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Re: Purchase parts/services same as sales?

Hi Keith;

I understand the problem, and I will say that it isn't straightforward
in LSMB at the moment.  Assemblies will be the best way to go, but it
can take some effort to come up with a useful way to do this.  As I
say, I am sure that the whole manufacturing side will be reworked as
time goes on but for now, this is what the capabilities are.

On 1/15/07, Keith Nybakke <..hidden..> wrote:

I understand this, but let me pose an example that better illustrates
my problem:

A blacksmith makes a horseshoe from a bar of steel. There is only one
component in the assembly, a length of steel. But the end product
certainly has a value that is much higher than the value of the
single component. A blacksmith is not going to purchase one
horseshoe's worth of steel bar whenever an unshod horse appears. No,
he will have a raw material inventory of steel bar stock. He will
take what he needs from his inventory and fabricate one horseshoe.

Right.  You buy bulk steel or iron, and make the horse shoe to order.
For common goods this is still straightforward:

You order the steel, sell the horseshoe, and stock in retrospect (i.e.
at the end of the day, you have -10 horseshoes on hand so you stock 10
to bring this up to 0).  Everybody is happy :-)

However, I suspect your situation is more complex than that.  If you
are doing custom work, you may have to deal with the issue of items
with varying components, or on-the-fly customizations which assemblies
are going to have a hard time dealing with.  The example is in this
case more similar to a sandwich shop and the question of how much
lettuce did we put on sandwiches (not all sandwiches of each category
might have lettuce depending on what the customer wants)...  And
therein lies the problem...  This is not something we can deal with
gracefully at the moment, but it is something that is on the radar.

The only way to do this at the moment is to have the optional
inventory items also appear on the invoice.

I'm sure you are starting to get the idea behind the work flow in a
custom product job shop and how the accounting is different from an
value-added assembly business or resale operation or a service
provider. A blacksmith shop is a small-lot, custom product job-shop.
Yes, he creates and sells a product. But, it's a product that derives
its value primarily from the service portion of its creation, not its
material portion, so raw material is very close to just an expense
and is not as clearly accountable in the cost of goods sold.

Well, I would argue that the assembly unit is primarily a materials
and service sort of thing.  You can create an assembly to track this
and this way you can get a fairly clear picture of how much labor was
tied to what sort of income.  The larger issue of custom additions to
the invoice becomes a bigger issue, but we are looking at that.

Ideally, I would think you would want to be able to track the cost of
materials plus the labor time against the sale.  There are two ways to
do this at the moment:  assemblies and projects.  However, assemblies
are the more invoice-friendly option.

Hope this helps,
Chris Travers