM instead of linking to it?

A work order takes a snapshot of the BOM when it is planned, so later changes to the recipe do not rewrite batches already on the floor.

Recipes change. A new supplier's tube is thicker, so you cut less per chair. If the work order pointed at the live recipe, last month's batch would suddenly show different planned quantities. With a snapshot, each work order keeps the plan it was made against, and a BOM change is best saved as a new version.

How does a 50-chair batch flow from BOM to finished goods?

Lakshmi Steel Furnitures, the fictional Coimbatore business on this site, makes the steel visitor chair costed in the cost of production guide. Its BOM yields 10 chairs per batch with an additional cost of ₹1,500 per batch for labour and power. The work order is for 50 chairs, so every BOM line is multiplied by 5 and then by its scrap allowance.

1. 1

   Draft and plan

   The supervisor picks the chair, the default BOM and 50 pieces. Materials fill in from the BOM. Planning freezes them and checks the Main godown: foam cushions are short by 12, so a purchase order is raised from the shortfall.

2. 2

   Start

   The batch goes on the floor and the work order is marked in progress. The job card is printed with a tick column for each material issued.

3. 3

   Complete

   All 50 chairs pass inspection. The cutter reports 214 m of tube used instead of 210, because two lengths had a bad weld. Every other line is consumed as planned. The supervisor enters these actuals once.

4. 4

   Post

   Materials leave the Main godown at average cost, 50 chairs enter stock at actual cost, and the journal posts in the same step.

The ₹4.96 difference is small, but it is real, and it is visible. Over a year of batches, a gap between planned and actual cost per unit is the clearest sign of waste on the floor.

What does the journal look like when a work order is completed?

Completion moves material value into finished goods and adds the batch's additional cost to inventory, with no manual entry.

The labour and power you pay through payroll and bills are already in expense accounts. The credit to manufacturing overhead absorbed moves the ₹7,500 share of them into the value of the chairs, so it reaches cost of goods sold when the chairs are sold rather than in the month they were paid.

How should a small factory handle scrap and by-products?

Normal, expected scrap belongs in the BOM as a scrap percentage; anything you can sell or reuse goes into stock separately with a reason.

• Expected loss: set scrap percent on the BOM line, as with the 5% on steel tube. Planned quantities include it, and its cost lands in the finished product.
• Unexpected loss: enter the real quantity consumed at completion, as with the 214 m. The extra cost lands in that batch, where you can see it.
• By-products: offcuts sold to a scrap dealer, or broken bricks sold as hardcore, come into stock through a stock adjustment with a reason such as "offcuts from WO batch".
• Rejects: if 2 of the 50 chairs fail, complete the work order for 48. The cost of all materials consumed is then spread over 48 chairs.

What should you check before completing a work order?

A completion is final, so the few minutes before it decide whether your cost per unit means anything.

• Quantity produced is a count of good units, not the planned figure copied across
• Consumed quantities come from the floor, especially for lines with high scrap
• Every component has a cost; a component never received on a bill has an average of zero and makes the batch look cheap
• The source godown has enough stock of each component, or the shortfall is received first
• Additional cost per batch still reflects current labour and power rates
• Large runs are split into several work orders, since each one completes once

How does SimpleERP run a work order from BOM to finished goods?

In SimpleERP, the work order screen carries the materials from the BOM, availability, completion and costing, and completion posts the stock movements and the journal in one step. Finished goods enter stock at actual cost and blend into the product's weighted average.

• BOMs per finished product with versions, output quantity, scrap percent per line and additional cost per batch, with a live cost roll-up.
• Work orders snapshot the BOM, check availability and offer a purchase order from the shortfall.
• Completion records actual consumption and quantity produced, then values output at (material cost + additional cost) ÷ quantity produced.
• A printable job card for the floor, and a work order can be created from a confirmed sales order line.

Read more on the manufacturing page, or see how the standard cost is built in how to calculate cost of production with a BOM.