Building the Foundation for Dynamics GP Manufacturing: Things to Consider Before You Begin

By - December 4, 2017

Welcome to the wonderful world of manufacturing in Dynamics GP!  This series is designed to help you build the foundation for a successful implementation of the manufacturing module.  This post is designed to help you consider some important topics that will have a big impact on your Microsoft Dynamics GP manufacturing implementation.  So, let’s get started!

  1. How are you planning on valuing your inventory?  Are you planning on tracking actual costs or standard costs?

The answer to this question will not only dictate the Valuation Method on your inventory items – but it will also help you determine how detailed your cost accounting structure needs to be.  Actual costing may be the right choice if you work in a make-to-order environment or an environment when the costs of labor and material are constantly changing.  It also allows you to track the “true cost” of your finished goods.  Standard costing may be the right choice for you if you operate in a discrete, make-to-stock manufacturing environment.  Standard cost allows you to track variances with much more accuracy and at a much more detailed level than actual costing.

  1. How are you planning on tracking your inventory?  Do individual components get stored in multiple bins in your warehouse?  Are your components lot or serial tracked?

The answers to these questions are extremely important as they impact some of the basic setups within the inventory module and on each individual inventory item.  If individual components are stored in multiple bins in your warehouse, and you want to track your inventory at that level of detail in Dynamics GP, you will need to turn on the Multi-Bin functionality within the inventory module.  By default, Dynamics GP comes with a single bin tracking system in the inventory module.

Normally, lot or serial tracking is not a choice.  Whether for regulatory or quality control reasons, many manufacturers must track their inventory by lot or serial numbers.  Dynamics GP has robust lot and serial tracking functionality built into the inventory and manufacturing modules.  Serial/Lot Linking allows the lots of raw materials used in production to be linked to the lot of the finished good produced and for those lots to be tracked on sales documents, manufacturing documents, etc.  For those manufacturers that do not need to track lots or serial numbers, the system becomes much more streamlined.  Tracking lots and serial numbers requires a few extra steps on any window that interacts with inventory items, so it is advisable to take a good, long look at whether or not you need to track lots or serial numbers.

  1. Do you want to schedule and plan purchase orders and manufacturing orders?

Using Material Requirements Planning (MRP) and having the system make suggestions for your purchasers and planners can be daunting.  However, combining MRP with the institutional knowledge of your buyers and planners can be a powerful combination when it comes to streamlining your manufacturing processes and increasing efficiencies.  MRP is especially helpful in manufacturing environments where made items, purchased parts, or both have long lead times.  Taking a Crawl, Walk, Run approach is advisable when implementing MRP in an environment that has relied on institutional knowledge.

  1. Are you able to track labor on production orders?  Do you have any outsourced processing costs that you want to track on production orders?

Deciding whether or not to track labor and outsourcing costs on manufacturing orders has impacts on both routing setups and how the MRP functionality of Dynamics GP functions.  If you decide not to track labor costs on individual production orders and make journal entries to labor accounts in your GL, you only have to make a one-step routing in the manufacturing module in Dynamics GP.  Not tracking labor on individual production orders can also result in understating the costs on individual made inventory items.

If you have outsourced processing costs and want to track them on individual production orders, you are in luck!  Work centers in Dynamics GP can be set up as outsourced work centers, which will create a PO and require a receipt against that PO for all outsourced work.  This can really help to increase your ability to audit your costs and have a true understanding of where all of your cost of goods sold and production costs are coming from.

  1. Do you backflush material in your manufacturing process?

Backflushing is a practice that is normally used in manufacturing environments where made items have relatively short lead times because it results in the raw material issue happening at the same time as finished goods receipt.  If you’re an accountant and you’re scratching your head right now, you are correct – this removes WIP from the equation.  However, backflushing has the benefit of streamlining the production process in Dynamics GP by removing the raw material issue step.  However, it can result in raw material inventory being overstated at month end if there are still open production orders on the floor.

Dynamics GP also allows you to backflush some items and issue others.  The decision on whether or not to backflush is truly a joint decision between the accounting department and operations and the pros and cons for your business should take both the accounting and operational impacts into account.

Hopefully, these questions have got you thinking about some of the important decisions you will need to make before beginning your manufacturing implementation in Dynamics GP.  The remainder of the series will be focused on the foundational windows in both the inventory and manufacturing module.  Please leave any comments or questions below.  Hope you stick around for the rest of the series!

For further information, contact the author of this post or any of our Microsoft Dynamics experts at




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