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Chapter 11. The Conversion Business Process. Chapter Learning Objectives. Identify the activities and documents common to most conversion business processes Recognize the similarities and differences between various types of conversion processes
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Chapter 11 The Conversion Business Process
Chapter Learning Objectives • Identify the activities and documents common to most conversion business processes • Recognize the similarities and differences between various types of conversion processes • Explain the various components of the REA ontology in the conversion business process • Create a REA business process level model for an enterprise’s conversion process • Identify common information needs within the conversion process • Create database queries to retrieve conversion process information from a relational database
Conversion Cycle Events • Economic Increment Event • Production Run; the event that produces a finished product resource • Represents a batch or job in a job-order-costing environment (and may be labeled as such) • Represents a machine run in a process-costing environment, or some equivalent time period such as a growing season • Data typically captured include an assigned identifier, starting date/time and ending date/time of the event, and data as to the resources and agents involved in the production run
Conversion Cycle Events • Economic Decrement Event • Materials Issuance • Represents the using up of raw materials in the production process. Those raw materials are usually transformed into finished goods and lose their own identity and nature in the process. • Is usually symbolized by a move ticket or similar document • Data typically captured include date/time of issuance; origin and destination of the issuance, the underlying production order, and the agents involved in authorizing it (supervisor) and executing it (inventory clerk)
Conversion Cycle Events • Economic Decrement Event • Labor Operation • Represents the performance of a particular activity in the conversion process by a production employee, thereby using up that person’s labor • Is usually symbolized by a job time ticket or time track form • Data typically captured include the starting and stopping times for the labor operations and descriptions of the labor operations on a specific date by a specific employee
Conversion Cycle Events • Economic Decrement Event • Machine Operation • Represents the performance of a particular activity in the conversion process by a machine, thereby consuming part of the machine’s useful life • Is usually symbolized by an entry on the WIP job ticket • Data typically captured includes the starting and stopping dates and times for the machine operations, what machines were involved, who authorized them (supervisor) and who executed them (production employee)
Conversion Cycle Events • Increment Commitment Event • Production (Job) Order • A commitment event that schedules a work-in-process job, committing to a future increase in finished products • Is usually symbolized by a Production Order number and data such as what finished good is being produced, what quantity is being produced, who approved it, the order date and requested completion date. The production order document may also summarize data such as what specific labor operations and materials are needed
Conversion Cycle Events • Decrement Commitment Event • Raw Materials (or Labor or Machine) Requisition • Is a Commitment event whereby the production commits to transfer materials from the materials warehouse to the production floor, thus it commits to a future decrease in materials (or labor or machinery). • If insufficient materials are on-hand in the warehouse or if insufficient labor is available, this may trigger activities in the purchasing or payroll departments; however, those activities are part of the acquisition/payment and payroll processes, not the conversion process • Is usually symbolized by a materials requisition document • Data captured typically include the date/time of requisition and information about the resources and agents involved in the event
Conversion Cycle Relationships • Duality • Transformations are more complex than transfers found in other processes • Involve materials use, labor use, and equipment consumption • Often compromised such that only materials use is tracked directly, with labor and equipment consumption costs assigned via some allocation scheme • Often labor operations and machine operations are not maintained separately from work-in-process job because they are subsumed into the job; relationships of the production run to the labor type and machine resources are often maintained
Conversion Cycle Relationships • Stock-flow • Materials and labor are typically used up completely in the material issuances and labor operations; such stock flows are called Use • Machines are typically only partially used up in machine operations, such a stock flow is called Consume • Finished goods are produced by the production run (similar to inventory being purchased in acquisition cycle) • Fulfillment • Material issuances fulfill raw material requisitions • Production runs fulfill production orders
Conversion Cycle Relationships • Reservations • Raw materials are reserved for use via the requisition event • Finished Goods are reserved for availability via the production order • Participation relationships • Typically all agents in the conversion cycle are internal agents • Usually includes a direct association relationship (responsibility) between production supervisors and employees
Conversion Cycle Relationships • Linkages • Between Materials and Finished Goods • Contains information needed for Bill of Materials, I.e., a finished good is composed of what raw material items (in what quantities) • Between Labor (type) and Finished Goods • Contains information needed for Operations List, I.e., a what labor operations are needed to produce a finished good
Bill of Materials Captures Linkage (Raw Materials-Finished Goods) information
Operations List Captures Linkage (Labor Type-Finished Goods) Information
Relational Tables Encompassing Linkage Relationships: Ingredients-Cookies
Relational Tables Encompassing Linkage Relationships: Labor Types-Cookies
Conversion Cycle Relationships • Reciprocal • Production orders trigger the requisitioning of materials; this reciprocal relationship represents a schedule of what is to be produced and what will need to be used and consumed to accomplish the production. • Custody • Companies often give custody of materials (and possibly finished goods) to a set of inventory clerks to protect the goods from theft or other misappropriation
Resource Query Types • Detailed status information at one or more points in time for each resource instance • Detailed status information at one or more points in time for only those resource instances meeting specified criteria • Summarized status information at one or more points in time for all resource instances • Summarized status information at one or more points in time for only those resource instances meeting specified criteria
Conversion Cycle Resource Queries • List of machinery owned by an enterprise • Average age of machinery on a specified date • List of raw materials normally stocked by an enterprise • List of finished products normally produced by an enterprise • Average standard cost of labor types for an enterprise
Event Query Types • Detailed information about each event instance • e.g., what happened, when and where did it happen, etc. • Detailed information about each event instance that meets specified criteria • e.g. events of a specified type that occurred during a specified time period or that occurred at a specified location • Summarized information for all instances of an event type for a specified time period • e.g. total of the event instances during a specified time period • Summarized information for only those instances of an event type for a specified time period that meet specified criteria • e.g. average dollar value of the event instances for a specified location during a specified time period
Event Queries in the Conversion Process • Length of a specific production run • End time minus start time • Average length of production runs during a specific time period • Total number of production runs that occurred at a specific plant or workstation or during a specific time period • Date and/or time an issuance of materials occurred
Agent Query Types • Detailed status information at one or more point in time for each employee • Detailed status information at one or more points in time for each employee who meets specified criteria • Summarized status information at one or more points in time for all employees • Summarized status information at one or more points in time for all employees who meet specified criteria
Conversion Cycle Agent Queries • List of employees including selected attributes such as addresses and telephone numbers
Conversion Cycle Duality Relationship Queries • Identification of labor operations related to one or more specific production runs • Identification of machine operations related to one or more specific production runs • Calculation of the time taken for a labor (or machine) operation as a percentage of a complete production run • Count of the number of raw material issuances (or labor operations or machine operations) related to a specific production run
How many ingredient issuances were associated with each cookie batch?
Conversion Cycle Fulfillment Relationship Queries • Identification of unfulfilled commitment events • E.g. production orders for which production runs have not yet occurred • Identification of fulfilled commitment events • E.g. material requisitions for which material issuances have occurred • Identification of economic events for which commitments were not made • E.g. production runs that were not ordered
Conversion Cycle Fulfillment Relationship Queries • Calculation of length of time between commitment and economic events • E.g. length of time elapsed between material requisition and material issuance • Identification of causes of economic events • E.g. which production order led to a production run • Identification of results of commitment events • E.g. which material issuance filled a material requisition
Conversion Cycle Reservation Queries • What resources or resource types is a commitment event agreeing to increase or decrease? • E.g. what finished good or finished good type is a production order committing to produce? • What quantity of a resource or resource type is a commitment event agreeing to increase or decrease? • E.g. What quantity of each material type is a material requisition committing to use up? • What dollar value of a resource or resource type is a commitment event agreeing to increase or decrease? • E.g. What is the dollar value of the finished goods a production order is committing to produce?
Conversion Cycle Reservation Queries • When did an event commit to increase or decrease a specific resource or resource type? • E.g. When did a materials requisition commit to using up a specific material type? • Where did an event commit to increase or decrease a specific resource or resource type? • E.g. To which materials warehouse location was a materials requisition issued?
Query to identify quantities and descriptions of ingredients to be used up by issuance #1002
Conversion Cycle Participation Queries • Which agent(s) participated in a specified event? • E.g. Which production supervisor authorized a machine operation? • How many events of a specified type has a specified agent participated? • E.g. On how many production orders has a production employee been scheduled to work? • What is the total dollar value of events of a specified type in which a specified agent has participated for a specified time period? • E.g. What is the total dollar value of all material issuances approved by a production supervisor?
