Real-world example: Work orders for FizzPop Seltzers. They purchase raw ingredients and work with a manufacturer to assemble their final product.
FizzPop Seltzers meticulously tracks the cost of producing their Dragon Fruit Punch seltzer, including raw materials, packaging, and external bills like freight and lab testing. They use Work Orders in Settle to manage production and calculate the final landed cost.
Scenario: FizzPop is ready for their manufacturer, Bev2U, to produce another shipment of 500 cases of their Dragon Fruit Punch. They'll use a PO to purchase their ingredients from FoodSource and a work order to move product to Bev2U for them to assemble their finished goods.
Process:
Purchase orders for all materials including initial costs:
FizzPop Seltzers creates a new purchase order by clicking the +Create Purchase Order button from the Purchase Orders section in the left-hand navigation.
FoodSource is selected as the vendor.
Destination: production facility.
Product line items specifying all ingredients and packaging including quantities and unit price:
Dragon Fruit Concentrate
Natural Punch Flavoring
Carbonated Water
Aluminum Cans
Individual Can Labels
12-Pack Cardboard Cartons
Cases
Submit the PO:
Once FizzPop has reviewed the details, they'll submit the purchase order by including their vendor contact information. They've also included a note on the PO giving FoodSource some additional details about this order. An email w/PDF copy of this PO is sent to their POC at FoodSource for processing.
Receive the goods and confirmation receipt:
Upon arrival at the production facility, FizzPop Seltzers processes manual GRNs in Settle for each PO. This increases inventory levels of the raw materials.
Work order for production:
To produce 500 cases of "Dragon Fruit Punch," a Work Order (WO) is now created in Settle and sent to Bev2U.
Finished Good: Dragon Fruit Punch Seltzer (Case of 24 x 12-packs)
Quantity to Produce: 500 cases
Source Location: Production Facility
Destination Location: Finished Goods Storage (or WMS)
Bill of Materials (BOM): The BOM details the required quantities and costs for 500 cases:
Dragon Fruit Concentrate
Natural Punch Flavoring
Carbonated Water
Aluminum Cans (i.e. 144,000 units)
Individual Can Labels (i.e. 144,000 units)
12-Pack Cardboard Cartons (i.e. 12,000 unts)
Cases (500 units)
Tracking expenses on the work order:
FizzPop now tracks all of their related expense on this work order to manage their costs and SKU profitability.
External bills: Within the Work Order, they link external bills directly to this production run. For example: Freight bill: They link the invoice for transporting the raw materials to your production facility. For them, this cost will be allocated proportionally to the component items based on weight. Lab Testing Bill: They had to perform quality control tests on a batch of these finished materials so they link that invoice to the WO. This cost is also allocated across all the finished goods produced in this batch.
Landed Cost Calculation: Settle will automatically calculate the landed cost of each component item used in the production. This calculation typically involves:(Cost of Component Item) + (Proportional Share of Linked External Bills)
Final Landed Cost of Finished Goods: The final landed cost of each case of Dragon Fruit Punch will be calculated by:
Sum of (Landed Cost of Each Component Item x Ratio of that Component Used per Case) + (Any Additional Direct Costs Linked to the WO but not allocated to components)
For example, if the landed cost of the aluminum cans used in one case is $X, the landed cost of the concentrate is $Y, and there were $Z in direct labor costs allocated per case in the WO, the final landed cost per case would be ($X + $Y + $Z).
Receiving Finished Goods (GRN):
Once the 500 cases are moved to Finished Goods Storage, a GRN is processed through their WMS. This updates the inventory with the calculated landed cost per case.
Key Takeaways for this workflow:
Comprehensive cost tracking: Work Orders serve as a central point for tracking all costs associated with a production run, including raw materials and external bills.
Landed cost roll-up: Settle automatically calculates and rolls up the landed cost of each component into the final cost of the finished goods.
Accurate profitability analysis: By accurately capturing the landed cost, FizzPop Seltzers can gain a clear understanding of their production costs and profitability.
External bill linking: Directly linking freight, lab, and other relevant bills to the Work Order ensures these costs are factored into the final product cost.
🤯🤯 Want to see this in action for yourself? Connect with your Settle representative for a demo.