Why do I set up offsite locations and production facilities?
A location is a place in a company where inventory is stored. A location can represent a physical place, such as a city, building, or floor of a building. It can also represent a logical classification, such as spare parts, office supplies, consignment inventory, or a warehouse.
Production facilities are the locations where finished goods are produced. Production facilities must be defined as inventory locations in the Inventory Control application.
You assign the waste, variance, and work-in-process (WIP) accounts from the General Ledger application when you define production facilities. This table describes how these accounts are used in the Production Order application.
| Account | Description |
|---|---|
| Waste | Cost of damaged components that are expensed and are not used as part of the cost of goods sold. |
| Variance |
When you reverse a work order and a cost is returned from inventory for byproducts, the amount is posted to the variance account. When the quantity of goods produced does not match the components used, the difference between the component costs is posted to the variance account. If you are a standard cost inventory company and your actual costs of producing a finished good do not match Inventory Control's known standard cost, the difference is posted to the variance account. |
| Work-in-Process | Component inventory costs post to the work-in-process account during production if you perform picking feedback. Component inventory costs are also posted to Work-in-Process during production feedback. |
| Income statement | Flag that indicates whether postings to production credit, burden absorption, and material expense accounts should occur. |
Offsite locations are locations that are external to your company. They complete all or part of the production of finished goods. Offsite locations are not defined as production facilities in the Inventory Control application.
At offsite locations, offsite components can be added to finished goods. Offsite components are not inventory-tracked at the production facility. These components can be owned and inventoried by offsite locations.
Offsite components are not included in your company's inventory.
If any normal or packaging components are sent offsite for production, they must be inventoried items at the production facility or another inventory location.