AX2012 - ENUS - Lean Manufacturing PDF

COURSE: 80310
LEAN MANUFACTURING
IN MICROSOFT DYNAMICS AX
Last Revision: August 2011

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Table of Contents
Introduction
0-1
Welcome ...........................................................................................................0-1
Microsoft Dynamics Courseware Contents........................................................0-2
Documentation Conventions .............................................................................0-3
Student Objectives ............................................................................................0-4
Chapter 1: Lean Manufacturing Concepts and Overview
1-1
Objectives .........................................................................................................1-1
Introduction .......................................................................................................1-1
Core Concepts ..................................................................................................1-2
The Value Stream ...........................................................................................1-12
Introduction to Production Flows .....................................................................1-14
Introduction to Kanbans ..................................................................................1-16
Simple Production Flow ..................................................................................1-22
High Level Production Flow ............................................................................1-24
Setup and Interconnectivity .............................................................................1-28
Summary ........................................................................................................1-38
Test Your Knowledge ......................................................................................1-39
Quick Interaction: Lessons Learned ................................................................1-41
Solutions .........................................................................................................1-42
Chapter 2: Production Flows
2-1
Objectives .........................................................................................................2-1
Introduction .......................................................................................................2-1
Production Flow Versions .................................................................................2-3
Takt and Cycle Times .......................................................................................2-4
Activities Setup .................................................................................................2-9
Lab 2.1 - Creating a Single Process Activity Production Flow .........................2-14
Single Transfer Activity Production Flow .........................................................2-20
Two Activity Production Flow: Process and Transfer.......................................2-22
Activity Relations.............................................................................................2-23
Lab 2.2 - Multiple Activity Production Flow ......................................................2-26
Multiple Activity Scenarios ..............................................................................2-29
Inventory Integration .......................................................................................2-34
Semi-Finished .................................................................................................2-41
Costing Implications ........................................................................................2-51
Summary ........................................................................................................2-53
Solutions .........................................................................................................2-57
Chapter 3: Use and Manage Kanbans
3-1
Objectives .........................................................................................................3-1
Introduction .......................................................................................................3-1
Kanban Types ...................................................................................................3-2
Kanban Replenishment Strategies ....................................................................3-5
Subcontracting Activities and Manufacturing Kanbans ....................................3-22
Summary ........................................................................................................3-26
Lean Manufacturing in Microsoft Dynamics AX 2012

Solutions .........................................................................................................3-30
Chapter 4: Fixed Quantity Kanbans
4-1
Objectives .........................................................................................................4-1
Introduction .......................................................................................................4-1
Kanban Rule Setup ...........................................................................................4-2
Lab 4.1 - Configure a Fixed Quantity Kanban Rule .........................................4-26
Kanban Job Planning ......................................................................................4-29
Lab 4.2 - Planning a Kanban on the Kanban Board ........................................4-39
Kanban Printing ..............................................................................................4-40
Kanban Processing - Process Jobs ................................................................4-42
Lab 4.3 - Kanban Processing on the Kanban Board for Process Jobs ............4-54
Kanban Processing - Transfer Jobs ................................................................4-55
Lab 4.4 - Kanban Processing on the Kanban Board for Transfer Jobs ............4-58
Summary ........................................................................................................4-59
Solutions .........................................................................................................4-64
Chapter 5: Event Kanbans
5-1
Objectives .........................................................................................................5-1
Introduction .......................................................................................................5-1
Lab 5.1: Configure an Event Kanban Rule ......................................................5-17
Sales Line Events ...........................................................................................5-20
Lab 5.2 - Process a Sales Line Event .............................................................5-26
Capable to Promise ........................................................................................5-28
Lab 5.3 - Process a Sales Line Event with CTP ..............................................5-31
Kanban Line Event..........................................................................................5-34
Lab 5.4 - Kanban Line Event ...........................................................................5-38
BOM Line Event ..............................................................................................5-41
Lab 5.5 - Set up a BOM Line Event Kanban Rule ...........................................5-43
Lab 5.6 - Process a BOM Line Event ..............................................................5-45
Stock Replenishment Event ............................................................................5-46
Lab 5.7 - Set up a Stock Replenishment Event Kanban Rule ..........................5-50
Lab 5.8 - Process a Stock Replenishment Event ............................................5-52
Summary ........................................................................................................5-54
Solutions .........................................................................................................5-59
Chapter 6: Scheduled Kanbans
6-1
Objectives .........................................................................................................6-1
Introduction .......................................................................................................6-1
Planned Orders of Type Kanban .......................................................................6-2
Supply Schedule ...............................................................................................6-3
Lab 6.1 - Scheduled Kanban Rule Setup ........................................................6-24
Planning Scheduled Kanbans .........................................................................6-28
Lab 6.2 - Scheduled Kanban ...........................................................................6-31
ii
Table of Contents
Summary ........................................................................................................6-34
Solutions .........................................................................................................6-38
Chapter 7: Activity Based Subcontracting
7-1
Objectives .........................................................................................................7-1
Introduction .......................................................................................................7-1
Subcontracting Vendor Payments .....................................................................7-3
Resource Group/Work Cell ...............................................................................7-6
Production Flow with Subcontracting Activities .................................................7-8
Lab 7.1 - Process a Subcontract Activity .........................................................7-21
Subcontracting as an Alternate Resource .......................................................7-26
Lab 7.2 - Using an Alternate Subcontractor.....................................................7-29
Cost Accounting of Subcontracted Services....................................................7-31
Summary ........................................................................................................7-36
Solutions .........................................................................................................7-40
Chapter 8: Production Flow Costing
8-1
Objectives .........................................................................................................8-1
Introduction .......................................................................................................8-1
Backflush Costing .............................................................................................8-2
Standard Cost Requirement ..............................................................................8-3
Components for Lean Manufacturing ................................................................8-4
Lab 8.1 - Configure Standard Costing in Microsoft Dynamics AX 2012 ...........8-13
Lab 8.2 - Calculation of Standard Cost Based on a Production Flow...............8-20
Reporting Production Flow Activities ...............................................................8-22
Lab 8.3 - End a Kanban Process Job and Observe Posted Costs...................8-29
Subcontracting ................................................................................................8-31
Lab 8.4 - Costing for a Subcontracted Activity.................................................8-32
Backflush Costing ...........................................................................................8-35
Lab 8.5 - Perform Periodic Backflush Costing .................................................8-42
Summary ........................................................................................................8-44
Solutions .........................................................................................................8-48
Chapter 9: Kanban Quantity Calculations
9-1
Objectives .........................................................................................................9-1
Introduction .......................................................................................................9-1
Kanban Quantity Calculation Policies................................................................9-2
Calculating Kanban Quantities ..........................................................................9-9
Lab 9.1 - Calculating Kanban Quantities .........................................................9-18
Summary ........................................................................................................9-21
Solutions .........................................................................................................9-25
iii
iv
Introduction
INTRODUCTION
Welcome
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0-1
Microsoft Dynamics Courseware Contents

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0-2
Introduction
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0-3
Student Objectives
What do you hope to learn by participating in this course?
List three main objectives below.
1.
2.
3.
0-4
CHAPTER 1: LEAN MANUFACTURING CONCEPTS

AND OVERVIEW
Objectives
The objectives are:
Explain Lean basic concepts.
Explain the Value Stream theory.
Describe the production flow concept and how it is used in Microsoft

Dynamics AX 2012.
Explain the Kanban concept and how it is used in Microsoft

Dynamics AX 2012.
Describe the Simple Production Flow example and introduce the

Contoso scenario.
Describe the High Level Production Flow example and introduce the
Contoso scenario.
Set up time units to be used in Microsoft Dynamics AX 2012.
Set up the production flow model and explain the capacity settings.
Set up work cells as resource groups.
Set up Lean schedule groups.
Describe the new inventory breakdown concept for Lean

manufacturing in Microsoft Dynamics AX 2012.
Describe standard costing and backflush costing and how they are
used for Lean manufacturing in Microsoft Dynamics AX 2012.
Introduction
Lean Manufacturing Concepts and Overview is designed to introduce students
to Lean principles and how Lean manufacturing for Microsoft Dynamics AX
2012 can be implemented to support those principles. The topics discussed are:
Lean basic concepts
Value Stream theory
Introduction to production flows
Introduction to Kanbans
Setup specific to Lean manufacturing and interconnectivity with

other modules
1-1

Scenario
As a systems developer and consultant for Microsoft Dynamics AX 2012, you
are embarking on a new project for Contoso Entertainment Systems (C.E.S.), a
manufacturer of home entertainment systems. Recognizing that their existing
ERP system is outdated, slow, and costly to maintain, Contoso has decided to
replace it with a new system. The new system must be able to support the
company in its transformation from traditional manufacturing to Lean
manufacturing to remain competitive in the world market.
Your company specializes in Lean manufacturing, and your intention is to
implement the value of Lean manufacturing for Microsoft Dynamics AX 2012 to
support C.E.S. in their initiative to transform their business.
You and the Value Stream Manager, Pierre, go through the process of modeling
Contoso's Value Streams within Lean manufacturing for Microsoft Dynamics
AX 2012 and architecting a solution to support their Lean processes now and in
the future.
Core Concepts
The core concepts for Lean manufacturing in Microsoft Dynamics AX 2012
provide a base level understanding of Lean concepts necessary to understand the
system functionality within Microsoft Dynamics AX 2012.
Five Lean Principles

In their fundamental work for Lean, Womack and Jones defined the five Lean
principles:
Customer Value
Identify the Value Stream
Flow
Pull
Perfection
(Womack & Jones, 2003)
Lean Principle: Identifying Value

When identifying the value, you would specify what creates value from the
customer's perspective.
1-2
The customer defines the value of product in a Lean supply chain.
Value-adding activities transform the product closer to what the

customer actually wants.
An activity that does not add value is considered to be waste.

Lean Principle: Understanding the Value Stream
The Value Stream is the sequence of processes all the way from raw material to
final customer or from product concept to market launch. If possible, look at the
whole supply chain.
The Value Stream is the sequence of processes from raw material to

the product provided to the customer that creates value.
The Value Stream can include the complete supply chain.
Value Stream Mapping is an important tool to help model the Lean

transformation.
The Value Stream is those set of tasks and activities required to design and
make a family of products or services that are undertaken with a group of linked
functions or companies from the point of customer specification right back to the
raw material source.
(Hines et al., 2000)
Lean Principle: Creating Flow

Create flow wherever possible in the process.
Make the value process flow.
Using one piece flow by linking all the activities and processes into
the most efficient combinations to maximize value-added content
while minimizing waste.
The waiting time of work in progress between processes is

eliminated; hence, adding value more quickly.
Lean Principle: Introducing Pull

Make only what is needed by the customer (short term response to the customers
rate of demand).
Pull: response to the customers rate of demand, that is, the actual
customer demand that drives the supply chain.
With a pull concept, based on a supply chain view from downstream to upstream
activities, nothing is produced by the upstream supplier until the downstream
customer signals a need.
Lean Principle: Striving for Perfection

The last Lean principle is to strive for perfection. In striving for perfection, Lean
is a journey of continuous improvement. The goal is to produce exactly what the
customer wants, exactly when the customer wants, economically. Perfection is
an aspiration, anything and everything is able to be improved.
1-3

Lean Enterprise
The Lean enterprise is defined as [a] group of individuals, functions, and
sometimes legally separate but operationally synchronized organizations (The
Association for Operations Management [APICS], 2005, p.60)
Lean Enterprise: Value Stream

The objectives of the Lean enterprise are to correctly specify value to the
ultimate customer, and to analyze and focus the Value Stream so that it does
everything from product development and production to sales and service in a
way that actions that do not create value are removed and actions that do create
value proceed in a continuous flow as pulled by the customer. (APICS, 2005,
p.60)
Therefore, the Value Stream, alongside a new concept of the production flow, is
used to model the structure of the Lean enterprise in Microsoft Dynamics AX
2012. It is used to support these operations of the Lean enterprise:
Lean planning and forecasting (takt, cycle time, throughput,

schedules)
Cellular manufacturing
Flow manufacturing
Lean accounting /Value Stream costing
Six Sigma
Cell and Line Design

In The New Lean Toolbox, John Bicheno describes the process for cell and line
design:
Cell and line design is a hierarchical process, from factory layout to detailed
workstation ergonomics:
1-4
Product family or Value Stream identification
Value Stream Mapping
Strategy and subcontract issues
Plant layout and location of supermarkets
Activity timings and sampling
Calculate takt and cell cycle time
Identify any constraints
Paper kaizen
Theoretical minimum activity times
Theoretical minimum operators
Cell reference cost and savings calculation
Cardboard simulation
Cell layout design
Operator balancing
Workstation ergonomics
Pull system design
(Bicheno, 2004, p. 31)

In opposition to the classical MRP approach, where individual items are linked to
individual and independent resources or resource groups (work centers, groups),
the Value Stream unifies the process for a product family in a top down
approach, before defining (or possibly eliminating) exceptions on the item level.
Lean Terminology
There are ten basic Lean core elements that will be used throughout the training
course. These are:
Value Stream
Kaizen
(Work) Cell
Cycle time
Takt time
Supermarket
Production flow
Backflush costing
Kanban
Heijunka leveling
Definitions of these core elements are presented in these sections:
Lean Terminology: Value Stream, Kaizen, and (Work) Cell
Lean Terminology: Cycle Time and Takt Time
Lean Terminology: Supermarket and Production Flow
Lean Terminology: Backflush Costing, Kanban, and Heijunka

Leveling
1-5

Lean Terminology: Value Stream, Kaizen, and (Work) Cell
These are the definitions of the Lean core elements of Value Stream, Kaizen,
and (Work) Cell.
1-6
Core elements
Definition
Value Stream
A Value Stream is "the processes of creating, producing

and delivering a good or service to the market" (APICS,
2005, p.121).
In Microsoft Dynamics AX 2012, the Value Stream is
represented by one or multiple production flows. It can
also be modeled as an operating unit costing purposes.
Kaizen
Japanese for "continuous improvement." Kaizen is a

management philosophy emphasizing employee
participation, where every process is continuously
evaluated and re-evaluated to eliminate waste.
(Work) Cell
A (work) cell is a manufacturing or service unit

consisting of a number of workstations and the materials
transport mechanisms and storage buffers that
interconnect them (APICS, 2005, p. 16).
In Microsoft Dynamics AX 2012, a work cell is a resource
group, where resources are grouped to execute a process
flow.
The work cell represents the effective capability of all
resources assigned to the cell. It is handled as a black box,
meaning that the internal structure of the cell is not
documented in the system.

Lean Terminology: Cycle Time and Takt Time
These are the definitions of the Lean core elements of Cycle time and Takt time.
Core elements
Definition
Cycle time
The cycle time of a product refers to the time between

completion of two discrete units of production. For
example, the cycle time of motors assembled at a rate of
120 per hour would be 30 seconds. In materials
management, it refers to the length of time from when
material enters a production facility until it exits (APICS,
2005, p. 27).
In Microsoft Dynamics AX 2012, the average cycle times
for each activity of a production flow are determined at
the validation of a production flow version based on the
takt requirement of a production flow version. The actual
cycle times are calculated for a defined period and
compared to the average through the cycle time
performance control.
Takt time
Takt time "sets the pace of production to match the rate of

customer demand and becomes the heartbeat of any Lean
production system. It is computed as the available
production time divided by the rate of customer demand.
For example, assume demand is 10,000 units per month,
or 500 units per day and planned available capacity are
420 minutes per day. The takt time = 420 minutes per day/
500 units per day = 0.84 minutes per unit. This takt time
means that a unit should be planned to exit the production
system on average every 0.84 minutes (APICS, 2005, p.
115).
In Microsoft Dynamics AX 2012, the takt requirements
are defined on a production flow version. For production
flows that feed into other flows, the takt requirements can
be calculated based on the target cycle times of the
consuming activities.
1-7

Lean Terminology: Supermarket and Production Flow
These are the definitions of the Lean core elements of Supermarket and
Production flow.
Core elements
Definition
Supermarket
"In essence, a supermarket is a central storage location

where (raw) materials are stored near their point-of-use so
customers (or consumers) can pull them as needed.
Supermarkets are used to:
Minimize transaction costs
Facilitate visual management
Establish the framework for a point-of-use Kanban

system (pull)"
(Gross & McInnis, 2003, p. 185).

Supermarket areas should be grouped together to enable
the material handler to visit on his or her regular routes. It
is called a supermarket because that is where the material
handler goes shopping for parts (Bicheno, 2004, p. 104).
Production
flow
1-8
The production flow is a part of a Value Stream that

covers the door to door production flow inside a plant,
including shipment to the plants customers and delivery
of supplied parts and material (Rother & Shook, 2003, p.
3).
The flow of material and products throughout work cells
and locations for a specific production or supply scenario
can be described as a sequence or small network of
process or transfer activities, called a production flow. In
Microsoft Dynamics AX 2012, a production flow is linked
to an operating unit that plays the role of the Value
Stream.

Lean Terminology: Backflush Costing, Kanban, and
Heijunka Leveling
These are the definitions of the Lean core elements of Backflush costing,
Kanban, and Heijunka leveling.
Core elements
Definition
Backflush
costing
A cost accumulation method where the application of

costs is based on the output of a process. Backflush
costing is usually associated with repetitive manufacturing
environments (APICS, 2005, p. 8).
Backflush costing omits recording some or all of the
journal entries that relate to the stages from the purchase
of direct materials to the sale of finished goods. Since
some stages are omitted, the journal entries for a
subsequent stage use normal or standard costs to work
backward to flush out the costs in the cycle for which
journal entries were not made.
Kanban
Japanese for visible record. Kanbans have been adopted

by many industries as a method of controlling production
and internal supply. A Kanban can apply to a paper ticket
or a physical container.
A Kanban is [a] method of Just-in-Time production that
uses standard containers or lot sizes with a single card
attached to each. It is a pull system in which work centers
signal with a card or other device that they wish to
withdraw parts from feeding operations or suppliers. The
Japanese word Kanban, loosely translated, means card,
billboard, or sign, but other signaling devices such as
colored golf balls have also been used. The term is often
used synonymously for the specific scheduling system
developed and used by the Toyota Corporation in Japan
(APICS, 2005, p. 58).
In Microsoft Dynamics AX 2012, a Kanban is a pull
signal that represents demand and triggers process and
transfer activities for a unit of a specific item or item
family.
Heijunka
leveling
A production leveling technique using either volume or

product mix.
In Microsoft Dynamics AX 2012, the Kanban schedule
board is designed to be used as a Heijunka board to level
production load on a cell
1-9

Supported Lean Principles in Microsoft Dynamics AX
2012
This section helps you understand how Lean manufacturing for Microsoft
Dynamics AX supports Lean principles and processes.
Supported Lean Principle: Value Streams

The future state Value Stream can be modeled in Microsoft Dynamics AX as a
production flow. All processes of the Value Stream are modeled as process
activities. Movements or transfers can be modeled as transfer activities, if the
transfer status has to be registered or if an integration to inventory picking or
consolidated shipments is required.
The Value Stream is modeled as an operating unit in Microsoft Dynamics AX.
This allows the use of the Value Stream as a financial dimension.
Supported Lean Principle: Production Flows

To establish a production and cost context for the various Kanban scenarios that
are proposed in Microsoft Dynamics AX 2012, the activity-based production
flows are introduced as the backbone of Lean manufacturing. All Kanban rules
refer to this pre-defined structure. The activity-based model allows the setup of a
wider range of scenarios than supported by previous versions of Lean
manufacturing for Microsoft Dynamics AX, without adding complexity for the
shop floor workers, because all scenarios use the same activity-based user
interface.
Supported Lean Principle: Lean Accounting - Production

Flow Costing
Lean manufacturing disrupts the traditional cost concepts of job costing, because
the context of a production order is not available. Lean manufacturing for
Microsoft Dynamics AX 2012 uses the production flow as the cost accumulator.
Cost of material, and semi-finished and finished products are tracked for each
item and cost group. Work in process (WIP) is tracked for every production flow.
Supported Lean Principle: Pull Based Manufacturing Kanban

In Microsoft Dynamics AX 2012, Kanban is implemented as a framework to
plan, track, and process based on pull signals. The Kanban framework supports
Lean processes in combination with the other Lean modules:
1-10
Value Stream, Production flow, and Cell
Visual planning boards (Heijunka)
Kanban schedules

Supported Lean Principle: Semi-Finished Products
In previous versions of Microsoft Dynamics AX, Kanban rules cannot be set up
for semi-finished products. A common mitigation for this issue is to introduce
additional BOM levels, which in the worst case, results in a non-Lean explosion
of BOM levels and thereby inventory transactions. Lean manufacturing for
Microsoft Dynamics AX integrates Kanbans for inventoried products and semifinished products in a single framework, offering a unified user experience for all
use-cases.
Supported Lean Principle: Capable to Promise

The Capable to Promise (CTP) functionality provides the order takers with
accurate information at the point of order entry about the availability of products,
material, and resources needed to satisfy a specific customer demand.
This is implemented with two sub-features:
Delivery date control CTP: The CTP delivery date control helps in
verifying the requested ship date and potential of updating the
confirmed ship date on a sales line.
This is enabled by extending the existing delivery control with a CTP
option that will trigger a Master Scheduling explosion and the
returned futures date is used as the suggested ship date.
Sales event Kanbans with CTP check on the work cell schedule:
In Lean manufacturing, the availability of resources can be
determined by loading the Kanban jobs on the Kanban job schedule
that are related to a work cell. The availability of material is
determined by explosion and pegging within Microsoft Dynamics
AX 2012.
Supported Lean Principle: Kanban Quantity Calculation

Determining the Kanban quantity is one of the most important tasks of Kanban
planning. Microsoft Dynamics AX 2012 provides the capability to calculate the
Kanban quantity by taking forecast, material demands from open orders, and
historical demands into account.
Supported Lean Principle: Barcoding

The Kanban boards integrate standard barcoding operations with Lean
manufacturing. Barcodes can be used to manage Kanban transactions and
provide visibility of material flow.
1-11

Supported Lean Principle: Mixed Mode Manufacturing
Lean manufacturing can be introduced in different ways. While some companies
start with the Lean philosophy and try to apply the Lean principles, Value Stream
by Value Stream, others take a more local approach and start from specific work
cells where resources and demand structure allow or even require a Lean
approach.
Microsoft Dynamics AX 2012 supports mixed mode manufacturing
environments where both Lean manufacturing and traditional manufacturing
exist. Mixed mode scheduling within Microsoft Dynamics AX 2012 uses Master
Planning to reconcile and manage master planning approaches where a mixture
of traditional production orders and Kanbans are used.
Where Lean transformations are currently in progress, the concept of the pull
point is supported throughout the Kanban architecture. Within the pull point, the
buffer is the limit of push and its size and method of fulfillment are under the
control of traditional techniques, such as forecasting and MRP. Beyond the
buffer, inventory will be pulled through Lean processes. Microsoft Dynamics AX
2012 has provided various Kanban scenarios to help link traditional push and
Lean pull systems.
The Value Stream

The Value Stream is defined as the sequence of processes from raw material to
final customer or from product concept to market launch. The Value Stream
should encompass the entire supply chain.
In Microsoft Dynamics AX 2012, the Value Stream is represented by one or
multiple production flows. It is also represented as an operating unit in the
organization hierarchy of the enterprise. The Value Stream should be analyzed
to eliminate any non-value adding activities. Value Stream mapping is the
process of identifying and charting the flows of information, processes, and
physical items across the entire supply chain, from the raw material supplier to
the possession of the customer.
Value Stream mapping is not part of Microsoft Dynamics AX 2012 functionality,
but provides the needed setup inputs into Lean manufacturing for Microsoft
Dynamics AX 2012.
Support of Operations
In Microsoft Dynamics AX 2012, the Value Stream is used to support these
operations of the Lean Enterprise:
1-12
Lean planning and forecasting (takt, cycle time, throughput,

schedules)
Cellular manufacturing
Flow manufacturing
Lean accounting/Value Stream accounting
Six Sigma
When you are considering an implementation of Lean manufacturing in

Microsoft Dynamics AX 2012, the ground work must be laid through defining
the Value Streams, mapping them, and eventually setting this up within the
system.
In Microsoft Dynamics AX 2012, the Value Stream is configured as an operating
unit. This allows you to use the Value Stream as a financial dimension. Multiple
production flows can exist for a company that uses this operating unit for each
company.
Demonstration 1.1: Setting up Value Streams

Scenario: After defining and mapping the Lean Production Value Stream for one
of the C.E.S. companies, Contoso Entertainment United States (CEU), Pierre, the
Value Stream Manager, creates the Value Stream within Microsoft Dynamics
AX 2012.
To set up a Value Stream as an operation unit, use this procedure:
1. Click Production Control > Setup > Organization > Value
Streams.
2. Click the New button to create a new Value Stream.
3. Enter the Name of Value Stream (for example, Lean Production).
4. Enter the Search Name for the Value Stream (for example, Lean
Production).
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5. Select the Value Stream Manager in the Manager field (for
example, Allison Brown).
6. Enter address and contact information if applicable in the Addresses
and Contact information FastTabs.
FIGURE 1.1 VALUE STREAM OPERATING UNIT
Introduction to Production Flows

A Lean manufacturing scenario is usually more than an accumulation of
unrelated Kanban rules or material-supply policies. The flow of material and
products throughout work cells and locations for a specific production or supply
scenario can be described as a sequence or small network of process or transfer
activities, called a production flow.
Value Stream and Production Flow

The result of the mapping process, the future state Value Stream, can then be
modeled in Microsoft Dynamics AX 2012 as a production flow version. All
processes of the Value Stream are modeled as process activities. Movements or
transfers can be modeled as transfer activities, if the transfer status has to be
registered or if an integration to inventory picking or consolidated shipments is
required.
Many production flows can make up the Value Stream. The production flow can
produce products for consumers or other production flows. In the case where the
products of a production flow are used in another flow, this is called a Feeder
Flow.
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Production Flow Function
Production flows are introduced as the backbone of Lean manufacturing, as they
perform these functions:
Define the process and transfer activities of the Value Stream.
Support the Kanban rules in defining the activities a Kanban goes

through.
Provide an activity-based context for the planning and production

processes.
Establish a cost context for the various Kanban production scenarios.
Continuous Improvement
To support continuous improvement, the production flows are implemented in
time-effective versions. This allows you to copy an existing production flow
versionincluding all related Kanban rulesto a draft version of the production
flow, and model the future-state production flow before validating and activating
it for production.
Semi-Finished Products (Non BOM levels)

In many inventory transaction-based Kanban solutions, Kanban rules cannot be
set up for semi-finished products. A common mitigation for this issue is to
introduce additional BOM levels, which in the worst case results in a non-Lean
explosion of BOM-levels and thereby inventory transactions. Lean
manufacturing for Microsoft Dynamics AX 2012 integrates Kanbans for
inventoried products and semi-finished products in a single framework, offering
a unified user experience for all cases.
Products and Materials in Work in Progress

The reduction of batch sizes down to the ideal state of a single piece flow in Lean
manufacturing can cause a dramatic increase of inventory transactions if each
picking process or Kanban registration causes transactions for the consumed
items.
The production flow architecture allows the transfer of material to the production
flow with withdrawal Kanbans in storage or transport handling unit sizes. The
value of the issued material is added to the Work in Progress (WIP) account that
is related to the production flow, similar to material that is issued to a production
order. The same principle can be applied for products and semi-finished
productsunless they are created, transferred, or consumed within a production
flow; inventory transactions are optional, not mandatory. Once the products are
posted to inventory, the WIP account to the production flow is deducted by the
related standard cost.
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Introduction to Kanbans
The word Kanban means visible record in Japanese. Kanban has been
adopted by many industries as a method of controlling production and internal
supply.
Kanban is an essential part of a pull system of supply, which is a critical element
of Lean production/supply. When a Kanban has been consumed, it should be
passed (triggered) to the source of supply to replenish it. This source of supply is
defined through the production flow activities that the Kanban is linked to,
providing the definition of how the Kanban is filled. Kanban rules in Microsoft
Dynamics AX 2012 are essential to production flows, as they define the activities
that a Kanban rule goes through.
Kanban Types
Lean manufacturing in Microsoft Dynamics AX provides two Kanban types that
are used to define how the empty signal is filled: manufacturing and withdrawal.
Kanban Type: Manufacturing

A Kanban of the type manufacturing is assigned to at least one process that
adds value. The Kanban is assigned to a production flow activity and thus a
resource group with the role of a work cell, where the value is added.
Manufacturing Kanbans relate to at least one process activity. The first activity of
a manufacturing Kanban must be a process activity. A process activity can be
followed by a transfer or another process activity, allowing a Kanban to span
multiple activities.
Kanban Type: Withdrawal

A Kanban with the type withdrawal creates a transfer job that is based on a
single transfer activity. Withdrawal Kanbans are used to move a Kanban of a
specific item between supermarkets, warehouses, and production locations.
Withdrawal Kanbans do not add value.
Kanban Replenishment Strategies

Microsoft Dynamics AX 2012 Kanban rules can be set up to support a variety of
make-to-stock and make-to-order scenarios through various Kanban
replenishment scenarios:
Fixed quantity Kanbans to support traditional fixed card and two bin
type systems.
Several Kanban types to support variable quantity scenarios

including:
o
o
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Minimum on-hand inventory triggered Kanbans

Planned Kanbans calculated by Master Scheduling from
requirements

o
o
o
Sales order entry triggered Kanban generation

Kanbans generated from production order BOM line
requirements
Kanbans generated from Kanban line requirements
Fixed Quantity Kanbans

A fixed quantity Kanban rule relates to a fixed number of bins or Kanban cards,
meaning that the number of active Kanbans is constant. Whenever a material
handling unit related to a Kanban is consumed (emptied), a new Kanban of the
same type is recreated. Fixed quantity Kanbans are often used with fixed
circulating cards, but can also be used with single use cards. When circulating
cards are used, the card is detached from the consumed Kanban and assigned to
the new created Kanban.
Single Use Kanbans: A fixed quantity Kanban is a make-to-stock scenario.
Additional single use Kanbans can be used to cover additional demand to level
specific exceptional demand. Single use Kanbans are only (and always) based on
fixed quantity rules and no specific rules need to be created for this
replenishment strategy. Instead, the Kanbans have a flag that marks them as
manual. You can also use event Kanbans for exceptional demand above a certain
quantity to maintain the buffer stock of a fixed Kanban.
Scheduled Kanbans
Master Planning creates scheduled Kanbans automatically for planned Kanban
orders to cover the requirements within the firm horizon of the production
forecast. Scheduled Kanbans can also be manually created.
Event Kanbans
Event Kanbans are only created out of the related demand, so event Kanbans
belong to the category make-to-order. The creation of event Kanbans is
initiated when certain events occur. In Microsoft Dynamics AX 2012, these
events include when you create sales lines, when estimating production orders,
upon creation of upper level Kanban demand, or when reaching a certain level of
on hand inventory.
Event: Sales Line and BOM Line Events

The descriptions of the Kanban events of sales line and BOM line events are:
Sales line event: This event creates the pull for final assembly,
packaging, or simply shipping out of the sales orders. When a sales
order is entered, the Kanbans that are needed to produce or withdraw
the goods to satisfy the customer order are created automatically or
by the pegging event processing batch job.
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BOM line event: In a mixed mode environment (that is, a company

is using Kanbans and production orders in the same facility), a
picking list is created based on a production order to withdraw
material from warehouses or other upstream processes. If the
warehouse or the upstream process is controlled by event Kanbans,
the picking list creates the related Kanbans (manufacturing or
withdrawal) of the related item source.
Event: Kanban Line Event and Stock Replenishment

Event
The descriptions of the Kanban events Kanban line and stock replenishment
events are:
Kanban line event: Similar to a picking list, the creation of Kanbans

that pull components to Kanbans is used to pull the required material
to a downstream manufacturing process. This is only needed when
the material is varying by event and a high number of variants
(strangers) are required (otherwise, a fixed quantity Kanban
environment is recommended).
Stock replenishment event: Whenever on-hand inventory is

reduced for an item on a coverage dimension that is covered by an
event Kanban rule, and inventory falls under the minimum stock as
designated on the item's coverage, an event Kanban is created to
replenish that minimum stock. The pegging event processing in Lean
manufacturing checks minimum inventory for selected Kanban rules
and creates the needed Kanbans to replenish.
Diagram: Kanban Type/Replenishment Strategy

This diagram shows the Kanban types and replenishment strategies available in
Microsoft Dynamics AX 2012.
FIGURE 1.2 KANBAN TYPE/REPLENISHMENT STRATEGY
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Kanban Boards
Visual planning and implementation is important for companies that are on the
Lean journey. Many companies spend considerable time and effort updating the
data on manually-created visual boards on the shop floor (Kanban boards, Kaizen
boards). The Kanban boards, which are available within Microsoft Dynamics AX
2012, are designed to automate many of the manual and time-consuming visual
systems by leveraging the data within the enterprise system and integrating Lean
concepts into system generated visuals.
Kanban Schedule Board

The Kanban schedule board is designed to be used as a Heijunka board to level
production load on a cell. The planner drags and drops the Kanbans on the
desired production day or week depending on the period type related to the Lean
production flow model. The work cell capacity is shown and decremented as
additional Kanbans are added to a bucket on the schedule. Once planned, Kanban
jobs will be available to process on the Kanban board for process jobs form.
Kanbans that are automatically scheduled do not require manual dragging and
dropping, but rather will load onto the period.
This figure shows an example of the Kanban schedule board.
FIGURE 1.3 KANBAN SCHEDULE BOARD
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Kanban Board for Process Jobs
Manufacturing Kanbans are performed on the shop floor using the Kanban board
for process jobs. Once planned, the Kanbans will appear on this board.
Specifically for the shop floor in Lean manufacturing, three user profiles have
been evaluated in an extensive customer field research that included visits to a
variety of different manufacturing companies in Europe, the United States, and
Canada.
The shop floor supervisor needs a complete overview of what goes

on in a specific work cell, and decides on priorities and sequences of
jobs.
The waterspider replenishes supermarkets on the shop floor,

prepares handling units and picks material for Kanbans or production
orders, puts away finished products, or moves semi-finished products
to the next work cell or supermarket.
The machine operator / shop floor worker is reporting the start and
end of jobs.
In the manufacturing floor, these three roles often have some overlap. Dependent
on throughput and importance, waterspiders have been found to be dedicated for
a single work cell or for a group of work cells. Some Lean organizations remove
the system interaction for the machine operators and use the waterspiders to
report the finished goods.
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Kanban Board for Process Jobs: User Interface
The result of this research is a new user interface for Lean manufacturing that
combines all requirements for the three manufacturing roles into a single,
configurable, and scalable user interface.
This figure shows an example of the Kanban board for process jobs.
FIGURE 1.4 KANBAN BOARD FOR PROCESS JOBS
Kanban Board for Transfer Jobs

Withdrawal Kanbans are performed on the shop floor using the Kanban board for
transfer jobs.
The Kanban board for transfer jobs form is designed to enable a waterspider the
visibility to gather materials to replenish line side supermarkets and to support
the picking of materials from supermarkets. Physical traceability requirements
are also supported. The waterspider can filter the board in a variety of ways,
including:
Production flow
Activity name
Transfer from: site, warehouse, and location
Transfer to: site, warehouse, and location
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An example of the Kanban board for transfer jobs is shown in this figure.
FIGURE 1.5 KANBAN BOARD FOR TRANSFER JOBS
Simple Production Flow

The simplest form of a production scenario for Lean manufacturing is a
production flow where all operations are grouped to a single process activity in a
single work cell.
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Scenario: Simple Production Flow
Scenario: Pierre has set up a production flow to model the process of painting
covers. The speaker cover paint shop is picking unpainted covers from the
warehouse. The painted covers are supplied to a supermarket where they can be
picked for other manufacturing processes or for sales.
FIGURE 1.6 SIMPLE PRODUCTION FLOW
Scenario: Simple Production Flow: Setup

The production flow is set up for the general activity painting, no matter what
item variant, color, or specific painting process is applied, providing it is
happening in the same group of resources at the same physical location. The
activity times and cycle times for a production flow activity are initially set for an
average process.
A fixed quantity Kanban rule is then created for the process activity for
painting, which manages the Kanban signal for the painted speaker covers that
replenish the painted speaker cover supermarket.
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High Level Production Flow

The high level production flow introduced in this topic provides a more detailed
production scenario of assembling and packaging car speakers. The high level
production flow shows the interconnection between activities and Kanbans.
Scenario: High Level Production Flow

Scenario: Pierre has set up a production flow and Kanban rules for CEU to
model the process of assembling and packaging car speakers to be sold to the
customer. Pierre now goes through the production flow together with you to
review the basic setup of the process activities, transfer activities, and Kanban
rule relationships to understand the basic scenario.
FIGURE 1.7 CEU SPEAKER ASSEMBLY AND PACKAGING PRODUCTION

FLOW
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Scenario: High Level Production Flow - Replenish the VMI
Warehouse
Beginning with the customer pull in Figure 1.7 CEU Speaker Assembly and
Packaging Production Flow, the various elements of the production flow are
broken down in Figure 1.8 CEU Packaging and Transfer to VMI Activities.
There are two scenarios for the end pull to the customer. The first scenario
(shown in this figure) replenishes the VMI warehouse where material is
packaged and transferred to the customer.
FIGURE 1.8 CEU PACKAGING AND TRANSFER TO VMI ACTIVITIES
A process activity controls the packaging and a transfer activity controls the
transfer to VMI. A sales event Kanban is used to trigger the Kanban based on
sales order demand and pulls the finished good through the Packaging process to
the VMI warehouse.
Scenario: High Level Production Flow - Replenish the

Sales Warehouse
The second scenario shown in Figure 1.9: CEU Packaging and Transfer to VMI
Activities replenishes the Sales warehouse where material is packaged to fill the
Sales warehouse to be sold to the customer.
FIGURE 1.9 CEU PACKAGING AND TRANSFER TO SALES ACTIVITIES
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A process activity controls the packaging, and a transfer activity controls the
transfer to the Sales warehouse. A scheduled Kanban is used to trigger the
Kanban based on demand and pulls the finished good through the Packaging
process to the Sales warehouse.
Scenario: High Level Production Flow - Packaging

Materials Replenishment
The Packaging process requires packaging materials stored in another warehouse
to be used in the process. A transfer activity moves the packaging parts from a
Packaging material warehouse to the Packaging work cell. A fixed quantity
withdrawal Kanban is used to control this movement.
FIGURE 1.10 CEU PACKAGING MATERIALS REPLENISHMENT
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Scenario: High Level Production Flow - Assembly and
Packaging Activities
A process activity controls the car speaker assembly process that is performed
before the packaging process. A sales line event Kanban is used to trigger the
Kanban based on the upper level sales demand to perform the assembly.
FIGURE 1.11 CEU CAR ASSEMBLY AND PACKAGING ACTIVITIES
Scenario: High Level Production Flow - Mechanical Parts

Replenishment
The Car Speaker Assembly process requires Mechanical parts that are stored in
another warehouse to be used in the process. A transfer activity moves the
packaging parts from a Mechanical parts warehouse to the Car speaker assembly
work cell. A fixed quantity withdrawal Kanban is used to control this movement.
FIGURE 1.12 CEU MECHANICAL PARTS REPLENISHMENT
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Scenario: High Level Production Flow - Electrical and
Speaker Assembly
The Electrical Assembly process supplies a supermarket in WIP for the Car
Speaker Assembly process. The parts are not posted in inventory. A fixed
quantity manufacturing Kanban replenishes the supermarket for these mechanical
pre-assembly parts. The Car Speaker Assembly process posts this material to
WIP.
FIGURE 1.13 CEU ELECTRICAL ASSEMBLY AND CAR SPEAKER

ASSEMBLY WIP ACTIVITIES
Setup and Interconnectivity

As with all modules in Microsoft Dynamics AX 2012, there is a high degree of
integration and interconnectivity between the Lean manufacturing functionality
and other modules. This interconnectivity allows the production flow to act as the
mainstay for Lean manufacturing and maintain important relationships for the
planning, scheduling, and implementation pieces of the production process. The
processes described in this lesson are listed in the order that they need to be
conducted.
Time Units
As production flow activities and resource group capacity settings require
definition in time units, these must be set up properly as a unit with a new
concept in Microsoft Dynamics AX 2012 of Unit class referring to Time.
Time units for days, hours, minutes and seconds should be present with the Unit
class of Time. Proper unit conversions should also be created for these time
units.
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These time units can then be set up as the defaults within the production
parameters Unit of Measure tab to establish the default units of measure that are
used to define activity times and lead times. The Default time unit for
production flows should be set on the Lean manufacturing tab of the
Production Parameters.
Production Flow Model

The production flow model predefines the calendar and capacity usage for a
group of work cells and for the detailed settings in the production flow processes.
It also predefines the structure and behavior of the Kanban schedule for the cells.
A unique production flow model should be defined for a category of work cells
that have similar behavior.
FIGURE 1.14 CEU CAR SPEAKER PRODUCTION FLOW MODEL
Production Flow Model: Model Type

The most important property of the production flow model is the model type,
which selects the method to measure capacity for the work cell. The production
flow model defines the capacity settings for the work cell. The options are:
Throughput: The capacity and load of a work cell are measured in

quantities of product that are produced.
Hours: The capacity and load of a work cell are measured in periods
of hours and minutes.
NOTE: After you create a production flow model, you cannot change the value
of this field.
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Production Flow Model: EPE Cycle in Days
Every Product Every (EPE) defines the number of days within the EPE cycle that
is used in automatic planning. The value in this field is used to calculate the
period when a Kanban job is scheduled:
Start date = Due date EPE cycle.
NOTE: After you create a production flow model, you can change the value of
this field. The change does not affect jobs that were previously created.
Production Flow Model: Capacity Shortage Reaction

The Capacity shortage reaction defines the method of Kanban scheduling to
use if there is no capacity available during the required period. This parameter is
only used when the Kanban auto planning is used for Process jobs. The options
are:
Postpone: The job is postponed until the day that throughput

becomes available.
Cancel: Automatic planning of the Kanban job is cancelled.
Add to the requested period: The job is added to the scheduled

period of the required date. The result is that the work cell is
overloaded during the scheduled period.
Distribute: The Kanbans of a single event are distributed to the

available production periods, starting with the first available period.
Production Flow Model: Planning Period Type

The planning period is used for planning Kanbans automatically and using the
Kanban schedule board. The options are:
Day: The Kanban schedule consists of periods of calendar days. The

Kanban schedule board displays days for each column for
scheduling.
Week: The Kanban schedule consists of periods of weeks. The

Kanban schedule board displays weeks for each column for
scheduling.
Production Flow Model: Planning Time Fence

The Planning time fence defines the number of planning periods that are defined
in the Planning period type to use in the planning time fence. Planning periods
can be either days or weeks. The Kanban schedule board displays the Kanban
jobs that are scheduled during the defined planning time fence. Kanbans can only
be scheduled within this planning time fence.
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NOTE: The Capable to promise (CTP) based on the work cell schedule only
covers the schedule horizon that is set in the Planning time fence field of the
production flow model. Outside of this horizon, only CTP Explosion applies.
Demonstration 1.2: Creating A Production Flow Model

Scenario: Pierre has come to a logical grouping of work cell capacity that has
similar behavior in capacity load for the work cells that are used to model his Car
Speaker production flow.
Use this procedure to create a production flow model:
1. Click Production Control > Setup > Lean manufacturing >
Production flow models.
2. Select New button or select CTRL+N to create a new line.
3. In the Production flow model field, enter an alphanumeric identifier
up to fifty characters in length (for example, PFModel).
4. In the Model type field, select Throughput or Hours (for example,
select Throughput).
5. In the EPE Cycle in days, enter a numeric value (for example, enter
1).
6. In the Capacity shortage reaction field, select Postpone, Cancel,
Add to the requested period or Distribute (for example, select
Add to the request period).
7. In the Planning period type field, select Day or Week (for example,
select Day).
8. In the Planning time fence field, enter a numeric value (for
example, enter 10).
Work Cells
Lean work cells are modeled in Microsoft Dynamics AX 2012 using resource
groups, where resources are grouped to initiate a process flow. Activities within a
production flow are assigned to a work cell.
A work cell has a determined capacity that is typically expressed in throughput.
All manufactured items can be mapped to that throughput by setting a ratio
within the Lean schedule groups, which is described further in this topic.
The work cell represents the effective capability of all resources that are assigned
to the cell. It is handled as a black box, meaning that the internal structure of the
work cell is not documented in the system.
NOTE: Resource groups that are designated as work cells cannot be used for
long term capacity planning. To model long term capacity planning, a route must
be set up using resource groups that are not designated as work cells.
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Example: Creating Resource Groups as Work Cells
To create a resource group as a work cell, these actions are performed:
1.
2.
3.
4.
5.
The resource group is marked as a Work cell.

Input and Output Warehouses and Locations are specified.
A Run time category is defined if direct labor is tracked in costing.
A Calendar is assigned to the resource group.
The work cell capacity is defined using a Model type to define
capacity as Hours or Throughput to define the throughput capacity of
the work cell.
6. Work cells managed by a subcontractor are marked as resource type
Vendor.
Work Cells: Input/Output Warehouses and Locations

Default Input and Output warehouses and locations are placed on the work
cell. The default Input warehouse and Input location define warehouses and
locations to use as the supplying warehouse and location for the work cell. The
default Output warehouse and Output location define warehouses and
locations that designate the target warehouse and location for items produced in
this work cell.
Work Cells: Calendar

Calendars are assigned to the selected work cell. You can also set the expiration
and start dates for the assigned calendars. The active calendars are used for
calculating capacity. Depending on the Model type of Throughput or Hours,
the calendar is used in calculating capacity in different ways.
A new concept called Standard workday has been added to the calendar to help
define the capacity for Throughput. Standard workday defines the length of a
standard workday in hours for a work cell.
The standard workday hours describe the length of a workday related to the given
throughput (capacity) of a work cell. According to the working time template,
every day could have a different length.
The standard workday also defines the scaling range of a workday in the Kanban
schedule board.
Work Cells: Work Cell Capacity

The work cell capacity defines the capacity settings for the work cell. The
production flow model is attached to the work cell and defines the basic capacity
settings discussed in "Chapter 1: Lean Manufacturing Concepts and Overview:
Production Flows: Setup and Interconnectivity: Production Flow Model: Model
Type".
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Work Cells: Work Cell Capacity - Model Type
When you are defining the work cell capacity, the Model type selected from the
production flow model is how capacity is expressed for the work cell. A work
cell can be of two different capacity models:
Throughput - the average throughput capacity of the work cell for

the capacity period.
Hours if this option is chosen, the Capacity period and Average

throughput quantity and unit are inactive. The related capacity is
then determined through the calendar.
Work Cells: Work Cell Capacity - Throughput Model

Settings
If the capacity model is Throughput, the Capacity period is used to define the
period that is related to the given capacity. If the capacity model is hours, this is
not defined.
Standard workday The capacity is the quantity produced during a

standard workday (related to the hours given in the Standard
workday hours field on the Calendar).
Week The capacity is the quantity produced in one week. The

available hours of a week can be determined through the calendar
assigned to the production flow model.
Month The capacity is the quantity produced in one month.
The Average throughput quantity defines the quantity that is produced in the
work cell during the selected Capacity period. If the capacity model is Hours, this
is not defined. The Unit of measure defines the unit of measure to use with the
Average throughput quantity.
To calculate the actual throughput of a specific day, the available working hours
of this day need to be determined out of the calendar. The actual throughput is
calculated by:
Actual throughput = Average throughput * actual working hours /
available hours (capacity period)
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Work Cells: Work Cell Capacity - Cell Capacity Period
Effective and Expiration Date
The time periods defined by the Effective date to the Expires date, where a
resource group has a cell capacity assigned, are the periods where the resource
group is effectively acting as a work cell. The periods cannot overlap, but the
periods do not have to be consecutive.
FIGURE 1.15 EFFECTIVE DATES ON CELL CAPACITY
Demonstration 1.3: Creating a Work Cell

Scenario: Pierre uses these steps to begin setting up the resource groups that
define the work cells to model his Car Speaker production flow.
To designate a work cell from a resource group, follow these steps:
1. Navigate to Organization Administration > Common >
Resources > Resource Groups.
2. Create a new resource group (select the New button or Ctrl+N).
3. Enter an identifier for the Resource group in the Resource group
field (for example, enter WCell).
4. Enter a Site for the work cell (for example, select 2).
5. On the General FastTab, check the Work cell check box to
designate the resource group as a work cell.
6. Select the Input warehouse and location, designating the supplying
warehouse and location for this cell (for example, select Warehouse
PaCovers and Location Supermarke).
7. Select the Output warehouse and location, designating the target
warehouse and location for items produced in this cell (for example,
select Warehouse PaCovers and Location Supermarke).
8. Select the Calendars FastTab.
9. Select the Add button.
10. Choose a Calendar for the work cell (for example, select Standard).
11. Select the Work cell capacity FastTab.
12. Create a new line (select the Add button or Ctrl+N).
13. Select the Production flow model to use with the work cell (for
example, PF Model). The Model Type will default to Throughput
or Hours based on the selection on the Production Flow Model.
14. Choose the Capacity period type (for example, select Standard
workday).
15. Enter the Average throughput quantity if using Throughput
Model (for example, enter 100).
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16. Enter the Unit of measure to use with the Average throughput
quantity (for example, select Pcs).
17. Enter an Effective start date and time (for example, enter today's
date).
Lean Schedule Groups

A work cell has a determined capacity that is typically expressed in Throughput,
as described in the Work cell capacity settings. All manufactured items can be
mapped to that throughput by setting a ratio within the Lean schedule groups.
The default ratio is 1. A ratio > 1 indicates the part is consuming more
throughput than a standard part, a ratio < 1 indicates the part consumes less
throughput.
Example: Creating a Lean Schedule Group

Scenario: Pierre has decided to use these steps to create a Lean schedule group
for his speaker covers to provide a throughput ratio to a specific item, in addition
to having the Kanban show up on the board with a color.
To create a Lean schedule group, these steps are performed:
1. Open the form Operations Resource Group from
Production control > Setup > Lean manufacturing > Lean
schedule groups.
2. Create a new Schedule Group by selecting the New button or press
Ctrl+N.
3. Name the new Schedule group.
4. Assign the Schedule color to the schedule group.
5. Save the record by pressing Ctrl+S or the File> Save button and
accepting the infolog.
6. Select the Assign items to group button.
7. Create a new line (New button or Ctrl+N), select the Item relation
type Item.
8. Enter the Item number.
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9. Select the appropriate Color dimension for the item.
10. Set the Throughput ratio for the item.
FIGURE 1.16 LEAN SCHEDULE GROUP
Warehouses
A new concept has been created within the warehouse location structure in
Microsoft Dynamics AX 2012. This concept, a Kanban supermarket, is a special
location type that has the inventory deduction policy on empty of the material
handling unit.
This type of supermarket is used for materialthat is, inventory controlled in the
supermarketbut will not be deducted by an inventory backflushing or manual
picking or transfer processes, but rather a Kanban empty signal that is registered
separately.
From a costing point of view, this behavior is similar to a supermarket in WIP,
with the exception that on-hand is shown in the supermarket.
Standard Costing and Backflush Costing

Costing for Lean manufacturing in Microsoft Dynamics AX 2012 is implemented
through backflush costing based on the standard cost framework. The production
flow is used as the cost accumulator for a costing period.
NOTE: For Lean manufacturing in Microsoft Dynamics AX 2012, items must be
set up as standard cost.
1-36

Backflush costing is defined as a cost accumulation method where the
application of cost is based on the output of the process. Backflush costing is
usually associated with repetitive manufacturing environments. Backflush
costing omits recording some or all of the journal entries relating to stages from
the purchase of direct materials to the sale of finished goods. Since some stages
are omitted, the journal entries for subsequent stages use normal or standard cost
to work backward to flush-out the cost for the activity where the journal entry
was not made.
Standard Costing and Backflush Costing: WIP

The material consumed by the production flow is added to WIP. The products
received from the production flow are deducted from WIP at their standard cost.
The periodic backflush costing determines the effective value of WIP to the end
of the period based on the Kanban handling units and the Kanban job status. The
deviation between the effective values and the actual WIP values for each cost
group and item are accounted and displayed as variances.
NOTE: When you are using multiple activities, it only records the cost
transaction on the final activity transaction.
Traditional cost accounting systems do not fit within a Lean environment without
some type of modification. The move to backflush costing integrates Lean
manufacturings production flow reporting system based off of Kanban execution
signals, and cost accounting under full absorption (direct and indirect
manufacturing cost) for the production flow, which simplifies reporting
procedures for direct resource usage.
References
Bicheno, J. (2004). The New Lean Toolbox (3rd ed.). Buckingham: Piscie
Books.
Blackstone, J., & Cox, J. (Eds.). (2005). APICS Dictionary (11th ed.).
Alexandria, VA: APICS The Association for Operations Management.
Gross J. M. & McInnis K. R. (2003). Kanban Made Simple: Demystifying and
Applying Toyotas Legendary Manufacturing Process. New York, NY:
AMAZOM, a division of American Management Association.
Rother, M. & Shook J. (2003). Learning to See: Value stream mapping to create
value and eliminate muda. Brookline, MA: The Lean Enterprise Institute, Inc.
Womack, J. P. & Jones, D. T. (2003) Lean Thinking: Banish Waste and create
Wealth in your Corporation. New York, NY: Free Press.
1-37
Summary
Lean Manufacturing Concepts and Overview provided a broad overview of
some of the main characteristics of Lean manufacturing and the functionality
within Microsoft Dynamics AX 2012 that supports Lean manufacturing. It
included these key points:
Lean manufacturing is a way of manufacturing that is based on the

five Lean principles.
It is important in Lean manufacturing implementations to understand

the Value Stream and map it to provide the proper inputs into the
system configuration.
The production flow is a new concept that is the mainstay of Lean

Various types of Kanbans and replenishment strategies are used to

support Lean manufacturing processes in Microsoft Dynamics AX
2012.
The work cell is modeled as a resource group and provides different

mechanisms for understanding capacity with Lean manufacturing
processes.
Costing for Lean manufacturing in Microsoft Dynamics AX 2012 is

implemented through backflush costing based on the standard cost
framework.
Lean manufacturing in Microsoft Dynamics AX is highly interactive,

drawing upon information from other modules.
This lesson also introduced the Contoso scenario that will be used throughout the
course to help understand Lean manufacturing for Microsoft Dynamics AX 2012.
This lesson also summarized the ways in which Lean manufacturing in Microsoft
Dynamics AX 2012 supports Lean manufacturing processes.
1-38
Test Your Knowledge

Use these short answer questions to test your overall understanding of the course.
It would be beneficial to place each question into a familiar context and relate it
to a company or industry with which you are familiar.
1. List three Lean terms.
2. What are the five Lean principles?
3. What is a Value Stream, why is it important, and how is it modeled in

Microsoft Dynamics AX 2012?
1-39

4. What is a production flow and how is it connected to Kanban rules?
5. How is a work cell modeled in Microsoft Dynamics AX 2012?
6. Describe the two options for modeling capacity in Lean manufacturing for
1-40

Take a moment and write down three key points you have learned from this
chapter
1.
2.
3.
1-41
Solutions
Test Your Knowledge
1. List three Lean terms.
MODEL ANSWER:
Any three terms from the chapter, such as: Value Stream - the set of all
actions (both value added and non-value added) that are required to bring a
specific product(s) or service from raw material through to the customer;
Kanban - Japanese for visible record. Kanbans have been adopted by many
industries as a method of controlling production and internal supply. It can
apply to a paper ticket or a physical container; Kaizen - Japanese for
continuous improvement. Kaizen is a management philosophy, which
emphasizes employee participation, and in which every process is
continuously evaluated and re-evaluated for the elimination of waste.
2. What are the five Lean principles?
MODEL ANSWER:
1.
2.
3.
4.
5.
Identify value
Understand the Value Stream
Create flow
Introduce pull
Strive for perfection
3. What is a Value Stream, why is it important, and how is it modeled in

Microsoft Dynamics AX 2012?
MODEL ANSWER:
A Value Stream is the set of all actions (both value added and non-value
added) that are required to bring a specific product(s) or service from raw
material through to the customer. This is important because the Value Stream
has to be understood to eliminate any non-value added activities. When you
are considering an implementation of Lean manufacturing in Microsoft
Dynamics AX 2012, the ground work must be laid through defining the
Value Streams, mapping them, and eventually setting this up within the
system. Value Streams are modeled as an operating unit for costing purposes
and can be modeled as one or many production flow versions to enable the
activity-based planning, production, and costing in a Lean manufacturing
environment.
1-42

4. What is a production flow and how is it connected to Kanban rules?
MODEL ANSWER:
A production flow is the mainstay of Lean manufacturing in Microsoft
Dynamics AX 2012, it defines the flow of material and products throughout
work cells and locations for a specific production or supply scenario and can
be described as a sequence or small network of process or transfer activities.
In Microsoft Dynamics AX 2012, a production flow provides the activity
basis that Kanban rules are set up to be planned and initiated against.
5. How is a work cell modeled in Microsoft Dynamics AX 2012?
MODEL ANSWER:
Work cells are modeled in Microsoft Dynamics AX 2012 using resource
groups, where resources are grouped to initiate a process activity.
6. Describe the two options for modeling capacity in Lean manufacturing for
MODEL ANSWER:
The two ways of modeling capacity are set up on the production flow model
and resource groups. These are:
1. Throughput: The capacity and load of a work cell are measured in
quantities of product that are produced.
2. Hours: The capacity and load of a work cell are measured in periods of
hours and minutes.
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1-44
CHAPTER 2: PRODUCTION FLOWS

Objectives
The objectives are:
Create a new production flow version.
Set up takt/cycle times.
Set up process type activities.
Set up single transfer type activities.
Set up a two activity production flow containing transfer and process

type activities.
Define predecessors/successors.
Describe activity relations and constraints.
Describe picking activities and setup required.
Describe semi-finished product and setup required.
Describe costing implications.
Introduction
Production Flows explains the purpose of production flows, how to set them up,
how they are vital as the foundation for the Lean manufacturing in Microsoft
Dynamics AX 2012, and the implications that the production flow has from a
costing and inventory point of view. The topics discussed are:
Production flow versions
Takt/cycle times
Process type activities
Transfer type activities
Predecessors/successors
Activity relations and constraints
Inventory integration concepts
Costing implications
2-1

Overview
A Lean manufacturing scenario is usually more than an accumulation of
unrelated Kanban rules or material-supply policies. The flow of material and
products throughout work cells and locations for a specific production or supply
scenario can be described as a sequence or small network of process or transfer
activities, called a production flow.
The activity-based production flows are introduced in Microsoft Dynamics AX
2012 to establish a production and cost context for various Kanban scenarios. All
Kanban rules are directly connected to this pre-defined structure. The activity
based model allows users to set up a wider range of scenarios than supported by
previous versions of Lean manufacturing for Microsoft Dynamics AX, without
adding complexity for the shop floor workers because all scenarios use the same
activity-based user interface.
Production Flow Function

Production flows are introduced as the foundation of Lean manufacturing, as
they:
Support the Kanban rules in defining the activities that a Kanban

goes through.
Provide an activity-based context for the planning and production

processes.
The architecture of Lean manufacturing for Microsoft Dynamics AX is inspired

by the five Lean principles that are formulated by Womack and Jones: Customer
Value, Value Stream, Flow, Pull, and Perfection (Womack & Jones, 2003). A
proven method to implement Lean manufacturing solutions in the physical world
of manufacturing involves values stream mapping (VSM) introduced by Rother
and Shook in their Publication Learning to See at the Lean Enterprise Institute
(Rother & Shook, 2003).
The result of this process, the futures state value stream, can be modeled in
Microsoft Dynamics AX as a production flow. All processes of the value stream
are modeled as process activities. Movements or transfers can be modeled as
transfer activities, if the transfer status has to be registered or if an integration to
inventory picking or consolidated shipments is required.
2-2
Production Flow Versions

To better support continuous improvement, the production flows are
implemented in time-effective versions. This allows users to copy an existing
production flow versionincluding all related Kanban rulesto a future version
of the production flow, and model the future-state production flow before
validating and activating it for production. Existing Kanbans from old production
flow versions are automatically related to the new version to ensure a seamless
material flow on the transition date and beyond.
Creating and Activating a Production Flow Version

To map a Lean manufacturing scenario to Microsoft Dynamics AX, the
definition of a production flow is mandatory. The production flow defines the
organizational context of a manufacturing scenario and relates to accounting and
costing.
The production flow needs these settings:
A unique name
A description
A legal entity that owns the operations in the production flow
An operating unit of type value stream
NOTE: This operating unit can be configured to be used as a financial

dimension.
A production group
NOTE: The production group defines the set of accounts that are used for the
financial postings that are related to the production flow. The most important
accounts are the WIP and Offset accounts, which are the basis of variance
calculation for the production flow.
The setting of financial dimension for the production flow is optional
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Example: Production Flow with One Active Version
The activities of a production flow are organized in time-effective versions. A
simple production flow usually needs only one version. The time effectiveness
allows users to set up versions for the future or set an expiration date on a
production flow version, if the version or the complete production flow is
discontinued at a certain point in time. This is an example of a production flow
with one active version for the Contoso Car Speaker scenario introduced in
"Chapter 1: Lean Manufacturing Concepts and Overview: Scenario".
FIGURE 2.1 PRODUCTION FLOW VERSION
Takt and Cycle Times

The production flow version details specify the takt requirements of the
production flow. These are used at the activation to calculate the actual cycle
time requirements of each activity in the production flow. For a single activity
production flow, the takt requirements of the production flow version are equal to
the cycle time of the activity.
At the validation and activation of a production flow version, the calculated
activity cycle times are verified against the capacity of the assigned work cells. If
the capacity needed to support the average cycle time is higher than the available
capacity of the work cell, a warning message is displayed.
Fields and Definitions

These nine fields are used to set up and view the takt and cycle times for the
production flow version:
2-4
Per cycle unit of measure
Quantity per cycle
Takt unit
Average takt time
Minimum takt time
Maximum takt time
Required takt time
Actual takt time
Period for actual cycle time (days)
Definitions of the nine fields are presented in these sections:
Fields and Definitions: Per Cycle Unit of Measure, Quantity Per

Cycle, and Takt Unit
Fields and Definitions: Average Takt Time, Minimum Takt Time,

and Maximum Takt Time
Fields and Definitions: Required Takt Time, Actual Takt Time, and
Period for Actual Cycle Time (Days)
Fields and Definitions: Per Cycle Unit of Measure,

Quantity per Cycle, and Takt Unit
These are the definitions of the fields of Per cycle unit of measure, Quantity
per cycle, and Takt unit.
Field
Definition
Per cycle
unit of
measure
Enter the unit of measure that is used to define the product

quantity for each cycle. If the Default quantity unit field is
set in the production parameters, the value is displayed
here by default, but you can change it. If the production
flow version is activated, you cannot change the value of
this field. All items produced in the production flow that
have a different inventory unit of measure must have a
conversion factor to convert to this unit of measure when
jobs are created for the item.
Quantity
per cycle
Enter the product quantity that is produced for every one

takt cycle of the production flow version. The default value
is 1, but you can change it.
Takt unit
Select the unit of measure to use with takt times and cycle
times of the production flow. If the Default time unit is set
in the production parameters, the value is displayed here by
default, but you can change it.
2-5

Fields and Definitions: Average Takt Time, Minimum Takt
Time, and Maximum Takt Time
These are the definitions of the fields Average takt time, Minimum takt time,
and Maximum takt time.
Field
Definition
Average
takt time
Enter a target takt time for the production flow version.

You can use this field to monitor and analyze the
performance of the work cell. You can compare the
average takt time that you set against the actual takt time
that is calculated.
Minimum
takt time
Enter the minimum acceptable takt time for the production

flow version. If the actual takt time is less than the
minimum takt time, the production flow is running too
quickly. A warning message is displayed in the Cycle time
performance indicator in the Kanban board, and the
indicator color moves to the red area.
The default value is 1, but you can change it.
Maximum
takt time
Enter the maximum acceptable takt time for the production

flow version. If the actual takt time is more than the
maximum takt time, the production flow is running too
slowly. A warning message is displayed in the Cycle time
performance indicator in the Kanban board, and the
indicator color moves to the red area.
The default value is the Average takt time x 2, but you can
change it.
Fields and Definitions: Required Takt Time, Actual Takt

Time, and Period for Actual Cycle Time (Days)
These are the definitions of the fields Required takt time, Actual takt time, and
Period for actual cycle time (days).
2-6
Field
Definition
Required
takt time
For feeder production flows, the required takt time is the

takt time that is needed to supply the related downstream
activities of the production flow version. The value is
calculated from the cycle times of the downstream
activities. This formula is used:
Required takt time = 1 / (ratio (activity relation)/cycle
time (downstream production flow activity)).

Field
Definition
Actual takt
The takt time that is calculated based on the actual jobs that
are completed during a defined period. If the production
flow version is active, this field is calculated by using this
formula:
Actual takt = working hours of cycle time period / quantity
produced in cycle time period.
The output quantity of the production flow version is
determined from the last activity of the production flow. If
a production flow version has multiple delivery branches,
the quantities from the last activities of all branches are
summed.
Example
The working shift is eight hours, from 8:00 to 16:00. The
cycle time period is two days. The working hours of the
cycle time period are 16 hours, which is equal to 960
minutes. Assuming that 600 pieces were produced during
the last 16 hours of working time (on Wednesday at 24:00
all jobs that were completed between Monday 24:00 and
Wednesday 24:00 are included), the actual takt time is:
960 / 600 = 1.6 minutes
Period for
actual cycle
time (days)
Enter a number of days for which the actual takt time is

calculated. The actual takt time is calculated based on the
jobs that are completed during this period.
You can change this value on production flow versions
regardless of the activation status.
Production Flow Version Details
FIGURE 2.2 PRODUCTION FLOW VERSION DETAILS
2-7

The activity cycle times (average, minimum, and maximum) for each activity are
calculated based on the takt settings of the production flow version. A cycle time
ratio is used among activities within the cycle time calculation of the production
flow as well.
The initial calculation is done on validation /activation of the version, but can be
recalculated with the Recalculate button at any point in time. However, the cycle
time for a Kanban job is calculated on job creation. The recalculation of the
activity cycle times will not affect existing jobs.
Example: Activity Cycle Times

An example of activity cycle times and the calculation of the production flow is
described in this figure.
FIGURE 2.3 ACTIVITY CYCLE TIMES
Assume that Process D supplies pallets of 100 pieces and Process B produces
boxes of 10. The average takt of the production flow is set to be 10 minutes. As
10 activities for Process B are needed for one Process D, the cycle time ratio is
set to 10. On validation/recalculation of the production flow, the cycle time for
the process activity is calculated to one minute.
Demonstration 2.1: Setting Up a Production Flow and

Version
Scenario: Pierre creates the production flow version for the Contoso Car Speaker
production flow using these steps:
1. Select Production Control > Setup > Lean manufacturing >
Production flows.
2. Press the New button to create a new production flow.
2-8

3. In the Name field, enter an alphanumeric identifier (for example,
enter CarSpeakProdFlow).
4. In the Description field, enter an alphanumeric identifier (for
example. enter Car Speaker Production Flow).
5. In the Legal entity field, choose the appropriate legal entity (for
example, select ceu).
6. In the Value Stream field, choose the appropriate value stream (for
example, select LeanProduction).
7. In the Production group field, choose the appropriate group (for
example, select 10).
8. Save the records, by clicking on a FastTab the production flow is
saved.
9. On the Versions FastTab, select the Add button to add a new
version, update the effective date if it is different from today's date
and an expiration date (only needed if applicable). (For example,
select Effective as today's date, leave Expiration date blank and
select OK).
NOTE: The effective date of the production flow version cannot start before the
effective dates of the calendar and capacity assignments of the used work cells.
10. To configure the takt requirements of the version, select the Details
button from the Versions FastTab.
11. In the Per cycle unit of measure field, choose the appropriate unit
of measure that will be used for the average cycle time (for example,
select Pcs).
12. In the Quantity per cycle field, enter the quantity that is produced
for each takt cycle of the production flow version (for example, enter
1).
13. In the Average takt time field, enter the average takt time of items
produced in this flow version (for example, enter 1).
14. In the Minimum takt time field, enter the minimum takt time for
items produced within this flow version (for example, enter 1).
15. In the Maximum takt time field, enter the maximum takt time for
items produced within this flow version (for example, enter 2).
16. In the Period for actual cycle time (days) field, enter a number of
days in which the actual takt time is calculated for jobs completed
during this period (for example, enter 1).
17. Select Close button.
Activities Setup
The production flow is composed of a series of process and transfer activities.
Setting up these activities is described in these sections: Single Process Activity
Production Flow, Single Transfer Activity Production Flow, and Two Activity
Production Flow: Process and Transfer.
2-9

Single Process Activity Production Flow
The simplest form of a production scenario for Lean manufacturing is a
production flow where all operations are grouped to a single process activity in a
single work cell. The demo data for Microsoft Dynamics AX contains an
example of this type of production flow.
FIGURE 2.4 SINGLE PROCESS ACTIVITY PRODUCTION FLOW
Single Process Activity Production Flow: Settings

The speaker cover paint shop is picking unpainted covers from a warehouse. The
painted covers are supplied to a supermarket where they can be picked for other
manufacturing processes or for sales.
The production flow is set up for the general activity Painting, no matter what
item variant, what color, or what specific painting process is applied, as long as it
is happening in the same group of resources at the same physical location.
The activity times and cycle times for a production flow activity are initially set
for an average process. For each output item, a throughput ratio can be defined
for each work cell using the Lean schedule groups. This throughput ratio
represents the relative resource consumption compared to the default runtime and
cycle time.
The fixed Kanban rule provides the relationship between the item and the process
activity it goes through within the production flow to make the painted speaker
covers. In this example, the Kanban rule is created against a single activity of
Painting.
2-10

Creating a Process Activity
Once a production flow version is created, activities can be defined for the
production flow. The activities are automatically associated to the version that
they are created for.
The creation of a production flow activity is done with the activity wizard. The
different wizard pages are displayed based on the selected settings.
Demonstration 2.2: Creating a Process Activity - Setup a

Single Activity Production Flow
In the case of a process activity for a single activity production flow, these steps
are needed:
Production flows (for example, select the Production flow
CarSpeakProdFlow).
2. Select the Versions FastTab.
3. Select the Activities button and the Production flow activities form
will display.
4. Select the New version activity button and select Create new plan
activity from the drop down list.
5. Select Next> button to enter the name and activity type.
6. In the Name field, enter an alphanumeric identifier up to 30
characters in length (for example, enter Process Activity).
7. Select the Activity type Process.
8. Enter a Process quantity. If the activity is normally performed for a
quantity > 1, then run time would be the same, no matter what the
actual job quantity is. This could be true in the example of painting
covers.
Assume that the painting machine can paint 10 covers with one
operation; the runtime would be valid for 10 painted covers.
However, the full runtime would still be needed if only five covers
are painted. In this case, the process quantity has to be set to 10.
9. Select an Operating unit. The operating unit is by default the value
stream. It can be any operation unit that is within the hierarchy of the
value stream (for example, select LeanProduction).
10. Select Next > button.
11. Select the Work cell that performs the process activity (for example,
select SCPS_Cover).
12. Verify that Update on hand receipt is selected. All material that is
consumed and all products supplied by a production flow must be
registered in inventory. For a single activity production flow this
means that the activity must update inventory on picking and on
receipt.
13. Verify that the Semi-finished product options are cleared.
2-11

14. Select Next > button. The default picking activity is automatically
created for the input location of the selected work cell. For the
default behavior, the pre-created picking activity is confirmed.
Picking activities can still be added or modified, even if the
production flow version is active.
15. Verify that the Update on hand check box is selected. When you
pick from the specified location, inventory is updated. For a single
activity production flow, this has to be selected.
16. Verify that the Register scrap check box is selected. When selected,
the scrap factor set on the BOM lines is applied on backflushing.
17. Select Next > button. The activity time can be specified for the
activity time types. The activity times can be modified after creation.
18. Enter Queue time before (Optional) the time that the material
should be available before the process activity starts.
19. Enter Runtime (Mandatory) the time it takes to initiate the activity
on average. For each output item, the runtime of a specific job is
calculated, dependent on the job quantity and the throughput ratio of
the output item (for example, enter 10).
20. Enter Queue time after (Optional) the time it takes to make the
products that are produced with the activity available for the next
activity or for shipment.
22. Select Finish button.
Creating a Process Activity: Activity Time Types and

Kanbans
NOTE: All activity time types are added up to calculate the throughput time of
the activity. Based on the due date of a Kanban job, the throughput time is used
to determine the issue time for the material. The queue times are not taken into
account on cost calculation, only in scheduling.
For a single activity production flow, no more interactions need to be done. With
the creation of the activity, it is now possible to create Kanban rules that use this
single process activity. However, to create Kanbans, the production flow version
needs to be activated.
Validating and Activating the Production Flow Version

Before Kanbans can be created for activities of a production flow version, the
version needs to be activated. The activation initiates the validation and activates
the production flow version if no errors are found.
The validation checks the consistency of the activities and Kanban rules of a
production flow version. This can be done at any state before or after activation.
For a single activity production flow, the validation is of low importance because
there is only one process activity and no connecting activities to validate.
2-12

With any production flow, the validation check will ensure that the first and last
activities of the production flow are selected to have update on hand activated on
pick or receipt. This occurs as material consumption and product supply of a
production flow must be posted to inventory, as is the case with a production
order. This is why a single activity production flow must have update on hand
activated on both.
2-13
Lab 2.1 - Creating a Single Process Activity Production Flow

This lab facilitates the creation of a production flow for a single process activity.
Scenario
A new car speaker remote is being developed to compliment the car speaker kits
that are sold at Contoso. The remote control is purchased in from an outside
vendor and configured at CEU. The process activity will be used to configure the
remote and place this in stock for use elsewhere. To create this production flow, a
resource group first needs to be created.
Challenge Yourself!
Use these steps to create the production flow.
1. Create a new work cell/resource group.
The resource group settings should be:
o Name: CSR_CONFIG
o Work cell: checked
o Site: 2
o Input warehouse: ElComp
o Input location: Output
o Output warehouse: SpProd
o Output location: ElPreAsm
o Cost Run time category: CS_Wrk_RA
o Calendar: Standard
o Production Flow Model: CarSpeakerModel
o Capacity period: Standard workday
o Average throughput: 250
o Unit: Pcs
o Effective: Today
o Expiration: None
2. Create a new production flow and version.
The production flow settings should be:
o Name: Remote PF
o Description: Remote Control Production Flow
o Value Stream: LeanProduction
o Production group: 10
o Effective: Today
o Expires: 31/12/2100
o Per cycle unit of measure: Pcs
o Quantity per cycle: 5
o Takt unit: min
o Average takt time: 9.6
2-14

o
o
o
Minimum takt time: 6

Maximum takt time: 12
Period for actual cycle time (days): 0.50
3. Create a process activity.

The process activity settings should be:
o Name: RemoteConfig
o Update on hand inventory: checked
o Runtime: 12 min for every 25 pieces
4. Activate the production flow version.
Step by Step: Create a New Resource Group for the Work

Cell: Steps 1-23 of 23
This procedure explains the process of creating a new resource group for the
work cell.
1. Select the Area Page node: Organization administration >
Common > Resources > Resource groups.
2. Select the Resource group > New > Resource group button.
3. Enter the Resource Group name as CSR_CONFIG.
4. Enter the Description as Car Speaker Remote Configuration.
5. Select the Site as 2.
6. Select the Work cell field.
7. Select the Input warehouse as ElComp.
8. Select the Input location as Output.
9. Select the Output warehouse as SpProd.
10. Select the Output location as ElPreAsm.
11. Switch to the Operation FastTab.
12. Select the Run time category as CS_Wrk_RA.
13. Switch to the Calendars FastTab.
15. Select the Calendar as Standard.
16. Switch to the Work cell capacity FastTab.
18. Select the Production flow model as CarSpeakerModel.
19. Select the Capacity period as Standard workday.
20. Enter the Average throughput quantity as 250.00.
21. Select the Unit as Pcs.
22. Select the Effective date of Today.
23. Save the record and select the Close button to close the Resource
groups form.
2-15

Step by Step: Create a New Production Flow and Version:
Steps 1-8 of 16
This procedure explains steps 1-8 of the 16 step process of creating a new
production flow version.
1. Select the Area Page node: Production control > Setup > Lean
manufacturing > Production flows.
2. Select the New button.
3. Enter the Name of Remote PF.
4. Enter the Description as Remote Control Production Flow.
5. Select the Value stream of LeanProduction.
6. Select the Production group as 10.
7. Switch to the Versions tab and click the Add button.
FIGURE 2.5 NEW PRODUCTION FLOW VERSION
8. Select the OK button.
2-16

Step by Step: Create a New Production Flow and Version:
Steps 9-16 of 16
his procedure explains steps 9-16 of the 16 step process of creating a new
9. Select the Details button.
FIGURE 2.6 PRODUCTION FLOW VERSION DETAILS
10. Change the Quantity per cycle from 1.00 to 5.00.

11. Change the Takt unit from sec to min.
12. Change the Average takt time from 1.00 to 9.60.
13. Change the Minimum takt time from 1.00 to 6.00.
14. Change the Maximum takt time from 2.00 to 12.00.
15. Change the Period for actual cycle time (days) from 1.00 to 0.50.
16. Close the Production flow version details form.
Step by Step: Create a Process Activity: Steps 1-7 of 12

This procedure explains steps 1-7of the 12 step process of creating a new process
activity within a production flow.
1. Select the Activities button under the Versions tab
2. Select the New version activity > Create new plan activity menu
button.
3. Select the Next > button.
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4. Enter the Name of RemoteConfig".
FIGURE 2.7 PROCESS ACTIVITY CREATION
6. Select Work cell CSR_CONFIG.

Step by Step: Create a Process Activity: Steps 8-12 of 12

This procedure explains steps 8-12 of the 12 step process of creating a new
process activity within a production flow.
FIGURE 2.8 ACTIVITY TIMES
9. Change the Time unit from sec to min.
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10. Enter 12.00 min Runtime and Per quantity of "25" pcs.
12. Select the Finish button and select the Close button to close the form.
Step by Step: Activate the Production Flow Version:

Steps 1-2 of 2
This procedure explains the process of activating the production flow version.
1. From the Version FastTab, click the Activation > Activate button.
FIGURE 2.9 ACTIVATION OF PRODUCTION FLOW
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Single Transfer Activity Production Flow

Replenishing line-side supermarkets for production is one of the more common
and basic applications of Kanbans, no matter if the production is performed
based on production Kanbans or production orders. A transfer activity is used to
perform this replenishment, and a simple production flow with a transfer activity
can be used for this scenario.
FIGURE 2.10 EXAMPLE OF A WITHDRAWAL KANBAN THAT REPLENISHES

A SUPERMARKET
Creating a Transfer Activity

A transfer activity describes the transfer from specific location A to location B
and is valid for all products that are transferred. You can create a production flow
transfer activity with the activity wizard.
Demonstration 2.3: Setting up a Transfer Activity

In the case of a transfer activity for a single activity production flow, these steps
are needed:
CarSpeakProdFlow).
will display.
4. Select the New version activity button and select Create new plan
activity from the drop down list.
5. Select Next> button to enter the name and activity type.
6. In the Name field, enter an alphanumeric identifier up to 30
characters in length (for example, enter Transfer Activity).
7. Select the Activity type Transfer.
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8. Enter a Process quantity. Set a process quantity if the activity is
normally performed for a quantity > 1 and the run time would be the
same, no matter what the actual job quantity is. Transfer activities
usually consume the same transport time, no matter if a bin is full or
half full. For transfer activities, the process quantity should therefore
be set to the maximum quantity for each bin (for example, leave as
default).
9. Select an Operating unit. The operating unit is by default the value
stream. It can be any operation unit that is within the hierarchy of the
value stream (for example, select LeanProduction).
NOTE: Updating the Replenishing Work Cell and Replenished Work Cell is
optional; if the transfer activity is used to replenish a work cell or transfers
products that are produced by a work cell, you can select the work cells. This
will default to the locations that are associated with the work.
11. Enter the Replenishing and Replenished (Optional) work cells (for
example, select Replenishing work cell CSR_CONFIG and leave
Replenished blank).
12. Validate that the Product type: Finished product is selected
(Default).
A single transfer activity in a production flow can only be used to
transfer finished products. Selecting semi-finished would result in an
error at the validation of the production flow version.
13. Validate that the Update on hand and On receipt/pick fields are
selected (default). A single transfer activity in a production flow
must have the selection to update on hand on pick and on hand on
receipt. Clearing either field would result in an error on validation
of the production flow version.
15. In the Warehouse field, enter the appropriate transfer from the
warehouse. If work cells have been selected, the locations can be
pre-set from the work cells. Transfer from / to locations are
mandatory to define (for example, select Transfer to location:
Warehouse as ElComp).
16. In the Location field, enter the appropriate transfer from warehouse
location. Lean manufacturing needs a specific location to set up a
transfer. This is independent of the Locations definitions in the
Storage dimension groups of the items. Any type of location is valid
for the from / to locations. If shipments or output orders should be
used, the from location must be of the outbound dock type (for
example, select Transfer to location: Location as Output).
17. Enter the Freighted by as Carrier, Shipper or Recipient to define
who is paying for the freighting if applicable (for example, select
Shipper).
18. Select Next > button. The activity time can be specified for the
activity time types. The activity times can be modified after creation.
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19. Enter the Queue time before (optional) average time to consider in
planning before a transfer is executed. If a transfer between two
locations is only happening once a day, and the standard workday is
eight hours, this should be set to eight hours, to make sure planning
makes material available for transfer in time.
20. Enter the Runtime (mandatory), in this case the pure transfer (for
example, enter 10).
21. Enter Queue time after (optional) average time needed to make
material available for the next activity or a shipment process after the
transfer.
23. Select the Finish button.
Creating a Transfer Activity: Validation of the Production

Flow Version
For a single activity production flow, no more interactions need to be done. With
the creation of the activity, it is now possible to create Kanban rules that use the
activity. However, to create Kanbans, the production flow version needs to be
activated.
Two Activity Production Flow: Process and Transfer

Under "Chapter 2: Production Flows: Single Transfer Activity Production Flow",
scenarios described production flows with a single process activity and a single
transfer activity. The scenario in this section introduces a production flow with a
process activity and a transfer activity.
Example: Process and Transfer Activity

When setting up resource groups as work cells, the work cell for Lean
manufacturing usually has an input and output location. Depending on the
physical layout of a plant, a transfer could be required to move the output
products of a work cell to the next cell, to a warehouse or supermarket.
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If the transfer is done by a forklift driver or a waterspider that has to take care of
many cells, the production flow can be modeled with a process activity and a
following transfer activity. When the process activity is completed, the related
transfer activity is shown with supply status available on the Kanban transfer
board for the waterspider to move the material.
FIGURE 2.11 PROCESS ACTIVITY AND TRANSFER ACTIVITY PRODUCTION

FLOW
A transfer is needed if the output warehouse and/or location of the work cell for
the process activity are not identical with the final point of consumption, which
in this example, is the location Warehouse Indock.
Creating Process and Transfer Activities

The activities, process and transfer, are created as described in Example: Process
and Transfers Activities, but within the same production flow.
A valid variant could be to vary the update on hand settings of both activities. It
is possible to configure the process activity to update on hand on receipt = no
and the transfer activity to update on hand on pick = no. In this case, the
competition of the process activity would not post the created product to
inventory. The product would only be shown in inventory after the transfer to the
warehouse is complete.
Activity Relations
If a production flow version has more than one activity, the sequence and
structure of the activities in the production flow version must be defined before
the production flow version can be activated. This definition is done by adding
activity relations.
Predecessors and Successors

The activities, process and transfer, are connected within the same production
flow using predecessors and successors to define the activity relations between
the two.
Production flows will generally have predecessors and successors defined, unless
the flow has only a single activity. Predecessors are the upstream activity or
activities that are defined for the selected activity. The activity relations that are
configured for these activities can carry sequence constraints.
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Successors are the downstream activity or activities that are defined for the
selected activity. The activity relations that are configured for these activities can
also carry sequence constraints.
When defining predecessors and successors, you only need to define either the
predecessor or the successor. Once a predecessor is defined for an activity, the
downstream successor activity is automatically defined for that step. If a
successor is defined first, then the upstream predecessor is automatically defined.
NOTE: You can only add or remove activity relations on production flow
versions that are not previously activated.
Demonstration 2.4: Creating an Activity Relation

Use this procedure to create an activity relation:
Production flows (for example, select Production flow
CarSpeakProdFlow).
will display.
4. Select the first activity to be performed within this flow (for
example, select Process Activity); open the Successors FastTab.
5. Select the Add successor button. The activity relation form is
opened. The previously selected activity is preset as predecessor.
6. Select the successor Activity (for example, select Transfer Activity).
7. Change Constraint value (optional). To add an End-Start constraint
between the activities, activate the Constraint group and enter the
time and time unit for the constraint.
8. Change Cycle time ratio (optional). The Cycle time ratio is the
relation between two plan activities in a production flow version.
The ratio of 1 equates to having the same takt as the downstream
activities. A ratio of 2 describes an activity that has to feed two
activities into the downstream activity.
9. Click the OK button.
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Demonstration 2.5: Performing Validation and Activation
Without a valid activity relation between all activities of a production flow
version, the validation and activation will fail with an error. The same happens if
the update on hand settings of activities that are connected with a relation do not
match.
Perform the validation with these tasks:
1. Select Production control > Setup > Lean manufacturing >
CarSpeakProdFlow).
2. Switch to the Versions tab on the Production flows form.
3. Select the appropriate version (for example, select version 1).
4. Select the Validate button.
6. Close infolog.
7. Select the Activation > Activate button.
9. Close infolog.
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Lab 2.2 - Multiple Activity Production Flow

This lab facilitates the creation of a production flow with multiple activities.
Scenario
A new car speaker remote is being developed to compliment the car speaker kits
sold at Contoso. The production flow created in "Lab 2.1: Creating a Single
Process Activity Production Flow" now needs to be amended to include a
transfer activity to move the configured remote to the Electrical Component
warehouse.
Challenge Yourself!
Use these steps to perform the amendments:
1. Deactivate the current production flow version.
2. Create a new transfer activity.
The transfer activity settings should be:
o Name: RemoteTransfer
o Type: Transfer
o Replenishing Work cell: CSR_CONFIG
o Update on hand on receipt: selected
o Update on hand on pick: cleared
o Product type: Finished product
o Transfer to Warehouse: ElComp
o Transfer to Location: Output
o Freighted by: Shipper
o Runtime: 1 min per quantity 25
3. Create the predecessor/successor relationship between the process
and transfer activity with no constraints.
4. Activate the production flow version.
Step by Step: Steps 1-8 of 26

This procedure explains steps 1-8 of the 26 step process to create a production
flow with multiple activities.
1. Navigate to Production control > Setup > Lean manufacturing >
Production flows.
2. Select the Production Flow Remote PF.
3. On the Versions tab, click the Activation > Deactivate menu
button.
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5. Close the infolog.
6. On the Versions tab, click the Activities button.
FIGURE 2.12 PRODUCTION FLOW ACTIVITIES
7. Select the New version activity > Create new plan activity button.

9.
Enter Name RemoteTransfer.
10. Change the Activity type from Process to Transfer.

FIGURE 2.13 NEW TRANSFER ACTIVITY CREATION
12. Select Replenishing as CSR_CONFIG.
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13. Select the Next > button
14. Select the Transfer to Warehouse ElComp.
15. Select the Transfer to Location Output.
16. Change Freighted by from Carrier to Shipper.
18. Enter a Runtime of 1 Min per quantity 25.

21. Highlight the RemoteConfig Process activity, and on the Successor
tab, click the Add successor button.
FIGURE 2.14 ACTIVITY RELATIONS
21. Select the Successor Activity of RemoteTransfer.

23. Close the Production flow activities form.
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24. On the Versions tab, click the Activation > Activate menu button.
25. Click the OK button and close the infolog.
Multiple Activity Scenarios

Multiple activities are created and can be associated to each other within a
production flow. These sections present multiple activity scenarios that describe
various ways in which activities can be connected within a production flow to
meet the requirements for certain production environments:
Sequential Activities
Optional Activities
Alternative Activities
Parallel Activities
Sequential Activities
A common example of a production flow that consists of sequential activities is
the classic production or assembly line. It applies to any product that is built
activity by activity. These can be process and transfer activities performed in
sequence, as shown in this diagram.
FIGURE 2.15 SEQUENTIAL ACTIVITIES WITHIN A PRODUCTION FLOW
To build a finished product for a customer, all activities must be processed and
completed. The production flow requires a fixed sequence.
A production flow would not be a flow if it contains activities that are not related
to the flow. This is why all activities of a production flow version must be related
to be able to validate and activate the version.
Optional Activities
Optional activities are activities that are only needed for specific products, but
need a considerable amount of time or specific and limited resources. Therefore,
these activities cannot be grouped into a single activity, but rather are
accommodated with optional activities that form a branch in the production flow.
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Optional Activities: Branches within a Production Flow
This example describes a branch of a production flow with optional activities. All
products produced by this production flow go through the activity Striking, but
depending on the individual items and Kanban rules, might go through the
various branches.
FIGURE 2.16 OPTIONAL ACTIVITY BRANCHES WITHIN A PRODUCTION

FLOW
Optional Activities: Predecessors and Successors

Assume that the products for this production flow are produced with a single
Kanban rule that spans over multiple activities. The Kanban rule provides the
relationship between the item and the activities it goes through within the
production flow. The first activity of all Kanban rules would be striking, and the
last activity either packaging or packaging subcontractor, depending on the
product.
The production flow activities are connected using predecessors and successors
to define the activity flows that are possible to select for a Kanban rule:
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Striking > Packaging
Striking > Partial coating > Packaging
Striking > Lacquering > Packaging
Striking > Partial coating > Lacquering > Packaging
Striking > Packaging subcontractor
Striking > Plating > Packaging subcontractor

The Kanban rule thus defines the activity flows that a specific item or group of
items would go through; in other words, the production flow branch that the
specific item will go through.
Alternative Activities
Alternative activities are activities that can supply the same product by using
different activities. In this common example, the coating of the products can be
done in an internal work cell or by a subcontractor. As the subcontractor needs to
be supplied with the output of the milling activity, an additional transfer activity
is modeled. This illustrates that in many cases, an alternative activity is not the
same activity that is performed with a different resource.
FIGURE 2.17 ALTERNATE ACTIVITIES WITHIN A PRODUCTION FLOW
The resulting activity flows for the alternative branches from milling to
supermarket would be:
Milling > Coating
Milling > Transfer to subcontractor > Coating subcontractor >

Transfer to supermarket
Alternative Activities: Kanban Rules

The Kanban rule provides the relationship between the item and the activities it
goes through within the production flow. In this example, two Kanban rules
could exist to handle the alternate scenarios. At the point of planning the Kanban,
the alternate Kanban rule could be selected to go through alternate activity flow.
Parallel Activities
Parallel activities in a production flow are different activities that provide
different outputs that are processed at the same point in time and contribute to the
same finished product.
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A common example of a production flow that includes parallel activities has
activities that start from different, independent branches, all resulting in one
related activity, as shown in this figure.
FIGURE 2.18 PARALLEL ACTIVITIES WITHIN A PRODUCTION FLOW
Parallel Activities: Main Products, Co-Products, and ByProducts

In this scenario, the output of Process A is needed for Process B and C, which are
needed to complete Process D.
FIGURE 2.19 PARALLEL ACTIVITIES WITHIN A PRODUCTION FLOW 2
This latter case is better known in the process industries, where processes can
have main products, co-products and by-products. Production orders and process
Kanbans have only one main output product. Co-products and by-products can be
modeled with a negative BOM quantity. It is not possible to create a pull for a
co-product, but it is possible to create flow.
A new option for Lean manufacturing for Microsoft Dynamics AX would be
modeling process A to output either semi-finished goods or products in WIP. The
concept of semi-finished is expanded further under Chapter 2: Production
Flows: Inventory Integration".
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Activity Constraints
A constraint is needed if the successor activity cannot start immediately after the
predecessor due to a specific relation of the activities (if the constraint is not due
to the relation but to one of the activities, this should be defined as a queue time
of the activity instead). This figure shows the constraint that is created with the
successor predecessor activity relation.
FIGURE 2.20 ACTIVITY CONSTRAINTS
Activity Constraints: Using a Constraint Instead of Queue

Times
A business scenario of this would be two assembly work cells, B and C, assemble
similar products that are fed by work cell A; however, work cell A and B are in
the same building, while work cell C is in a different building. The transfer of
material from A to B takes five minutes, while the transfer from A to C takes 15
minutes. In this case, a constraint would be used instead of the queue times
because the constraint is due to the sequence of activities, not by the activity.
Activity Constraints: Overlapping Processes

If the processes overlap, in other words, the second process starts before the first
is complete, a negative constraint is possible. Consider that for Lean
manufacturing, where the production flow is tracked by the physical flow of the
handling units assigned to the Kanban signals, an overlap is unusual. Instead of
modeling overlaps, you should consider splitting the maximum Kanban product
quantities.
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The constraint of the activity relation is added to the throughput time of the
Kanban flow that is used to schedule the demand of material in the material
warehouse.
Activity Constraints: Scheduling and Calculating

This is an example of the scheduling and calculation of this constraint using two
activities: A and B.
Both activities have:
One minute queue time before
One minute runtime
One minute queue time after
The activity relation constraint is five minutes.

A Kanban is then created for A and B, with a due time of 12:00. The throughput
time of the Kanban, the period between the receipt and the issues, is 3 + 3 + 5
minutes = 11 minutes. The issues for the Kanban are thus issued for 11:49.
In theory, you could reach the same result by adding the constraint to the queue
time after of A or the queue time before of B. The activity relation constraint
should be used when the constraint is due to the special relation of activity A and
B and not only a queue time of a single activity.
Inventory Integration
With the new production flow backbone within Lean manufacturing in Microsoft
Dynamics AX 2012, there have been several improvements to the way that Lean
functionality has been integrated with the inventory module, providing flexibility
in configuration of Lean scenarios. The main improvements are:
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Production flow activities and Kanbans modeled against WMSLocations to match the physical flow without adding more WMSWarehouses.
Introduction of new inventory transactions that support integrating

Lean manufacturing functionality with inventory management,
master planning, and costing.
Updating inventory and possibilities with semi-finished activities.
WIP accounts integration.
The Supermarket as a new type of WMS element for Lean

manufacturing.
Material consumption strategies.

Sites, Warehouses, and Locations
Lean manufacturing in Microsoft Dynamics AX 2012 models all locations of a
production flow as WMS-Locations, the lowest level of the Inventory
breakdown. For the production flow implementation process, it is not important
to which warehouse a location is assigned. However, assuming that the
warehouse is the lowest level of the inventory breakdown that is visible to master
planning, the warehouse model of a production flow depends on the expected
planning functionality.
NOTE: In Microsoft Dynamics AX 2012, production flows cannot be set up
across legal entities (companies).
The location model of a production flow reflects the physical material flow. The
more locations that are modeled, the more transfers or dedicated registration
activities might be needed. Considering the additional effort required in moving
material on the shop floor that is non-value adding, the locations should be
minimized wherever possible.
Inventory Scenarios: WMS Elements

The inventory scenarios that are common with lean operations and their six
WMS Location implications within Lean manufacturing for Microsoft Dynamics
AX 2012 are:
Material warehouses
Supermarkets
Input location of a work cell
Output location of a work cell
Finished goods warehouses
Outdocks and shipments to customers or cross site
The implications of the six WMS location elements are described in these
sections:
Inventory Scenarios: WMS Elements: Material Warehouses and

Supermarkets
Inventory Scenarios: WMS Elements: Input Location of a Work Cell

and Output Location of a Work Cell
Inventory Scenarios: WMS Elements: Finished Goods Warehouses

and Outdocks and Shipments to Customers or Cross Site
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Inventory Scenarios: WMS Elements: Material
Warehouses and Supermarkets
These are the implications of the WMS elements of Material warehouses and
Supermarkets.
WMS Element
Implication
Material
warehouses
The point of consumption of a material warehouse that

is assigned to a transfer or picking activity is usually a
location of the Outdock type. With manual picking or
picking routes, this location can be overwritten or
distributed to multiple locations.
Supermarkets
A supermarket usually consists of a single WMSLocation. Because supermarkets are usually physically
placed on the shop floor and are to be replenished by
withdrawal Kanbans or transfer orders, the
supermarkets of a production flow should be grouped
within their own warehouse for each site.
Inventory Scenarios: WMS Elements: Input Location of a

Work Cell and Output Location of a Work Cell
These are the implications of the WMS elements of Input location of a work
cell and Output location of a work cell.
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WMS Element
Implication
Input location of
a work cell
The input location of the work cell is the default

location that is used to pick material for an activity. The
location can be a simple buffer, a supermarket, or an
Outdock of a material warehouse.
Output location
of a work cell
The output location of a work cell is the default location

where all output of the cell is put when it is coming out
of the work cell. This can be a simple buffer, the input
location of the following work cell, a supermarket, or an
Indock or Outdock of a finished goods warehouse.

Inventory Scenarios: WMS Elements: Finished Goods
Warehouses and Outdocks and Shipments to Customers
or Cross Site
These are the implications of the WMS elements of Finished goods warehouses
and Outdocks and shipments to customers or cross site.
WMS Element
Implication
Finished goods
warehouses
Indocks are used to move the output of an activity to a

finished goods warehouse.
Outdocks and
shipments to
customers or
cross site
In a build to order scenario with real flow, the output of

the last activity would probably directly go to the
Outdock or a specific shipment zone, which would not
require an additional picking process to ship to a
customer. The same applies for products that have to be
transferred to other sites.
NOTE: In Microsoft Dynamics AX 2012, the cost context for an item is always
established by site.
Production Flow Activities, Inventory, and Storage

Concepts
ERP systems in general, including Microsoft Dynamics AX 2012, have a large
dependency on inventory transactions. Inventory transactions are used for
planning, implementation, tracking, tracing, and costing of production and
logistic operations. Lean manufacturing for Microsoft Dynamics AX 2012
introduces new types of inventory transactions for Kanban jobs to fully support
the integration of Lean manufacturing in master planning.

Concepts: Activity Based Model Approach
Kanban jobs are created based on the production flow activities and associated
Kanban rules. These are used to plan, implement, track, trace, and cost against
activities within the production flow and provide master planning visibility. In
Lean manufacturing applications, transactions could in some cases restrict the
use of Lean manufacturing for Microsoft Dynamics AX 2012 and add
unnecessary complexity. As a result, various scenarios have been introduced to
provide a balance of transactions and simplicity. Lean manufacturing for
Microsoft Dynamics AX 2012 introduces an activity-based model to approach
these transactions, which allows a seamless combination of these scenarios:
Kanban jobs that update inventory
Usage of Kanbans for semi-finished products that do not have their

own BOM Level
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Managing of material and products in WIP that includes a move

from inventory to WIP, a transfer inside WIP, and receipt from WIP
to inventory
Various mechanisms to report material consumption, including

reporting by handling unit, job consumption, or backflushing

Concepts: Pick and Receipt
In Microsoft Dynamics AX 2012, activities of a production flow can be
configured for a specific behavior regarding the inventory updates for:
Pick: configures the inventory behavior on consumption. Process

activities allow the configuration of multiple picking activities,
which define the inventory update behavior by warehouse or even by
picked item. Refer to Chapter 2: Production Flows: Inventory
Integration: Picking Activities for more information on picking
activities.
Receipt: configures the inventory behavior on the receipt (when the

job is completed).
Update on Hand
The default behavior of an activity is to update on hand. For each job related to
this activity, an inventory transaction is created.
Update on hand on receipt = yes: A receipt transaction is created

for the due date of the Kanban job. When the job is planned on the
Kanban schedule board, the planned receipt date is updated
according to the assigned planning period.
Update on hand on pick = yes: For transfer activities, an issue

transaction is created for the transferred item on the due-date based
on the activity times. For process activities, the BOM explosion
creates issues for each item in the BOM that matches a picking
activity that has update on hand on receipt = yes on the due-date
based on the activity times.
The creation of these related transactions gives master scheduling full visibility
of the Kanban jobs based on activities that update on hand.
Because these transactions are also used within a costing context, activities
within a production flow must have update on hand activated when they are
supplying material to or consuming material from a costing boundary:
Activities at the start or end of the production flow
Activities that transfer material between sites
These conditions are validated either at the creation of the activity or at the
validation of the production flow.
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Tracking and Tracing
In Lean manufacturing for Microsoft Dynamics AX 2012, tracking and tracing
using batch or serial numbers is restricted to Kanban jobs that update inventory.
Inventory transactions are required in this instance because the traceable context
is established using these transactions.
WMS Integration
Integration into WMS functionality, output orders, and shipments are restricted to
Kanban jobs that update inventory.
BOM Settings and Picking

The BOM within in Microsoft Dynamics AX can be used to define the picking
warehouse as well as to define at what point the material is consumed within the
production process. The resource consumption field allows the BOM to become
independent of the production process and allows two production flows (perhaps
on two different sites) to use the same BOM by replacing the default site,
warehouse and location with the defaults set on the work cell. For example, the
BOM can now leave the consumption warehouse blank and the activity will use
the default warehouse and location from the input warehouse and location of the
work cell for that activity. The system will look first to the BOM lines. If a
warehouse is stated in the BOM line, the warehouse is used for picking. The
location is then determined either from the default issue location of the item or a
picking activity of the process activity. If no warehouse is stated in the BOMline, the warehouse and location of the work cell are used.
The BOM can also designate the backflushing or forward flushing options as
with production orders.
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Picking Activities
Picking activities are used to configure how the issue transactions related to
Kanban process jobs behave, when material is consumed from a given
warehouse. The picking activities can be used to define the settings that
determine if the picking should update on hand inventory and register scrap
according to the BOM. If a warehouse is defined on the BOM line, the picking
activity can also define the picking location for an activity. Picking activities
cannot be used to define a different warehouse to pick from. If the activity has
been marked to pick up semi-finished, then no picking activities are used or
created by default.
FIGURE 2.21 PICKING ACTIVITIES FORM
Picking Activities: Multiple Picking Activities

Multiple picking activities are needed in these cases:
If material is picked from different warehouses, there should be a

picking activity for each warehouse with the related default location
to pick from.
If material for a single activity is picked from different types of

locations, for example Kanban supermarkets, the update on hand
principle can be different for different items that are consumed in the
same process.
If different picking locations are to be set for a specific item and

warehouse. However, you cannot use a picking activity to define a
different warehouse to pick.
Picking Activities: Settings

The default settings for the picking activities are automatically created for the
input location of the selected work cell. This warehouse and input location then
become generic for the process and these two fields are defined for the activity:
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Update on hand - when picking from the specified location that

inventory is updated. For a single activity production flow, this must
be selected.
Register scrap - when selected, the scrap factor set on the BOM
lines is applied on backflushing. This is only applicable if the update
on hand is selected for the picking activity.

Exceptions can be entered for each item where the settings should be overridden
for a specific component or a specific warehouse.
For a process activity, all picking and receiving activities must be at the same
site, the selection of warehouses of a different site then the related work cell
(resource group) is not allowed.
NOTE: If changes are made to the picking activities, these will only have an
effect on Kanban jobs that are created after the change takes place.
Semi-Finished
A new concept of semi-finished activities has been introduced to support Lean
manufacturing operations. In traditional manufacturing within Microsoft
Dynamics AX 2012, production orders allow users to report jobs on an operation
level. With each finished operation, the product reaches a different state of semifinished product; however, this status is not registered on inventory unless the
last operation of a production order has been completed and the next BOM-Level
is reached. Semi-finished products that do not represent a BOM-Level are usually
identified by the product ID of the next BOM Level and the last completed
operation.
With Lean manufacturing for Microsoft Dynamics AX, this concept can now be
applied to production with the manufacturing Kanbans through the underlying
production flow activities.
Semi-Finished: Activities
FIGURE 2.22 SEMI-FINISHED ACTIVITIES
In this figure, three activities are needed to assemble material from the BOM
lines to a finished product:
Activity 1 picks the BOM components and outputs semi-finished.
Activity 2 picks semi-finished products from Activity 1 and still

outputs semi-finished.
Activity 3 picks semi-finished products from Activity 2 and outputs

finished products, reaching the next BOM-Level.
These activities use the activity settings that control product picking and receipt
in the production flow. An activity that outputs semi-finished (as Activity 1 and 2
in the figure show) in a production flow shows this behavior for all products,
independent of its BOM structures.
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Activity 2 and Activity 3 also do not show picking lines in the Kanban board. In
Microsoft Dynamics AX 2012, activities that consume semi-finished products
have no picking activities to pick components.
Semi-Finished: Settings
This figure shows semi-finished settings on a process activity.
FIGURE 2.23 SEMI-FINISHED ACTIVITY SETTINGS
Semi-Finished: Options
This table describes the options on production flow activities that affect pick and
receipt.
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Option
Description
Update on
hand receipt
Select this check box if the activity outputs products that

are finished products (BOM level), and the product receipt
is registered in inventory.
When you use this check box, the value of the finished
product is moved out of the production flow at standard
cost.
When you leave this check box blank, the value of the
received product remains in the WIP of the related
production flow. The value is moved out of WIP when the
goods are transferred or consumed by the succeeding
activity in the production flow.

Option
Description
Pick up
Select this check box if the activity consumes semifinished products. A semi-finished product is any
intermediate state of a product that is between two BOM
levels.
An activity that consumes semi-finished products cannot
be the first activity in a production flow.
Receive
Select this check box if the activity outputs semi-finished

products. You can only select this check box if the Update
on hand receipt check box is not selected.
Example: Configuring Process Activities for SemiFinished

Refer to "Chapter 2: Production Flows: Activity Relations" for creating a process
activity with the activity wizard. This process would be completed for each of the
three process activities in this example. After selecting the work cell, set the
values for Update on hand receipt, Semi-finished product - Pick Up, and
Semi-finished product - Receive.
The fields are shown on the Create process activity form.
For the first activity, the settings should be:
Update on hand receipt: check box is cleared.
Semi-finished product - Receive: check box is selected.
Semi-finished Pick up: check box is cleared.
For the second activity, the settings should be:
Update on hand receipt: check box is cleared.
Semi-finished product - Receive: check box is selected.
Semi-finished - Pick up: check box is selected.
For the third activity, the settings should be:
Update on hand receipt: can be selected or cleared.
Semi-finished product - Receive: check box is cleared.
Semi-finished - Pick up: check box is selected.
Activities can only be related if the receipt and pick properties of the activities
match to the same product type. During entry of the activities, the product type is
checked against all of the related activities, and if it does not match, an error
message is displayed. Once an activity is related to another activity, the product
properties are read only and cannot be changed.
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Multi Process Activity Kanbans
Kanbans can now go through multiple process activities. To select a Kanban flow
with multiple process activities, the process activities must have the semifinished configuration.
A multi-process activity Kanban must also begin with a process activity. In the
further flow, transfer and process activities can be mixed. Transfer activities can
transfer products or semi-finished products, but they can never change the
product property.
The concept of semi-finished introduces registration of Kanbans down to single
operations; however, this is not recommended. Each activity within the Kanban
flow has to be planned and reported. To reduce non value adding system
interactions or transactions, keep the number of activities to the minimum that
actually requires reporting. We also recommend that the registrations are
supported by barcode or RFID to reduce manual efforts where a transaction must
be performed.
Kanbans that Supply Semi-Finished Product

The architecture of activities supplying semi-finished allows the introduction of
yet another variant for production. A Kanban rule can be configured to supply a
semi-finished product to a supermarket.
FIGURE 2.24 SEMI-FINISHED KANBAN SUPERMARKET EXAMPLE
In this figure, Activity 1 supplies the supermarket for semi-finished products with
Kanban Rule1.
The Kanban job for Activity 1 has Kanban line transactions for the material, but
no receipt transaction of producing the semi-finished product. Semi-finished
products are by definition accounted in WIP, but not visible in inventory. They
are not visible in inventory; therefore, they are also not visible to master
scheduling.
WIP
A production flow must be related to a production group. In the production
group, the Work in Process (WIP) accounts for the production flow are specified.
We recommend that you create a single WIP account for each production flow,
because the backflush costing functionality that closes the costing period for all
production flows calculates the variances as the difference of the WIP value
before and after backflush costing for each single production flow.
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Components or products that are picked from inventory (requires update on
hand for pick = yes) for an activity of a production flow are added to the WIP
account of the production flow at their standard cost.
Products that are received from the production flow to inventory are deducted
from WIP at their standard cost. Again, this requires the activity to be configured
as update on hand on receipt = yes.
WIP: Production Flow Behavior

The production flow behavior with WIP is similar to that of production orders,
except that the production flow builds WIP and variances for all products and
materials that are consumed in or received from the production flow, whereas a
production order tracks WIP and cost for a single product.
Because it is difficult in any system to support the level of detail that is required
to track the realities of WIP on the shop floor, Lean manufacturing for Microsoft
Dynamics AX 2012 introduces three additional features to ensure that
consumption and receipt quantities correspond to the actual physical flow and
eliminate systematic errors based on calculated average over or under
consumption. These features are supported by a new concept of handling units.
Handling units help remove the dependence on transactions and track units in
WIP.
Products Supplied by Production Flow Activity Stay in

WIP
By configuring an activity to update on hand on receipt = no, but not selecting
it as receipt semi-finished, completing the activity will result in a handling unit
filled with the product. The product will not be posted to inventory, but stays in
WIP. This has these advantages:
The received product is only visible to the production flow, not

inventory or master planning. It cannot be used to cover demand
from other production flows.
If the product is consumed by a downstream activity in the same

production flow, the registration of the product consumption is
independent of BOM lines but only corresponds to the emptying of
material handling units.
Half-filled handling units do not suggest availability in inventory.
Material Directly Transferred to WIP with Transfer Activity

In many cases, material that has been issued to a specific production flow does
not need to be shown as on hand. The transferred material is added to WIP and at
this point does not get picked up by master planning. Whenever the Kanban
handling unit is registered as empty, the value is release from WIP and accounted
as consumed.
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The transfer activity needed for this process must be configured in this way:
Transfer products (not semi-finished)
Update on hand on pick = yes
Update on hand on receipt = no > value is added to WIP
The transfer activity has no predecessor in the production flow, but

needs a successor
The successor needs a picking activity with update on hand = no for

the specific material or for the complete warehouse
Products Transferred out of Production

Whenever a handling unit of a product is transferred out of the production flow,
WIP is deducted by the standard cost of the related product. This configuration
has no dependencies to any BOM structure; it simply follows the physical
material flow.
This graphic shows an example that is common in process industries of how
scrap material can be returned to a material warehouse through a transfer activity.
The transfer activity registers boxes of scrap at their actual weight. In the
foundry, the scrap is identified as its own product number that is used in the
BOM of the Refining process.
FIGURE 2.25 SCRAP MATERIAL TRANSFER ACTIVITY
Products Transferred out of Production: Configuration

The transfer activity needed for this process must be configured as:
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Transfer products that are not semi-finished.
Update on hand on pick = no. Value is deducted from WIP.
The transfer activity needs a predecessor (in this case Blanking) with
update on hand on receipt = no. This implies that any products
received from Blanking stay in WIP. If the Blanks need to be booked
to inventory, an additional transfer is needed to move the products
out of WIP.
Update on hand on receipt = yes.
The transfer activity has no successor.

Scenario: Contoso Car Speaker Production Flow
The Contoso Car Speaker production flow introduced in "Chapter 1: Lean
Manufacturing Concepts and Overview: Scenario" contains products in WIP.
FIGURE 2.26 CONTOSO CAR SPEAKER PRODUCTION FLOW
Scenario: Contoso Car Speaker Production Flow Electrical Assembly

The activity for Electrical Assembly supplies a supermarket in WIP. The parts
are not posted in inventory. The mechanical parts are moved from a warehouse to
the Car speaker assembly work cell. The value goes to WIP. The activity for the
Car speaker assembly posts material to WIP.
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The Electrical Assembly activity that supplies a supermarket in WIP is shown in
this figure. Notice update on hand inventory = no.
FIGURE 2.27 ELECTRICAL ASSEMBLY PROCESS ACTIVITY
2-48

Scenario: Contoso Car Speaker Production Flow Mechanical Parts Replenishment
The Mechanical Parts transfer activity that controls the transfer of parts to the
Car speaker assembly work cell to WIP is shown in this figure.
FIGURE 2.28 TRANSFER ACTIVITY REPLENISHING MECHANICAL PARTS
2-49

Scenario: Contoso Car Speaker Production Flow Speaker Assembly
The activity for the Car speaker assembly posts material to WIP, as shown in this
figure.
FIGURE 2.29 CAR SPEAKER ASSEMBLY PROCESS ACTIVITY
Kanban Supermarkets
The two possibilities to register material consumption related to Lean
manufacturing from inventory are:
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Deduct according to the BOM-line quantity

o On preparation of the Kanban
o On start of the first activity of a Kanban (forward flushing)
o On complete of the last activity of a Kanban (backflushing)
Transfer to WIP, deduct WIP with handling units, and register
empty.

With the Kanban supermarket, a third option is available. A Kanban supermarket
is a special type of WMS-location that has the inventory deduction policy on
empty of the material handling unit. This type of supermarket should be used for
material that is inventory controlled in the supermarket, but will not be deducted
by inventory backflushing, manual picking, or transfer processes.
From a costing point of view, this behavior is similar to a supermarket in WIP,
with the exception that on hand is shown in the supermarket.
When Kanban supermarkets are used in picking activities, the update on hand
on pick property of the picking activity must be configured to no.
Variable Consumption
For Kanban jobs that are based on process activities, the picking list lines are
created based on the active or the selected BOM on the creation of the Kanban
jobs. The BOM version cannot be replaced unless the job is unplanned.
So far, the possibility of variable consumption is limited in Lean manufacturing.
These are approaches to enable variable consumption:
When the Flushing principle is set to "finish" on the BOM line: the
actual consumption of Kanban picking lines is re-calculated when
the job is complete, calculating the total consumption needed for the
actual reported good and in addition the error quantity of the finished
product.
The consumption can be defined for each picking activity, if the

scrap factors are considered in the final consumption calculation.
Using a withdrawal Kanban with a Kanban line event. Because

transfer activities allow an individual reporting of the transferred
quantity, we recommend that you use a withdrawal Kanban with
Kanban line event to pull material to an activity and report individual
consumption. Furthermore, we suggest that you configure this
activity with update on hand on receipt = no.
Costing Implications
The Microsoft Dynamics AX 2012 backflushing cost model streamlines
processes by reducing the number of inventory transactions that need to be
tracked on the production floor. A key feature is the ability to track Kanban
requirements without the need for levels in the bills of materials or placing
inventory on hand.
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Backflush Costing Method
Under this backflush costing method, the direct material at standard cost is
accumulated in the production flow's work in progress cost account. Standard
conversion costs (direct manufacturing and indirect manufacturing cost) are
applied at standard upon crediting production flow work in progress for
completed quantities at standard cost. Periodic costing of the production flow
allows you to calculate the production variances to standard cost for the
production flow and period, while correcting ledger entries to account for unused and in process quantities that are still in the production flow at end of the
period.
Key Costing Features

A summary of some key costing features includes:
All items produced or consumed in a production flow are standard

cost controlled.
Work in process (WIP) is tracked by production flow.
When the update on hand receipt flag is selected for a process

activity, finished products are moved out of the production flow and
into inventory at their standard cost.
The update on hand activated flag must be selected when you are
supplying or consuming materials for activities at the start or end of
a production flow or if transferring materials between sites. This
relieves inventory of the components at their standard cost and
places the finished item in inventory at its standard cost.
When the update on hand receipt flag for a process activity is

cleared, the value of received product remains in WIP of the
production flow. The value will be moved out of WIP when the
goods are transferred or consumed by the succeeding activity in the
production flow.
A products standard cost can be computed according to the

production flow definition for the product and the standard costs that
are associated with the required resources.
Periodic costing computes the total cost of resource use for the
period and clears work in progress. The system computes variances
to standard cost for the period and production flow by comparing
total cost of resource use against the total completed goods for the
period at standard cost.
References
Rother, M. & Shook J. (2003). Learning to See: Value stream mapping to create
value and eliminate muda. Brookline, MA: The Lean Enterprise Institute, Inc.
Womack, J. P. & Jones, D. T. (2003) Lean Thinking: Banish Waste and create
Wealth in your Corporation. New York, NY: Free Press.
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Summary
Production Flows provided setup and configuration scenarios for how
production flows, the mainstay of the Lean functionality, are implemented in
Microsoft Dynamics AX 2012. It included these key points:
Production flow versions are used to maintain the activities within a

production flow.
Takt/cycle times are important in the production flow version and

connection with process activities.
Transfer activities move materials, semi-finished or finished

products. Process activities convert materials into products.
Activity relations are set through predecessors/successors and can be

used to define constraints between activities.
Inventory integration scenarios exist, providing connections with

WMS, picking activities, the possibilities for semi-finished product,
and WIP scenarios with production flows.
Production flows provide the cost context for manufacturing in Lean

manufacturing.
This lesson also introduced various labs that provided instruction on creating new
production flows and activities in Lean manufacturing for Microsoft Dynamics
AX 2012.
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Test Your Knowledge

1. Explain what is meant by the term production flow version.
2. Explain how minimum, maximum, average, and actual takt time is used.
3. What is meant by the term activity relation and how does it apply to process
activities?
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4. Explain the difference between transfer activities and process activities.
5. What is the difference between picking activities and transfer activities?
6. Explain what is meant by backflush costing and how it applies to Lean

concepts.
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chapter
1.
2.
3.
2-56
Solutions
Test Your Knowledge
1. Explain what is meant by the term production flow version.
MODEL ANSWER:
The futures state value stream can be modeled in Microsoft Dynamics AX
2012 as a production flow version. All processes of the value stream are
modeled as process activities. Movements or transfers can be modeled as
transfer activities, if the transfer status has to be registered or if an integration
to inventory picking or consolidated shipments is required. Production flow
versions can have an effective and expiry date and must be activated prior to
use.
2. Explain how minimum, maximum, average, and actual takt time is used.
MODEL ANSWER:
The Average takt time for a production flow is the target takt time for a
production flow version and is used to monitor and analyze performance of
the work cell. The Minimum takt time is the minimum acceptable takt time
for a production flow. A warning message is displayed in the Cycle time
performance indicator of the Kanban board if the actual cycle time is less
than the minimum takt time. The takt time is calculated based on actual
production in a work cell that is completed during a defined period. The takt
time is calculated using this formula: actual takt = working hours of cycle
time period / quantity produced in the cycle time period.
3. What is meant by the term activity relation and how does it apply to process
activities?
MODEL ANSWER:
Activity relation as it applies to process activities allows process sequencing
by using predecessors and successor relationships that must be defined when
there is more than one activity in a production flow. Predecessor activities
are the upstream activities that are defined for a selected activity. Successor
activities are the downstream activity or activities that are defined for the
activity. When defining Predecessors and Successors, you only need to
define the predecessor or the successor and the other relationship will be
created automatically.
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4. Explain the difference between transfer activities and process activities.
MODEL ANSWER:
Transfer activities can be defined to transfer material from one inventory
location to another, move material from inventory to WIP, move products out
of WIP to inventory, and move material around within WIP. A Process
activity is the aggregation of the picking, operations, receipt, and reporting
processes that are associated with producing a manufactured item. Transfer
activities move materials, semi-finished or finished products. Process
activities convert materials into products.
5. What is the difference between picking activities and transfer activities?
MODEL ANSWER:
Picking activities are used to define the settings that determine if the picking
should update on hand inventory and register scrap according to the BOM. If
the activity has been marked to pick up semi-finished, then no picking
activities are allowed to be set up. A transfer activity describes the transfer of
a material from specific location A to location B and is valid for all products
that are transferred. Replenishment of material in a supermarket is a common
application of transfer activities.
6. Explain what is meant by backflush costing and how it applies to Lean
concepts.
MODEL ANSWER:
Backflush costing is based on the standard cost framework. The production
flow is used as the cost accumulator for a costing period. The material
consumed by the production flow is added to WIP. The products received
from the production flow are deducted from WIP at their standard cost. The
periodic backflush costing determines the effective value of WIP to the end
of the period based on the Kanban handling units and the Kanban job status.
The deviation between the effective values and the actual WIP values for
each cost group and item are accounted and displayed as variances.
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CHAPTER 3: USE AND MANAGE KANBANS

Objectives
The objectives are:
Describe manufacturing Kanbans and explain the different ways they

can be used to streamline business processes using Microsoft
Dynamics AX 2012.
Define withdrawal Kanbans and explain how they are used to move
materials.
Describe fixed quantity Kanbans and how they compare to fixed bin
and fixed card Kanban systems.
Define event Kanbans and describe how they can be used to trigger
pull events.
Describe scheduled Kanbans and when they should be used.
Describe subcontracting scenarios using Kanbans.
Introduction
Use and Manage Kanbans provides a base level introduction into the various
types of Kanbans and where they are best suited to be used in Lean
manufacturing for Microsoft Dynamics AX 2012. The topics discussed are:
Manufacturing Kanbans
Withdrawal Kanbans
Fixed quantity Kanbans
Event Kanbans
Scheduled Kanbans
Subcontracting activities and Kanbans
3-1

Overview of Kanbans
In Microsoft Dynamics AX 2012, a Kanban is implemented as a framework to
plan, track, and process based on Pull signals.
A Kanban is an essential part of a pull system of supply, which is a critical
element of Lean production/supply. When a Kanban has been consumed, it
should be passed (triggered) to the source of supply to replenish it. This source of
supply is defined through the production flow activities to which the Kanban is
linked.
Kanban rules in Microsoft Dynamics AX 2012 are tied to production flows as the
foundation that defines the activities of a Kanban. Microsoft Dynamics AX 2012
Kanban rules can be set up to support a variety of make-to-stock and make-toorder scenarios. The basic Kanban types and Replenishment strategies are shown
in this diagram.
FIGURE 3.1 KANBAN TYPE/REPLENISHMENT STRATEGY
Kanban Types
The two Kanban types within Microsoft Dynamics AX 2012 are: manufacturing
and withdrawal. These Kanban types are used to manufacture and transfer
materials in the production process.
Manufacturing Kanban
A Kanban of the type manufacturing is assigned to a process that adds value.
The Kanban is linked to a production flow activity and thus a resource group
with the role of a work cell. Manufacturing Kanbans relate to at least one process
activity. The first activity of a manufacturing Kanban must be a process activity.
A process activity can be followed by a transfer or another process activity,
allowing a Kanban to span multiple activities.
Subcontracting activities are also modeled as activities and use manufacturing
Kanbans for the processing that occurs at the vendor.
3-2

New or unplanned process jobs appear on the Kanban schedule board to be
scheduled, if they are not configured to be automatically planned. If they are
automatically planned, these are added directly to the Kanban schedule and can
be processed directly with the Kanban board for process jobs. The Kanban
schedule board is shown in this figure.
Manufacturing Kanban: Planning Period and Time Fence

Kanban process jobs are planned based on the configuration of the production
flow model associated with the work cell. The Planning period and Planning
time fence set on the production flow model define the periods for the Kanban
schedule board. Planning periods can be either days or weeks. The Kanban
schedule board displays the Kanban jobs that are scheduled during the defined
planning time fence. Kanbans can only be scheduled within this planning time
fence.
Manufacturing Kanban: Capacity Storage Reaction

The Capacity shortage reaction defines the method of Kanban scheduling to
use if there is no capacity available during the required period when Kanbans are
automatically planned. The options are:
Postpone: The job is postponed until the day that throughput

becomes available.
Cancel: Automatic planning of the Kanban job is cancelled.
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Add to the requested period: The job is added to the scheduled

Distribute: The Kanbans of a single event are distributed to the

Manufacturing Kanban: Schedule Board for Process Jobs

After being planned, the shop floor then uses the Kanban board for process jobs
for performing against the various Kanban jobs. This figure shows the Kanban
board for process jobs.
FIGURE 3.3 KANBAN BOARD FOR PROCESS JOBS
Withdrawal Kanban
A Kanban with the type withdrawal creates a transfer job that is based on a
transfer activity. Withdrawal Kanbans are used to move a Kanban of a specific
item between supermarkets, warehouses, and production locations. Withdrawal
Kanbans do not add value and do not get planned as manufacturing Kanbans do.
3-4

Withdrawal Kanban Schedule Board for Transfer Jobs
Withdrawal Kanbans are implemented on the shop floor using the Kanban board
for transfer jobs. The Kanban board for transfer jobs form enables a
waterspider the visibility to gather materials to replenish line side supermarkets
and to support the picking of materials from supermarkets. Physical traceability
requirements are also supported. This is an example of the Kanban board for
transfer jobs.
Kanban Replenishment Strategies

The various Kanban replenishment strategies are fixed quantity Kanbans,
scheduled Kanbans and event Kanbans. These strategies are used to handle
common manufacturing and replenishment scenarios. This lesson will help
demonstrate the purpose of the various Kanban replenishment strategies for
triggering Kanban pull signals and the benefit that those mechanisms can offer to
Lean organizations.
Fixed Quantity Kanban

A fixed quantity Kanban rule relates to a fixed number of handling units;
meaning, the numbers of active Kanbans are constant. Whenever the products of
a Kanban are consumed and handling units are manually emptied, a new Kanban
of the same type is created.
Fixed quantity Kanbans are often used with fixed circulating cards, but can also
be used with single use cards. A fixed quantity Kanban is a make-to-stock
scenario.
3-5

Fixed Quantity Kanban: Circulating and Single Use Cards
For a circulating Kanban card, the printed cards are reused and circle physically
between the item origin and the point of consumption. After you define the
Kanban quantity, the needed cards are printed once. Fixed circulating cards can
move between item origin and point of consumption multiple times a day. This
replenishment strategy is mostly applied between cells of one site that have
physical proximity; an example of this is to replenish a cell supermarket out of
the main material warehouse.
Kanbans created for single usage can be used to cover additional demand to level
fixed quantity rules and no specific rules need to be created for this pull type.
Instead, the Kanbans have a flag that marks them as single use. You can also use
event Kanbans for exceptional demand above a certain quantity to maintain the
buffer stock of a fixed quantity Kanban, as described under Chapter 3: Use and
Manage Kanbans: Event Kanban: Sales Line Event.
Fixed Quantity Kanban: Kanban Quantity Calculations

Determining the fixed Kanban quantity is one of the most important tasks of
Kanban planning and is often one of the most difficult tasks to perform.
Microsoft Dynamics AX 2012 can calculate the Kanban quantity by taking
forecast, current demand, and historical demand into account. This functionality
is covered in Chapter 9: Kanban Quantity Calculations.
Scenario: Fixed Quantity Kanban: Make to Stock Finished

Goods
This scenario describes manufacturing based on fixed quantity Kanbans for
make-to-stock finished goods.
As a result of research and observation, Pierre and Eduardo have decided that a
certain product has a stable demand, so a fixed quantity Kanban would be the
best choice to produce the item. Pierre has set up the production flow activities
and Kanban rules for this scenario. The initially created fixed quantity Kanbans
are produced and in stock. Susan, the order taker, enters the sales order for the
product. Sammy, the Shipping and Receiving Clerk, performs the shipping
transaction against the sales order. Sammy ships enough inventory to empty a
Kanban. Sammy then registers the fixed quantity Kanban as empty triggering a
new fixed quantity Kanban.
3-6

Eduardo then schedules the fixed quantity Kanban on the Kanban schedule
board, which makes the Kanban show on the Kanban board for process jobs to be
produced. Shannon, shop floor execution, opens the Kanban board for process
jobs, manufactures the product, and reports completion of the Kanban, placing
the product into inventory. The scenario repeats as finished goods are ordered
and subsequently shipped. This diagram depicts the scenario.
FIGURE 3.5 FIXED KANBAN - SHIPMENTS TRIGGERING KANBAN

REPLENISHMENT
Scenario: Fixed Quantity Kanban: Make to Stock Finished

Goods: Steps
These steps are performed by the various roles to handle this scenario within
Microsoft Dynamics AX 2012:
1. Pierre/Eduardo: create production flow activities and fixed quantity
Kanban rule.
2. Ahmed/Shannon/Lars: processes production required for the initial
Kanbans.
3. Susan: enters sales lines for an item under fixed quantity Kanban
control.
4. Sammy: ships the order line, removing enough inventory to empty
one or more fixed quantity Kanbans.
5. Sammy/Ahmed: empty the fixed quantity Kanban to reset the status
to empty, which creates one or more new Kanban record(s) that are
available to be scheduled on the Kanban schedule board.
6. Eduardo: schedules the Kanban on the Kanban schedule form, which
makes the Kanban available on the Kanban board for process jobs.
7. Shannon: processes production required for the Kanban.
3-7

Scenario: Fixed Quantity Kanban: Manufactured Sub
Assembly - Manual Empty
This scenario describes manufacturing based on fixed quantity Kanbans for
manufactured sub-assembly with manual empty.
manufactured component has a stable demand, so a fixed quantity Kanban would
be the best choice to produce the item. The item is low cost and runs in a cell that
does not currently have capacity constraints, so they decide to set up the Kanban
to automatically schedule on the cell.
Pierre has set up the production flow activities and Kanban rules for this scenario
and generates the Kanbans for this item. The initially created fixed quantity
Kanbans are produced and in stock. Ahmed, the waterspider, pulls the component
from a supermarket and scans the Kanban as empty.
A new fixed quantity Kanban then shows automatically on the Kanban board for
process jobs. Shannon and Lars will process production that is required for the
Kanban and report the Kanban as completed.
This diagram depicts the scenario.
FIGURE 3.6 FIXED KANBAN FOR MANUFACTURED COMPONENT

SCENARIO
Scenario: Fixed Quantity Kanban: Manufactured Sub

Assembly - Manual Empty: Steps
1. Pierre/Eduardo: create production flow activities and fixed quantity
Kanban rule.
2. Ahmed: processes production that is required for the initial Kanbans.
3. Ahmed: pulls the component from a supermarket and scans the
Kanban as empty.
4. System: the emptied fixed quantity Kanban then shows automatically
on the Kanban board for process jobs.
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5. Shannon/Lars: open the Kanban board for process jobs and processes
production that is required for the Kanban and report as completed.
6. This scenario repeats each time a Kanban is emptied.
Scheduled Kanban
Master planning creates scheduled Kanbans automatically for planned Kanban
orders to cover the requirements within the firm horizon of the production
forecast. Scheduled Kanbans can also be manually created.
The behavior of scheduled Kanbans in master scheduling is similar to production
orders. Kanbans are created by firming planned Kanbans manually or using a
firming fence. The scheduled principle is used for items or variants that are
produced in a Lean work cell, but demand is created from forecast, customer, or
dependent demand, without being explicitly built to order.
The scheduled replenishment strategy should be applied when items are not
supposed to be produced without explicit demand, but the minimum batch sizes
cannot be lowered to a single piece flow. Examples of this being where the
minimum order size is greater than a quantity of one, or where multiple
requirements need to be grouped into a single planned supply, and the coverage
group in Master Planning is set to that of period.
Scheduled Kanban: MRP and Planned Kanbans

This diagram shows how scheduled Kanbans fit into the overall Master Planning
scheduling concept.
FIGURE 3.7 MRP AND PLANNED KANBANS
3-9

The master scheduling engine of Microsoft Dynamics AX creates issue
transactions from customer demand, forecast, and production demand (BOM
explosion), which are pegged against existing receipt transactions (supply) from
planned or firmed production orders, transfer orders, and the new Kanban
transaction types.
Scheduled Kanban: Planned Orders

For all uncovered demand, new planned orders are created using parameters such
as minimum and maximum order size or the coverage code that allows grouping
of issues by period.
The planned orders are created specific for the pre-defined order types that are
designated for the item in the default order settings or the item coverage settings
(allows definition by site or warehouse) with these options:
Planned production order
Planned transfer order
Planned purchase order
Planned Kanban order
FIGURE 3.8 DEFAULT ORDER TYPE OF KANBAN
Scheduled Kanban: Master Planning

The planned Kanban orders that result from the Master Planning run follow the
same concept as the other planned order types, but once firmed, result in a
Kanban. The coverage group that is set up against the item can be set with an
auto-firming fence, such that the firming of the planned order does not have to be
performed within that time frame.
Once the planned order is firmed, the Kanban then appears on the Kanban
schedule board to be scheduled, or if automatic planning is set on the Kanban, it
shows up directly on the Kanban board for process jobs to be manufactured.
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Scenario: Scheduled Kanban
This scenario describes the manufacturing process based on production schedules
and scheduled Kanbans.
Pierre and Eduardo have decided that a certain product is not suitable to be
produced through fixed quantity Kanbans because the product is not frequently
used. Consequently, Eduardo has decided to base production on a production
schedule. The schedule will be analyzed and updated weekly based on the
customer sending his or her forecast. By doing this, Eduardo attempts to level
production to meet the schedule without building inventory. Eduardo uses the
supply schedule form to view the demand and supply requirements for this
product.
Pierre has set up the production flow activities, item coverage, and Kanban rules
for this scenario. Eduardo creates the production schedule as a forecast and runs
master planning, resulting in scheduled Kanbans. Shannon, from shop floor
execution, transacts against the Kanban and manufactures the product.
Eduardo uses the firming horizon of the item coverage to firm the Kanbans that
are related to his production schedule. He can also create additional Kanbans to
level production on top of the production schedule if required. As this product is
defined with a scheduled Kanban rule, additional demand will be caught by
master planning. This diagram depicts the scenario.
FIGURE 3.9 SCHEDULED KANBAN SCENARIO
Scenario: Scheduled Kanban: Steps

1. Pierre/Eduardo: set up items and item coverage settings including
firming horizon.
2. Pierre/Eduardo: create production flow activities and scheduled
Kanban rules.
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3. Eduardo: creates a demand forecast.
4. Eduardo: runs master planning. Kanbans are created for issues within
the horizon and are manually firmed
5. Shannon/Lars: processes production that is required for the
scheduled Kanban.
Event Kanban
belong to the make-to-order category. Event Kanbans are triggered and create
related issues when you create sales lines, estimate production orders, create
Kanbans that are supplied through event Kanban rules, or run the pegging event
processing where inventory has hit a minimum quantity.
Event Kanban: Sales Line Event

The sales line event creates the pull for final assembly, packaging, or simply
shipping out of the sales orders. When a sales order is entered, the Kanbans
needed to produce or withdraw the goods to satisfy the customer order are
created. These Kanbans can be created automatically upon sales order entry, in
batch through a batch routine, or manually released from the sales order. These
settings can be configured on the Kanban rule.
Scenario: Event Kanban: Sales Line Event

This scenario describes a manufacturing process based on event Kanbans with a
sales line event.
certain product is produced in high variants and would like to configure the
product to be a pure make to order (MTO) or pull to order (PTO) case with an
event Kanban based on a sales line event. In this case, sales lines directly trigger
the event Kanban to be manufactured.
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for this scenario. Susan, the order taker, enters the sales order for the product,
which loads automatically onto the final assembly work cell. Ahmed transacts
against the Kanban and manufactures the product to the sales order. This diagram
depicts the scenario.
FIGURE 3.10 SALES LINE EVENT SCENARIO
Scenario: Event Kanban: Sales Line Event: Steps

1. Pierre/Eduardo: create production flow activities and sales line event
Kanban rule.
2. Susan: enters sales lines for an item, and then enters a warehouse that
is replenished through an event rule.
3. System: the sales line creates one or multiple Kanbans (depending on
the sales quantity and the maximum quantity of the event Kanban).
4. System: the created inventory receipts that are related to the Kanbans
are reserved/marked to the sales line.
5. Ahmed/Shannon/Lars: process production that is required for the
Kanban.
Scenario: Event Kanban: Bypassing Finished Goods

Supermarket for Large Sales Orders
This scenario describes a common situation where a fixed quantity Kanban is set
up for a certain product to hold a buffer inventory within the finished goods
warehouse to cover a calculated amount of customer demand, but an
exceptionally large order is placed by a customer. In this scenario, instead of
depleting the entire buffer inventory and risk being reactive to the market for
other customers, the exceptional demand is treated as a sales line event and
becomes a make to order scenario with an event Kanban.
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Supermarket for Large Sales Orders: Setup
Pierre and Eduardo have calculated the historical shipments on average and
create a buffer stock in the finished goods warehouse for this product. The
supermarket is replenished through fixed quantity Kanbans that cover the average
need of two shipping days + security stock. They also set up an event Kanban
against the sales line event with a minimum event quantity for the exceptional
orders. The minimum event quantity defines the size of an exceptional order.
for this scenario. Susan enters the sales order for an exceptionally high quantity
for the product, which consequently loads automatically onto the final assembly
work cell. Shannon transacts against the Kanban and manufactures the product to
the sales order. This diagram depicts the scenario.
FIGURE 3.11 BYPASSING FINISHED GOODS SUPERMARKET FOR LARGE

SALES ORDERS SCENARIO

Supermarket for Large Sales Orders: Steps
1. Pierre/Eduardo: create production flow activities; fixed quantity
Kanban calculated using historical average demand, and an event
Kanban rule against a sales line event with a minimum event
quantity that represents an exceptionally large sales order.
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2. Susan: enters sales lines for an item, and then enters a warehouse and
location that is larger than or equal to the minimum event quantity on
the event Kanban rule.
3. System: the sales line creates one or multiple Kanbans (depending on
the sales quantity and the maximum quantity of the event Kanban).
5. Eduardo sees the unplanned Kanban jobs on the Kanban scheduling
board and plans them by distributing to specific periods
6. Susan uses delivery date control functionality, capable to promise, to
determine when all event Kanbans that are related to the sales order
will be available to confirm the order to the customer.
7. Shannon: processes production that is required for the Kanban
Event Kanban: Production BOM Line Event

In a mixed mode environment (in other words, a company is using Kanbans and
production orders in the same facility), a picking list is created based on a
production order to withdraw material from warehouses or other upstream
processes. If the components are controlled by event Kanbans, the estimation of
the production order creates the related Kanbans (manufacturing or withdrawal)
of the related item source.
Scenario: Event Kanban: Production BOM Line Event

Kanban
This scenario describes a mixed mode manufacturing scenario where some parts
of a production order are supplied by a production flow to fulfill the sales
warehouse.
Parts of a product can be supplied using a mixture of traditional methods or
Kanban pull methods. At the time of creating the production order, users might
not know how the individual components of the BOM are sourced and they
should not be forced to make any decision about that at this time in the process.
With BOM line events, a seamless material flow can be achieved even with
different ways of sourcing.
In this scenario, the final assembly resource group is planned with production
orders. Standard components that are required for the production order are picked
from a supermarket. There are, however, parts that have little demand and are
therefore not placed in the supermarket. These stranger items are instead
produced to order in the Pre-Assembly work cell as an event Kanban based on a
BOM line event.
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Kanban: Setup
Pierre has set up the production flow activities and Kanban rules for this
scenario. Kevin, the sales manager, enters a sales forecast for the products and
Susan enters the sales orders. Master Planning runs and creates production orders
for the products to place into the Sales Warehouse. The production orders, upon
estimation, create the event Kanbans based on the BOM line event to be
produced on the Pre-assembly work cell. Lars, shop floor supervisor for Preassembly, then sees the Kanban demand and plans the event Kanbans together
with the fixed quantity Kanbans for the standard components. This diagram
FIGURE 3.12 PRODUCTION BOM LINE EVENT SCENARIO

Kanban: Steps
1. Pierre/Eduardo: create production flow activities and event Kanban
rules.
2. Eduardo: sets the firming fences for the finished items.
3. Kevin: sets the sales forecast plan for the next forecast period.
4. Susan: creates sales orders on the sales warehouse.
5. System: MRP creates the planned production orders to cover the
demand that is related to the forecast schedule and the actual
customer orders. For the next period, MRP firms the production
orders for the Final assembly resource group.
6. System: on estimation of the production orders, the event Kanbans
get created.
7. Lars: plans the event Kanbans together with the fixed quantity
Kanbans for the standard components.
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Event Kanban: Kanban Line Event
Similar to a picking list, the creation of Kanbans that pull components to
Kanbans is used to pull the required material to a downstream manufacturing
process. Kanban line events are used to supply components that are not stored in
a supermarket by the line side because they are not used frequently. These
Kanbans (manufacturing or withdrawal) are created automatically or manually by
the upper level Kanban. This type of Kanban is suggested where the components
required vary by event and a high number of variants are required. Where these
are not stranger items, a fixed quantity Kanban environment is recommended
for these components.
Kanban line events can be used where materials are made to order on a feeder
cell in a multiple assembly cell structure.
Scenario: Event Kanban: Kanban Line Event

This scenario describes a manufacturing situation where product variants are
driven by component variants such as color. In this scenario, component variants
are pulled as they are needed for a specific Kanban directly from the point of
source. At the same time, visibility is given to the consuming cell on the status of
the component pulls.
A Lean assembly cell assembles colored variants of A composed of painted
components B. The B components are produced based on Kanban pulls to the
component painting work cell. The regular colors of the components can be
pulled from painting with fixed quantity Kanbans, but the special colors (Gold,
Silver) are pulled by an event Kanban based on Kanban line events because they
are rarely used.
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Scenario: Event Kanban: Kanban Line Event: Setup
scenario. Eduardo plans the Kanbans for the assembly work cell, which
automatically updates the dates for the component painting work cell for the
Kanban line events. Lars sequences the component requirements by color and
due date on the Kanban schedule board for the component painting work cell.
This diagram depicts the scenario.
FIGURE 3.13 KANBAN LINE EVENT SCENARIO
Scenario: Event Kanban: Kanban Line Event: Steps

1. Pierre/Oscar: set up the production flow and define the Kanban rules,
including the Kanban line event rule for B (Gold/Silver).
2. System: Kanbans for A are created (depending on the Kanban type).
Kanban line event Kanbans are automatically created for B.
3. Eduardo: plans Kanbans for A on the Kanban schedule board, which
updates the expected dates of the event Kanbans for B.
4. Lars (Component Painting): sequences the component requirements
by color and due date on the Kanban schedule board.
5. Ahmed/Shannon (Component Painting): executes the sequence that
was set by Lars on the Kanban board for process jobs.
6. Ahmed (Assembly): prepares assembly Kanbans dependent on the
availability of the needed components shown on the Kanban board
for process jobs.
7. Shannon (Assembly): processes Kanban jobs for A.
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Scenario: Event Kanban: Pull Material from a Remote
Supermarket by Kanban Line Event
This scenario involves replenishment of material from a distant
supermarket/warehouse located at a different site that is pulled to the specific
Kanbans on demand using a Kanban line event.
In this scenario, needed material is pulled for the next shift/planning period from
a remote location to a production cell using withdrawal Kanbans. Traceability is
supported throughout the process because all Kanban receipts are inventory
controlled.

Supermarket by Kanban Line Event: Setup
Process A on Site 1 produces material in different variants for a process B that
can be processed on Site 1 or Site 2 and stores it in a supermarket in Site 1. To
process on Site 2, a withdrawal Kanban is used to pull the material from Site 1 to
Site 2. Scheduled Kanbans are created for Process B on Site 2, which in turn
generates the withdrawal Kanbans based on the Kanban line event. The transfer
between the sites is done for each shift to make sure that the exact needed
material is transferred for the next shift. This scenario is also typical for
subcontracting, where Site 2 is managed by a subcontractor. This diagram depicts
the scenario.
FIGURE 3.14 PULL MATERIAL FROM A REMOTE SUPERMARKET BY

KANBAN LINE EVENT SCENARIO
scenario. Eduardo creates and plans the Kanbans for the Process B on Site 2
which automatically creates and updates the dates for the withdrawal Kanbans to
bring the components to Site 2. Sammy, who is in charge of Shipping and
Receiving, processes the withdrawal Kanbans to move the components from Site
1 to Site 2.
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Supermarket by Kanban Line Event: Steps
1. Pierre: sets up the production flow and the related Kanban rules.
2. Eduardo: creates and plans scheduled Kanbans for Process B on Site
1 and Site 2. For all processes planned on Site 2, withdrawal
Kanbans for the material are created and the due date calculated.
3. Sammy (Site 1): prints the requested withdrawal Kanbans and picks
the material from the supermarket for the material shipment to Site 2
for each shift. He uses the Kanban transfer board and the picking
form to assign the picked traceability dimensions (batch number,
serial number, and so on).
4. Sammy (Site 1): reports the withdrawal Kanbans as started when
loading the truck (that is, by scanning the Kanban card).
5. Sammy (Site 2): receives the transport and moves the material to the
requested cells. He reports the transfer to be received (that is, by
scanning the Kanban card).
6. Ahmed (Site 2): prepares the jobs for Process B on Site 2 depending
on the available material that is transferred from Site 1.
Event Kanban: Stock Replenishment Event

Stock replenishment events are used to trigger Kanbans based on hitting a certain
level of on hand inventory. This has been integrated within Microsoft Dynamics
AX 2012, where the item coverage settings on the item define the minimum
stock that is required for each coverage dimension.
Stock replenishment events are useful in a quick turning environment, where
safety stock violations must instantly create a Kanban (manufacturing or
withdrawal) to replenish the missing item. The pegging event processing in Lean
manufacturing checks minimum inventory for selected Kanban rules and creates
the needed Kanbans to replenish.
Scenario: Event Kanban: Manufacturing Based on Stock

Replenishment Event
This scenario involves manufacturing a product where the safety stock has been
violated due to incoming sales orders. The event Kanbans based on the stock
replenishment event are created to replenish the stock immediately.
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Producing to stock based on a forecast schedule/production schedule is often
combined with a minimum stock/safety stock setting to avoid running dry if the
actual short term demand is higher than the predicted forecast. In a slow turning
environment, the security stock requirement is taken into account by the next
MRP run. In a quick turning environment, the violation of the security stock must
create an event Kanban based on the stock replenishment event to replenish the
missing item.

Replenishment Event: Setup
In this scenario, a sales warehouse is replenished by scheduled Kanbans. The
final assembly cell that replenishes the warehouse can replenish any item in the
warehouse within four hours. Pierre wants to lower the safety stock on the
warehouse to less than one day (to a lower lead time than the cycle time of the
MRP run). To avoid shortfall, Pierre sets up an event Kanban rule based on a
stock replenishment event. When the on hand falls under minimum inventory, a
manufacturing Kanban is created to replenish the missing items. This diagram
FIGURE 3.15 MANUFACTURING BASED ON STOCK REPLENISHMENT

EVENT
scenario. Eduardo defines the safety stock levels for the items and the forecast
schedules. MRP then creates the scheduled Kanbans where required. Susan then
enters many small orders that reduce inventory of the product and violates the
safety stock levels. This then creates event Kanbans that Lars notices on the Final
Assembly work cell and expresses for Susan.
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Replenishment Event: Steps
1.
2.
3.
4.
5.
6.
7.
8.
Pierre: sets up the production flow and related Kanban rules.

Eduardo: defines the safety stock levels for each item.
Eduardo: sets up the production schedules/forecast schedules.
MRP creates the scheduled Kanbans to cover the demand that is
related to the forecast schedule for the next period.
Susan: creates many small sales orders.
Sammy: ships the incoming orders to the customers from the
warehouse. The company target is to ship any order within 24 hours.
Sammy: ships an item that falls under safety stock. A minimum
event Kanban is created after the pegging batch job is run in the
background.
Lars: verifies the Kanban quantity overview by the hour. He
discovers a minimum quantity event Kanban and plans it as a priority
Kanban for Susan.
Subcontracting Activities and Manufacturing Kanbans

The basic principle of a production flow does not change when activities are
subcontracted using Microsoft Dynamics AX 2012; material still flows between
locations, process activities convert material to products, and transfer activities
move material or products from one location to another. Subcontracting activities
are modeled as activities of a production flow and use manufacturing Kanbans
for the processing that occurs at the vendor. Locations and work cells can be
modeled as vendor managed by assigning the vendor account to a warehouse or
to a resource of a resource group.
Transfer activities can also be used in conjunction with the subcontracting and
can even be configured where the payment for the shipment is third party, the
recipient, or the shipper. The transfers to and from the subcontractor are modeled
as explicit transfer activities to support the picking and shipment process. If an
explicit registration is not needed to support the physical transport, the transfer
activities can simply be left out.
A service purchase order is created in the background for payment of the
subcontracting service that is performed against the Kanban.
Microsoft Dynamics AX 2012 supports the ability to choose alternate activities
to facilitate level loading. Processes normally done internally can be
subcontracted when overloads occur. The ability to select from multiple
subcontractors for an activity is also supported.
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Scenario: Fixed Quantity Kanban Subcontract
This scenario involves manufacturing a product where part of the process is
performed by a subcontractor. This scenario involves a simple production flow
with a subcontracted activity that is based on fixed quantity Kanbans.
Scenario: Fixed Quantity Kanban Subcontract: Setup

In this example, the subcontractor works out of a supermarket that is located at
the subcontractor. When handling units are emptied at the subcontractor, the
Kanban cards are returned with the next shipment to the assembly cell and the
supermarket at the subcontractor gets replenished. The transfers to and from the
subcontractor are modeled as explicit transfer activities to support the picking
and shipment process. This diagram depicts the scenario.
FIGURE 3.16 FIXED QUANTITY KANBANS AND SUBCONTRACTING

ACTIVITIES
Pierre, the value stream manager determines that a process is going to be

completed by a subcontractor. Pierre creates the appropriate work cell/resource
group and resource that are required for the vendor. Alicia, the purchasing agent,
establishes a subcontracting agreement with the vendor. Oscar, the process
engineer, relates the activities of the production flow to the agreement lines that
relate to the vendor and service item.
Eduardo plans the Kanbans on the Kanban scheduling board. Ahmed picks
materials and prepares for the subcontractor. Ahmed also registers incoming
Kanbans from the subcontractor. At the end of the invoicing period, a purchase
order for the services that were provided is created and the vendor bases the
service report or invoice on the provided services.
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Scenario: Fixed Quantity Kanban Subcontract: Steps
1. Pierre: creates an appropriate work cell and resource for the
subcontract vendor.
2. Alicia: creates a subcontract agreement with the vendor.
3. Oscar: relates activities of the production flow to the agreement lines
that relate the vendor and service item.
4. Eduardo: plans the Kanbans on the Kanban scheduling board.
5. Ahmed: picks materials and prepares for subcontractor. Materials are
sent to the subcontractor, along with appropriate paperwork.
6. Ahmed: registers incoming Kanbans from the subcontractor.
7. Lars/System: generates purchase orders and receipts for transactions
occurring during the billing period.
Alternative Production Flow Subcontract

This scenario involves manufacturing a product where a subcontracting work cell
can be used for coating of steel tubes as an alternative to production on-site. The
subcontractor is used to load balance the overall capacity of the production flow.
In this scenario, scheduled Kanbans are used to perform the subcontracting
operations.
Scenario: Alternative Production Flow Subcontract: Setup

Eduardo schedules and balances both work cells on demand with the Kanban
scheduling board and monitors the consolidated supply schedule for the
supermarket in the Kanban supply board.
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To optimize his work on the Kanban schedule board, Eduardo uses a function to
convert Kanbans to the alternative Kanban rule, which allows him to reschedule
a Kanban that was originally created for internal production to the alternative
work cell. In fact, the subcontracting nature of the work cell has no impact on the
production flow. The same working principle would apply for two parallel
internal work cells or two subcontracted cells. The processes to schedule and
implement subcontracted activities are identical to the processes that are done for
internal activities. The scenario is illustrated in this figure.
FIGURE 3.17 ALTERNATE KANBANS AND SUBCONTRACTING ACTIVITIES
Scenario: Alternative Production Flow Subcontract: Steps

1. Pierre: creates an appropriate work cell and resource for the
subcontract vendor.
2. Alicia: creates a subcontract agreement with the vendor.
3. Oscar: relates activities of the production flow to the agreement lines
that relate the vendor and service item.
4. Eduardo: opens the Kanban schedule board and chooses an
alternative vendor for the Kanban.
5. Eduardo: while still on the Kanban schedule board, chooses the
alternative vendor's work cell and schedules the Kanban.
6. Ahmed: picks materials and prepares for the subcontractor. Sends
materials to the subcontractor, along with appropriate paperwork.
7. Ahmed: registers incoming Kanbans from the subcontractor.
8. System: generates purchase orders and receipts for transactions
occurring during the billing period.
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Summary
Use and Manage Kanbans provided an overview of the Kanban types and
replenishment strategies within Microsoft Dynamics AX 2012 that support Lean
manufacturing. It included these key points:
3-26
Manufacturing Kanbans are used to add value to a product and are

planned on the Kanban schedule board and performed against on the
Kanban board for process jobs.
Withdrawal Kanbans are used to transfer items to various sites,

warehouses, and locations but do not add value to a product.
Fixed quantity Kanbans can be used to model fixed bin and fixed
card Kanban systems.
Scheduled Kanbans are used where production occurs in a Lean

work cell, but demand is created from forecast, customer, or
dependent demand, without being explicitly built to order.
Event Kanbans are used where Kanbans should be generated only

when certain events occur. The events triggering these Kanbans are
sales line events, production BOM line events, stock replenishment
events, and Kanban line events.
Subcontracting is performed using manufacturing Kanbans against

process activities within Lean manufacturing for Microsoft
Dynamics AX 2012.
Test Your Knowledge

1. Define the two types of Kanbans that are available in Microsoft Dynamics
AX 2012 and how they are used.
2. What is the difference between fixed and scheduled Kanbans and when
would each be used?
3. What are sales line events and how are they triggered?
3-27

4. What are Kanban line events and how are they triggered?
5. How can an exceptional customer demand be handled so that all of the buffer
stock is not depleted if a customer places an exceptionally large sales order?
6. How is subcontracting modeled in Microsoft Dynamics AX 2012?
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chapter
1.
2.
3.
3-29
Solutions
Test Your Knowledge
1. Define the two types of Kanbans that are available in Microsoft Dynamics
AX 2012 and how they are used.
MODEL ANSWER:
The two types of Kanbans are withdrawal Kanbans and manufacturing
Kanbans. The first activity of a manufacturing Kanban must be a process
activity. A process activity can be followed by a transfer or another process
activity, allowing a Kanban to span multiple activities. A Kanban with the
type withdrawal creates a transfer job that is based on a transfer activity.
Withdrawal Kanbans are used to move a Kanban of a specific item between
supermarkets, warehouses, and production locations. Withdrawal Kanbans
do not add value. Withdrawal Kanbans are not planned as manufacturing
Kanbans are.
2. What is the difference between fixed and scheduled Kanbans and when
would each be used?
MODEL ANSWER:
Fixed quantity Kanbans: A fixed quantity Kanban rule relates to a fixed
Number of bins, meaning that the number of active Kanbans is constant.
Whenever a Kanban is consumed (emptied), a new Kanban of the same type
is recreated. Fixed quantity Kanbans are typically used in environments
where demand is somewhat constant. Kanban calculations can be run
periodically to recalculate Kanban quantities from Master Planning data.
Scheduled Kanbans: Master Planning creates scheduled Kanbans
automatically for planned Kanban orders to cover the requirements within
the firm horizon of the production forecast. Scheduled Kanbans can also be
manually created. The scheduled replenishment strategy should be applied
when items are not supposed to be produced without explicit demand, but the
minimum batch sizes cannot be lowered to a single piece flow. Examples of
this being where the minimum order size is greater than a quantity of one, or
where multiple requirements need to be grouped into a single planned
supply, and the coverage group in Master Planning is set to that of period.
3. What are sales line events and how are they triggered?
MODEL ANSWER:
This event creates the pull for final assembly, packaging, or simply shipping
out of the sales orders. When a sales order is entered, the Kanbans needed to
produce or withdraw the goods to satisfy the customer order are created.
Sales line events can be triggered at the time an order line is entered, and the
Kanban creation can occur automatically, in batch periodically, or manually.
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4. What are Kanban line events and how are they triggered?
MODEL ANSWER:
Similar to a picking list, the creation of Kanbans that pull components to
Kanbans is used to pull the required material to a downstream manufacturing
process. Kanban line events are used to supply components that are not
stored in a supermarket by the line side because they are not used frequently.
These Kanbans (manufacturing or withdrawal) are created automatically or
manually by the upper level Kanban. This type of Kanban is suggested where
the components required vary by event and a high number of variants are
required.
5. How can an exceptional customer demand be handled so that all of the buffer
stock is not depleted if a customer places an exceptionally large sales order?
MODEL ANSWER:
Fixed quantity Kanbans are set up to handle the normal historical demand;
additionally, a sales line event Kanban is set up with a minimum event
quantity to cover the exceptional order quantities.
6. How is subcontracting modeled in Microsoft Dynamics AX 2012?
MODEL ANSWER:
Subcontracting is modeled as activities and uses manufacturing Kanbans for
the processing that occurs at the vendor. The resource group in this case has a
resource as the vendor. Process and transfer activities are then used to
describe and set up the payment information for the subcontracting service.
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CHAPTER 4: FIXED QUANTITY KANBANS

Objectives
The objectives are:
Describe how fixed quantity Kanbans are used in Microsoft

Dynamics AX 2012.
Define how to set up and configure fixed quantity Kanban rules.
Review the planning process for a fixed quantity Kanban.
Explain how to use the Kanban schedule board in the planning

process for fixed quantity Kanbans.
Explain how to use printing pick lists and Kanban cards to signal
processes on the shop floor.
Describe how to use the Kanban board for process jobs when using
fixed quantity Kanbans.
Describe the processing of fixed quantity Kanbans.
Introduction
Fixed Quantity Kanbans covers how to set up and process fixed quantity
Kanbans in Microsoft Dynamics AX 2012.
The topics discussed are:
Fixed quantity Kanban rule setup
Kanban job planning
Kanban schedule board
Processing Kanban jobs
Kanban board for process jobs
4-1

Overview: Fixed Quantity Kanban Rules
A fixed quantity Kanban rule relates to a fixed number of handling units;
meaning, the numbers of active Kanbans are constant. Whenever the products of
a Kanban are consumed and handling units is manually emptied, a new Kanban
of the same type is created.
Overview Fixed Circulating and Single Use Cards

Fixed quantity Kanbans are often used with fixed circulating cards, but can also
be used with single use cards. A fixed quantity Kanban is a make-to-stock
scenario.
For a circulating Kanban card, the printed cards are reused and circle physically
between the item origin and the point of consumption. After you define the
Kanban quantity, the needed cards are printed once. Fixed circulating cards can
move between item origin and point of consumption multiple times a day. This
replenishment strategy is mostly applied between cells of one site that have
physical proximity, as an example to replenish a cell supermarket out of the main
material warehouse.
Kanbans created for single usage can be used to cover additional demand to level
fixed quantity rules and no specific rules need to be created for this
replenishment strategy. Instead, the Kanbans have a flag that marks them as
single use. You can also use event Kanbans for exceptional demand above a
certain quantity to maintain the buffer stock of a fixed quantity Kanban, as
described in the Chapter 3: Use and Manage Kanbans: Event Kanban: Kanban
Sales Line Event topic.
Overview: Determining Quantity

Determining the fixed Kanban quantity is one of the most important tasks of
Kanban planning and is often one of the most difficult tasks to perform.
Microsoft Dynamics AX 2012 can calculate the Kanban quantity by taking
forecast, current demand, and historical demand into account. This functionality
is covered in "Chapter 9: Kanban Calculation.
Kanban Rule Setup

Kanban rules are a material supply policy that governs process and transfer
activities that are based on Kanbans. The Kanban rule defines the way in which
an item is produced or transferred, and links the item to the activities within the
production flow.
Kanban rules are linked to a specific version of a production flow, because the
Kanban rules are linked to these activities to define how they produce or transfer
the various items.
4-2

On creation, a Kanban rule inherits the effective and expiration date of the
production flow version. A Kanban rule cannot be valid outside the validity
period of the production flow version that it relates to. An expired Kanban rule
can have a replacing Kanban rule that models the changed behavior for the
product selection. The replacing Kanban rule can be part of the same production
flow version or the next production flow version.
At the point in time when a Kanban rule expires, the active Kanbans of the
expired rule are counted as Kanbans of the replaced rule. When a Kanban
handling unit for an expired fixed quantity rule is registered as emptied, a new
Kanban is used for the replaced rule. The circulating cards of the replaced rule
are inherited to the replacing rule just the same.
Kanban Rules - Form

New Kanban rules are set up in the Kanban rules form, which contains a list of
all existing Kanban rules. You can locate this form by selecting Production
Control > Kanbans.
To create a new Kanban, select the New Kanban rule button and use the
Kanban rules form to create and define a new Kanban rule. The relevant settings
are then defined for the type of Kanban.
FIGURE 4.1 KANBAN RULES
4-3

Kanban Rules - Form: Fields
There are seven fields on the main form. These are:
Type
Replenishment strategy
Kanban rule
Product selection
First plan activity
Multiple activities
Last plan activities
Descriptions of the fields on the main form are presented in these sections:
Kanban Rules Form: Fields: Type, Replenishment Strategy,

Kanban Rule, and Product Selection
Kanban Rules Form: Fields: First Plan Activity, Multiple

Activities, and Last Plan Activity
Kanban Rules - Form: Fields: Type, Replenishment

Strategy, Kanban Rule, and Product Selection
These are the descriptions for the fields of Type, Replenishment strategy,
Kanban rule, and Product selection that appear on the main form.
4-4
Field
Description
Type
Specify whether the Kanban is a manufacturing

Kanban that creates a Kanban process job or a
withdrawal Kanban that creates a Kanban transfer
job.
Replenishment
strategy
Choose fixed when creating a fixed quantity

Kanban rule.
Kanban rule
Automatically assigned number identifying the

Kanban rule.
Product selection
The identification of the product selection of the

Kanban rule.

Kanban Rules - Form: Fields: First Plan Activity, Multiple
These are the descriptions for the fields of First plan activity, Multiple
activities, and Last plan activity that appear on the main form.
Field
Description
First plan activity
Select the first activity of the Kanban rule. This

links the Kanban to the production flow version
activity. The first activity of a manufacturing
Kanban rule must be a process activity. The first
and only activity of a withdrawal Kanban rule must
be a transfer activity.
Multiple activity
Select this check box to configure multiple activities

for the Kanban rule. Only manufacturing Kanbans
can have multiple activities.
Last plan activity
When the Multiple activities check box is selected,

select the last activity of the Kanban rule. When
Multiple activities are selected, the activity flow
based on the production flow activity relations can
be chosen to produce the Kanban specific flow. The
lookup form displays all activities that are
downstream from the first activity in the same
4-5

Kanban Rules - Details FastTab
The Details FastTab in the Kanban rules form is used to input the product for
which this Kanban is being created, along with the dimension information, date
effectiveness, lead time, and unit of measure for the selected Kanban rule.
FIGURE 4.2 KANBAN RULES - DETAILS FASTTAB
Kanban Rules - Details FastTab: Fields

There are seven fields on the Details FastTab. These are:
Product selection
Product
Product family
Valid Effective and Expires
Replaced rule
Lead time
Unit of measure
Descriptions of the fields on the Details FastTab are presented in these sections:
4-6
Kanban Rules Details FastTab: Fields: Product Selection, Product,

and Product Family
Kanban Rules Details FastTab: Fields: Valid Effective and

Expires and Replaced Rule
Kanban Rules Details FastTab: Fields: Lead Time and Unit of

Measure

Kanban Rules - Details FastTab: Fields: Product
Selection, Product, and Product Family
These are the fields of Product selection, Product, and Product family that
appear on the Details FastTab.
Field
Description
Product
selection
Fixed quantity Kanban rules must always specify a product

selection of the type Product, and the product cannot have
optional product dimensions.
Product
When the Product option is selected in the Product selection

field, select the item from the lookup list. If the product carries
product dimensions, the Product dimension fields are
activated. For fixed quantity Kanban rules, the product
dimensions are mandatory.
Product
family
This field is not enabled for fixed quantity Kanban rules.
Kanban Rules - Details FastTab: Fields: Valid - Effective

and Expires and Replaced Rule
These are the fields of Valid Effective and Expires and Replaced rule that
appear on the Details FastTab.
Field
Description
Valid Effective
and
Expires
Select the dates when the Kanban rule becomes effective and
when it expires.
For Kanban rules that are expired and not replaced with an
updated rule, these conditions are true:
A Kanban job cannot be started.
Replaced
rule
A Kanban job cannot be planned.
A Kanban job cannot be prepared.
A Kanban job can be cancelled, or its job status can be

reset.
No Kanbans can be created.
A Kanban cannot be changed.
A Kanban can only be cancelled.
Circulating cards cannot be created.
The rule used when a Kanban rule expires. The rule can
belong to the same version or a new version of the same
production flow and needs to have the same item relation and
last activity of the Kanban flow.
4-7

Kanban Rules - Details FastTab: Fields: Lead Time and
Unit of Measure
These are the fields of Lead time and Unit of measure that appear on the
Details FastTab.
Field
Description
Lead time
View the lead time that is needed to replenish the Kanban.

The lead time is the actual lead time that is agreed upon to
replenish a Kanban in a supermarket when the handling unit is
empty. It is probable that the actual lead time is longer than
the calculated lead time. When a Kanban rule is created, it is
preset with the calculated lead time that is determined by
using this formula:
activity times (activities in the Kanban flow) +
minimum constraint values (activity relations)
The lead time is used to calculate the due date for fixed
quantity Kanbans. The Kanban boards show an overdue
symbol for:
All Kanban jobs that have a due date in the past.
Unit of
measure
4-8
Jobs that are scheduled for a period that ends after the due
date.
The unit of measure that is used with the Lead time.

When the unit of measure is changed, the lead time is
recalculated according to the defined conversion of the old
and new units of measure. Only units of measure of the class
Time can be used.

Kanban Rules - Quantities FastTab
The Quantities FastTab in the Kanban rules form is used to view or modify the
Kanban quantity, alert quantities, and Automatic planning quantity.
FIGURE 4.3 KANBAN RULES - QUANTITIES FASTTAB
Kanban Rules - Quantities FastTab: Fields

There are eleven fields on the Quantities FastTab. These are:
Default quantity
Minimum quantity
Maximum quantity
Product quantity variance
Variance below
Variance above
Fixed kanban quantity
Alert boundary minimum
Alert boundary maximum
Automatic planning quantity
Maximum planned jobs
4-9

Descriptions of the fields on the Quantities FastTab are presented in these
sections:
Kanban Rules Quantities FastTab: Fields: Default Quantity,

Minimum Quantity, and Maximum Quantity
Kanban Rules Quantities FastTab: Fields: Product Quality

Variance, Variance Below, Variance Above, and Fixed Kanban
Quantity
Kanban Rules Quantities FastTab: Fields: Alert Boundary

Minimum and Alert Boundary Maximum
Kanban Rules Quantities FastTab: Fields: Automatic Planning

Quantity and Maximum Planned Jobs
Kanban Rules - Quantities FastTab: Fields: Default

Quantity, Minimum Quantity, and Maximum Quantity
These are the fields of Default quantity, Minimum quantity, and Maximum
quantity that appear on the Quantities FastTab.
Field
Description
Default
quantity
Enter the target product quantity to use for each Kanban.

This field is mandatory for fixed quantity rules.
Minimum
quantity
This field is disabled for fixed quantity Kanbans.
Maximum
quantity
Kanban Rules - Quantities FastTab: Fields: Product

Quality Variance, Variance Below, Variance Above, and
Fixed Kanban Quantity
These are the fields of Product quantity variance, Variance below, Variance
above, and Fixed kanban quantity that appear on the Quantities FastTab.
4-10
Field
Description
Product
quantity
variance
Upon completion of a Kanban job, a quantity tolerance can

be set up for each Kanban. Select this check box to allow
the finished product quantity to differ from the specified
product quantity for each instance of a Kanban job that
references the Kanban rule.
Variance
below
Enter the quantity by which the finished product quantity

can be less than the specified product quantity.
Variance
above

can exceed the specified product quantity.

Field
Description
Fixed kanban
quantity
Enter the number of Kanbans that are required to cover the

forecasted demand during the validity period of the Kanban
rule. Kanban quantity calculations can be used to set the
fixed Kanban quantity. The calculation is based on actual
demand, forecast demand, or historic consumption.
Kanban Rules - Quantities FastTab: Fields: Alert

Boundary Minimum and Alert Boundary Maximum
These are the fields of Alert boundary minimum and Alert boundary
maximum that appear on the Quantities FastTab.
Field
Description
Alert
boundary
minimum
A visual alert can be set up for Kanbans to show where

planned Kanbans are below a defined level.
Enter a number of Kanbans to define the minimum Kanban
quantity for each work cell or supermarket. This Kanban
level is visible in the Kanban quantity overview of the
Kanban boards. The Alert boundary minimum has these
effects:
When the number of jobs for active Kanbans that are
planned does not meet the specified minimum alert
quantity, the background color is red instead of green.
Active Kanbans can have any handling unit status
except Empty.
The Kanban rules are sorted by planning importance

based on this alert boundary minimum. This is
calculated for active Kanbans using this formula:
Alert boundary minimum number of jobs that have the
status >= planned
Alert
boundary
maximum
Enter a number of Kanbans to define the maximum Kanban

quantity for each work cell or supermarket. This boundary
helps to visualize excess inventory in a supermarket. It also
gives a visual signal when more scheduled or event Kanbans
than expected are created for a Kanban rule.
The Kanban level is visible in the Kanban quantity overview
of the Kanban boards. When the number of completed jobs
for active Kanbans is more than the specified maximum
alert quantity, the background color is red instead of green.
Active Kanbans can have any handling unit status except
Empty.
4-11

Kanban Rules - Quantities FastTab: Fields: Automatic
Planning Quantity and Maximum Planned Jobs
These are the fields of Automatic planning quantity and Minimum planned
jobs that appear on the Quantities FastTab.
4-12
Field
Description
Automatic
planning
quantity
To automatically plan a Kanban instead of manually loading

it onto a work cell, an automatic planning quantity should be
set.
Enter the number of unplanned jobs that cause automatic
planning to occur. An unplanned Kanban job has the status
of not planned.
Example: An Automatic planning quantity of 1 will plan
every unplanned job. An Automatic planning quantity of
5 will wait for five unplanned jobs to be generated, and then
plan all five Kanban jobs.
A planning quantity of zero must be manually planned on
the Kanban schedule board.
Maximum
planned jobs

Kanban Rules - Kanban and Cards FastTab
The Kanban and cards FastTab in the Kanban rules form is used to view or
modify Kanban card information and circulating card information, if applicable.
FIGURE 4.4 KANBAN RULES - KANBAN AND CARDS FASTTAB
Kanban Rules - Kanban and Cards FastTab: Fields

There are eight fields on the Kanban and cards FastTab. These are:
Card number sequence
Automatic printing
Print picking list with card
Kanban print instructions
Circulating cards
Number of active cards
Card assignment
Single use kanbans use circulating cards
4-13

Descriptions of the fields on the Kanban and cards FastTab are presented in
these sections:
Kanban Rules Kanban and Cards FastTab: Fields: Card Number

Sequence and Automatic Printing
Kanban Rules Kanban and Cards FastTab: Fields: Print Picking

List with Card, Kanban Print Instructions, Circulating Cards, and
Number of Active Cards
Kanban Rules Kanban and Cards FastTab: Fields: Card

Assignment and Single Use Kanbans Use Circulating Cards
Kanban Rules - Kanban and Cards FastTab: Fields: Card

Number Sequence and Automatic Printing
These are the fields of Card number sequence and Automatic printing that
appear on the Kanban and cards FastTab.
4-14
Field
Description
Card number
sequence
The Kanban card number sequence that is assigned to this

Kanban rule. When a Kanban rule is created, the default
number sequence from the production parameters is used.
You can create number sequences for Kanban cards in the
Number sequences form.
Automatic
printing
Select the event that causes automatic printing of Kanban

cards. The options are:
None Automatic printing is not used. We recommend
that you use this setting when circulating cards or
electronic Kanban processing is used.
Creation Print Kanbans when the Kanban is created.

We recommend that you use this setting when a
physical planning board for event Kanbans is used and
circulating cards cannot be used.
Plan Print Kanbans when the first job of the Kanban

is planned. We recommend that you use this setting
when a printed Kanban card triggers the processing of
Kanban jobs on the shop floor.
Prepare Print Kanbans when the first job of a

Kanban flow is registered as prepared.
Start Print Kanbans when the first job of a Kanban

flow is registered as in progress.
Receive Print Kanbans when the first job of a

Kanban flow is registered as completed. This option is
often used if batch or serial numbers of the finished
items are printed on the Kanban card.

Kanban Rules - Kanban and Cards FastTab: Fields: Print
Picking List with Card, Kanban Print Instructions,
Circulating Cards, and Number of Active Cards
These are the fields of Print picking list with card, Kanban print instructions,
Circulating cards, and Number of active cards that appear on the Kanban and
cards FastTab.
Field
Description
Print picking
list with card
Select this check box to print the picking list with the
Kanban card.
Kanban print
instructions
Select the information to print on the Kanban card. The

options are:
Work instructions print the production instructions
document that is attached to the Kanban.
Shipping instructions used for event Kanbans.

Refer to "Chapter 5: Event Kanbans" for more
information.
Circulating
cards
Select this check box to use circulating cards with the

current Kanban rule.
Number of
active cards
Enter the number of active circulating cards that are in

circulation at a given time for the Kanban rule.
4-15

Assignment and Single Use Kanbans Use Circulating
Cards
These are the fields of Card assignment and Single use Kanbans use
circulating cards that appear on the Kanban and cards FastTab.
Field
Description
Card
assignment
Select the method of assigning circulating cards. The

options are:
Automatic When a Kanban is created, a card is
assigned automatically when these conditions are true:
an unassigned active Kanban and an unassigned active
card exist for a Kanban rule. This is the default setting.
When Kanbans are created before circulating cards are
created, the cards are assigned automatically when the
cards are created. If there is a shortage of cards, when a
Kanban is registered as empty, the card is automatically
assigned to a new Kanban. This is especially useful when
circulating cards correspond to a limited number of
conveyers, racks, or bins.
Manual You must assign a card manually in the
Kanban board. You can do this when you prepare a
Kanban job.
Single use
kanbans use
circulating
cards
4-16
For fixed quantity Kanban rules, select this check box to

use circulating cards with single use Kanbans. When the
check box is not selected, single use Kanban cards are
created for single use Kanbans. Circulating cards are then
reserved for use with Kanbans that are not created for
single use.

Kanban Rules - Production Flow FastTab
The Production flow FastTab in the Kanban rules form is used to identify the
production flow activities that are associated with this Kanban and to define how
transactions are handled when the Kanban is processed.
FIGURE 4.5 KANBAN RULES - PRODUCTION FLOW FASTTAB
Kanban Rules - Production Flow FastTab: Fields

There are eight fields on the Production flow FastTab. These are:
First activity
Last activity
Register as empty
Inventory transactions
Financial transactions
Kanban flow defined
Warehouse
Location
4-17

Descriptions of the fields on the Production flow FastTab are presented in these
sections:
Kanban Rules Production Flow FastTab: Fields: First Activity,

Last Activity, and Register as Empty
Kanban Rules Production Flow FastTab: Fields: Inventory

Transactions and Financial Transactions
Kanban Rules Production Flow FastTab: Fields: Kanban Flow

Defined, Warehouse, and Location
Kanban Rules - Production Flow FastTab: Fields: First

Activity, Last Activity, and Register as Empty
These are the fields of First activity, Last activity, and Register as empty that
appear on the Production flow FastTab.
Field
Description
First
activity
View the production flow and version that the first activity
references. If there are no Kanbans created for this rule, you
can edit this field in the activity lookup form.
Last
Activity
View the production flow and version that the last activity
references. If there are no Kanbans created for this rule, you
can edit this field in the activity lookup form.
Register
as empty
Select an option to define when material handling units are

registered as empty. The options for fixed quantity Kanbans
are:
When handling units are received When the last job of
a Kanban is completed, the Kanbans are registered as
empty and disappear from the Kanban quantity overview
in the Kanban boards. When used with the fixed quantity
strategy, a new Kanban is created whenever the last job of
the previous Kanban is completed.
4-18
Manual (includes scanning empty) The Kanbans must

be explicitly registered as empty. This setting is used
when products are stored in supermarkets before they are
consumed or shipped. This is the default setting for fixed
quantity Kanbans.

Kanban Rules - Production Flow FastTab: Fields:
Inventory Transactions and Financial Transactions
These are the fields of Inventory transactions and Financial transactions that
Field
Description
Inventory
transactions
This check box is selected if the first activity, last activity,

or both activities of the Kanban rule are configured to
create inventory transactions. This field is automatically
selected based on the activities in the production flow
version.
Financial
transactions
This check box is selected automatically when the Kanban

rule creates inventory transactions, and one or more of
these conditions are true:
The Kanban type is manufacturing.
The Kanban type is withdrawal, and the picking and

receipt locations are managed by subcontractors.
The Kanban type is withdrawal, and the picking and

receipt locations are on different sites.
o
The picking activity updates the on hand inventory,

and the receipt does not update on hand inventory
but is transferred to work in process (WIP).
The picking activity does not update on hand
inventory, but the receipt is transferred from WIP
and does update on hand inventory.
Kanban Rules - Production Flow FastTab: Fields: Kanban

Flow Defined, Warehouse, and Location
These are the fields of Kanban flow defined, Warehouse, and Location that
Field
Description
Kanban flow
defined
This check box is selected when a valid Kanban flow is

defined for the Kanban rule.
The Kanban flow defines the specific activity flow that this
Kanban rule goes through if multiple activities are selected.
Warehouse
View the warehouse where products are supplied.
Location
View the location where products are supplied.
4-19

Kanban Rules - Kanbans FastTab
The Kanbans FastTab in the Kanban rules form is used to create or remove
Kanbans that are created for the fixed quantity Kanban rule.
FIGURE 4.6 KANBAN RULES - KANBANS FASTTAB
Kanban Rules - Kanbans FastTab: Fields

There are four fields on the Kanbans FastTab. These are:
Kanban
Item number
Kanban quantity
Handling unit status
Descriptions of the fields on the Kanbans FastTab are presented in these

sections:
4-20
Kanban Rules Kanban FastTab: Fields: Kanban and Item Number
Kanban Rules Kanban FastTab: Fields: Kanban Quantity and

Handling Unit Status

Kanban Rules - Kanbans FastTab: Fields: Kanban and
Item Number
These are the fields of Kanban and Item number that appear on the Kanbans
FastTab.
Field
Description
Kanban
The identification of the Kanban.
Item
Number
The item number and any product dimensions (that are

selected in the Storage dimension groups form) that
describes the product that is replenished by the Kanban.
Kanban Rules - Kanbans FastTab: Fields: Kanban

Quantity and Handling Unit Status
These are the fields of Kanban quantity and Handling unit status that appear
on the Kanbans FastTab.
Field
Description
Kanban
quantity
The product quantity that is replenished by the Kanban.
Handling
unit status
The status of the material handling unit that references a

Kanban. Handling unit status is determined by the
corresponding Kanban job status. The handling unit status is
assigned automatically. The options are:
When the Handling unit status is Not assigned and the
job status is Planned or Not planned, the first job is not
prepared or started.
When the Handling unit status is Assigned and the job

status is Prepared, the material for the first job is picked.
The handling unit is prepared and a Kanban card must be
assigned.
When the Handling unit status is Received and the job

status is Completed, the output from the last job is
received at the incoming warehouse.
When the Handling unit status is Empty, the output

supplied by the Kanban is consumed. The handling unit is
now empty. Circulating cards are unassigned and reused.
4-21

Demonstration 4.1: Creating a Fixed Quantity Kanban
Rule
Follow these steps to set up a fixed quantity Kanban rule:
1. Pierre, the value stream manager, opens the form for Kanban rules
by selecting Production control > Setup > Lean manufacturing >
Kanban rules.
2. Pierre creates a new rule.
3. Pierre chooses the Kanban type of Manufacturing. The valid
Kanban types are manufacturing and withdrawal.
4. Pierre chooses the Replenishment strategy of Fixed.
5. Pierre now selects the first activity that is related to this Kanban rule.
The validity constraints of the selected production flow activity are
copied to the effective/expires date and time constraints of the
Kanban rule.
6. Pierre changes to the Details FastTab (he could have done this
earlier).
7. Pierre chooses the item for the item relation. Depending on the item,
the item dimensions are activated.
8. Pierre chooses the item dimensions for the Kanban rule.
9. Pierre can set/modify the validity (Effective / Expiration date) for
the Kanban rule. The entered / modified dates are checked against
the validity interval of the Kanban flows last activity production
flow. The Effective date must be equal to or greater than today
(actual day). The Kanban rule validity must range within the validity
interval of the related version. If an incorrect date is set, an infolog
error message is shown.
10. Pierre chooses one rule as the replacement rule (when the new rule is
saved, it updates the expiry date and time property of the replaced
rule).
11. Pierre sets the replenishment Lead time in the time unit of measure.
For fixed quantity Kanbans, these are used to set the due date and
time of the Kanban.
12. Pierre changes to the Quantities FastTab.
13. Pierre enters the Default quantity (mandatory).
14. Pierre enters the Fixed Kanban quantity (number of fixed quantity
Kanbans) (mandatory).
15. Pierre enters the Automatic planning quantity. The Automatic
planning quantity is the number of Kanbans with the status of
unplanned that trigger an automatic sequencing. If no automatic
planning will be done, the planning quantity is 0.
4-22

16. Pierre enters the alert boundaries for the Kanban. The alert
boundaries are related to the level of the Kanban at the final receipt
location. If the Kanban quantity at the final receipt location is
beyond the Alert boundary minimum or above the Alert boundary
maximum, a visual signal is created in the Kanban quantity
overview.
17. Pierre changes to the Kanban and cards FastTab. At the creation of
the new line, the number sequences for Kanbans and circulating
cards have been initialized with the pre-settings in the Lean
parameters. Pierre can change the Card number sequence for the
circulating cards if they need to be manually assigned. Pierre could
also choose the Automatic printing trigger: The trigger is either
none, meaning that no automatic printing is done (which is the
normal case when using circulating cards), or it can be set to any of
these job statuses:
o Creation
o Plan
o Prepare
o Start
o Receive
18. Pierre saves the Kanban rule. Before saving the rule, he performs
these verifications:
o All additional mandatory fields need to be filled. For fixed
quantity Kanbans, the Default quantity and the Fixed Kanban
quantity are mandatory.
o The rule validity is confirmed against the production flow
versions that are related to the activities.
o The preselected flow is checked to be valid.
Demonstration 4.2: Creating Kanbans based on a Fixed

Quantity Kanban Rule
Follow these steps to create the Kanbans for the fixed quantity Kanban rule:
1. Pierre opens the form for Kanban rules Production control >
Setup > Lean manufacturing > Kanban rules.
2. Pierre finds the Kanban rule (for example, find Kanban rule
000035_1015 by right-clicking on the Kanban rule field and
selecting Filter by field and entering Kanban rule 000035_1015).
3. Pierre switches to the Kanbans FastTab on the Kanban rules form.
4. Pierre selects the Add button. The Kanban creation form opens,
showing the number of existing Kanbans and calculates the number
of missing Kanbans according to the rule.
4-23

5. Pierre confirms or changes the number of Kanbans created (for
example, enter Number of new kanbans as 5) and selects the
Create button.
The due dates of the Kanbans are calculated as:
If the from date of the rule is lower than or equal to today, then:
Due date = Now (date + Time) + Lead Time (Kanban rule)
If the from date of the rule is greater than today, then:
Due date = From date (date + shift start of this day) + Lead Time
(Kanban rule)
Kanban creation includes creating jobs, allocating created Kanbans
to free circulating cards, and creating Kanban job consumption lines
and automatic planning.
6. The Kanban creation form closes. After Kanban creation, the lower
grid is automatically refreshed and shows all Kanbans that are
related to the rule.
Demonstration 4.3: Creating a Multiple Activity Fixed

Kanban Rule
Follow these steps to set up a fixed quantity Kanban rule:
1. Pierre, the value stream manager, opens the form for Kanban rules
by selecting Production control > Setup > Lean manufacturing >
Kanban rules.
2. Pierre creates a new rule by selecting the New > Kanban rule
button.
3. Pierre chooses the Kanban Type of Manufacturing. The valid
Kanban types are manufacturing and withdrawal.
4. Pierre chooses the Replenishment strategy of Fixed.
5. Pierre now selects the First plan activity that is related to this
Kanban rule (for example, select Packaging). The validity constraints
of the selected production flow activity are copied to the
effective/expires date and time constraints of the Kanban rule.
6. Pierre activates the Multiple activities group to create a Kanban rule
that spans over more than one activity. The last plan activity input
field becomes active.
7. Pierre now chooses the Last plan activity (for example, select
MoveToVMI).
8. The Kanban flow form is opened and shows all Kanban flow
alternatives that have been created so far.
9. Pierre selects the Generate flow button to create all possible flows
between first and last activity. The missing flows are created and
displayed.
10. Pierre checkmarks to select one of the possible flows and presses
OK (for example, select Packaging >MoveToVMI). The Kanban
flow is saved temporarily until the rule is saved.
4-24

11. Pierre changes to the Details FastTab. Pierre chooses the item for
the Product field (for example, select CSS_SS1Y).
12. Pierre changes to the Quantities FastTab.
13. Pierre enters the Default quantity (mandatory) (for example, enter
20).
14. Pierre enters the Fixed Kanban quantity as the number of fixed
quantity Kanbans (mandatory) (for example, enter 4).
15. Pierre selects the Close button to save the Kanban rule.
4-25
Lab 4.1 - Configure a Fixed Quantity Kanban Rule

This lab facilitates the configuration of a fixed quantity Kanban rule.
Scenario
A new car speaker remote has been developed to compliment the car speaker kits
that are sold at Contoso. The production flow was completed in "Lab 2.2:
Multiple Activity Production Flow" and now the products and Kanbans required
to process the flow must be created.
Products have been set up for the purchased un-programmed remote and for the
remote that will be programmed through the activities of the production flow.
The Bill of material (BOM) has also been created, adding the purchased unprogrammed remote as a BOM line.
Once the BOM is created, Kanban rules are set up for the process activity to
program the remote and for the transfer activity to transfer the programmed
remote (now a finished good) to the warehouse and location where it will be
stored until it is sold.
To perform this setup, follow these steps:
1. Create a Kanban rule for the process activity with these settings:
o Product: CSS_Rem
o Type: Manufacturing
o Replenishment strategy: Fixed
o First plan activity: RemoteConfig
o Default quantity: 100
o Fixed Kanban quantity: 4
o Circulating cards: True
o Card assignment: Automatic
2. Create Kanban rule for the transfer activity with these settings:
o Product: CSS_Rem
o Type: Withdrawal
o Replenishment strategy: Fixed
o First plan activity: RemoteTransfer
o Fixed Kanban quantity: 4
o Circulating cards: True
o Card assignment: Automatic
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Challenge Yourself!
Use these steps to configure a fixed quantity Kanban rule:
1. Create a manufacturing type Kanban rule for the RemoteConfig
process activity.
2. Create Kanbans for the process activity.
3. Create a Kanban rule for transfer activity.
4. Create Kanbans for the transfer activity.
5. Establish standard cost for programmed remote.
Step by Step: Creating the Kanban Rule for the Process

Activity
Use these steps to create the Kanban rule for the process activity. These steps are
dependent on completing Lab 2.1: Creating a Single Process Activity
Production Flow.
1. To create a new Kanban rule for the process activity, select
Production control > Setup > Lean manufacturing > Kanban
rules.
2. Select the Setup > New > Kanban rule button.
3. Select the First plan activity called RemoteConfig.
4. Enter the Product "CSS_Rem".
5. Switch to the Quantities FastTab on the Kanban rules form.
6. Enter a Default quantity of 100.
7. Enter a Fixed Kanban quantity of 4.
8. Switch to the Kanban and cards FastTab on the Kanban rules
form.
9. Select the Circulating cards field.
10. Change the Card assignment to Automatic.
11. Select File and then select Save.
12. Select the Create cards button.
13. Deselect the Print new cards box.
14. Select the Create button.
15. Select Close.
16. Switch to the Kanbans FastTab on the Kanban rules form.
18. Verify that the default number of new Kanbans is 4.
19. Select the Create button to create the process activity Kanbans.
20. Select Close.
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Step by Step: Creating the Kanban Rule for the Transfer
Activity
Use these steps to create the Kanban rule for the transfer activity. These steps are
dependent on completing Lab 2.2: Multiple Activity Production Flow.
1. To create a new Kanban rule for the process activity, select
Production control > Setup > Lean manufacturing > Kanban
rules.
2. Select the Setup > New > Kanban rule button.
3. Change the Type to Withdrawal.
4. Update the First plan activity to RemoteTransfer.
5. Enter the Product "CSS_Rem".
6. Switch to the Quantities FastTab.
7. Enter the Default quantity of 10.
8. Enter the Fixed Kanban quantity of 4.
9. Switch to the Kanbans FastTab.
10. Select the Add button to create the transfer Kanbans.
11. Verify that the number of new Kanbans defaults to 4.
13. Close the Kanban rules form.
Step by Step: Creating the Standard Cost for the Item

Use these steps to create the standard cost for the item.
1. To set a standard cost for item "CSS_Rem", navigate to Product
information management > Common > Released products.
2. Enter the Item Number "CSS_Rem" in the Filter for the Item
number.
3. Select Manage costs > Set up > Item price button.
4. Select the Calculation button.
5. Select Costing version "Standard" from the drop down.
6. Change the Site to 2.
7. Change Item procured using from Production order to
Production flow.
9. Switch to the Pending prices tab on the Item price form.
10. Select the record that has a Price type of Cost.
11. Select the Activate button.
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Kanban Job Planning

Microsoft Dynamics AX 2012 has several methods to support planning Kanbans
for various production scenarios in Lean manufacturing. Kanbans do not have to
go through a manual planning process, but rather can be automatically planned
onto the work cell. Various options exist to help support common planning
scenarios such as automatic planning, Kanban schedule boards, and Heijunka
leveling.
For fixed quantity Kanbans, a planned Kanban based on this replenishment
strategy cannot be manually firmed, because Kanbans are only re-created based
on consumption. The initial number of Kanbans is defined manually or calculated
based on the Kanban quantity calculation.
This topic introduces the considerations for planning Kanbans, and describes the
mechanism to plan these Kanbans jobs on the Kanban schedule board.
Planning a Process Kanban Job

The three possibilities to plan/prioritize a Kanban job are:
Plan manually in the Kanban schedule board: the Kanban schedule

board allows leveling and planning for a number of days or weeks
ahead (depending on the period type that is related to the Lean
production flow model.
Automatic planning based on the automatic planning quantity:

whenever the number of unplanned jobs corresponds to this level, the
automatic planning method is called for that exact number of
Kanbans.
Denote a Kanban as a priority Kanban on the Kanban board for

process jobs.
When the process job is not planned, the estimated start date and time of the job
is determined out of the due date of the Kanban based on the Kanban flow entries
that describe the various activities that the Kanban goes through.
The Due Date of the process job = Due date of the Kanban sum of all
the lead times of all activities of the Kanban flow after the process.
The planned period date of the job is set when the job is planned; it holds the
start of the planning period.
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Work Cell Capacity
A Kanban job is planned by assigning it to a period and a sequence within the
period on a work cell. The period types and the number of periods are defined on
the resource groups in the Work cell capacity FastTab. The defined capacity
will show as the available capacity for the period on the Kanban schedule board
and will be consumed as automatic and manually scheduled Kanban jobs are
loaded onto the schedule for that work cell.
FIGURE 4.7 WORK CELL CAPACITY SETTINGS
Kanban Job Status for Process Jobs

The Kanban job status is important for understanding the planning process for
Kanbans. A Kanban job of the process type can have these statuses:
Not planned
Planned
Prepared
In progress
Completed
On the Kanban board for process jobs and the Kanban schedule board, the
buttons for processing certain activities for that Kanban job (example
Prepare/Start) are activated depending on the Kanban job status.
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Kanban Job Status for Process Jobs: Method to Change
Job Status
This table shows the statuses that enable the different methods to change a job
status.
FIGURE 4.8 KANBAN JOB STATUS FOR PROCESS JOBS METHOD TO

CHANGE JOB STATUS
Kanban Job Status for Process Jobs: Process Actions

The process actions of prepare, start, and complete can only be performed when a
process job is planned. Process jobs that are not explicitly planned must have the
automatic planning quantity in the Kanban rule set to 1. All not planned process
jobs that are related to this rule are automatically planned when created and can
now be prepared, started, or completed.
Automatic Planning of Kanbans

The capacity parameters for automatic planning of the Kanban schedule are
defined in the Kanban rule and Lean production flow model that are linked to the
work cell capacity.
Kanban process jobs are automatically planned when the number of unplanned
jobs that are related to the Kanban rule reaches the automatic planning quantity.
Any value of 1 or greater placed in this field will cause the Kanbans to
automatically plan. If the automatic planning quantity is greater than 1, the
Kanbans triggered together are planned in a sequence.
Planning Period Fence

When the planning period fence set in the production flow model is 1, the
Kanbans jobs are added to the end of the planning period of the work cell
schedule. If one period is completely loaded, the next period is opened
automatically. The Kanbans can be set as priority by designating them as such on
the Kanban schedule board.
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When more than one period is defined in the production flow model, the latest
possible start period is determined for each Kanban job by this formula:
Start date = due date - EPECycle
The EPECycle is configured in the production flow model.
Capacity Shortage Reaction

If the calculated start date is in the past, the start date is set to today.
The automatic planning tries to load the Kanban jobs on the period that is related
to this date. If this is not possible, the automatic planning proceeds according to
the capacity shortage reaction setting in the Lean production flow model. The
possible settings are:
Postpone: the job is postponed until the day that throughput

becomes available.
Cancel: automatic planning of the Kanban job is cancelled and a

message displays, indicating that the job could not be planned.
Add to the requested period: the job is added to the scheduled

Distribute: the Kanbans of a single event are distributed to the

An example of this would be if the automatic planning quantity is 3,
the automatic planning looks for a period that has enough capacity
for the three triggered Kanbans.
Capacity Shortage Reaction: Distribute Method

If the capacity requested by the triggered Kanbans is higher than the daily
capacity of the cell, the distribute method is applied automatically (because a
free slot could never be found).
Starting from the period that is related to the start date, the periods are checked
going backward in time until the actual period (today). If no slot can be found
before the due date, the search continues after the due date and continues in the
future unless a period with enough capacity can be found.
The planning period fence defines the number of available periods for planning,
starting from the period that is related to the actual day. If no available capacity
can be found to slot in all available periods, the automatic planning is cancelled
and an error message is displayed.
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Loading Kanban Jobs on the Kanban Schedule
The Kanban schedule for each work cell consists of periods that correspond to
the settings in the lean production flow model. The periods can be daily or
weekly.
The availability of each period in hours is defined by the working time of the
period that is assigned to the calendar. If the capacity model is throughput and
the period type is standard work day, the capacity is calculated as:
capacity = throughput (standard day) * working time (period) length of
standard day (calendar)
The load of each Kanban is calculated depending on the throughput ratio of the
item that is related to the work cell in the lean schedule group setup. The
calculation depends on the capacity model.
For throughput, the load is calculated as:
capacity load = throughput ratio * Kanban quantity * unit correction
factor
For hours, the load is calculated as:
capacity load = cycle time (activity) * throughput ratio * quantity
correction (job quantity) * unit correction factor
The load of each planned Kanban is added for each period to determine the
periods load. The capacity load of a Kanban process job is calculated whenever
a Kanban process job is planned for the first time. Unit correction factors are
used for the case where the unit of measure of a job is different than the unit of
measure of the capacity of the work cell. The quantity correction is used if the
job quantity differs from the activity quantity or the cycle time quantity.
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Lean Schedule Groups
Lean schedule groups allow users to assign colors and throughput ratios for
Kanban scheduling to items or item groups. This can be done globally or
specifically for a work cell. The colors can be used to visually understand the
different characteristics of items that are produced in the cell for scheduling
purposes.
FIGURE 4.9 LEAN SCHEDULE GROUPS
Lean Schedule Groups: Lean Schedule Items

Specific items or groups of items can be assigned to a Lean schedule group with
a specific throughput ratio using the Lean schedule items form.
FIGURE 4.10 LEAN SCHEDULE ITEMS
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The Kanban schedule board displays the Kanban jobs that are scheduled during
the planning time fence that is defined on the work cell. Kanbans can only be
scheduled within this planning time fence.
Kanban Schedule Board: Buttons

There are seven buttons on the Kanban schedule board that are used for
planning. These are:
Create kanban
Plan
Cancel
Revert job status
Pegging tree supply status
Use alternative kanban rule
Plan entire pegging tree
Descriptions of the buttons on the Kanban schedule board that are used for
planning are presented in these sections:
Kanban Schedule Board: Buttons: Create Kanban, Plan, Cancel, and

Revert Job Status
Kanban Schedule Board: Buttons: Pegging Tree Supply Status, Use

Alternative Kanban Rule, and Plan Entire Pegging Tree
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Kanban Schedule Board: Buttons: Create Kanban, Plan,
Cancel, and Revert Job Status
These are descriptions for the Create kanban, Plan, Cancel, and Revert job
status buttons on the Kanban schedule board that are used for planning.
Button
Description
Create
kanban
Creates a new Kanban based on the current rule for the

selected Kanban rule (only scheduled and fixed quantity
Kanbans).
Plan
Plans an unplanned Kanban for the first available period

according to its due date. This planning will plan as the
automatic planning functionality does.
Cancel
Resets the status of a Kanban job from planned, prepared, in

progress, or completed to not planned. To delete a Kanban,
the status must be not planned.
Revert job
status
Allows setting the status of a planned Kanban job to a given

job status.
Kanban Schedule Board: Buttons: Pegging Tree Supply

Status, Use Alternative Kanban Rule, and Plan Entire
Pegging Tree
These are descriptions for the Pegging tree supply status, Use alternative
kanban rule, and Plan entire pegging tree buttons on the Kanban schedule
board that are used for planning.
Button
Description
Pegging
tree supply
status
Checks the supply status of all lower level Kanbans in the

pegging tree.
Use
alternative
kanban
rule
Uses an alternative Kanban rule to fulfill selected

requirements. This is used where a product can go through
alternate activities, for example.
Plan entire
pegging
tree
Upon planning a Kanban job with multiple activities, this

plans the remaining upstream Kanban jobs.
Changing Kanban Job Statuses

The different job status can be reset to other statuses using the Revert Job Status
button. The reset function reverses the previously processed actions to reach the
correspondent status. If more than one status has to be reset, all reverse actions
are performed step by step.
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Changing Kanban Job Statuses: Preconditions
The various preconditions and results of resetting Kanban jobs are shown in this
table.
Reversal
Statuses
Pre-Conditions
Result
Completed to
in progress
The related financial

transactions (if any) are not
processed. There must be
enough on hand to reverse
the physical transactions.
The related Kanban is not
of the empty status.
Reverse the physical

transactions (receipt and
issues). If this was the last
job in the Kanban, reset the
Kanban status to "In
progress."
In progress to
prepared
None
Resets the job status to

"Prepared."
Prepared to
planned
None
Reverse the forward

flushing issue transactions,
if any. If the circulating
cards are used and the
assignment method is
manual, the card
assignment is reversed. If it
is the first job of the
Kanban, also reset the
Kanban status to "Not
planned".
Planned to not
planned
If the automatic planning

quantity is assigned to 1,
this step is not performed
on the reset; the job
remains at status planned.
Removes the planned

starting date and the related
sequence.
Changing Kanban Job Statuses: Cancel Functionality

The cancel functionality of a Kanban can also be used to set all jobs to the status
of not planned and then set the related Kanban to a status of not planned as well.
NOTE: After a reset to a specific status or cancel, the automatic planning is not
automatically launched. If automatic planning should be run again for this
Kanban, the automatic planning needs to be started manually for the Kanban
rule.
4-37

Demonstration 4.4: Scheduling Kanbans on the Kanban
Schedule Board
Scenario: Eduardo, the planner, uses the Kanban schedule board to plan the work
for a work cell using the principles of a Heijunka box. The items or item groups
are represented as colors. The board shows a configurable number of planning
periodsdays or weeks. Eduardo also has an overview of the Kanban rules and
their related status. In some cells, Eduardo might choose to use an electronic
display board to make the planning situation visible to everyone in the cell.
Follow these steps to schedule Kanbans on the Kanban schedule board.
1. Eduardo opens the Production control > Common > Lean
manufacturing > Kanban schedule board link.
2. If entering the board for the first time, Eduardo selects the Work cell
using the infolog. Otherwise, Eduardo selects the View > Options >
Change work cell button to select the work cell. He then chooses the
desired work cell and selects the OK button (for example, select
work cell SCPS_Cover).
3. Eduardo switches to the Plan tab on the Kanban schedule board.
4. For this example, as all demo data is planned, select the first planned
Kanban job from the Friday 07/01/2011 period of the Kanban
schedule board (top left Kanban job for Item number
SCPS_PSCR, Color Red) and drag this Kanban job into the Kanban
quantity overview area of the Kanban schedule board to un-plan
the Kanban job.
5. Eduardo then plans the unplanned Kanban job by selecting the
Kanban job in the Kanban quantity overview area (for example,
under SCPS_PSCL Red, find the hash marked Kanban job) and drag
and drop it into the desired period (for example, Monday
10/01/2011).
6. The Kanban jobs are now planned and available to be processed on
the Kanban board for process jobs.
NOTE: Automatically planned Kanban jobs do not require this step because they
will automatically show in the calculated period.
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Lab 4.2 - Planning a Kanban on the Kanban Board

This lab facilitates planning a Kanban on a Kanban Board.
Scenario
The process Kanbans created in "Lab 4.1: Configure a Fixed Quantity Kanban
Rule" needs to be planned. When the Kanban jobs are not automatically planned,
they must be dragged and dropped onto the desired period on the Kanban
schedule board.
Challenge Yourself!
Use these steps to plan the process Kanbans created in "Lab 4.1: Configure a
Fixed Quantity Kanban Rule":
1. Open the Kanban schedule board.
2. Locate the schedule for work cell CSR_CONFIG.
3. Schedule the unplanned Kanbans for item CSS_Rem to a day with
available capacity.
Step by Step
Use these steps to plan the process Kanbans created in "Lab 4.1: Configure a
Fixed Quantity Kanban Rule":
1. To plan the Kanban, select Production control > Common > Lean
manufacturing > Kanban schedule board.
2. Select the View > Options > Change work cell button.
3. Change Work cell to "CSR_CONFIG.
5. Switch to the Unplanned tab on the Kanban schedule board.
6. Select a Kanban job from the unplanned Kanban jobs, and then drag
and drop onto a schedule period. Repeat for the remaining Kanban
jobs.
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Kanban Printing
The printing of Kanban cards and pick lists is not required but can be used to
signal processes on the production floor. Microsoft Dynamics AX 2012 offers
several scenarios of printing pick lists and Kanban cards, including:
Printing of circulating cards on creation of the circulating cards.
Manual printing of Kanban cards.
Automatic printing of Kanban cards.
Manual printing of pick lists.
Automatic printing of pick lists with the Kanban card.
Priority designation on Kanban card.
Use the printed Kanban cards to scan and report the progress of a Kanban using
the Kanban boards.
This figure is an example of a printed Kanban card.
FIGURE 4.12 KANBAN CARD
Demonstration 4.5: Creating Circulating Cards and Print

Cards for the Shop Floor
Scenario: Pierre, the value stream manager, is setting up the Kanban quantity of
a Kanban rule that is working with circulating cards. Pierre creates the circulating
cards, prints them, and hands them out to the shop floor.
Follow these steps to create circulating cards and print cards for the shop floor:
1. Pierre opens the Kanban rules form.
2. Pierre selects or creates a Kanban rule with configuration for
circulating cards.
4-40

3. Pierre switches to the Kanban and cards FastTab and selects the
Create cards button.
4. Pierre creates the suggested number of cards and leaves Print new
cards selected. He selects the Create button.
5. The selected number of cards are created and printed.
Manual Printing of Kanban Cards

The manual printing of Kanban cards can occur from any of these forms:
Kanban board for transfer jobs
Kanban schedule board
Kanban rules form
Kanban details form
The Kanban print button is available to print the Kanbans. On the Kanban
schedule board, right-click on the Kanban and select Print Kanban to print the
card.
Automatic Printing of Kanban Cards and Pick Lists

In some cases, it might be desirable to automatically print the Kanban cards.
Kanban cards can be set up to automatically print when a Kanban reaches a
specific status. To change these settings, go to: Production control > Setup >
Lean manufacturing > Kanban rules.
The options are:
None
Creation
Plan
Prepare
Start
Receive
When a Kanban reaches the specified status as set up in the Kanban rule, the
Kanban card will automatically print. If desired, a pick list could print at the
same time.
4-41

Scenario: Automatically Print Cards to the Shop Floor
Scenario: Ahmed, the shop floor supervisor, wants to automatically print the
Kanban cards and pick list just before the shop floor wants to pick/operate a
particular Kanban. Pierre sets the automatic printing and pick list parameters.
Follow these steps to automatically print cards for the shop floor:
1. Pierre: sets up fixed quantity Kanban rules for a cell that is set to
Automatic planning quantity of 3 and the Automatic printing is
set to plan. He also selects the check box to print the pick list when
the Kanban card is printed.
2. Ahmed (consuming cell): scans Kanbans that were emptied. When
the automatic planning quantity is reached, three Kanbans are
planned and automatically printed.
3. Ahmed (providing cell): takes the Kanbans out of the printer and
starts picking in the printed sequence.
Kanban Processing - Process Jobs

Once a Kanban is planned, either automatically or by adding to the Kanban
schedule board, the Kanban is then available for reporting on the Kanban board
for process jobs. The Kanban can be prioritized, picked, or manufactured using
this form.
The Kanban board for process jobs is designed to support the normal production
flow, minimize interaction with the system, and give the work cell an overview
of the current situation allowing the work cell to make ad hoc decisions. The
board is also designed to support barcode scanning for the reporting of Kanbans,
if that is desired.
The functionality of the Kanban board for process jobs is described within this
topic under the heading Kanban Board for Process Jobs Pick Tab". Work cell
specific processes for producing Kanbans can be adapted with the various
possibilities of statuses and functions of the Kanban board for process jobs.
4-42

Kanban Board for Process Jobs - Pick Tab
This figure shows the Kanban board for process jobs Pick tab.
FIGURE 4.13 KANBAN BOARD FOR PROCESS JOBS PICK TAB
Kanban Board for Process Jobs - Pick Tab: Production

Buttons
This table describes the Production buttons that are available on the Kanban
board for process jobs Pick tab.
Button
Description
Prepare
Pick materials and prepares job.
Empty
Empties a handling unit of a Kanban.
Update
picking list
Allows users to update the picking data on the picking list to

prepare a production Kanban.
Kanban Board for Process Jobs - Pick Tab: Transfer

Buttons
This table describes the Transfer buttons that are available on the Kanban board
for process jobs Pick tab. These are used where transfer jobs are performed on
the Kanban process board as well, instead of the Kanban board for transfer jobs.
Button
Description
Start
transfer
When a transfer job is selected, allows the designation that

the transfer is in process.
Complete
transfer
Completes the transfer and performs the transfer of inventory

in the system.
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Kanban Board for Process Jobs - Pick Tab: Set Scan
Mode Buttons
This table describes the Set scan mode buttons that are available on the Kanban
board for process jobs Pick tab. These set the scan mode to perform the various
functions upon scanning the Kanban ticket on the Kanban board for process jobs.
Button
Description
Prepare
Sets scan mode to prepare Kanban jobs.
Empty
Sets scan mode to empty handling unit of Kanbans.
Select kanban
Sets scan mode to select a Kanban job in the job list.
Start transfer
Sets scan mode to start transfer jobs.
Complete transfer
Sets scan mode to complete transfer jobs.
Kanban Board for Process Jobs - Pick Tab: Print Buttons

This table describes the Print buttons that are available on the Kanban board for
process jobs Pick tab.
4-44
Button
Description
Pick list
Used to manually print the pick list for the selected

Kanban job(s).
Kanban
Use to manually print the Kanban card.

Kanban Board for Process Jobs - Manufacture Tab
This figure shows the Kanban board for process jobs Manufacture tab.
FIGURE 4.14 KANBAN BOARD FOR PROCESS JOBS MANUFACTURE TAB
Kanban Board for Process Jobs - Manufacture Tab:

Production Buttons
board for process jobs Manufacture tab. These are used to progress the status of
Kanbans for manufacturing.
Button
Description
Start
Start one or multiple selected Kanban jobs.
Complete
Complete one or multiple selected jobs with the

requested quantity.
Complete
(details)
Complete one or multiple selected jobs and report

detailed production data. This button will allow the
reporting of a different quantity completed, scrapped
quantities, updating the date/time and designating first
time through.
Update
registration
Update inventory receipts and register storage and

tracking dimensions for the lot.
Kanban Board for Process Jobs - Manufacture Tab: Set

Scan Mode and Print Buttons
This table describes the Set scan mode and Print buttons that are available on
the Kanban board for process jobs Manufacture tab. These set the scan mode to
perform the various functions upon scanning the Kanban ticket on the Kanban
board for process jobs, in this case to progress the status of Kanbans for
manufacturing. Use the Print button to print the Kanban cards.
4-45

Button
Description
Start
Sets scan mode to start Kanban jobs.
Complete
Sets scan mode to complete Kanban jobs.
Select kanban
Selects a Kanban in the Kanban list by scanning.
Print
Prints the Kanban cards of the selected Kanbans in the

process jobs list.
Kanban Board for Process Jobs - View Tab

This figure shows the Kanban board for process jobs View tab.
FIGURE 4.15 KANBAN BOARD FOR PROCESS JOBS VIEW TAB
Kanban Board for Process Jobs - View Tab: Production

Buttons
board for process jobs View tab.
4-46
Button
Description
Refresh
Refreshes the Kanban board for process jobs.
Refresh cycle
Sets the refresh cycle for automatically refreshing the

Kanban board for process jobs. By setting a refresh
cycle time to the Kanban board, users who do not
interact with the board every minute always have an
accurate view of the background information, quantity
overviews, and the cycle time performance.

Button
Description
Job details
Allows users to limit the number of Kanban jobs to

display on the Kanban board for process jobs by
Kanban job status. This allows the operator to focus
on the sequence of the selected jobs.
Dimensions
display
Sets the dimensions display for the various elements on

the Kanban board for process jobs.
Kanban Board for Process Jobs - Job Details Tab

When a job is selected in the job list the details of the job are shown in the lower
area of the screen, as seen in this figure of the Job Details tab.
FIGURE 4.16 JOB DETAILS TAB
Kanban Board for Process Jobs - Job Details Tab: Fields

This table describes the fields contained within the Job Detail tab.
Field
Description
Details
Displays details of selected job.
Production
instructions
Displays a related document or picture that contains

instructions or information related to the product or
process for the machine operators.
Picking list
Displays the sum of material to pick for the selected

jobs, one or multiple. The on hand status is displayed
for the picking list lines to display the availability of
material. The picking list can be printed as a separate
document or as an attachment to each Kanban card.
Pegging
Shows the Kanbans needed for selected jobs and the

handling unit status of the pegged Kanbans.
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Kanban Board for Process Jobs - FastTabs
On the right side of the Kanban board for process jobs, several FastTabs are
available to display complementary data and support specific processes. When
they are closed, the FastTabs do not consume runtime on update of the board.
Therefore, we recommend that you close any FastTab that is not needed. When
closing the board, the status of open/closed FastTabs is remembered (in the
session data) and the board will be restored with this status when next used.
FIGURE 4.17 KANBAN BOARD FOR PROCESS JOBS FASTTABS
Kanban Board for Process Jobs - FastTabs: Fields

There are seven FastTab fields. These are:
Registration
Cycle time performance indicator
Messages
Transfer jobs
Kanban quality overview- finished goods
Kanban quality overview materials
Job icon legend
Descriptions of the FastTab fields are presented in these sections:
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Kanban Board for Process Jobs FastTabs: Fields: Registration and

Cycle Time Performance Indicator
Kanban Board for Process Jobs FastTabs: Fields: Messages and

Transfer Jobs
Kanban Board for Process Jobs FastTabs: Fields: Kanban Quantity

Overview Finished Goods
Kanban Board for Process Jobs FastTabs: Fields: Kanban Quantity

Overview Materials and Job Icon Legend
Kanban Board for Process Jobs - FastTabs: Fields:

Registration and Cycle Time Performance Indicator
These are the descriptions for the FastTab fields of Registration and Cycle time
performance indicator.
Field
Description
Registration
When you use a bar code or RFID scanner, the

Registration FastTab should be opened to see the
scanned Kanban card ID. A wrong or unreadable
card ID can be manually corrected or typed in.
The registration is triggered with the Return or
TAB key.
Cycle time
performance indicator
The cycle time performance indicator displays the

actual calculated cycle time for the defined cycle
time period in relation to the boundaries defined
in the production flow version. The cycle time
performance indicator is usually applied in
production environments where many small jobs
are registered synchronously to production. It
gives an indication to the workers and managers
of a work cell on the actual performance of the
cell. The cycle time performance indicator is only
active, if a work cell is unique to one production
flow activity. For a work cell that executes
activities for multiple production flows, the cycle
time requirements cannot be calculated, and the
control is inactive.

Messages and Transfer Jobs
These are the descriptions for the FastTab fields of Messages and Transfer jobs.
Field
Description
Messages
The Kanban board for process jobs does not

display error messages in a separate infolog
window, but displays the messages in a Message
FastTab. The Message FastTab must be open to
see the feedback. When you close the Kanban
board for process jobs, the message history will
be deleted.
4-49

Field
Description
Transfer jobs
When a work cell is replenished by withdrawal

Kanbans or the process activity is followed with a
put-away transfer job, the active transfer jobs are
displayed in a grid in the Transfer jobs FastTab.
The jobs can be selected and registered as started
or complete in this control. A registration mode
start/complete transfer can also be set. This
FastTab supports the work of a user dedicated to a
specific work cell. The user can control transfer
in, transfer out, and picking processes in a single
User Interface (UI), filtering all transactions
related to the selected work cell.
For a machine operator, the Transfer jobs
FastTab should be kept closed.

Kanban Quantity Overview - Finished Goods
This is the description for the FastTab field of Kanban quantity overview
finished goods.
Field
Description
Kanban quantity
overview finished
goods
The Kanban quantity overview controls provide a

visual indication of the on hand, supply, and
demand status of the Kanban rules related to the
selected work cell. The finished goods overview
displays the Kanban rules for products supplied
by the work cell. For each Kanban rule, all active
jobs are shown sorted by job status. Shortages
can be spotted at a glance by these indications:
If a Kanban rule has insufficient completed,
started or planned Kanban jobs, the
background of the minimum alert quantity is
highlighted red.
4-50
If a planned Kanban job is overdue, it has a

time alert symbol. The Kanban rules are
sorted by urgency. The most urgent Kanban
rule displays on the top of the overview. The
shop floor supervisor can use the quantity
overview control to plan for incoming jobs
based on the urgency and priorities.

Kanban Board for Process Jobs - FastTabs: Fields
Kanban Quantity Overview - Materials and Job Icon
Legend
These are the descriptions for the FastTab fields of Kanban quantity overview
materials and Job icon legend.
Field
Description
Kanban quantity
overview materials
The Kanban quantity overview for material

displays the Kanban rules that supply material
consumed by the selected work cell. The shop
floor workers see an overview of the supply
situation and the on hand supply in the
supermarkets to make priority and picking
decisions.
Job icon legend
In the controls of the Kanban board for process

jobs, Kanban jobs are represented by using icons
that reflect the job or handling unit status.
Overdue or priority jobs are marked with an
overlay icon. The color of the job represents the
Lean schedule group of an item.
Prepare Kanban
Prepare is an optional status update performed with the Prepare button. The
prepare function picks materials and prepares jobs to be in process. Materials
with the flushing principle set to Start are physically posted when the prepare
method is processed. A Kanban job that has components that are pulled through
an event Kanban can only be prepared if the component Kanbans have been
received.
Start Kanban
Start is an optional status updateperformed with the Start buttonthat starts
one or multiple selected Kanban jobs. The start update sets the realized start date
and time of the Kanban process job. If the Kanban job has not been through the
prepare status, the start update will also prepare the Kanban job.
Complete Kanban
Complete must be performed to update the selected jobs and complete the
Kanban process jobs with the requested quantity. The complete update sets the
realized end date and time of the Kanban process job. If the Kanban job has not
been through the prepare or start statuses, the complete update will also prepare
and start the Kanban job.
4-51

Completion of the Kanban can also be performed using the Complete Details
button, which allows one or multiple selected jobs to report detailed production
data. This button allows the reporting of a different quantity completed, scrap
quantities, updating of the date/time and designation of first time through.
The complete update performs the physical receipt and inventory transactions of
the product at the location, if the receipt is inventory controlled. On the last
process job of a Kanban, the components with flushing principle Finish are
physically posted upon completing the Kanban.
If a Kanban process job is completed with a different Good quantity than the
product quantity (provided that the reported quantity is valid in terms of the
Kanban rule), and the job is not the last job of the Kanban, all subsequent
Kanban jobs are updated to the Good quantity of the reported job. The
subsequent Kanban process jobs cannot process more items than are produced by
the dependent job.
Scenario: Manufacturing with the Kanban Board

Scenario: Lars, Ahmed, and Shannon work together in one work cell. The work
cell is managed with Kanbans. Instead of a physical Kanban board, the electronic
Kanban board is used. Ahmed and Shannon each have their own computer. Their
main user interface is the Kanban board that is customized to the specific roles of
Ahmed and Shannon. Both have barcode reader equipment that reads in from
Kanbans to the computer (keyboard looped device). Lars is eventually coming to
the cell, discussing problems and taking decisions. At his work place, he has an
overview of the Kanban board. In this scenario, the work cell is working with
circulating cards and physical card posts.
Follow these steps to process the Kanbans using the Kanban board for process
jobs:
1. Lars looks at the Kanban schedule board. He sequences the
upcoming Kanban jobs for the cell and drags in additional cards if
needed.
2. Ahmed opens his Kanban board for process jobs at the beginning
of the shift.
3. Ahmed prepares the next jobs for Shannon. He marks a number of
jobs for which he wants to pick material. He picks the related
Kanbans from the Kanban in post or a physical Kanban board of the
work cell. In the picking list area of the Kanban board, the material
needed for all marked jobs is displayed, including the source of the
materials (warehouse and optionally Lean location). Ahmed can print
the picking list.
4. Ahmed goes to the supermarket in front of the work cell and picks
the material from the pick list. When a Kanban-bin is emptied on
picking, he takes the emptied Kanbans with him to his post.
5. Ahmed sets the scanning mode to prepare and scans the Kanbans
that are prepared for processing. He groups the picked material with
the related Kanban and moves it to Shannon.
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6. Ahmed sets the scanning mode to empty and scans the Kanbans
that have been emptied. He puts the emptied Kanbans to a Kanban
outpost to move back to their related item source.
7. Eventually, Ahmed controls the Kanban levels in the supermarket by
looking at the Kanban level overview. If he judges that it is time to
replenish the supermarket, he picks all emptied Kanbans from the
Kanban outpost. He walks to the related locations to pick a new
Kanban-bin for each of them and brings them to the supermarket.
8. Shannon opens her Kanban board at the beginning of the shift. She
sets her scanning mode to start and end.
9. Shannon scans the first Kanban; the Kanban job status is changed to
in progress. Shannon begins working on the first Kanban. When the
process is finished, she scans the Kanban again. The Kanban job is
now reported as completed. Shannon puts the finished goods in a
Kanban bin and attaches the Kanban to the bin.
10. Ahmed sees all transfer jobs that are ready to be moved to the
downstream supermarkets or work cells; the list is updated whenever
Shannon declares a Kanban job as completed. Eventually, Ahmed
sets his scanning mode to complete transport, scans the Kanbans,
and moves the Kanban-bins with the finished goods to the
destination supermarket or work cells.
4-53
Lab 4.3 - Kanban Processing on the Kanban Board for

Process Jobs
This lab facilitates processing Kanbans on the Kanban board for process jobs.
Scenario
The scheduled Kanbans from "Lab 4.2: Planning a Kanban on the Kanban
Board" are now ready to be processed. The Kanban board for process jobs will
be used to prepare, start, and complete the Kanbans.
Challenge Yourself!
Use these steps to process the scheduled Kanbans from "Lab 4.2: Planning a
Kanban on the Kanban Board":
1.
2.
3.
4.
5.
Open the Kanban board for process jobs.

Change to view the CSR_Config work cell.
Prepare the Kanban.
Start the Kanban.
Complete the Kanban.
Step by Step
Use these steps to process the scheduled Kanbans from "Lab 4.2: Planning a
Kanban on the Kanban Board":
1. To prepare the Kanban, select Production control > Common >
Lean manufacturing > Kanban board for process jobs.
2. If entering the board for the first time, select the CSR_CONFIG
work cell using the infolog. Otherwise, select the View > Options >
Change work cell button.
3. Change the Work cell to "CSR_CONFIG".
5. Select the appropriate Kanbans to prepare.
6. Select the Pick > Production > Prepare button.
7. To start the Kanbans, select the Manufacture > Production > Start
button.
8. To complete the Kanbans, select the Manufacture > Production >
Complete button
4-54
Kanban Processing - Transfer Jobs

Transfer jobs are planned automatically upon original creation of the transfers or
upon emptying of the Kanban. Transfer jobs do not go through the Kanban
schedule board or processes. While transfer jobs are not planned, it is possible to
select a Kanban as a high priority Kanban by selecting the Prioritize button on
the Kanban transfer board.
Transfer jobs are visible and can be processed on either the Kanban board for
process jobs or Kanban board for transfer jobs. If a waterspider is used to pull the
materials, the Kanban board for transfer jobs would typically be the best choice
because it only shows transfers. If the cell personnel are performing the transfers,
the Kanban board for process jobs could be used for reporting process and
transfer Kanbans. This figure shows the board.
Kanban Board for Transfer Jobs: Buttons

The Kanban board for transfer jobs uses buttons in the areas of Transfer, Set
Registration Mode and Print. The buttons are described in these sections:
Kanban Board for Transfer Jobs: Buttons: Transfer
Kanban Board for Transfer Jobs: Buttons: Set Registration Mode
Kanban Board for Transfer Jobs: Buttons: Print
4-55

Kanban Board for Transfer Jobs: Buttons: Transfer
The buttons under the Transfer area are described in this table.
Button
Description
Update picking
list
Opens the Pick form to allow updates to the picking list

warehouse, location, and quantity of the item being
picked.
Start
Registers a Kanban transfer job as in process.
Update
registration
Allows registration of batch or serial numbers and

splitting of a batch if required.
Complete
Registers a Kanban job as completed.
Kanban Board for Transfer Jobs: Buttons: Set

Registration Mode
The buttons under the Set Registration Mode area are described in this table.
Button
Description
Start
Registers a Kanban transfer job as in progress using a

wedge barcode scanner.
Complete
Registers a Kanban job as completed using a wedge

barcode scanner.
Empty
Registers the material handling unit that is referenced by a

Kanban as empty using a wedge barcode scanner.
Select
Registers a Kanban card number and automatically selects

the referenced job in the Kanban list using a wedge
barcode scanner.
Kanban Board for Transfer Jobs: Buttons: Print

The buttons under the Print area are described in this table.
4-56
Button
Description
Pick list
Prints the picking list for the selected transfer jobs.
Kanban card
Prints the Kanban cards for the selected Kanban jobs.

Processing a Transfer Job
A Kanban job of the transfer type can have these statuses:
Not planned
Started
Completed
When the transfer job is not planned, the due date and time of the job is
determined out of the due date of the Kanban based on the Kanban flow entries:
Due date of transfer job = due date (Kanban) sum of all the activity
times of all activities of the Kanban flow after the transfer
When a transfer job is started, the status is changed to "In progress"; when a
transfer job is completed, the status is changed to "Completed".
The inventory transaction of the job is physically posted (if any) upon either
status depending on the activity settings in the production flow.
4-57
Lab 4.4 - Kanban Processing on the Kanban Board for

Transfer Jobs
This lab facilitates processing Kanbans on the Kanban board for transfer jobs.
Scenario
The manufactured Kanban from "Lab 4.3: Kanban Processing on the Kanban
Board for Process Jobs" is now ready to be transferred to its final location. The
Kanban board for transfer jobs will be used to start and complete the Kanban.
Challenge Yourself!
Go to the Kanban board for transfer jobs and use these steps to transfer the
manufacturing Kanban from "Lab 4.3: Kanban Processing on the Kanban Board
for Process Jobs" to its final location:
1.
2.
3.
4.
Open the Kanban board for transfer jobs.

Change to view the CSR_Config work cell.
Start the Kanban transfer.
Transfer the Kanban to the final location.
Step by Step
Use these steps to transfer the manufacturing Kanban from Lab 4.3: Kanban
Processing on the Kanban Board for Process Jobs to its final location:
1. To begin the transfer process, select Production control >
Common > Lean manufacturing > Kanban board for transfer
jobs.
2. If entering the board for the first time, select Production flow
RemotePF using the infolog. Otherwise, select the View >
Options > Change Filtering options button and change Production
flow to RemotePF. Select the OK button.
3. Select the Kanbans.
4. To start the transfer, select the Transfer tab > Transfer > Start
button.
5. To complete the transfer, select the Transfer tab > Transfer >
Complete button.
4-58
Summary
Fixed Quantity Kanbans provided an overview of the setup, planning, and
processing of fixed quantity Kanbans in Microsoft Dynamics AX 2012. It
included these key points:
Kanban rules are supply policies that govern process and transfer
activities that are based on Kanbans. The Kanban rule for fixed
quantity Kanbans defines the replenishment strategy as fixed
quantity.
Kanban jobs are planned with various options to match the

production planning requirements for different production scenarios.
This is done using the Kanban schedule board and settings on the
work cell for capacity and periods.
Processing Kanban jobs is performed on the Kanban board for

process jobs. There are several optional statuses that can be used
throughout implementation depending on the production scenarios.
This is performed on the Kanban board for process jobs.
Kanban transfer jobs cannot be planned manually as Kanban process

jobs are. Kanban transfer jobs are processed either on the Kanban
board for process jobs or on the Kanban board for transfer jobs.
This lesson also included several labs to set up, plan, and process against Kanban
jobs using the Kanban schedule board, the Kanban board for process jobs, and
the Kanban board for transfer jobs.
4-59
Test Your Knowledge

1. Define fixed quantity Kanbans and describe how they are used in Microsoft
Dynamics AX 2012.
2. Describe what a Kanban rule is in Microsoft Dynamics AX 2012.
3. Describe the three ways to plan or prioritize Kanban jobs.
4-60

4. What is the function of the Prepare button on the Kanban board for process
jobs?
5. What is the function of the Complete button on the Kanban board for
process jobs?
4-61

6. How is scrap reported when you are producing a Kanban?
7. How are batch and serial numbers entered for product and materials of
Kanbans in Microsoft Dynamics AX 2012?
4-62

chapter
1.
2.
3.
4-63
Solutions
Test Your Knowledge
1. Define fixed quantity Kanbans and describe how they are used in Microsoft
Dynamics AX 2012.
MODEL ANSWER:
A fixed quantity Kanban relates to a fixed number of handling units;
meaning that the numbers of active Kanbans are constant. Whenever the
products for a Kanban are consumed (handling unit is emptied), a new
Kanban of the same type is created. Fixed quantity Kanbans are often used
with fixed circulating cards, but can also be used with single use cards. A
fixed quantity Kanban is a make-to-stock scenario.
2. Describe what a Kanban rule is in Microsoft Dynamics AX 2012.
MODEL ANSWER:
Kanban rules are a supply policy that governs process and transfer activities
that are based on Kanbans. The Kanban rule defines the way in which an
item is produced or transferred, and links the item to the activities within the
production flow. Kanban rules are linked to a specific version of a production
flow, because the Kanban rules are linked to these activities to define how
they produce or transfer the various items.
3. Describe the three ways to plan or prioritize Kanban jobs.
MODEL ANSWER:
There are three ways to plan or prioritize Kanban jobs: 1. Plan manually in
the Kanban schedule board: the Kanban schedule board allows leveling and
planning for a number of days or weeks ahead (depending on the period type
related to the Lean production flow model); 2. Automatic planning based on
the automatic planning quantity: whenever the number of unplanned jobs
corresponds to this quantity, the automatic planning is called for that exact
number of Kanbans; 3. Denote a Kanban as a priority Kanban on the Kanban
board for process jobs.
4. What is the function of the Prepare button on the Kanban board for process
jobs?
MODEL ANSWER:
Prepare is an optional status update performed when the Prepare button is
selected. The prepare function picks materials and prepares the job. Materials
with the flushing principle set to Start and no flushing principle are
physically posted when the prepare method is selected.
4-64

5. What is the function of the Complete button on the Kanban board for
process jobs?
MODEL ANSWER:
Complete must be performed to update the selected jobs and complete the
Kanban process jobs with the requested quantity. The complete function sets
the realized end date and time of the Kanban process job. If the Kanban job
has not been through the prepare or start statuses, the complete update will
also prepare and start the Kanban job. The complete job performs the
physical receipt and inventory transactions of the product at the location, if
the receipt is inventory controlled. On the last process job of a Kanban, the
components with flushing principle Finish are physically posted upon
completing the Kanban.
6. How is scrap reported when you are producing a Kanban?
MODEL ANSWER:
The Complete Details button on the Kanban board for process jobs allows
reporting of scrap quantities.
7. How are batch and serial numbers entered for product and materials of
Kanbans in Microsoft Dynamics AX 2012?
MODEL ANSWER:
For products, the Update registration button on the Kanban board for process
jobs form on the Manufacture tab allows registration of batch or serial
numbers and splitting of a batch if desired. For materials, the Update picking
button on the Kanban board for process jobs form on the Pick tab allows
registration of batch or serial numbers for materials against the Kanban.
4-65
4-66
CHAPTER 5: EVENT KANBANS

Objectives
The objectives are:
Describe how event Kanbans are used in Microsoft Dynamics AX

2012.
Define how to set up and configure event Kanban rules and the
corresponding event types.
Describe how to use the Kanban board for process jobs when you
use event Kanbans.
Describe the processing of event Kanban jobs.
Demonstrate how to set up and process a sales line event.
Demonstrate how to set up and process a sales line event with

Capable to Promise (CTP).
Demonstrate how to set up and process a Kanban line event.
Demonstrate how to set up and process a BOM line event.
Demonstrate how to set up and process a stock replenishment event.
Introduction
Event Kanbans covers how to set up and process event Kanbans in Microsoft
Dynamics AX 2012.
Event Kanban rule setup
Kanban job planning
Kanban scheduling board
Processing Kanban jobs
Event Kanbans are only created out of related demand, so event Kanbans belong
to the category of make-to-order. Event Kanbans are created when certain
events occur. In Microsoft Dynamics AX 2012, these events include when you
create sales lines, estimate production orders, create upper level Kanban demand,
or when you reach a certain level of on hand inventory.
5-1
Kanban Rule Setup

A Kanban rule is a material planning and replenishment policy that governs
process and transfer activities that are based on Kanbans. The Kanban rule
defines the way in which an item is produced or transferred, and links the item to
the activities within the production flow.
Event Kanban rules define which event triggers the Kanban and under what
conditions the event Kanban should be created.
Kanban Rules Form

New Kanban rules are setup in the Kanban rules form, which contains a list of
all existing Kanban rules. You can locate this form by selecting Production
control > Kanbans.
To create a new Kanban, select the New Kanban rule button and use the
Kanban rules form to create and define a new Kanban rule.
Kanban Rules Form: Fields

There are seven fields on the Kanban rules form that are specific to event
Kanbans. These are:
5-2
Type
Kanban rule
Product selection
First plan activity
Multiple activities
Last plan activity
Descriptions of the fields on the Kanban rules form that are specific to event
Kanbans are presented in these sections:
Kanban Rules Form: Fields: Type, Replenishment Strategy, Kanban

Rule, and Product Selection
Kanban Rules Form: Fields: First Plan Activity, Multiple Activities,

and Last Plan Activity
Kanban Rules Form: Fields: Type, Replenishment

Strategy, Kanban Rule, and Product Selection
These are the descriptions of the fields of Type, Replenishment strategy,
Kanban rule, and Product selection that appear on the Kanban rules form that
are specific to event Kanbans.
Field
Description
Type
Specify whether the Kanban is a manufacturing Kanban

which creates a Kanban process job or a withdrawal
Kanban, which creates a Kanban transfer job.
Replenishme
nt strategy
Choose Event when creating an event Kanban rule.
Kanban rule
Automatically assigned number identifying the Kanban rule.
Product
selection
The identification of the Kanban rules product selection.

These are the descriptions of the fields of First plan activity, Multiple
activities, and Last plan activities that appear on the Kanban rules form that
are specific to event Kanbans.
Field
Description
First plan
activity
Select the Kanban rules first activity. This links the Kanban
to the production flow version activity. A manufacturing
Kanban rules first activity must be a process activity. The
first and only activity of a withdrawal Kanban rule must be
a transfer activity.
Multiple
activities
Select this check box to configure multiple activities for the

Kanban rule. Only manufacturing Kanbans can have
multiple activities.
5-3

Field
Description
Last plan
activity
When the Multiple activities check box is selected, select

the last activity of the Kanban rule. When multiple activities
are selected, the activity flow that is based on the production
flow activity relations can be chosen to produce the Kanban
specific flow. The lookup form displays all activities that
are downstream from the first activity in the same

The Details FastTab in the Kanban rules form is used to input the product that
the Kanban is being created for along with the dimension information, effective
dates and unit of measure for the selected Kanban rule.

These are the fields on the Details FastTab on the Kanban rules form.
5-4
Field
Description
Product
selection
Event Kanban rules can specify a Product selection of the

type Product, Product family or All.
Product: The Kanban rule is valid for a single item
number. For items with product dimensions the Kanban
rule can be valid for a specific dimension or for all
values of the product dimension. The Kanban rule is
valid for all values of the product dimension by leaving
the product dimension of the Kanban rule blank.
Product family: The Kanban rule is valid for all items

and the related product dimensions that are assigned to a
single item allocation key.
All: The Kanban rule is valid for all products that are
supplied by the Kanban rules last activity.

Field
Description
Product
When the Product option is selected in the Product

selection field, select the item from the lookup list. If the
product carries product dimensions, the product dimension
fields are activated, but not mandatory.
Product
family
When the Product family option is selected in the Product

selection field, select the Item allocation key from the
lookup list.

Kanban quantity, alert quantities, and automatic planning quantity.

This table describes the fields on the Quantities FastTab in the Kanban rules
form.
Field
Description
Maximum
quantity
For event Kanban rules, enter the maximum product

quantity to use for each Kanban. The value that is entered in
the Default order settings, Stock quantity, Max. order
quantity setting is used as the default value. The Maximum
quantity field will override the default, but it cannot be
more than the stock quantity setting.
5-5

Field
Description
Automatic
planning
quantity
To automatically plan a Kanban instead of manually loading

it onto a work cell, an automatic planning quantity can be
set.
Not planned.
Example: An Automatic planning quantity of 1 will plan
every unplanned job. An Automatic planning quantity of
five will wait for five unplanned jobs to be generated and
will then plan all five Kanban jobs. A planning quantity of
zero must be manually planned on the Kanban schedule
board.
Maximum
planned jobs
When you use automatic planning of unplanned Kanban

jobs, enter the maximum number of Kanban jobs that are
planned for a specific Kanban rule. Use this limit to avoid
overloading a work cell for scheduled and event Kanbans.
This situation could occur due to false demand or
exceptionally large customer orders.
We recommend that you use this setting and a maximum
sales order quantity setting for sales event Kanban rules that
use capable to promise (CTP) or automatic Kanban creation.
These settings would limit the impact that erroneous order
quantities could have on system performance.

modify Kanban card information, in addition to circulating card information if
applicable.
5-6

There are four fields on the Kanban and cards FastTab in the Kanban rules
form. These are:
Automatic printing
Descriptions of the fields on the Kanban and cards FastTab on the Kanban
rules form are presented in these sections:


List with Card and Kanban Print Instructions

These are the descriptions of the fields of Card number sequence and
Automatic printing that appear on the Kanban and cards FastTab on the
Kanban rules form.
Field
Description
Card
number
sequence
The Kanban card number sequence that is assigned to the

Kanban rule. When a Kanban rule is created, the default
number sequence from the production parameters is used.
You can create number sequences for Kanban cards in the
It is a proven best practice to use unique and short number
sequences for fixed circulating cards. This helps to identify a
specific card more efficiently.
5-7

Field
Description
Automatic
printing
Select the event that causes automatic printing of Kanban

cards. The options are:
None Automatic printing is not used. We recommend
that you use this setting when using circulating cards or
when electronic Kanban processing is used.
Creation Print Kanbans when the Kanban is created.

We recommend that you use this setting when a physical
planning board for event Kanbans is used, and when
circulating cards cannot be used.
Plan Print Kanbans when the first job of the Kanban is

Planned. We recommend that you use this setting when a
printed Kanban card triggers the processing of Kanban
jobs on the shop floor.
Prepare Print Kanbans when the first job of a Kanban

flow is registered as Prepared.
Start Print Kanbans when the first job of a Kanban

flow is registered as In progress.
Receive Print Kanbans when the first job of a Kanban

flow is registered as Completed. This option is often used
if batch or serial numbers of the finished items are
printed on the Kanban card.

Picking List with Card and Kanban Print Instructions
These are the descriptions of the fields of Print picking list with card and
Kanban print instructions that appear on the Kanban and cards FastTab on
the Kanban rules form.
Field
Description
Print
picking list
with card
Select this check box to print the picking list with the Kanban
card.
Kanban
print
instructions
Select the information to print on the Kanban card. The

options are:
Work instructions Print the production instructions
document that is attached to the Kanban.
5-8
Shipping instructions Print the complete ship to

address and tracking information, including batch and
serial numbers, on the Kanban card.

Kanban Rules - Events FastTab
The Events FastTab in the Kanban rules form is used to identify and configure
settings for how events trigger Kanban creation.
FIGURE 5.5 KANBAN RULES - EVENTS FASTTAB
Kanban Rules - Events FastTab: Fields

There are twelve fields on the Events FastTab in the Kanban rules form. These
are:
Sales event
BOM line event
Kanban line event
Stock replenishment event
Minimum event quantity
Event Kanban handling unit must be received on
Delete unused event Kanbans
Source requirement reservation
Never
Always
Sales lines
BOM lines
Descriptions of the fields on the Events FastTab on the Kanban rules form are
presented in these sections:
Kanban Rules Events FastTab: Fields: Sales Event and BOM Line
Event
Kanban Rules Events FastTab: Fields: Kanban Line Event and

Stock Replenishment Event
Kanban Rules Events FastTab: Fields: Minimum Event Quantity

and Event Kanban Handling Unit Must Be Received On
5-9
Kanban Rules Events FastTab: Fields: Delete Unused Event

Kanbans and Source Requirement Reservation
Kanban Rules Events FastTab: Fields: Never, Always, Sales Lines,

and BOM Lines
Kanban Rules - Events FastTab: Fields: Sales Event and

BOM Line Event
These are the descriptions of the fields of Sales event and BOM line event that
appear on the Events FastTab on the Kanban rules form.
Field
Description
Sales event
This defines that the Kanban rule is triggered off of a sales

line event. This setting is used to configure Kanban rules
that fulfill requirements directly from sales orders. Select
one of these options to decide how the Kanbans are
created:
Not active Kanbans are not created for sales events.
BOM line
event
Manual You can create Kanbans manually for sales

events.
Batch Kanbans are generated during batch

processing for sales events.
Automatic Kanbans are generated when sales events

occur.
This defines that the Kanban rule is triggered off of a BOM

line event. This setting is used to configure Kanban rules
that replenish picking lists that are based on production
orders. Select one of these options to decide how the
Kanbans are created:
Not active Kanbans are not created for BOM line
events.
Automatic Kanbans are generated when BOM line

events occur.
Kanban Rules - Events FastTab: Fields: Kanban Line

Event and Stock Replenishment Event
These are the descriptions of the fields of Kanban line event and Stock
replenishment event that appear on the Events FastTab on the Kanban rules
form.
5-10

Field
Description
Kanban
line event
This defines that the Kanban rule is triggered off of a Kanban

line event. This setting is used to configure Kanban rules that
replenish material that is required for a downstream process
activity. Select one of these options to decide how the Kanbans
are created:
Not active Kanbans are not created for Kanban line
events.
Stock
replenish
ment
event
Manual You can create Kanbans manually for Kanban

line events.
Batch Kanbans are generated during batch processing for

Kanban line events.
Automatic Kanbans are generated when Kanban line

events occur.
This defines that the Kanban rule is triggered off of a stock

replenishment event. This setting is used to configure Kanban
rules that replenish minimum inventory levels. Select one of
these options to decide how the Kanbans are created:
Not active Kanbans are not created for stock
replenishment events.
Batch Kanbans are generated during batch processing for

stock replenishment events.
Kanban Rules - Events FastTab: Fields: Minimum Event

Quantity and Event Kanban Handling Unit Must Be
Received On
These are the descriptions of the fields of Minimum event quantity and Event
Kanban handling unit must be received on that appear on the Events FastTab
on the Kanban rules form.
Field
Description
Minimum
event quantity
This defines the minimum quantity that is required on the

source requirement to generate event Kanbans for the rule.
Event Kanbans are generated when the quantity of the
source requirement is equal to or greater than this field.
For example, in Chapter 3: Use and Manage Kanbans:
Supermarket for Large Sales Orders", this minimum
quantity would be set against a sales line event to define
the quantity that represents an exceptional order. Sales
order lines that are entered for anything under this
quantity would not create an event Kanban. Exceptionally
large sales order lines would create an event Kanban or
multiple event Kanbans.
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Field
Description
Event Kanban
handling unit
must be
received on
Select the status of the source requirement (for example

the sales line, Kanban job, or production order) that
determines when material handling units of the referenced
event Kanbans must be received. The options are:
None If sufficient on-hand inventory is available,
the material handling units do not need to be received.
Picking Material handling units must be received

before the source requirement can be prepared. For
sales events, this means that a packing slip can only
be posted when sales event Kanbans are received.
Start Material handling units must be received

before a Kanban job or production order can start.
Finish Material handling units must be received

before a production order can be reported as finished.
End Material handling units must be received

before a Kanban job or production order can be
completed.
Kanban Rules - Events FastTab: Fields: Delete Unused

Event Kanbans and Source Requirement Reservation
These are the descriptions of the fields of Delete unused event Kanbans and
Source requirement reservation that appear on the Events FastTab on the
Kanban rules form.
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Field
Description
Delete unused
event Kanbans
Select this check box to automatically delete referenced

event Kanbans that have the handling unit status of Not
assigned when the source requirement is registered as
finished. This setting is used when Event Kanban
handling unit must be received on is set to None.
Source
requirement
reservation
Select this check box to override the current inventory

reservation settings for demand source requirements such
as sales order lines and production BOM lines. With this
setting, the Kanban rule can enforce a consistent
reservation, for example to make sure that the components
supplied by event Kanbans are automatically reserved for
the source of demand (production order or sales order).

Kanban Rules - Events FastTab: Fields: Never, Always,
Sales Lines, and BOM Lines
These are the descriptions of the fields of Never, Always, Sales lines, and BOM
lines that appear on the Events FastTab on the Kanban rules form.
Field
Description
Never
Select this field when reservations for all referenced sales

lines and production BOM lines are to be made manually.
Always
Select this field to automatically reserve inventory for all

referenced sales lines and production BOM lines.
Sales lines
Select the method of automatic reservation to use for sales

lines. When sales order lines that reference the Kanban
rule are created, the setting in this field overrides the
default value from the sales header.
NOTE: the reservation type explosion should
not be combined with sales event Kanbans, as this
might lead to duplication of material demand.
BOM lines
Select the status of the production order upon which the

automatic reservation should occur for the BOM lines that
are associated with the event Kanban. When production
BOM lines that reference this Kanban rule are created, the
setting in this field overrides the default reservation
setting.
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The Production flow FastTab in the Kanban rules form is used to identify the
production flow activities that are associated with the Kanban and to define how

This table describes the fields on the Production flow FastTab in the Kanban
rules.
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Field
Description
Register
as empty

registered as empty. The default setting is When handling
units are received. The options for event Kanbans are:
When handling units are received When the last job of
a Kanban is completed, the Kanbans are registered as
empty and disappear from the Kanban quantity overview in
the Kanban boards.
When the source requirement is registered When the

products that are supplied by event Kanbans are consumed
by the demand source, the Kanbans are registered as
empty. They disappear from the Kanban quantity overview
in the Kanban boards.
Manual (includes scanning empty) The Kanbans must

be explicitly registered as empty. This setting is used when
products are stored in supermarkets before they are
consumed or shipped.

Demonstration 5.1: Creating an Event Kanban Rule
Follow these steps to setup an event Kanban rule that is triggered from a sales
line event.
1. Open the form for Kanban rules by selecting Production control >
2. Create a new rule by selecting the New > Kanban rule button.
3. Choose the Kanban Type, the valid Kanban types are manufacturing
and withdrawal (for example, select manufacturing).
4. Choose the Replenishment strategy of Event.
5. Select the First plan activity that is related to the Kanban rule (for
example, select Process Activity).
6. Select the Multiple activities field to create a Kanban rule that spans
over more than one activity. The last activity input field becomes
active.
7. Select the Last plan activity. The Kanban flow form is opened and
shows all Kanban flow alternatives that have been created so far (for
example, select Transfer Activity).
8. Use the Generate flow button to create all possible flows between
the first and last activity. The missing flows are created and
displayed.
9. Choose one of the possible flows and press OK. The Kanban flow is
saved temporarily until the rule is saved (for example, select Process
Activity > Transfer Activity).
10. Change to the Details FastTab.
11. Choose the Product selection type for the Kanban rule. This can be
Product, Product family or All (for example, select Product).
a. If Product is chosen, select the Product for the Kanban rules
product relation. Depending on the item, the item dimensions are
activated (for example, select SCPS_PSCL).
b. If Product family is chosen, select the Product family for the
relation of the Kanban rule (not used in this example).
12. Change to the Quantities FastTab.
13. Enter the Maximum quantity as the maximum product quantity to
use for each Kanban (for example, enter 5).
14. Enter the alert boundaries for the Kanban quantities (for example,
enter the Alert boundary maximum as 10).
15. Enter the Automatic planning quantity to define the number of
Kanbans with the status of unplanned that trigger an automatic
sequencing (for example, enter 1). If no automatic planning is
required, the Automatic planning quantity is 0.
NOTE: Automatic planning is recommended in combination with delivery date
control CTP.
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16. Enter the Maximum planned jobs to avoid overloading a work cell
(for example, enter 20).
17. Change to the Kanban and cards FastTab.
18. Choose the Automatic printing option as either none, meaning that
no automatic printing is done, or the automatic printing selection
based on the status of the Kanban job (for example, select None).
19. Choose the Kanban print instructions to print with the event
Kanban (for example, select Shipping instructions).
20. Change to the Events FastTab.
21. Choose the event options that define the event to trigger the Kanban
creation. The event options of Sales event, BOM line, Kanban line
and Stock Replenishment (for example, select Kanban line event
as Automatic).
22. Enter a Minimum event quantity for the Kanban rule (for example,
enter 10).
23. Change to the Production flow FastTab.
24. Choose the Register as empty setting to control how the Kanban is
emptied for the event Kanban (for example, select When the source
requirement is registered).
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Lab 5.1: Configure an Event Kanban Rule

This lab facilitates the configuration of an event Kanban rule.
Scenario
In Chapter 1: Lean Manufacturing Concepts and Overview: Scenario: Simple
Production Flow, the speaker cover paint shop was introduced, where speaker
covers were painted and placed into a buffer inventory. The speaker cover paint
shop is picking unpainted covers from the warehouse. The painted covers are
supplied to a supermarket where they can be picked for other manufacturing
processes or for sales.
Customer requirements decided that a new color should be introduced to the
speaker cover product at Contoso. This color, Platinum, is to be considered a
special item that does not have the volumes of the other speaker covers under
fixed quantity Kanban rules.
An event Kanban rule should now be set up against the painting speaker covers
process activity. This Kanban will be triggered automatically upon creation of a
sales order for a platinum speaker cover.
Challenge Yourself!
1. Create a new color Platinum as a dimension for product
SCPS_PSCL and release it into the company CEU.
2. Create a new Lean schedule group for the platinum color and
associate the new Platinum color to the group with these settings:
o Color: Platinum (C0C0C0)
o Throughput Ratio: 1
o Product: SCPS_PSCL
o Product dimension Color: Platinum
o Replenishment strategy: Event
o First plan activity: PaintSpeakerCovers
o Maximum quantity: 5
o Alert boundary minimum: 0
o Alert boundary maximum: 10
o Automatic planning quantity: 1
o Sales event: Automatic
o Minimum event quantity: 1
o Source requirement reservation: Always; Sales order Always
o Register as empty: When source requirement is registered
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How could this lab be done simpler?
HINT: Item allocation keys; duplication of Kanban rules.
Step by Step: Create and Release New Color

Follow these steps to create and release a new color.
1. Navigate to Product information management > Common >
Released products.
2. Find the product SCPS_PSCL.
3. Select the Product dimensions button.
5. Enter a new color Name of Platinum.
6. Close the Product dimensions form.
7. Select the Released product variants button.
FIGURE 5.7 PRODUCT VARIANTS
8.
9.
10.
11.
Select the New button.

Enter the Product name as SCPS_PSCL_Platinum.
Enter the Color as Platinum.
Select the Close button.
Step by Step: Lean Schedule Group

Follow these steps to create a Lean schedule group and associate the new color to
the group.
Lean schedule groups.
3. Enter a new Platinum Schedule group.
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4.
5.
6.
7.
8.
9.
10.
11.
Change the Schedule color to platinum.

Select the OK button.
Save the record.
Select the Assign items to group button.
Select the New button.
Select the Item relation type as Item.
Select the Item number as SCPS_PSCL.
Select the Color as Platinum.
Step by Step: Kanban Rule

Follow these steps to create a Kanban rule for the process activity.
Kanban rules.
2. Select the New > Kanban rule button.
3. Select Type of Manufacturing.
4. Select Replenishment strategy of Event.
5. Select the First plan activity of PaintSpeakerCovers.
6. Deselect the Multiple activity field.
7. Switch to the Details FastTab on the Kanban rules form.
8. Enter the Product as SCPS_PSCL.
9. Select the Color as Platinum.
11. Enter Maximum quantity of 5.00.
12. Enter Alert boundary minimum of 0.
13. Enter Alert boundary maximum of 10.
14. Enter Automatic planning quantity of 1.
15. Switch to the Events FastTab on the Kanban rules form.
16. Select Sales event as Automatic.
17. Enter Minimum event quantity of 1.00.
18. Select the Source requirement reservation and select Always.
19. Select the Sales line as Automatic.
20. Switch to the Production flow FastTab on the Kanban rules form.
21. Change Register as empty from When handling units are received
to When the source requirement is registered.
22. Close the Kanban rule.
23. Close the infolog that displays a warning message about the
performance of using the Automatic setting for sales events.
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Sales Line Events

The sales event is triggered by the creation or a change of a sales line, regardless
of where the sales line was created. The sales events can also work in
conjunction with the Capable to Promise (CTP) delivery date control of the sales
line.
Each sales line creates one or multiple Kanbans to fulfill the related demand,
based on the maximum product quantity defined in the Kanban rule that
corresponds with the maximum handling unit size. The Kanban cards that are
printed for sales event Kanbans contain customer and customer order references
and can be used as shipment labels for the handling units.
Pegging Tree
The pegging tree form can be used from the sales order to provide a quick
inquiry of the availability of Kanbans. To view the pegging tree from the sales
order line, select the Product and supply > Requirements > View pegging tree
button.
FIGURE 5.8 PEGGING TREE
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The pegging tree shows the Kanban issues from the sales order and will show
multiple levels down. The Kanban jobs provide a quick visual showing the job
status of the Kanban. Where the job status of the Kanban is completed, a check
mark appears in the Kanban ticket icon on the pegging tree.
The entire pegging tree can be planned using the Plan entire pegging tree
button. This is useful where automatic planning is not set on the event Kanban
rules.
Scenario: Sales Line Event

The speaker cover paint shop production flow supplies painted covers to a
supermarket where they can be picked for other manufacturing processes or for
sales.
Pierre and Eduardo have analyzed this production flow and decided that certain
colors should be handled by using differing Kanban strategies. For the runner
colors (red, green, and blue) a fixed quantity Kanban replenishment strategy was
chosen. An event Kanban rule was also set up for the runners where a minimum
event quantity of 40 is used to pick up the exceptional orders and instead of
depleting the buffer, turn these into make-to-order Kanbans.
Several colors are built to customer forecasts (yellow, black and magenta), so
Pierre and Eduardo decided to model these items using scheduled Kanbans so
that Master Scheduling could be used to plan these future requirements.
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For the uncommon colors (gold, silver, and the new platinum), an event Kanban
was set up based on the sales line event to the effect that when a sales order for
these colors is placed, it directly triggers the event Kanban to be manufactured.
The platinum color is configured on the Kanban rule with automatic planning.
for this scenario. This diagram depicts the scenario.
FIGURE 5.9 SPEAKER COVER SCENARIO
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Scenario: Speaker Cover: Sales Line Event - End to End
Process
Susan, the order taker, enters the sales order for the platinum color, which loads
automatically onto the speaker cover paint shop work cell. Ahmed transacts
against the Kanban and manufactures the product to the sales order. The end to
end scenario is shown in this figure.
FIGURE 5.10 SPEAKER COVER SALES EVENT END TO END PROCESS
Scenario: Speaker Cover: Steps 1-4 of 7

Steps are performed by the various roles to handle this scenario within Microsoft
Dynamics AX 2012. These are steps 1-4 of 7:
1. Susan enters sales lines with this information:
o Color: Gold
o Site: 2
o Warehouse: PaCovers
o Location: Supermarket
The product is replenished through an event Kanban rule for a
quantity of 10.
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2. System: the sales line creates two Kanbans (because the sales
quantity is 10 and the maximum quantity of the event Kanban is 5).
4. Eduardo views the unplanned Kanban jobs on the Kanban schedule
board on the SCPS_Cover work cell. He plans the Kanban jobs onto
the specific days. This figure shows Eduardo scheduling the gold
Kanbans.
FIGURE 5.11 SCHEDULING GOLD SPEAKER COVER
5-24

Scenario: Speaker Cover: Steps 5-7 of 7
These are steps 5-7 of 7:
5.
Susan views the pegging tree and determines that the delivery date
is possible for the sales order by following the Sales order line >
Product and Supply > Requirement > View pegging tree
navigation.
FIGURE 5.12 SALES ORDER PEGGING TREE
6. Ahmed/Shannon/Lars: process production that is required for the

Kanban on the Kanban board for process jobs.
7. Ahmed moves the finished product to the shipping area and ships it
to the customer.
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Lab 5.2 - Process a Sales Line Event

This lab facilitates the processing of a sales line event.
Scenario
A sales order has been received for the platinum speaker cover, which now has
an event Kanban rule that was set up in "Lab 5.1: Configure an Event Kanban
rule.
Challenge Yourself!
To process the sales line event, follow these steps:
1. Enter a sales order with these settings:
o Customer: 2001
o Color: Platinum
o Site: 2
o Quantity: 5
o Price: 10
2. View the pegging tree for the sales order.
3. Produce the quantity signaled by the Kanban on the Kanban board
for process jobs.
4. View the sales order pegging tree and the sales order reservation
status.
Step by Step: Enter Sales Order

Follow these steps to enter the sales order and view the pegging tree for the sales
order.
1. Navigate to Sales and marketing > Common > Sales orders > All
sales orders.
2. Select the New > Sales order button.
3. Select the Customer account as 2001.
5. Enter the Item number as SCPS_PSCL.
6. Enter the Quantity as 10.
8. Select the Site 2.
9. Select the Warehouse as PaCovers.
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10. Enter the Unit price as 10.00.
11. Select the Product and supply button.
12. Select the View pegging tree button.
Step by Step: Produce Quantity Signaled by Kanban

Follow these steps to produce the quantity signaled by the Kanban on the
Kanban board for process jobs.
1. Navigate to Production control > Common > Lean
manufacturing > Kanban board for process jobs.
2. Ensure the Work cell of SCPS_Cover.
3. Filter on the Schedule group field by right-clicking and selecting the
Filter by field option. Enter "Platinum" and select the OK button.
4. Find and select a Kanban ticket for SCPS_PSCL color Platinum,
quantity 5.
5. Select the Manufacture > Production > Start button.
6. Select the Manufacture > Production > Complete button.
7. Repeat steps 3-6 for the remaining Kanban of quantity 5.
Step by Step: View Sales Order

Follow these steps to view the sales order pegging tree and the sales order
reservation status.
sales orders.
2. Double-click the sales order entered for the sales event as the last
sales order on the bottom of the form.
3. Select the Product and supply button.
5. Note the completion checkmark and status Completed for the
Kanban in the pegging tree. Close the pegging tree.
6. Select the Inventory button.
7. Select the Reservation button.
8. Note the reservation of the five pieces against the sales order line.
5-27
Capable to Promise
An important company objective in the Lean transformation process is improving
the ability to deliver a product that is assembled to order or built to order with a
competitive lead time.
The Capable to Promise (CTP) functionality provides the order takers with
accurate information at the point of order entry about the availability of products,
material, and resources that are needed to satisfy a specific customer demand.
This functionality can occur automatically at order entry time or in a batch job
after the sales order has been entered. The availability of resources for Lean
manufacturing can be determined by loading the Kanban jobs on the Kanban job
schedule that are related to a work cell. The availability of material is determined
by explosion and pegging, similar to manufacturing with production orders.
Delivery Date Control CTP

The CTP delivery date control helps companies verify the requested ship date
and potentially update the confirmed ship date on a sales line where there is a
problem fulfilling the customer- requested ship date.
This is enabled by extending the existing delivery control with a CTP option that
triggers a Master Scheduling explosion and uses the returned futures date as the
suggested ship date.
These are prerequisites for running delivery date CTP.
The configuration key for Master Planning is set.
A dynamic plan is setup and assigned to the Master Planning

parameters.
Dynamic plan is configured for futures messages.
The static and dynamic plans have been calculated.
Where CTP is used for a given product, these prerequisites are suggested:
5-28
Coverage group setting where Futures messages are enabled.
Default order settings with a sales lead time of 0 days.
Default order settings with the delivery date control of CTP.
A Kanban rule exists for either scheduled or automatic sales event.
Automatic planning on the Kanban rule set to 1.
For scheduled Kanbans, a firming fence is required.

Scenario: Delivery Date Control CTP
The CTP functionality can be run on an individual basis on the sales order lines
automatically or in a batch job at a later point in time for all lines of a sales order.
Susan, the order taker, is taking orders with delivery date control CTP.
Susan creates a sales order and selects the delivery date control type
of CTP. A specific requested ship date from the customers is entered
and a requested receipt date is calculated through the transport
settings.
Susan creates a sales order line that defaults with the dates and the
delivery date control type of the sales order.
Susan selects an item, sets site, and warehouse quantity, and fills in
all requested data that is related to the sales line. Finally, she saves
the line.
System: this creates any sales event Kanbans that are set to
Automatic in the Kanban rule Sales line setting. These Kanbans
are also automatically planned if Automatic planning is set on the
Kanban rules. These Kanbans are planned according to the
Capacity shortage reaction settings on the production flow model.
System: the CTP explosion is run.
System: scheduled Kanbans are created and the related jobs are
planned if Automatic planning is set on the Kanban rules and the
firming fence is set.
System: the end date of the scheduled periods is returned as the

estimated date/time of arrival and used to calculate the futures date.
System: if the sales line cannot be fulfilled by the requested ship

date, a futures date will be calculated and the Confirmed ship date
will be updated with the calculated futures date.
System: if the futures date is empty, the Confirmed ship date is

updated with the requested ship date and the confirmed receipt date
is recalculated through the transport settings.
Batch Calculation Using CTP

A calculation can be run after the sales lines have been entered from the header
of the sales order.
From the sales order header, select Sell > Generate > Calculate
confirmed delivery dates.
Run the CTP check for the sales orders without the Update
confirmed dates option selected.
The batch job will run the CTP explosion for all sales order lines and
provide an infolog with the resulting confirmed ship dates, but
without updating the sales line.
5-29
If the proposed ship dates are acceptable, the calculation is run again
with the Update delivery dates on sales lines option selected. This
runs the CTP explosion and updates the confirmed ship dates and
confirmed receipt dates on the sales lines.
FIGURE 5.13 CALCULATE CONFIRMED DELIVERY DATES
5-30
Lab 5.3 - Process a Sales Line Event with CTP

This lab facilitates the processing of a sales line event with CTP.
Scenario
A sales order has been received for the platinum speaker cover. To provide an
accurate delivery date to the customer, use the CTP delivery date control from
the sales order.
Challenge Yourself!
To process the sales line event, follow these steps:
1. Configure the coverage group and default coverage settings to enable
CTP:
o On the Lean_Cover coverage group, turn on Futures messages
with a Futures time fence of 100.
o On the Default order settings for SCPS_PSCL, override the
sales lead time and set to 0 days, override the delivery date
control and set to CTP.
o In the Item coverage for SCPS_PSCL, override the firming
fence for the color Platinum to zero.
o Customer: 2001
o Delivery date control: CTP
o Color: Platinum
o Site: 2
o Quantity: 5
o Price: 10
3. View the Kanbans that were automatically created on the sales order
pegging tree.
Step by Step: Setup

Follow these steps to setup the coverage group and default coverage settings to
enable CTP.
1. Navigate to Master planning > Setup > Coverage > Coverage
groups.
2. Highlight the Coverage group Lean_Cover .
3. Navigate to the Futures tab.
4. Select the Futures message field.
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5. Enter Futures time fence of 100.
Released products.
7. Find Item number SCPS_PSCL.
8. Select the Manage inventory > Order setting > Default order
settings button.
9. Switch to the Sales order tab on the Default order settings form.
10. Check the Override sales lead time field.
11. Change the Sales lead time from 10 to 0.
12. Select the Override delivery control field.
13. Change the Delivery date control to CTP.
14. Select the Close button to close the Default order settings form.
15. Select the Plan > Coverage > Item Coverage button.
17. Select Site 2.
18. Select Color Platinum.
19. Select Warehouse PaCovers.
20. Navigate to the General tab.
21. Select the Override time fences field.
22. Enter the Firming time fence as "0".
Step by Step: Kanban Schedule Board

Follow these steps to enter the sales order on the Kanban schedule board.
1. Navigate to Production Control > Common > Lean
2. Ensure the Work cell is set to SCPS_Cover.
3. Select all Kanbans that are scheduled for a date in the past by
selecting the first Kanban job and then pressing Ctrl and selecting the
remaining Kanban jobs. This will highlight the Kanbans to be
unplanned.
4. Un-plan the Kanban by selecting the Revert job status button and
update status to Not planned, or by dragging the planned Kanbans
into the Kanban quantity overview.
5. Close and open the Kanban schedule board.
6. Plan enough Kanban jobs for today to fill the capacity for today by
selecting Kanban jobs from the Kanban quantity overview area of
the board and dragging them onto the period for Today until the
capacity is shown as 250/250.
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Step by Step: Sales Order
Follow these steps to view the Kanbans that were automatically created on the
sales order pegging tree.
sales orders.
4. On the Shipping FastTab of the Create sales order form, select the
Delivery date control as None.
5. Update the Requested receipt date to today.
6. Select OK button.
12. Enter the Unit price as 10.00.
13. Save the Sales order line.
14. In the Available ship and receipt dates form, highlight a date to
confirm to the customer (the next available date without a yellow
warning indicator) and select the Update confirmed ship date
button.
15. Select the Product and supply button
17. Highlight one of the Kanbans in the left pane.
18. Open the Kanban jobs FastTab and view the Scheduled period
date.
19. Select the Close button.
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Kanban Line Event

Kanban line events are used to pull required material or semi-finished products to
a downstream manufacturing process. Kanban line events are used to supply
components that are not stored in a supermarket by the line side because they are
not used frequently or the ability to supply of the upstream work cell or
warehouse makes a buffer in the supermarket obsolete.
These Kanbans (manufacturing or withdrawal) are created automatically or
manually based on the requirements of the upper level Kanban. This type of
Kanban is suggested where the components that are required vary by event and a
high number of variants are required.
Kanban line events can be used where materials are made to order on a feeder
cell in a multiple assembly cell structure.
Scenario: Kanban Line Event

The car speaker assembly and packaging production flow that was introduced in
Chapter 1: Lean Manufacturing Concepts and Overview: Scenario: High Level
Production Flow, models the assembly and packaging of car speakers that are
sold to the customer.
In this scenario, the OEM customer orders trigger a sales event on the Packaging
work cell to produce the speaker sets and transfer them to the VMI warehouse. A
Kanban line event is used to trigger the production on the Car Speaker Assembly
work cell to replenish the speaker kits to the Packaging work cell.
A process activity controls the car speaker assembly and packaging processes. A
transfer process controls the transfer to VMI to fulfill the customer sales order.
FIGURE 5.14 CEU CAR ASSEMBLY AND PACKAGING ACTIVITIES
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Scenario: Kanban Line Event: Setup
The customer order in this scenario is for the product CSS_SS1G, speaker set 1
green. This uses several green speaker kits, one of which is the product
CSS_SKF1LG, speaker kit front 1 left green. The Kanban line event Kanban
rule for the speaker kit against process activity SpeakerAssembly is shown in
this figure.
FIGURE 5.15 SPEAKER KIT KANBAN LINE EVENT
scenario. Susan enters the sales order for the product CSS_SS1G, speaker set 1
green. Eduardo plans the Kanbans for the speaker assembly and packaging work
cell. Lars uses the Kanban board for process jobs to produce the speaker kit on
the speaker assembly work cell. Ahmed views the pegging tree on the packaging
work cell to view the status of the speaker assembly Kanbans.
Scenario: Kanban Line Event: Steps

1. Susan enters the sales lines for the product CSS_SS1G as:
o Site: 2
o Warehouse: VMIW
o Quantity: 1
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2. System: the sales line event creates one Kanban for the upper level
speaker set on the Packaging work cell and four Kanbans for the
lower level speaker kits on the speaker assembly work cell. This
figure shows the Kanbans that were created upon sales order entry.
FIGURE 5.16 PEGGING TREE KANBAN LINE EVENT SCENARIO
3. Eduardo sees the unplanned Kanban jobs on the Kanban schedule

boardon the CSS_PACK Packaging work cell and the CSS_SA
Speaker Assembly work celland plans them onto the specific days.
4. Lars processes the required production for the Kanban on the
Kanban board for process jobs on the CSS_SA work cell.
5. Ahmed moves the finished speaker kits to the Packaging work cell.
6. Shannon processes production for the speaker set on the Packaging
work cell.
7. Ahmed transfers the finished speaker kits to the VMIW warehouse
by using the Kanban board for transfer jobs that are awaiting
shipment to the customer.
Manual Creation of Event Kanbans

Where the event Kanban is setup to manually create a Kanban based on the sales
line event or Kanban line event, this manual creation can be done either on the
Sales order line, Kanban details form, Kanban schedule board, or the
Kanban board for process job.
5-36

Manual Creation of Event Kanbans: Kanban Line Events
For Kanban line events, this table shows the various options for manually
creating the event Kanbans for Kanban line events.
Form
Navigation
Procedure
Kanban
details
Production control > Setup >

Lean manufacturing >
Kanban rules on the Kanbans
tab, select the Details button on
the Kanban job.
Alternately, from the Kanban
schedule board or Kanban
board process job double-click
on the Kanban ticket to view the
Kanban details.
Find the upper level

Kanban and select the
Create event kanbans
button to generate the
Kanban line events.
Kanban
schedule
board
Production control >

Common > Lean
manufacturing > Kanban
schedule board
Plan the upper level

Create event Kanbans
Kanban line events.
Kanban
board for
process
jobs
Production control >

Common > Lean
manufacturing > Kanban
board for process jobs
Highlight the upper level

Create event Kanbans
Kanban line events.
Manual Creation of Event Kanbans: Sales Line Events

For sales line events, this table shows the option for manually creating the event
Kanbans for sales line events.
Form
Navigation
Procedure
Sales order
line
From the sales order line, select

Product and supply > New >
Event kanban.
Once the sales line is

complete and the event
Kanbans should be
generated, select the
Product and supply >
New > Event kanban
sales line events.
5-37
Lab 5.4 - Kanban Line Event

This lab facilitates the processing of a Kanban line event.
Scenario
A sales order has been received for a green speaker set, which triggers event
Kanbans for the speaker set on the packaging work cell and the speaker kits on
the speaker assembly work cell. Produce the speaker kits and speaker set to
fulfill the customer sales order.
Challenge Yourself!
To process the sales line event follow these steps:
o Customer: 2002
o Product: CSS_SS1G
o Site: 2
o Warehouse: VMIW
o Location: Supermarke
o Quantity: 1
View the pegging tree for the sales order.
2. Plan the Kanbans on the packaging and speaker assembly work cells.
3. Produce the Kanban line events for the four speaker kits on the
Kanban board for process jobs speaker assembly work cell. Produce
the speaker set on the Kanban board for process jobs packaging work
cell.
4. Transfer the speaker set to the VMIW warehouse.

Follow these steps to enter the sales order and view the pegging tree for the sales
order.
sales orders.
5. Enter Item number of CSS_SS1G.
6. Enter Quantity of 1.00.
7. Select Site of 2.
8. Select Warehouse of VMIW.
5-38

9. Select Location of Supermarke. If Location is not set on the sales
order, select the Sales order line > Display > Dimensions button.
10. Select the Product and supply > View pegging tree menu button to
view the event Kanbans created for the sales order.
Step by Step: Plan the Kanbans

Follow these steps to plan the Kanbans on the packaging and speaker assembly
work cells.
2. Select the Change work cell button.
3. Change the Work cell to CSS_PACK.
4. Plan the Kanban for CSS_SS1G by selecting the Kanban job in the
Kanban quantity overview area and dragging this onto the period for
today.
5. Select the planned Kanban job from step 4 and select the Plan entire
pegging tree button to plan the Kanbans for CSS_SKF1LG,
CSS_SKF1RG, CSS_SKR1LG and CSS_SKR1RG.
6. Change the Work cell to CSS_SA.
7. View the planned Kanbans for CSS_SKF1LG, CSS_SKF1RG,
CSS_SKR1LG and CSS_SKR1RG.
Step by Step: Produce the Kanbans

Follow these steps to produce the Kanban line events on the Kanban board for
process jobs.
2. Select the Change cell button.
3. Change Work cell to CSS_SA.
4. Highlight the Kanbans for CSS_SKF1LG, CSS_SKF1RG,
CSS_SKR1LG and CSS_SKR1RG and select the Start button.
5. Highlight the Kanbans for CSS_SKF1LG, CSS_SKF1RG,
CSS_SKR1LG and CSS_SKR1RG and select the Complete button.
7. Change Work cell to CSS_PACK.
8. Highlight the Kanban for CSS_SS1G and switch to the Pegging tab
on the Kanban board for process jobs - work cell: CSS_PACK
form. View the complete lower level speaker set Kanbans on the
pegging tree.
9. Highlight the Kanban for CSS_SS1G and select Start button.
10. Highlight the Kanban for CSS_SS1G and select the Complete
button.
5-39

Step by Step: Transfer the Speaker Set
Follow these steps to transfer the speaker set to the warehouse.
manufacturing > Kanban board for transfer jobs.
2. If entering the board for the first time, select Production flow Car
Speaker PF using the infolog. Otherwise, select the Change
Filtering options button and select the Production flow as Car
speaker PF.
3. Select the Transfer to Warehouse as VMIW.
5. Select the Start button.
6. Select the Complete button.
5-40
BOM Line Event

Similar to Kanban line events, a production order can consume material that is
supplied by Lean manufacturing. In a mixed mode environment, a production
BOM is created based on a production order to withdraw material from
warehouses or other upstream processes. If the warehouse or the upstream
process is controlled by event Kanbans for any component used in the production
order, the related Kanbans are created upon estimation (manufacturing or
withdrawal) of the related production order. On estimation of the production
orders for the final assembly, the BOM line event Kanbans are created and
appear on the work cell or the Kanban board for transfer jobs depending on the
activity type. The BOM line for the component supplied by a BOM line Kanban
must be set to a Line type of Pegged supply.
Scenario: BOM Line Event

This scenario describes a mixed mode manufacturing environment where some
parts of a production order are supplied by Kanban. In this scenario, the final
assembly resource group is planned with production orders. Standard
components that are required for the production order are picked from a
supermarket. There are, however, parts that have little demand and are therefore
not placed in the supermarket. These stranger items are instead produced to
order in the Packaging work cell as an event Kanban based on a BOM line event.
The production orders, upon estimation, create the event Kanbans based on the
BOM line event to be produced on the Packaging work cell. Lars, shop floor
execution/production supervisor for Packaging, then sees the Kanban demand
and plans the event Kanbans together with the fixed quantity Kanbans for the
standard components. This figure depicts the scenario.
FIGURE 5.17 BOM LINE EVENT SCENARIO
5-41

Scenario: BOM Line Event: Steps
1. Pierre: creates the production flow activities and related BOM line
event Kanbans.
2. Eduardo: sets the firming fences for the finished items.
3. Kevin: sets the sales forecast plan for the next forecast period.
4. Susan: creates sales orders on the sales warehouse.
5. System: MRP creates the planned production orders to cover the
demand that is related to the forecast schedule and the actual
customer orders. For the next period, MRP firms the production
orders for the Final assembly resource group.
6. System: on estimation of the production orders, the event Kanbans
get created.
7. Lars: plans the BOM line event Kanbans together with the fixed
quantity Kanbans for the standard components.
5-42
Lab 5.5 - Set up a BOM Line Event Kanban Rule

This lab facilitates the setup of a BOM line event Kanban rule.
Scenario
In company CEU, product 11001, a home theater entertainment system, contains
product 1102, a high-end speaker. The home entertainment system is
manufactured by using a traditional production order, but the high-end speaker is
manufactured by using a Kanban on the speaker assembly work cell. Set up the
Kanban rule for the high-end speakers.
Challenge Yourself!
Use this procedure to set up the BOM line event scenario.
1. Create, approve and activate a BOM for the home theatre
entertainment system product 11001 for Site 2, with these
components:
o Product: 1201
o Warehouse: 21
o Quantity: 1
o Line type: Pegged supply
2. Activate production flow PF1.
o Product: 1102
o First plan activity: Assembly (PF1 production flow)
o BOM Line event: Automatic
Step by Step: BOM

Follow these steps to create, approve, and activate the BOM.
Released products.
2. Find Item number 11001.
3. Select the Engineer > BOM > Lines button.
4. Select the Create BOM button.
5. Enter a Description of Site 2.
6. Select Site 2.
5-43

8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
In the BOM Lines, enter Item number 1102.

Ensure Warehouse is 21.
Ensure Quantity is 1.
Switch to the General tab.
Select the Line type Pegged supply.
Select the Approve button.
Select an Approved by employee.
Select the Approve bill of materials? field.
Select the Activation button to activate the BOM.
Step by Step: Production Flow

Follow these steps to activate the production flow.
Production flows.
2. Highlight Production flow PF1.
3. In the Versions tab, select the Activation button.
5. Select the OK button to activate the production flow.

Kanban rules.
5. Select the First plan activity of Assembly.
6. Deselect the Multiple activities field.
8. Enter the Product ''1102.
10. Ensure Maximum quantity is 40.
12. Change the BOM line event from Not active to Automatic.
5-44
Lab 5.6 - Process a BOM Line Event

This lab facilitates the processing of a BOM line event.
Scenario
A production order need has been created for the home theater entertainment
system, which upon estimation of the production order triggers an event Kanban
for the high-end speaker on the speaker assembly work cell.
Challenge Yourself!
To process the BOM line event follow these steps:
1. Create a new production order with these settings:
o Product: 11001
o Site: 2
o Quantity: 5
2. Estimate the production order.
3. View the Kanban that was created based on the BOM line event.
Step by Step
Use these steps to create a new production, estimate the production order, and
view the Kanban created based upon the BOM line event.
1. Navigate to Production control > Common > Production orders >
All production orders.
2. Select the New > Production order button.
3. Enter Item number 11001.
4. Change Site from 1 to 2.
5. Select Yes to the Insert the active versions for bill of materials and
route? question.
6. Enter a Quantity of 5.
8. In the production order, select the Estimate button.
10. Navigate to: Production control > Setup > Lean manufacturing >
Kanban rules.
11. Highlight the event Kanban for 1102 and view the created Kanban
based on the BOM line event.
5-45
Stock Replenishment Event

When you run Master Scheduling in Microsoft Dynamics AX, additional planned
orders are created when minimum on-hand is reached. For a Lean manufacturing
application that surveys minimum on-hand of important parts, this might lead to
a delay of a day until the signal for replenishment reaches the replenishing work
cell. Stock replenishment events are useful in a quick turning environment,
where safety stock violations must instantly create a Kanban (manufacturing or
withdrawal) to replenish the missing item. The pegging event processing in Lean
manufacturing checks minimum inventory for selected Kanban rules and creates
the needed Kanbans to replenish.
Stock replenishment events are used to trigger Kanbans based on hitting a certain
level of on-hand inventory. This has been integrated within Microsoft Dynamics
AX 2012, where the item coverage settings on the item define the minimum
stock that is required for each coverage dimension.
Batch Processing of Event Kanbans

Use the Pegging event processing batch process in Microsoft Dynamics AX
2012 to set up a batch process to create Kanbans that are based on events. To run
the Pegging event processing, navigate to Production control > Periodic >
Lean manufacturing > Pegging event processing.
FIGURE 5.18 PEGGING EVENT PROCESSING
The Pegging event processing can be filtered by the production flow, activity, or
Kanban rule for which to create the event Kanbans. It can also be filtered to
create event Kanbans only for a certain upper level source requirement, for
example, a sales order or Kanban. The stock replenishment event requires the
pegging event processing to create the event Kanbans.
5-46

For sales line events, the batch processing can also occur on the Sales order
header. From the sales order header, select Sell > Generate > Process event
Kanbans. Once the sales order is complete and the event Kanbans should be
generated, select the Sell > Generate > Process event kanbans button to
generate the sales line events.
Item Coverage Settings

The item coverage settings on the released products define the minimum stock
that is required for each coverage dimension. The minimum stock is defined in
the Minimum field on the coverage dimensions or by a Min./max. key. The
planned order type can also be configured on the item coverage settings. Where a
Kanban is used to supply the coverage dimension, this Planned order type is set
to Kanban.
To set the item coverage settings for an item navigate to Product information
management > Common > Released products and select the Plan >
Coverage > Item coverage button.
FIGURE 5.19 ITEM COVERAGE SETTINGS
Scenario: Stock Replenishment Event

The stock replenishment event scenario involves manufacturing a product where
the safety stock has been violated due to shipping incoming sales orders. The
event Kanbans based on the stock replenishment event are created to replenish
the stock immediately.
5-47

In this scenario, the painted speaker covers warehouse is replenished by
scheduled Kanbans. The speaker cover paintshop cell that replenishes the
warehouse can replenish any item in the warehouse within four hours. Pierre
wants to lower the safety stock on the warehouse to less than one day (to a lower
lead time than the cycle time of the MRP run). To avoid shortfall, Pierre sets up
an event Kanban rule based on a stock replenishment event. When the on-hand
falls under minimum inventory, a manufacturing Kanban is created to replenish
the missing items. This figure depicts the scenario.
FIGURE 5.20 MANUFACTURING BASED ON STOCK REPLENISHMENT

EVENT
Scenario: Stock Replenishment Event: Setup

scenario. Eduardo defines the safety stock levels for the items and the forecast
schedules. MRP then creates the scheduled Kanbans where required. Susan then
enters many small orders that reduce inventory of the product and violates the
safety stock levels. This then creates event Kanbans that Lars notices on the final
assembly work cell and expresses for Susan.
Scenario: Stock Replenishment Event: Steps

1. System: MRP creates the scheduled Kanbans to cover the demand
that is related to the forecast schedule for the next period.
2. Susan creates many small sales orders.
3. Sammy ships the incoming orders to the customers from the
warehouse. The company target is to ship any order within 24 hours.
5-48

4. Sammy ships an item that falls under safety stock. A minimum event
Kanban is created after the pegging process runs.
5. Lars verifies the Kanban quantity overview by the hour. He
discovers a minimum quantity event Kanban and plans it as a priority
Kanban for Shannon.
5-49
Lab 5.7 - Set up a Stock Replenishment Event Kanban Rule

This lab facilitates the setup of a stock replenishment event Kanban rule.
Scenario
Set up the event Kanban rule and minimum item coverage settings for the
magenta painted speaker cover. This is currently set up as a scheduled Kanban
using a Product family, but Pierre now wants to reduce the minimum stock in the
PaCovers warehouse to less than a days worth of inventory.
Challenge Yourself!
These steps show how to set up the stock replenishment event scenario.
1. Set the item coverage settings with these settings:
o Color: Magenta
o Minimum: 5
o Product dimension Color: Magenta
o Stock replenishment event: Batch
Step by Step: Item Coverage Settings

Follow these steps to set the item coverage settings.
Released products.
3. Select the Item coverage button.
4. Against the Warehouse PaCovers, select the Color Magenta, and
then set the Minimum quantity to 5.
5-50

Kanban rules.
5. Select the First plan activity of PaintSpeakerCovers.
6. Deselect the Multiple activities field.
8. Enter the Product ''SCPS_PSCL.
9. Select the Color as Magenta.
11. Enter Maximum quantity of 5.00.
13. Select Stock replenishment event of Batch.
5-51
Lab 5.8 - Process a Stock Replenishment Event

This lab facilitates the processing of a stock replenishment event.
Scenario
A sales order has been received and shipped for the magenta speaker cover,
which triggers an event Kanban for the magenta speaker cover on the speaker
cover painting work cell.
Challenge Yourself!
Use this procedure to process the sales line event.
o Customer: 2003
o Color: Magenta
o Site: 2
o Quantity: 6
2. Ship the sales order.
3. Run the pegging event processing job and then prioritize and plan the
Kanban on the speaker cover painting work cell.

Follow these steps to enter the sales order.
sales orders.
2. Select New > Sales order button.
7. Select the Color Magenta.
10. Select the Location as Supermarke. If Location is not set on the
sales order, select the Sales order line > Display > Dimensions
button. Select Location and select the OK button, then select the
Location on the sales order lines.
5-52

Step by Step: Ship the Sales Order
Follow these steps to ship the sales order.
1.
2.
3.
4.
5.
6.
Select the Pick and pack > Generate > Packing slip button.
Change Quantity from Picked to All.
Select the Inventory button.
Select the On-hand inventory button and view the on-hand stock of
4 pieces, which has breached the minimum stock settings.
Step by Step: Plan and Prioritize Kanban

Follow these steps to run the pegging event processing job and then prioritize and
plan the Kanban on the speaker cover painting work cell.
1. Navigate to Production control > Periodic >
Lean manufacturing > Pegging event processing.
2. For this example, do not enter filtering criteria and select the OK
button.
3. Close the infolog that displays a message indicating that it has
created a Kanban.
5. Switch to the View tab and select the Change work cell button.
6. Enter the work cell SCPS_Cover and select OK.
7. View the SCPS_PSCL Magenta Kanban.
8. Double-click the SCPS_PSCL Magenta Kanban to view the details.
9. Select the Prioritize button.
10. Close the Kanban form.
11. On the Kanban schedule board, drag the SCPS_PSCL Magenta
Kanban onto today to plan it for production.
5-53
Summary
Event Kanbans provided an overview of the setup and processing of event
Kanbans in Microsoft Dynamics AX 2012. It included these key points:
Kanban rules for event Kanbans define the type of event that triggers
the Kanban to be created. These triggers can occur automatically,
upon running of a batch job, or manually depending on the type of
event and the Kanban creation policy of the event.
Sales line events are triggered based off of a sales line and can
include the use of CTP to provide more accurate delivery dates to the
customer.
Kanban line events are triggered based off of upper level Kanbans
and can be automatically or triggered using batch processing.
BOM line events are triggered based off of upper level production
order demand and are used in mixed mode environments where
traditional production orders are used for the downstream process.
Stock replenishment events are triggered based off of an item

reaching the minimum stock settings. These are useful in quick
turning environment, where safety stock violations must instantly
create a Kanban and cannot wait for MRP to run.
This lesson included several labs to setup and process against Kanban jobs that
are triggered off of the various event types.
5-54
Test Your Knowledge

1. Define event Kanbans in Microsoft Dynamics AX 2012.
2. Describe sales line events and how they are used in Microsoft Dynamics AX
2012.
3. What is CTP?
5-55

4. Describe Kanban line events and how they are used in Microsoft Dynamics
AX 2012.
5. What is the pegging tree and what does it show?
5-56

6. Describe BOM line events and how they are used in Microsoft Dynamics AX
2012.
7. Describe stock replenishment events and how they are used in Microsoft
Dynamics AX 2012.
5-57

chapter
1.
2.
3.
5-58
Solutions
Test Your Knowledge
1. Define event Kanbans in Microsoft Dynamics AX 2012.
MODEL ANSWER:
belong to the category make-to-order. The creation of event Kanbans is
initiated when certain events occur. In Microsoft Dynamics AX 2012, these
events include when you create sales lines, when estimating production
orders, upon creation of upper level Kanban demand, or when reaching a
certain level of on-hand inventory.
2. Describe sales line events and how they are used in Microsoft Dynamics AX
2012.
MODEL ANSWER:
The sales event is triggered by the creation or a change of a sales line,
regardless of where the sales line was created. The sales line event is used in
manufacturing environments where production is directly against the sales
order. The sales line event can also be used in the scenario where
exceptionally large orders are placed and instead of depleting the buffer, the
large order is made to order against an event Kanban.
3. What is CTP?
MODEL ANSWER:
Capable to Promise provides the order takers with accurate information at the
point of order entry about the availability of products, material and resources
that are needed to satisfy a specific customer demand. This functionality can
occur automatically at order entry time or in a batch job.
4. Describe Kanban line events and how they are used in Microsoft Dynamics
AX 2012.
MODEL ANSWER:
Kanban line events are used to pull the required material to a downstream
manufacturing process. Kanban line events are used to supply components
that are not stored in a supermarket by the line side because they are not used
frequently. These Kanbans (manufacturing or withdrawal) are created
automatically or manually by the upper level Kanban.
5-59

5. What is the pegging tree and what does it show?
MODEL ANSWER:
The pegging tree can be used from the sales order to provide a quick inquiry
of the availability of Kanbans. The pegging tree shows the Kanban issues
from the sales order and will show multiple levels down. The Kanban jobs
provide a quick visual showing the job status of the Kanban. Where the job
status of the Kanban is completed, a checkmark appears in the Kanban ticket
icon on the pegging tree.
6. Describe BOM line events and how they are used in Microsoft Dynamics AX
2012.
MODEL ANSWER:
BOM line events are used where a production order consumes material that
is supplied by Lean manufacturing. On estimation of the production orders
for the final assembly, the BOM line event Kanbans are created and loaded
on the work cell or the Kanban board for transfer jobs depending on the
activity type. BOM line events are used in mixed mode environments to
bridge products that are produced using traditional production orders where
material is provided through Kanbans.
7. Describe stock replenishment events and how they are used in Microsoft
Dynamics AX 2012.
MODEL ANSWER:
Stock replenishment events trigger Kanbans based on violation of minimum
stock settings. Stock replenishment events are useful in a quick turning
environment, where safety stock violations must instantly create a Kanban
(manufacturing or withdrawal) to replenish the missing item. The pegging
event processing in Lean manufacturing checks minimum inventory for
selected Kanban rules and creates the needed Kanbans to replenish.
5-60
CHAPTER 6: SCHEDULED KANBANS

Objectives
The objectives are:
Describe the behavior of planned orders of type Kanban.
Describe the Supply schedule form and the relationship with

scheduled Kanbans.
Describe how scheduled Kanbans are used in Microsoft Dynamics

AX 2012.
Define how to set up and configure scheduled Kanban rules.
Describe the planning process for a scheduled Kanban.
Describe the planning considerations for scheduled Kanbans.
Introduction
In Microsoft Dynamics AX 2012, scheduled Kanbans can be created by Master
Planning based on requirements from demand forecast, supply forecast, or from
any other demand, for example sales orders, transfer orders or production orders.
The planned orders of type Kanban are created based on the Kanban rule and
follow the standard Master Planning logic and horizons. Master Planning item
coverage settings determine how the planned orders are created and whether they
are automatically or manually firmed.
Scheduled Kanbans are used for items that are not typically suited for fixed
quantity Kanban rules. These products are not as frequently used and one would
only want to base the production of these items on a schedule. The schedule will
be analyzed and updated weekly based on the customer sending their forecast. By
doing this, the planner can ensure that he or she can level production to meet the
schedule without building inventory.
Scheduled Kanbans can be used by a company where these scenarios are
required:
Loading of a work cell with scheduled demand on top of the fixed

quantity Kanban jobs.
Creating Kanbans based on a minimum stock quantity and

minimum/maximum keys to model demand that changes over time.
Modeling build to order scenarios in batch sizes higher than the

average sales or picking line, grouping demand into small batches.
Modeling a mixed mode environment where it makes sense to use a

consistent way of reporting on the production floor using the Kanban
transactions.
6-1
Planned Orders of Type Kanban

Planned orders of type Kanban are created by Master Scheduling for items
supplied by Kanbans.
To have planned orders of type Kanban created by Master Planning, a default
order type must be defined as Kanban. To schedule and firm the planned Kanban
from Master Planning, a scheduled Kanban rule must be defined for the item, a
group of items, or all items as defined in the Kanban rule. Setting a Kanban rule
for an entire product group allows the user to define the settings for a group of
items instead of each individual item.
Default Order Type

The Planned order type can be defined in multiple places. The Planned order
type of Kanban can be defined on the company-specific product default order
settings, or by location and product dimensions in the item coverage form.
FIGURE 6.1 DEFAULT ORDER TYPE
NOTE: Kanbans that are supplied on fixed quantity or event Kanban rules also
should have the planned order type Kanban. The related items should have a
firming fence of 0 days, else master planning might create warnings or errors
when trying to firm.
6-2

Planned Order Rules
If the planned order setting of type Kanban is not set, the rules will not be
searched and found by Master Planning. If the planned order type Kanban is set,
but no scheduled Kanban rule is defined for the item on the dimensions that are
defined as being Kanban controlled, then only sub orders marked as dynamic
will be generated by Master Planning to control the derived requirement.
If a planned order of type Kanban has been created, a scheduled Kanban rule
must exist to firm the planned order. When firming this planned order of type
Kanban, one or more scheduled Kanbans are created. The default order sizes of
planned orders of type Kanban are determined from the default order settings or
the default order settings by site. The sizes of created Kanbans are determined
from the product quantity settings of the Kanban rules.
Supply Schedule
The Supply schedule form, new in Microsoft Dynamics AX 2012, provides a
comprehensive view of supply and demand. The supply schedule is displayed for
a specific plan and can be filtered to show the supply and demand for a specific
item and item dimension, a generic item with the item dimension left blank, or
for a product family. A period template allows the supply schedule to be viewed
by a configurable range of periods.
Navigation to Supply Schedule

The supply schedule can be opened from the locations shown in this table.
Entry
Navigation
Result
Main menu
Master planning >

Common >
Supply Schedule
The filter dialog opens and allows

entry of the filtering options.
Planned
order
Master planning >

Common >
Planned orders
Select the View >
Supply Schedule
button.
The item filter is set to the item and

item dimensions of the selected
planned order. The supplied
locations are filtered to the supplied
location of the selected planned
order. The Master plan of the
planned order is used.
Net
requirements
Product
information
management >
Common >
Released products
Select the Inquires
> Supply Schedule
button.
The item filter is set to the item and

item dimensions according to the net
requirements filter. The supplied
locations are filtered to the locations
in the Net requirements form.
6-3

Entry
Navigation
Result
Released
products
Product
information
management >
Common >
Released products
Select the Plan >
Supply Schedule
button.
The item filter is set to the item with

empty dimensions. The dynamic
Master plan is used. The locations
filter is not set.
Item
allocation
key
Inventory and
warehouse
management >
Setup > Forecast
> Item allocation
keys
Select the Supply
Schedule button.
The product family filter is set to the

Item allocation key. The dynamic
Master plan is used. The locations
filter is not set.
Supply Schedule Display

The supply schedule also shows the planning fences with colors to indicate the
fences in a visible way with the planning fence row and colors representing the
fence.
FIGURE 6.2 SUPPLY SCHEDULE
To remain in context with Lean manufacturing in Microsoft Dynamics AX 2012,

the descriptions of the supply schedule have been limited to Kanbans, but the
Supply schedule form can be used just the same for production orders, transfer
orders and purchase orders.
6-4

Processing with the Supply Schedule
The supply schedule provides the planner with visibility into the supply and
demand of certain products, or groups of products, and also allows the planner to
take action through firming planned Kanban orders and inserting new Kanbans.
By highlighting the cell where the planned Kanban quantity is shown, the
Planned production Kanbans FastTab opens and shows the planned Kanbans.
These planned Kanbans can be processed with the Firm, Approve, and Change
status buttons if a scheduled Kanban rule exists.
Once the planned order is firmed, the Kanban then appears on the Kanban
schedule board to be scheduled; or, if automatic planning is set on the Kanban
rule, it shows up directly on the Kanban board for process jobs to be
manufactured.
New scheduled Kanbans can also be created from the supply schedule where
supply does not meet demand. The Scheduled Kanban button creates a new
scheduled Kanban straight from the supply schedule to cover the demand.
Scenario: Supply Schedule

Eduardo uses the supply schedule at Contoso to get an overview of production.
Eduardos overall goals are to make sure there is enough supply to meet
customer demands but not so much that he builds up excess inventory. Eduardo
works in a mixed mode environment with production order and Kanbans. The
supply schedule provides an overview of all supply, including production orders
and Kanban.
Scenario: Supply Schedule: Steps

This procedure includes the steps that Eduardo will take to obtain an overview of
all supply, including production orders and Kanbans:
1. Open a view of the supply schedule for a specific item or product
family.
2. Examine the actual sales order demand, forecasted demand,
transports, and planned production for this week.
3. Analyze the details for the planned production this week, which
consists of Kanban jobs and production orders. Check the status of
the production orders and Kanbans.
4. Find the projected available inventory for this week and the
following week.
5. Enter additional scheduled Kanbans as needed where shortages exist.
6-5

Scenario: Production Schedule
This scenario describes the manufacturing process based on production schedules
and scheduled Kanbans. The term production schedule is associated to a supply
schedule with scheduled supply from production orders or manufacturing
Kanbans. Microsoft Dynamics AX 2012 also allows a supply forecast schedule
for production material.
The supply forecast creates planned orders. Freezing an actual production
schedule with a freezing fence blocks master planning from changing the planned
order structure within each Master Planning run and allows a more stable
planning upstream. In this scenario, the Supply schedule form plays a key role
as it makes possible shortages against the production schedule transparent and
allows for small adjustments within the supply schedule. This provides a stable
plan that is in balance with resource capabilities and material demand.
Scenario: Production Schedule: Setup

Pierre and Eduardo have decided that a certain product is not suitable to be
produced through fixed quantity Kanbans because the product is not frequently
used. Consequently, Eduardo has decided to base production on a production
schedule. The schedule will be analyzed and updated weekly based on the
forecast that the customer sends. By doing this, Eduardo attempts to level
production to meet the schedule without building inventory. Eduardo uses the
Supply schedule form to view the demand and supply requirements for this
product.
for this scenario. Eduardo creates the production schedule as a forecast and runs
Master Planning, resulting in scheduled Kanbans. Shannon, from shop floor
execution, transacts against the Kanban and manufactures the product.
6-6

Eduardo uses the firming horizon of the item coverage to firm the Kanbans that
are related to his production schedule. He can also create additional Kanbans to
level production on top of the production schedule if required. Because this
product is defined with a scheduled Kanban rule, additional demand will be
caught by Master Planning. This diagram depicts the scenario.
FIGURE 6.3 SCHEDULED KANBAN SCENARIO
Scenario: Production Schedule: Steps

1. Pierre/Eduardo: set up items and item coverage settings including
firming horizon.
2. Pierre/Eduardo: create production flow activities and scheduled
Kanban rules.
3. Susan: creates a demand forecast.
4. Eduardo: runs Master Planning. Kanbans are created for issues
within the firming horizon and are automatically firmed. Planned
orders in the frozen period are not updated as a result of the Master
Planning run.
5. Eduardo: opens the Supply schedule form and reviews production,
inserting scheduled Kanbans to level production.
6. Shannon/Lars: processes production that is required for the
scheduled Kanban.
7. Ahmed: scans the handling unit as empty when it is consumed.
6-7
Kanban Rule Setup

A Kanban rule is a material supply policy that governs process and transfer
activities that are based on Kanbans. The Kanban rule defines the way in which
an item is produced or transferred, and links the item to the activities within the
production flow.
Based on the firm horizon of the supply forecast or actual demand from sales
orders or production, Master Planning automatically creates the Kanbans that are
needed to cover the related issues. The creation is done based on the Kanban rule
for the firmed horizon. The planner can also manually create planned orders of
type Kanban and firm them to scheduled Kanbans.
Kanban Rules Form

New Kanban rules are configured in the Kanban rules form, which contains a
list of all existing Kanban rules. You can locate this form by selecting
Production Control > Setup > Lean manufacturing > Kanbans rules.
To create a new Kanban rule, select the New Kanban rule button and use the
Kanban rules form to create and define a new Kanban rule.
Kanban Rules Form: Fields

There are seven fields on the Kanban rules form that are specific to scheduled
Kanbans. These are:
6-8
Type
Kanban rule
Product selection
First plan activity
Multiple activities
Last plan activity
Descriptions of the fields on the Kanban rules form that are specific to
scheduled Kanbans are presented in these sections:
Kanban Rules Form: Fields: Type, Replenishment Strategy, Kanban

Rule and Product Selection
Kanban Rules Form: Fields: First Plan Activity, Multiple Activities,

and Last Plan Activity
Kanban Rules Form: Fields: Type, Replenishment

Strategy, Kanban Rule, and Production Selection
These are the descriptions of the fields of Type, Replenishment strategy,
Kanban rule, and Product selection that appear on the Kanban rules form that
are specific to scheduled Kanbans.
Field
Description
Type
Specify whether the Kanban is a manufacturing

Kanban, which creates Kanban process jobs or a
withdrawal Kanban, which creates a Kanban transfer
job.
Replenishment
strategy
Choose Scheduled when creating a scheduled Kanban

rule. Scheduled Kanbans are generated during Master
Planning based on actual demand, forecast, or
minimum stock levels that signal demand. Scheduled
Kanbans can also be created manually.
Kanban rule
Automatically assigned number that identifies the

Kanban rule.
Product
selection
The identification of the Kanban rules product

selection.
6-9

Activities and Last Plan Activity
These are descriptions of the fields of First plan activity, Multiple activities,
and Last plan activity that appear on the Kanban rules form that are specific to
scheduled Kanbans.
6-10
Field
Description
First plan
activity
Select the Kanban rules first activity. This links the

Kanban to the production flow version activity. A
manufacturing Kanban rules first activity must be a
process activity. The first and only activity of a
withdrawal Kanban rule must be a transfer activity.
Multiple
activities
Select this check box to configure multiple activities

for the Kanban rule. Only manufacturing Kanbans can
have multiple activities.
NOTE: Scheduled Kanban rules have to end with an
activity that updates inventory; otherwise the activity
selection is not valid.
Last plan
activity
When the Multiple activities check box is selected,

select the last activity of the Kanban rule. When
multiple activities are selected, the activity flow that is
based on the production flow activity relations can be
chosen to produce the Kanban specific flow. The
lookup form displays all activities that are downstream
from the first activity in the same production flow
version, or related through an activity marked as Feeds
other production flows.

The Details FastTab in the Kanban rules form is used to assign the product
selection that the Kanbans can be created for along with the dimension
information, effective dates, and unit of measure for the selected Kanban rule.

There are three fields on the Details FastTab in the Kanban rules form. These
are:
Product selection
Product
Product family
Descriptions of the fields on the Details FastTab in the Kanban rules form are
Kanban Rules Details FastTab: Fields: Product Selection
Kanban Rules Details FastTab: Fields: Product and Product Family
6-11

Kanban Rules - Details FastTab: Fields: Product Selection
This is the description for the field of Product selection that appears on the
Details FastTab in the Kanban rules form.
Field
Description
Product
selection
Scheduled Kanban rules can specify a Product selection of the

Product, Product family, or All types.
Product: The Kanban rule is valid for a single item number. For
items with product dimensions, the Kanban rule can be valid for
a specific dimension or for all values of the product dimension.
The Kanban rule is valid for all values of the product dimension
by leaving the product dimension of the Kanban rule blank.
Product family: The Kanban rule is valid for all items and the
related product dimensions that are assigned to a single item
allocation key.
All: The Kanban rule is valid for all products that are supplied
by the Kanban rules last activity. In other words, the Kanban
rule is valid for all items of planned order type Kanban that have
issues related to the supplied location (site, warehouse) of the
Kanban rule.
Kanban Rules - Details FastTab: Fields: Product and

Product Family
These are the descriptions of the fields of Product and Product family that
appear on the Details FastTab in the Kanban rules form.
6-12
Field
Description
Product
When the Product option is selected in the Product selection

field, select the item from the lookup list. If the product carries
product dimensions, the Product dimension fields are
activated, but not mandatory.
Product
family
When the Product family option is selected in the Product

selection field, select the Item allocation key from the lookup
list.

Kanban quantity, alert quantities, and automatic planning quantity.

There are ten fields on the Quantities FastTab in the Kanban rules form. These
are:
Default quantity
Minimum quantity
Maximum quantity
Product quantity variance
Variance below
Variance above
Alert boundary minimum
Alert boundary maximum
Automatic planning quantity
Maximum planned jobs
Descriptions of the fields on the Quantities FastTab in the Kanban rules form
are presented in these sections:
Kanban Rules Quantities FastTab: Fields: Default Quantity,

Minimum Quantity, and Maximum Quantity
Kanban Rules Quantities FastTab: Fields: Product Variance,

Variance Below, and Variance Above
Kanban Rules Quantities FastTab: Fields: Alert Boundary

Minimum and Alert Boundary Maximum
Kanban Rules Quantities FastTab: Fields: Automatic Planning

Quantity and Maximum Planned Jobs
6-13

Kanban Rules - Quantities FastTab: Fields: Default
Quantity, Minimum Quantity, and Maximum Quantity
These are the descriptions of the fields of Default quantity, Minimum quantity,
and Maximum quantity that appear on the Quantities FastTab in the Kanban
rules form.
Field
Description
Default
quantity
For scheduled Kanban rules, enter the default product

quantity to use for each Kanban. A value in this field is not
required for scheduled quantity rules.
Minimum
quantity
For scheduled Kanban rules, enter the minimum product

quantity to use for each Kanban. The value that is entered
in the Default order settings, Inventory quantity, Min.
order quantity setting is used as the default value. You
can change it, but it cannot be less than the minimum order
quantity for inventory.
Maximum
quantity
For scheduled Kanban rules, enter the maximum product

quantity to use for each Kanban. The value that is entered
in the Default order settings, Stock quantity, Max. order
quantity setting is used as the default value. The
Maximum quantity will override the default, but it cannot
be more than the stock quantity setting.
Kanban Rules - Quantities FastTab: Fields: Product

Quantity Variance, Variance Below, and Variance Above
These are the descriptions of the fields of Product quantity variance, Variance
below, and Variance above that appear on the Quantities FastTab in the
Kanban rules form.
6-14
Field
Description
Product
quantity
variance
Select this check box to allow the finished product quantity

to differ from the specified product quantity for each
instance of a Kanban job that references the Kanban rule.
Variance
below

can be less than the product quantity of a Kanban job.
Variance
above

can exceed the product quantity of a Kanban job.

Kanban Rules - Quantities FastTab: Fields: Alert
Boundary Minimum and Alert Boundary Maximum
These are the descriptions of the fields of Alert boundary minimum and Alert
boundary maximum that appear on the Quantities FastTab in the Kanban
rules form.
Field
Description
Alert
boundary
minimum
Enter the number of Kanbans to define the minimum

Kanban quantity for each work cell or supermarket. This
Kanban level is visible in the Kanban quantity overview of
the Kanban boards. The Alert boundary minimum has
these effects:
When the number of jobs for active Kanbans that are
planned does not meet the specified minimum alert
quantity, the background color is red instead of green.
Active Kanbans can have any handling unit status
except Empty.
The Kanban rules are sorted by planning importance.

This is calculated for active Kanbans using this
formula:
Alert boundary minimum number of jobs that have the

Status >= Planned
Scheduled and event Kanban rules are not displayed on

the Kanban quantity overview if these conditions are
true:
a. Alert boundary minimum = zero

b. There are no active Kanbans
Alert
boundary
maximum
Enter the number of Kanbans to define the maximum

Kanban quantity for each work cell or supermarket. This
boundary helps visualize excess inventory in a
supermarket. It also gives a visual signal when more
scheduled or event Kanbans than expected are created for a
Kanban rule.
The Kanban level is visible in the Kanban quantity
overview of the Kanban boards. When the number of
completed jobs for active Kanbans is more than the
specified maximum alert quantity, the background color is
red instead of green. Active Kanbans can have any
handling unit status except Empty.
6-15

Kanban Rules - Quantities FastTab: Fields: Automatic
Planning Quantity and Maximum Planned Jobs
These are the descriptions of the fields of Automatic planning quantity and
Minimum planned jobs that appear on the Quantities FastTab in the Kanban
rules form.
Field
Description
Automatic
planning
quantity
To automatically plan the Kanban jobs instead of manually

loading them onto a work cell, an automatic planning
quantity can be set.
of Not planned.
Maximum
planned jobs
When you use automatic planning of unplanned Kanban

jobs, enter the maximum number of Kanban jobs that are
planned for a specific Kanban rule. Use this limit to avoid
overloading a work cell for scheduled and event Kanbans.
This situation could occur due to false demand or
exceptionally large customer orders.

modify Kanban card information, in addition to circulating card information if
applicable.

There are four fields on the Kanban and cards FastTab in the Kanban rules
form. These are:
6-16
Automatic printing

Descriptions of the fields on the Kanban and cards FastTab in the Kanban
rules form are presented in these sections:


List with Card and Kanban Print Instructions

These are the descriptions of the fields of Card number sequence and
Automatic printing that appear on the Kanban and cards FastTab in the
Kanban rules form.
Field
Description
Card number
sequence
The Kanban card number sequence that is

assigned to the Kanban rule. When a Kanban rule
is created, the default number sequence from the
production parameters is used. You can create
number sequences for Kanban cards in the
It is a proven best practice to use unique and short
number sequences for fixed circulating cards. This
helps to identify a specific card more efficiently.
6-17

Field
Description
Automatic printing
Select the event that causes automatic printing of

Kanban cards. The options are:
None Automatic printing is not used. We
recommend that you use this setting when
using circulating cards or when electronic
Kanban processing is used.
Creation Print Kanbans when the Kanban is

created. We recommend that you use this
setting when a physical planning board for
event Kanbans is used, and when circulating
cards cannot be used.
Plan Print Kanbans when the first job of the

Kanban is Planned. We recommend that you
use this setting when a printed Kanban card
triggers the processing of Kanban jobs on the
shop floor.
Prepare Print Kanbans when the first job of

a Kanban flow is registered as Prepared.
Start Print Kanbans when the first job of a

Kanban flow is registered as In progress.
Receive Print Kanbans when the first job of

a Kanban flow is registered as Completed.
This option is often used if batch or serial
numbers of the finished items are printed on
the Kanban card.

Picking List with Card and Kanban Print Instructions
These are the descriptions of the fields of Print picking list with card and
Kanban print instructions that appear on the Kanban and cards FastTab in the
Kanban rules form.
6-18
Field
Description
Print picking list with

card
Select this check box to print the picking list with

the Kanban card.
Kanban print
instructions
Select the information to print on the Kanban

card. The option is:
Work instructions Print the production
instructions document that is attached to the
Kanban.

The Production Flow FastTab in the Kanban rules form is used to identify the
production flow activities that are associated with the Kanban and to define how

This table describes the fields on the Production flow FastTab in the Kanban
rules form.
Field
Description
Register as
empty

registered as empty. The default setting is When handling
units are received. The options for event Kanbans are:
When handling units are received When the last job
of a Kanban is complete, the Kanbans are registered as
empty and disappear from the Kanban quantity overview
in the Kanban boards.
Receipt
warehouse
Manual (includes scanning empty) The Kanbans

must be explicitly registered as empty. This setting is
used when products are stored in supermarkets before
they are consumed or shipped.
The receipt warehouse displays where the Kanban job will be

received upon completion. It is recommended to use
coverage by warehouse. When using coverage by
warehouse, the Receipt warehouse is very important for
scheduled Kanban rules as this is the warehouse supplied by
this Kanban rule.
6-19

Kanban Rules - Kanbans FastTab
The Kanbans FastTab in the Kanban rules form is used to view, print, and
create new Kanbans.
FIGURE 6.9 KANBANS FASTTAB
Kanban Rules - Kanbans FastTab: Fields

There are six fields on the Kanbans FastTab in the Kanban rules form. These
are:
Add
Remove
Details
Dimensions display
Filter
Print
Descriptions of the fields on the Kanbans FastTab in the Kanban rules form are
Kanban Rules Kanbans FastTab: Fields: Add, Remove, and Details
Kanban Rules Kanbans FastTab: Fields: Dimensions Display,

Filter, and Print
Kanban Rules - Kanbans FastTab: Fields: Add, Remove,

and Details
These are the descriptions of the fields of Add, Remove, and Details that appear
on the Kanbans FastTab in the Kanban rules form.
6-20
Button
Description
Add
For fixed quantity Kanban rules or scheduled Kanban rules,

the Add button allows the user to manually create Kanbans
for the selected Kanban rule.
Remove
Deletes the selected Kanbans. You can only delete Kanbans

that have the handling unit status of Not assigned and that do
not have planned jobs.

Button
Description
Details
Opens the Kanban form to view detailed information about

the selected Kanban.
Kanban Rules - Kanbans FastTab: Fields: Dimensions

Display, Filter, and Print
These are the descriptions of the fields of Dimensions display, Filter, and Print
that appear on the Kanbans FastTab in the Kanban rules form.
Button
Description
Dimensions
display
Opens the Dimensions display form to select the product

dimensions to display in the Kanbans grid.
Filter
Allows the user to filter and display Kanbans that have the
handling unit status of Empty.
For use in daily work routines, we recommend that you do
not select the Show empty check box. This setting keeps
the focus on active Kanbans.
Print
Prints the Kanban cards for the selected Kanbans.
Demonstration 6.1: Creating a Scheduled Kanban Rule

Follow these steps to set up a scheduled Kanban rule.
1. Open the form for Kanban rules by selecting Production control >
2. Create a new rule by selecting the Setup > New > Kanban rule
button.
3. Choose the Kanban Type; the valid Kanban types are Manufacturing
and Withdrawal (for example, select Manufacturing).
4. Choose the Replenishment strategy as Scheduled.
5. Select the First plan activity that is related to this Kanban rule (for
example, select PaintSpeakerCovers).
6. Select the Multiple activities field to create a Kanban rule that spans
over more than one activity. The last activity input field becomes
active (in this example, deselect the Multiple activities field).
7. Choose the Last plan activity. The Kanban flow form is opened and
shows all Kanban flow alternatives that have been created so far (not
used in this example).
8. Use the Generate button to create all possible flows between first
and last activity. The missing flows are created and displayed (not
used in this example).
9. Choose one of the possible flows and press OK. The Kanban flow is
saved temporarily until the rule is saved (not used in this example).
10. Change to the Details FastTab.
6-21

11. Choose the Product selection type for the Kanban rule. This can be
Product, Product family, or All (for example, select Product family).
a. If Product is chosen, select the Product for the product relation
of the Kanban rule. Depending on the item, the item dimensions
are activated (not used in this example).
b. If Product family is chosen, select the Product family for the
relation of the Kanban rule (for example, select IAK_SCSS).
12. Change to the Quantities FastTab.
13. Enter the Default quantity as the target product quantity to use for
each Kanban (for example, enter 5).
14. Enter the Maximum quantity as the maximum product quantity to
use for each Kanban (for example, enter 5).
15. Enter the alert boundaries for the Kanban (for example, enter the
Alert boundary minimum as 10 and the Alert boundary
maximum as 20).
16. Enter the Automatic planning quantity to define the number of
Kanbans with the status of unplanned that trigger an automatic
sequencing. If no automatic planning will be done, the Automatic
planning quantity is 0 (for example, leave blank).
17. Enter the Maximum planned jobs to avoid overloading a work cell
(not used in this example).
18. Switch to the Kanban and cards FastTab.
19. Choose the Automatic printing option as either none, meaning that
no automatic printing is done, or the automatic printing selection
based on the status of the Kanban job (for example, select None).
20. Choose the Kanban Print instructions as Work instructions to
print these with the scheduled Kanban.
21. Change to the Production flow FastTab.
22. Choose the Register as empty setting to designate how the Kanbans
should be emptied (for example, select When handling units are
received).
23. Save the Kanban rule after performing validity checks to ensure that
all mandatory fields are populated.
Product Family and Item Allocation Keys

Kanban rules can be set up against product families such that those items within
the product family are represented by the Kanban rule. With scheduled Kanbans,
these can be particularly useful because the product family is represented by an
item allocation key. Item allocation keys can be used so that the total forecast
quantity is distributed down to the item or item dimensions based on percentages.
For example, a sales forecast line with 100 pieces is created on the item
allocation key. The key contains two items with 45 percent and 55 percent,
respectively. During forecast planning, a requirement line for each item number
is created with 45 and 55 pieces, respectively.
6-22

"Chapter 1: Lean Manufacturing Concepts and Overview: Scenario: Simple
Production Flow introduced a scenario that discussed ordering speaker covers in
a paint shop. In this scenario, the percentages are used to allocate the forecast to
the yellow, black, and magenta colors. This then creates the scheduled Kanbans
based on the colors forecasted demand.
FIGURE 6.10 ITEM ALLOCATION KEYS AND PRODUCT FAMILIES
Inventory Considerations for Scheduled Kanbans

A scheduled Kanban by definition always ends at an inventory-controlled
location. Therefore, a scheduled Kanban rule must have a last activity that
updates on-hand inventory. When you try to select a last activity that is not
inventory controlled, an error message is displayed.
6-23
Lab 6.1 - Scheduled Kanban Rule Setup

This lab facilitates offsetting up a scheduled Kanban rule.
Scenario
In "Chapter 1: Lean Manufacturing Concepts and Overview: Scenario: Simple
Production Flow", the speaker cover paint shop was introduced, where speaker
covers were painted and placed into a buffer inventory. The speaker cover paint
shop is picking unpainted covers from the warehouse. The painted covers are
supplied to a supermarket where they can be picked for other manufacturing
processes or for sales.
Aftermarket research was conducted at Contoso, and they decided that a new
color should be introduced to the speaker cover product. This color, orange, is
going to be planned off of a production schedule that results from a master
planning run.
The scheduled Kanban rule has already been configured against the product
family IAK_SCSS. The new color, orange, has to be set up with the proper
configuration and released into company CEU. It then needs to be added to the
IAK_SCSS product family.
Challenge Yourself!
1. Create a new color Orange as a dimension for product
SCPS_PSCL and SCPS_PSCR, and release them into the company
CEU.
2. Add the orange color to the product family IAK_SCSS and associate
10 percent to the orange color, deducting 10 percent from the yellow
color for items SCPS_PSCL and SCPS_PSCR.
3. Create a new Lean schedule group for the orange color and associate
the new orange color to the group with these settings:
o Color: Orange
o Throughput Ratio: 1
4. Ensure the default order settings for SCPS_PSCL and SCPS_PSCR
are set to Kanban.
5. Ensure the Scheduled Kanban rule exists for the speaker covers paint
shop scenario with these settings:
o Product Family: IAK_SCSS
o Replenishment strategy: Scheduled
6-24

o
o
o
o
Alert boundary minimum: 10

Alert boundary maximum: 20
Automatic planning quantity: 0
Register as empty: When handling units are received
Step by Step: Create and Release New Color

Follow these steps to create and release a new color.
Released products.
3. Select the Product > Product master > Product dimensions
button.
5. Enter a new color Name of Orange.
6. Close the Product dimensions form.
7. Select the Product > Product master > Released product variants
button.
9. Enter the Product name as SCPS_PSCL_ Orange.
10. Enter the Color as Orange.
12. Repeat steps 1-13 for item SCPS_PSCR.
Step by Step: Product Family

Follow these steps to add a color to the product family and associate percentages
for colors.
1. Navigate to Inventory and warehouse management > Setup >
Forecast > Item allocation keys.
2. Highlight the Item allocation key IAK_SCSS.
3. Select the Lines button.
5. Enter Item number SCPS_PSCL.
6. Change the Color to Orange.
7. Enter a Percent of 10.00.
9. Enter Item number SCPS_PSCR.
10. Change the Color to Orange.
11. Enter a Percent of 10.00.
12. Find the Item number SCPS_PSCL and color Yellow.
13. Change the Percent from 20.00 to 10.00.
14. Find the Item number SCPS_PSCR and color Yellow.
6-25

15. Change the Percent from 20.00 to 10.00.
16. Close the Item allocation keys form.
Step by Step: Lean Schedule Group

Follow these steps to create a Lean schedule group.
Lean schedule groups.
3. Enter Orange as the new Schedule group.
4. Select the Schedule color field.
5. Select the Schedule color as Orange.
7. Save the record.
8. Select the Assign items to group button.
10. Select the Item relation type as Item.
11. Enter the Item number SCPS_PSCL.
12. Select the Color as Orange.
14. Enter the Item number SCPS_PSCR.
15. Select the Color as Orange.
16. Close the Lean schedule groups form.
Step by Step: Default Order Settings

Follow these steps to ensure default order settings are set to Kanban.
Released products.
3. Select the Manage inventory > Order settings > Default order
settings button.
4. Ensure that the Default order type is set to Kanban.
5. Close the Default order settings form.
6. Repeat steps 2-5 for product SCPS_PSCR.

Follow these steps to ensure the scheduled Kanban rule exists.
Kanban rules.
2. Filter on the Product family field and find IAK_SCSS.
6-26

3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
Ensure that Replenishment strategy is Scheduled.

Ensure that the First plan activity is PaintSpeakerCovers.
Switch to the Details tab on the Kanban rules form.
Ensure the Product family IAK_SCSS.
Switch to the Quantities tab on the Kanban rules form.
Ensure a Default quantity of 5.
Ensure a Maximum quantity of 5.
Ensure an Alert boundary minimum of 10.
Ensure an Alert boundary maximum of 20.
Ensure an Automatic planning quantity of 0.
Switch to the Production flow tab on the Kanban rules form.
Ensure that Register as empty is set to When handling units are
received.
6-27
Planning Scheduled Kanbans

Master Planning creates scheduled Kanbans automatically for planned Kanban
orders to cover the requirements within the firm horizon of the requirements.
Scheduled Kanbans can also be manually created.
The behavior of scheduled Kanbans in Master Planning is similar to production
orders. Kanbans are created by firming planned Kanbans manually or using a
firming fence. The scheduled replenishment strategy is used for items or variants
that are produced in a Lean work cell, but demand is created from forecast,
customer, or dependent demand, without being explicitly built to order.
The Master Planning engine of Microsoft Dynamics AX creates issue
transactions from customer demand, forecast, and production demand, which are
pegged against existing receipt transactions (supply) from planned or firmed
production orders, transfer orders, and the new Kanban transaction types.
For all uncovered demand, new planned orders are created using parameters such
as minimum and maximum order size or the coverage code that allows grouping
of issues by period.
The planned Kanban orders that result from Master Planning follow the same
concept as the other planned order types, but once firmed, result in a Kanban.
The coverage group that is set up against the item can be set with a firming fence,
such that the firming of the planned order does not have to be performed within
that time frame.
Scheduled Kanban Planned Order Quantities

Planned orders of type Kanban accumulate issues before being firmed into
scheduled Kanbans, depending on the coverage settings for the item. The
quantities created in the planned Kanbans are controlled through the default order
setting inventory quantities. For scheduled Kanbans, the minimum and maximum
inventory settings in the default order settings are an important instrument to
control the sizing of planned orders.
Upon creation of the scheduled Kanban, however, the default quantity, minimum
quantity and maximum quantity on the Kanban rule is used. There are as many
scheduled Kanbans created as needed using the default quantity, to completely
cover the requirements. When using automatic planning, the number of
automatically scheduled Kanban jobs can be limited by the maximum planned
jobs field.
6-28

If no Default quantity is configured on the Kanban rule, the quantity of a
scheduled Kanban is determined out of the requested quantity of the summarized
issues:
If the issue quantity is less than Minimum quantity, the minimum

quantity is used.
If the issue quantity is greater than or equal to Minimum quantity,

and less than or equal to Maximum quantity, the issue quantity is
used as product quantity of the Kanban.
If the issue quantity is greater than Maximum quantity, the issue

quantity is split into multiple Kanbans of the maximum quantity; the
last issue with the remaining quantity is created with at least the
Minimum quantity.
Setting a Minimum quantity for this case might lead to unintended

overproduction. For example, if a minimum product quantity is set to 20 and the
maximum to 30, with an issue quantity of 40, then two Kanbans are created.
This creates one Kanban for 30 pieces and one Kanban for 20 pieces, leading to
overproduction of 10 pieces. This is, however, useful when delivering in full
boxes. It is also important to note that if the coverage code is set to period, this
would reduce the likelihood of this scenario occurring as the requirements are
grouped together.
Scheduled Kanbans and Action Messages

Master Planning will not delete firmed scheduled Kanbans. Based on settings on
the coverage group, actions can be generated to cancel, advance, postpone, or
increase scheduled Kanbans.
FIGURE 6.11 ACTION MESSAGES
6-29

All planned Kanbans can be canceled and changed just as any other planned
order, providing that it is outside the firming or freezing time fences or the
planned Kanbans have not been approved.
If an action message has been disabled, then no action will be generated, similar
to any other planned item. Actions only apply for items with inventory
transactions; therefore, there are no action messages for non-inventoried items.
MRP Considerations
If an item can be supplied by an event rule with a Kanban creation method of
batch, and a scheduled Kanban rule, the event processing for the item must be
finished before Master Planning can be progressed for that item. This creates a
dependency between the event batch processing and Master Planning. The user
should make sure that the pegging event processing job is run before Master
Planning.
6-30
Lab 6.2 - Scheduled Kanban

This lab facilitates the planning of scheduled Kanbans on the Kanban board for
process jobs.
Scenario
The customer forecast has been received for the SCPS_PSCL and SCPS_PSCR
speaker cover products. Enter the forecast and run master planning. Review the
scheduled Kanbans and planned scheduled Kanbans for the orange color that
were created in the horizons on the supply schedule. Plan the scheduled Kanbans
for the orange color on the Kanban schedule board. Process the scheduled
Kanban on the Kanban board for process jobs.
Challenge Yourself!
Perform these steps:
1. Enter weekly demand forecast lines going out six months for product
SCPS_PSCR with these settings:
o Item allocation key: IAK_SCSS.
o Model: 100
o Monthly Quantity: 100
2. Run master planning.
3. Review the supply schedule board for the orange color and static
plan 10.
4. Plan a Kanban for SCPS_PSCR on the Kanban schedule board.
5. Process the Kanban on the Kanban board for process jobs.
For an additional challenge, repeat the process with the product SCPS_ PSCL.
Step by Step: Enter Forecast

Follow these steps to enter weekly demand forecast lines.
Released products.
2. Find the SCPS_ PSCR product.
3. Select the Plan > Forecast > Demand forecast button.
4. Select the New button to create a new record in the Demand
forecast form.
5. Enter the Model 100.
6. Enter the Date as the last day of the current week.
7. Select the Item allocation key as IAK_SCSS.
8. Enter Quantity as 100.00.
9. Select the Inventory dimensions tab on the Demand forecast form.
6-31

10.
11.
12.
13.
14.
15.
16.
17.
Select the Site as 2.

Select the Warehouse as PaCovers.
Select the Overview tab on the Demand forecast form.
Select Method as Period.
Enter Per as 7.
Select Unit as Days.
Select the End date as six months from now.
Select Inventory forecast button to review the inventory forecast by
color.
Step by Step: Run Master Planning

Follow these steps to run master planning.
1. Navigate to Master planning > Periodic > Master scheduling.
2. Ensure the Master plan is set to 10.
Step by Step: Review Supply Schedule

Follow these steps to review the supply schedule.
1.
2.
3.
4.
5.
6.
Navigate to Master planning > Common > Supply schedule.

Enter Item number as SCPS_ PSCR.
Select Color as Orange.
Select Plan as 10.
Review the demand on supply schedule form.
Step by Step: Plan and Process Kanban

Follow these steps to plan and process the Kanban.
2. Select the View > Change work cell button.
3. Select the Work cell as SCPS_Cover.
5. Find the Kanban for the SCPS_ PSCR product, Orange color under
the IAK_SCSS item allocation key.
6. Drag the Kanban onto a date to plan the Kanban.
7. Select the Close button to close the Kanban schedule board.
9. Select the View > Change work cell button
6-32

10.
11.
12.
13.
14.
Select the Work cell as SCPS_Cover.

Find and highlight the Kanban job for SCPS_ PSCR, Color Orange.
Select the Manufacture > Production > Start button
Select the Manufacture > Production > Complete button.
6-33
Summary
Scheduled Kanbans provided an overview of the setup, planning, and
processing of scheduled Kanbans in Microsoft Dynamics AX 2012. It included
these key points:
Item coverage settings and coverage group settings are used when
you create planned Kanbans.
You can use item allocation keys to create scheduled Kanban rules
for product families.
Master Planning creates planned Kanbans that are firmed and create
scheduled Kanbans.
The Supply schedule form provides an overview of supply and

demand, including Kanbans.
The two labs in this chapter helped you to set up, plan, and process Kanban jobs
using the supply schedule, Kanban scheduling board, and the Kanban board for
process jobs.
6-34
Test Your Knowledge

1. Describe what settings control the quantities of the planned order of type
Kanban for an item.
2. How is a scheduled Kanban rule set up against a product family?
3. What are the ways that scheduled Kanbans can be created?
6-35

4. Describe the relationship between action messages and planned Kanbans.
5. What is the supply schedule and how does it relate to scheduled Kanbans?
6-36

chapter
1.
2.
3.
6-37
Solutions
Test Your Knowledge
1. Describe what settings control the quantities of the planned order of type
Kanban for an item.
MODEL ANSWER:
Planned orders of type Kanban can accumulate issues. The quantities that
are created in the planned orders of type Kanban are controlled through the
default order setting inventory quantities. For scheduled Kanbans, the
minimum and maximum inventory settings in the default order settings are
an important instrument to control the planned supply. Upon creation of the
scheduled Kanban, however, the default quantity on the Kanban rule is used.
2. How is a scheduled Kanban rule set up against a product family?
MODEL ANSWER:
Kanban rules can be set up against product families, such that those items
within the product family that are represented by the Kanban rule. The
product family is created as an item allocation key and associated with the
Kanban rule.
3. What are the ways that scheduled Kanbans can be created?
MODEL ANSWER:
Scheduled Kanbans are created by Master Planning based on requirements
from demand forecast, supply forecast, or from actual demand coming from
sales orders or production orders. The Kanbans are created based on the
Kanban rule and follow the standard Master Planning logic and firming
fences. Master Planning item coverage settings determine how the planned
orders are created and whether they are automatically or manually firmed
into scheduled Kanbans. Scheduled Kanbans can also be created manually by
the planner from the Kanban rule form, the Kanban schedule board and the
supply schedule.
6-38

4. Describe the relationship between action messages and planned Kanbans.
MODEL ANSWER:
Based on settings on the coverage group, actions can be generated to cancel,
advance, postpone, or increase scheduled Kanbans. Master Planning will not
delete firmed scheduled Kanbans. All planned Kanbans can be canceled and
changed just as any other planned order, providing that it is outside the
firming time fence or the planned Kanbans have not been approved. If an
action message has been disabled, then no action will be generated, similar to
any other planned item. Actions only apply for items with inventory
transactions; therefore, there are no action messages for non-inventoried
items.
5. What is the supply schedule and how does it relate to scheduled Kanbans?
MODEL ANSWER:
The Supply schedule form provides a comprehensive view of supply and
demand. The supply schedule is displayed for a specific plan and can be
filtered to show the supply and demand for a specific item and item
dimension, a generic item with the item dimension left blank, or for a product
family. A period template allows the supply schedule to be viewed by a
configurable range of periods. Scheduled Kanbans appear on the supply
schedule and can be firmed on the supply schedule directly. Scheduled
Kanbans can also be created manually on the supply schedule.
6-39
6-40
CHAPTER 7: ACTIVITY BASED SUBCONTRACTING

Objectives
The objectives are:
Describe how to set up subcontracting vendor payments.
Describe how to configure a resource group/work cell as

subcontracted.
Describe how activity-based subcontracting is used in Microsoft

Dynamics AX 2012.
Define how to set up and configure subcontracting activities in

production flows.
Define how to use alternate process flows with subcontracting

activities.
Describe how to use the Kanban board for process jobs for
subcontracting activities.
Introduction
Microsoft Dynamics AX 2012 provides a company with flexibility to subcontract
activities that are not seen as core competencies. The subcontracting functionality
offers visibility of the components provided to the subcontractor, and also, if
required, capacity visibility at the subcontractor. Additionally, working with the
Kanban planning and process boards allows companies to make quick, informed
decisions to effectively manage demand variations.
7-1

Overview
In Microsoft Dynamics AX 2012, there are now two approaches for
subcontracting: production orders and Lean manufacturing. The new solution
models the subcontracting work as a service that is related to an activity of a
production flow. A new cost group type, direct outsourcing, has been introduced,
and the subcontracting services are no longer part of a BOM. The cost accounting
of subcontracted work is completely integrated in the new costing for Lean
Overview: Subcontracting and Production Flows

Subcontracting, or outsourced manufacturing, for a company can combine many
components into multiple steps; some of these steps will occur within one or
more in-house manufacturing facilities and other steps will be completed outside
by one or more vendors. This type of work can result in complexities regarding
the tracking of components and estimated completion dates.
Production flows, as with in-house manufacturing, are the controlling part of the
subcontracting process, defining the various activities of the flow. A Kanban that
is processed through the production flow activities will create purchase orders for
vendor services; accordingly, the Kanban will update after completion of the
vendor services. A production flow that contains a service item, where the
resource group has a vendor as a resource, causes the system to create purchase
orders.
Overview: Subcontracting Capabilities

Subcontracting for Lean manufacturing in Microsoft Dynamics AX 2012
separates the material flow from the purchase process of the services. The
purchase order is created when the Kanban status is updated at least to planned.
These service items are used on purchase orders to represent the activity that the
vendor will do as part of the outside process. It contains the cost and results in an
accounts payable billing. When the vendor reports completing the work, the
purchase order receipt is posted for the services. When the related products are
received, the Kanban state is updated to Completed and the finished item is
received into inventory.
Perform these actions when subcontracting for an activity has been negotiated
with a vendor:
7-2
Create the service item (product).
Create the purchase agreement and agreement line for the vendor by
using the service item.
Create a resource group with the role of a work cell for the
subcontractor that provides the service.
Create a new version of a production flow (or a new production

flow).
Create a new production flow activity and relate the agreement to the
activity.
Connect the subcontracted activity to the other activities of the

production flow(if any).
Validate and activate the flow.
Subcontracting Vendor Payments

In Microsoft Dynamics AX 2012, you can create purchase agreements and
associate them with production flows. The purchase agreement contains all the
pricing information for the associated service, which is provided by the
subcontractor.
Release orders will be created from the purchase agreement to signal demands,
manage confirmations, report receipts and pay for the subcontracting service.
Purchase Agreements
You can locate the Purchase agreements form by navigating to Accounts
payable > Common > Purchase orders > Purchase agreements.
To create a new agreement, select the New > Purchase agreement button and
use the Purchase agreements form to create and define a new payment
agreement. The settings for subcontracting agreements are described in this topic.
The payment item that is used in activity-based subcontracting has to be a
product with the following properties:
Product type: Service
Inventory model group: Non stocked
Inventory model: FIFO
For cost calculation of the products, a standard cost of the service has to be
defined.
To be available for use with activity-based subcontracting, a purchase agreement
with the vendor is needed.
7-3

Purchase Agreement Header
This image shows the Purchase agreement header.
FIGURE 7.1 PURCHASE AGREEMENT HEADER
Purchase Agreement Header: Fields

The fields that are required for subcontracting on the Purchase agreement
header are described in this table.
7-4
Field
Description
Vendor account
The vendor account number.
Status
Select this field to activate or deactivate a purchase

agreement. You can only link order lines to purchase
agreements, if the purchase agreement is in Status
Effective.
Effective date
The date from which the purchase agreement is active.
Expiration date
The date until which the purchase agreement is active.
Purchase
agreement
classification
Blanket purchase agreement

Purchase Agreement Lines FastTab
This image shows the Purchase agreement lines FastTab.
FIGURE 7.2 PURCHASE AGREEMENT LINES FASTTAB
Purchase Agreement Lines FastTab: Fields

The fields required for subcontracting on the Purchase agreement lines FastTab
are described in this table.
Field
Description
Item number
The product used for the process should be of the service

type.
A service item is a non-tangible product.
In relation to subcontracting, the term service is used for
the product reference that is used to purchase,
deliver/receive, and invoice a specific service from a
vendor that is related to a tangible product or material
processed by Kanban.
Quantity
This is the total quantity contracted with the vendor for this
subcontracting agreement line.
Unit
Unit of service item.
Price
Price for each unit of service.
Effective date
The date from which the purchase agreement line is active.
Expiration
date
The date until which the purchase agreement line is active.
7-5
Resource Group/Work Cell

To configure a work cell as subcontracted, a resource of the vendor type needs
to be created and associated with the work cell (resource group). The vendor
defined in the purchase agreement must also be the vendor that is connected to
the work cell.
A runtime cost category with a direct outsourcing cost group type should be
assigned to the work cell. The cost categories for setup and quantity are not
needed.
In Microsoft Dynamics AX 2012, locations and work cells can be modeled as
vendor-managed by assigning the vendor account to a warehouse or to a resource
of a resource group.
Demonstration 7.1: Creating a Resource for the Vendor

Pierre, the value stream manager, is responsible for configuring the work cell.
1. Navigate to Organization administration > Common >
Resources > Resources.
FIGURE 7.3 RESOURCES
2. Select the Resource > New > Resource button.

3. Create a new record in the Resources form.
4. Enter the Resource identifier and a Description (for example, enter
Resource as 00001 and Description of subcontracting vendor).
5. Select Type as Vendor.
6. Select a Vendor (for example, select 1001).
7. Select the Close button to close the Resources form.
7-6

Demonstration 7.2: Configuring a Work Cell with
Subcontracting
Follow these steps to set up a work cell for subcontracting.
Resources > Resource groups.
FIGURE 7.4 RESOURCE GROUPS
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
Select the Resource group > New > Resource group button.
Create a new record in the Resource groups form.
Name the Resource group (for example, enter SUB).
Enter a Description for the Work cell (for example, enter
Subcontracting Work cell).
Select the Site (for example, select 2).
Switch to the General FastTab.
Select the Work cell field.
Select the Input warehouse the vendors warehouse (for example,
select SCC_SC1).
Select the Input location the vendors location (for example, select
material).
Select the Output warehouse (for example, select PaCovers).
Select the Output location (for example, select Supermarke).
Switch to the Calendars FastTab.
Select the Add button.
Select the Calendar (for example, select SubK).
Switch to the Resources FastTab.
7-7

18. Select the vendor Resource (for example, select 00001 created in
"Demonstration 7.1: Creating a Resource for the Vendor").
19. Select the vendor Calendar (for example, select SubK).
20. Switch to the Work cell capacity FastTab on the Resource groups
form.
21. Create a new record in the Work cell capacity area by selecting the
Add button.
22. Select the Production flow model (for example, select
CarSpeakermodel).
23. Select the Capacity period (for example, select Standard workday).
24. Enter the Average throughput quantity for the Vendor when using
throughput as the capacity measurement (for example, enter 100).
25. Select the capacity Unit (for example, select Pcs).
26. Select the Close button to close the Resource groups form.
Production Flow with Subcontracting Activities

The basic principle of a production flow does not change when activities are
subcontracted. Material still flows between locations, process activities convert
material to products, and transfer activities move material or products from one
location to another. Both process and transfer activities can be configured as
As any other activity in a production flow, subcontracted activities can consume
and supply inventoried, non-inventoried (WIP), and semi-finished material and
products. The processes to schedule and implement subcontracted activities are
the same in all cases, and are identical to the processes done for internal work.
Microsoft Dynamics AX 2012 identifies a work cell or warehouse as a vendor
type when you create activities within production flows; additionally, it
automatically populates this information into the activity wizard.
7-8

Subcontracting Service
The subcontracting service is assigned to the production flow activity using the
purchase agreements. The purchase agreement contains the service, and the
pricing information for the associated service.
FIGURE 7.5 SUBCONTRACTING SERVICE
7-9

Subcontracting Service Terms
When assigning the subcontracting service to the subcontracting activity within
the production flow, the subcontracting service terms can be configured to define
the basis for paying the vendor.
FIGURE 7.6 SPECIFY SUBCONTRACTING SERVICE TERMS
Subcontracting Service Terms: Fields

There are four options for configuring the subcontracting service terms. These
options are:
Product dimensions
Service ratio
Service unit
Service quantity base
Descriptions of the fields for these four options are presented in these sections:
7-10
Subcontracting Service Terms Fields: Product Dimensions, Service

Ratio, and Service Unit
Subcontracting Service Terms Fields: Service Quantity Base

Subcontracting Service Terms: Fields: Product
Dimensions, Service Ratio, and Service Unit
These are the descriptions of the fields of Product dimensions, Service ratio,
and Service unit that are options for configuring the subcontracting service
terms.
Field
Description
Product
dimensions
As a tangible product, a service can have variants that are

described with a configuration, size or color related to the
service.
Service ratio
The ratio used in the calculation to pay the vendor.
Service unit
The unit used in the purchase agreement.
Subcontracting Service Terms: Fields: Service Quantity

Base
This is the description of the field of Service quantity base that is an option for
configuring subcontracting service terms.
Field
Description
Service
quantity base
The complete purchase process is based on an item

reference for a service, measured in a services unit of
measure. Services are usually measured in number of
services (units) or in time. To calculate the service
quantity based on the registered completion of
Kanban, these methods can be applied:
Based on the number of jobs:
One Kanban job equals n units of service, independent
of the supplied product quantity.
In Lean manufacturing, one job corresponds to one
handling unit. This calculation method applies to all
services that have a fixed price for each handling unit.
This usually applies to transfer activities, but can also
apply to process activities that process entire handling
units.
Service quantity = Number of jobs(period) * Service
ratio
7-11

Field
Description
Based on the product quantity:
The service quantity is relative to the
scheduled/supplied product quantity. The supplied
product quantity can be calculated including or
excluding error quantities. This calculation method is
applied for all cases where the service price for each
unit of processed product is agreed upon.
Product quantity good:
Service quantity = Delivered product quantity good
(period) * Service ratio
Product quantity all:
Service quantity = Delivered product quantity (good +
error) (period) * Service ratio
Activity time:
The theoretical activity times are calculated based on
the processing time of the activity, the total processed
quantity, and the throughput ratio of the processed
product. This calculation method is applied for
services that are pay-by-the-hour and have a variance
in time for each processed product.
Activity time:Service quantity = Number of jobs
(period) * Activity run time * Service ratio
Demonstration 7.3: Configuring a Process Activity as a

Subcontracted Activity
Follow these steps to set up a subcontracting activity.
Production flows.
2. Select the New version activity > Create new plan activity menu
button.
4. Name the activity.
5. Select the Activity type as Process.
7. Assign a Work cell that is associated with the Vendor.
9. Assign the activity time for the subcontracting. When you select the
service calculation based on the service time, the activity runtime is
multiplied with the number of jobs to calculate the service quantity.
7-12

12. After a process activity is created and related to a subcontracted
work cell, a service needs to be configured for the activity before the
production flow version can be activated. This is done in the
Activity details form.
13. Select the subcontracting Activity and select the Details button.
14. Switch to the Service terms FastTab on the Activity details form.
15. Select the Add button. The wizard will guide you through this
process.
16. Select the Service and vendor service agreement being conducted.
18. Define the Subcontracting service terms.
Assigning Multiple Service Terms

Microsoft Dynamics AX 2012 allows you to have multiple service items for each
production flow activity. To assign multiple service items to one flow, select the
Add button in the Service terms FastTab and follow the wizard. Assign output
products to service items. An output product is the item that is produced by the
subcontractor. A different service term can be a different service product or just a
different calculation/service ratio.
7-13
FIGURE 7.7 MULTIPLE SERVICE TERMS
7-14

Transfer Activities as Subcontracting Activities
Transfer activities can be configured as subcontracting activities. The
subcontracting payment is determined by a combination of the Warehouse and
Freighted by field in the activity setup. A transfer activity is configured as a
subcontracted activity, depending on the Freighted by field of the transfer
activity and the warehouse setup.
The activity is subcontracted if the Freighted by is set to Shipper and the From
warehouse is managed by the vendor. The activity is subcontracted if the
Freighted by is set to Recipient and the To warehouse is managed by the
vendor. If the warehouse is managed by the vendor, the warehouse will have the
Vendor account designated as the subcontractor.
FIGURE 7.8 SUBCONTRACTING TRANSFER ACTIVITIES
Transfer Activities as Subcontractor Activities: Fields

This table defines the options for configuring the transfer details for
subcontracting transfer activities.
Field
Description
Transfer from
location
warehouse
The warehouse where the material will be transferred

from, normally an in-house warehouse.
Vendor
Auto-populated based on the warehouse selection.
7-15

Field
Description
Transfer to
location
warehouse
The warehouse to which the material is to be

transferred, normally the subcontractor warehouse.
Vendor
Auto-populated based on the warehouse selection.
Freighted by
A transfer activity is configured as a subcontracted

activity, depending on the Freighted by selection of
the transfer activity and the warehouse setup.
Shipper: if From Warehouse is managed by the
vendor, the activity is subcontracted.
Recipient: if To warehouse is managed by the

vendor, the activity is subcontracted
Carrier: activity is provided by a third party.
Demonstration 7.4: Configuring a Transfer Activity as

Subcontracted
To configure a transfer activity as a subcontracted activity, follow this procedure.
Inventory breakdown > Warehouses.
2. Create a new warehouse or find the Warehouse that represents the
subcontractor.
3. Ensure the warehouse has a Vendor account.
4. Select the Close button to close the Warehouses form.
5. Navigate to Production control > Setup >
Lean manufacturing >Production flows
6. Select the Production flow to add the transfer activity.
7. Select the Activities button.
8. Select the New version activities > create a new plan activity
button.
10. Enter activity Name for the transfer.
11. Select Activity type as Transfer.
14. Assign the transfer Warehouse and Locations.
15. Select the Freighted by as Shipper if From Warehouse is managed
by the vendor, to designate that the activity is subcontracted;
Recipient if To warehouse is managed by the vendor to designate
the activity is subcontracted; Carrier if the activity is provided by a
third party.
7-16

17. Assign the activity times. When you select the service calculation
based on the service time, the activity times are multiplied with the
number of jobs to calculate the service quantity. The activity times
are always (not only for subcontracting) used to calculate the issues
(requirements) for the material based on a jobs due date.
19. Select the > Finished button.
20. Select the Production flow.
21. Select the Details button.
22. Change to the Service terms FastTab.
24. Select the Service and vendor service agreement being conducted.
27. Select the > Finished button.
Create Purchase Documents for Subcontracting Form

Microsoft Dynamics AX 2012 allows you to procure pay, schedule, and receive
the service items that are used in the subcontracting process. The purchase
document creation is run individually or placed in a batch queue to pay, schedule,
and receive the process. The utility creates purchase order releases off of the
purchase agreement and posts receipts based on the completed subcontracted jobs
previously generated as a release for the purchase agreement. The action is
defined by using the selection criteria on the form.
FIGURE 7.9 CREATE PURCHASE DOCUMENTS FOR SUBCONTRACTING
7-17

You can locate the Create purchase documents for subcontracting form by
navigating to Production control > Periodic > Lean manufacturing >
subcontracting documents.
Create Purchase Documents for Subcontracting Form:

Fields
There are ten fields on the Create purchase documents for subcontracting
form. These are:
Production flow
Plan activity
Kanban rule
Vendor account
From date
To date
Minimum job status
Release purchase orders
Aggregate purchase lines by
Receipt advices
Descriptions of the fields on the Create purchase documents for

subcontracting form are presented in these sections:
Create Purchase Documents for Subcontracting Form: Fields:

Production Flow, Plan Activity, and Kanban Rule

Vendor Account, From Date, and To Date

Minimum Job Status and Release Purchase Orders

Aggregate Lines By and Receipt Advices

Fields: Production Flow, Plan Activity, and Kanban Rule
These are the descriptions of the fields of Production flow, Plan activity, and
Kanban rule that appear on the Create purchase documents for
subcontracting form.
7-18
Field
Description
Production
flow
Allows you to select the production flow for creating the


Field
Description
Plan activity
Allows you to select the activity name for creating the

Kanban rule
Allows you to select the Kanban rule for creating the


Fields: Vendor Account, From Date, and To Date
These are the descriptions of the fields of Vendor account, From date, and To
date that appear on the Create purchase documents for subcontracting form.
Field
Description
Vendor
account
Allows you to select the vendor for creating the

From date
Select only jobs with the job date equal to or after this date.
To date
Select only jobs with the job date equal to or before this
date. For planned jobs the planned period date is used. For
completed jobs the actual completion date is used.

Fields: Minimum Job Status and Release Purchase
Orders
These are the descriptions of the fields of Minimum job status and Release
purchase orders that appear on the Create purchase documents for
subcontracting form.
Field
Description
Minimum
job status
Minimum job status allows you to choose which Kanbans

you want to generate purchase documents for.
Not planned
Release
purchase
orders
Planned (recommended for purchase order creation)
Prepared (recommended for purchase order creation)
In Progress (recommended for purchase order creation)
Completed (recommended for purchase order receipt)
When selected, the utility will generate purchase release

orders from the purchase agreement for the Kanbans that
have not had releases already created for the selection
criteria.
7-19

Fields: Aggregate Purchase Lines By and Receipt
Advices
These are the descriptions of the fields of Aggregate lines by and Receipt
advices that appear on the Create purchase documents for subcontracting
form.
Field
Description
Aggregate
purchase
lines by
Microsoft Dynamics AX 2012 provides various selections to

aggregate demand. These are:
None: creates a purchase order for each Kanban
Receipt
advices
7-20
Day: creates one purchase order for each vendor for all
Kanbans that are scheduled for an individual day
Month: creates one purchase order for each vendor for

the month selected
All: creates a purchase order for each vendor for

Kanbans
When selected, the utility will generate purchase receipts for

existing purchase orders. This option is only available for
completed Kanbans.
Lab 7.1 - Process a Subcontract Activity

This lab facilitates the processing of a subcontract activity.
Scenario
Pierre has decided that he would like to temporarily stock some subcontract
products in his cell and although the Kanbans are of type schedule he has decided
to create tickets manually. Pierre creates new Kanban cards to signal sending and
receiving more material from the subcontractor.
Services have been configured for subcontracting.
Purchase agreements and an agreement line for the vendor using the
service item are configured.
The subcontracted activity will take place at a location provided by

the vendor; a resource group with the role of a work cell for the
vendor facility that provides the service is configured.
A production flow activity and related purchase agreement to the

activity is configured.
Challenge Yourself!
Follow these steps to process the Kanban jobs with subcontracting activities.
1. Create Kanban jobs using the existing Kanban rules for material to
be transferred to the subcontractor.
o Kanban rule: 000044_1015
o Product: SCPS_UPSCR
o Type: Withdrawal
o Kanban Rule: 000043_1015
o Product: SCPS_UPSCL
o Type: Withdrawal
be received from the subcontractor.
o Product: SCPS_CSCR
o Product: SCPS_CSCL
7-21

3. Transfer the raw materials to the subcontractor using the Kanban
board for transfer jobs.
4. Schedule the subcontract Kanban jobs using the Kanban schedule
board.
5. Start the Kanban jobs using the Kanban board for process jobs;
this indicates that the Kanban is at the supplier.
6. Release the purchase orders for the subcontractor by using the
Create purchase documents utility.
7. Complete the Kanban jobs by using the Kanban board for process
jobs; this indicates that the product has been reported complete by
the subcontractor.
8. Generate the receipt advices for the subcontractor by using the
Create purchase documents utility.
Step by Step: Create Kanban Tickets for Withdrawal

Kanbans
Follow these steps to create Kanban tickets for withdrawal Kanbans.
Kanban rules.
2. Right-click on the Kanban rule field and select Filter by field.
3. Enter the Kanban rule 000044_1015.
5. Open the Kanbans FastTab.
7. Enter the Number of new kanbans as 2.
8. Select the Due date/time as Today.
18. Select the Close button to close the Kanban rules form.
7-22

Step by Step: Create Kanban Tickets for Manufacturing
Kanbans
Follow these steps to create Kanban tickets for manufacturing Kanbans.
Kanban rules
Step by Step: Replenish the Kanban Transfer Jobs

Follow these steps to replenish the Kanban transfer jobs.
manufacturing > Kanban board for transfer jobs
2. Select the Change filtering options button.
3. Select Production flow as Speaker covers coating.
5. Select Kanban for Item number SCPS_UPSCR.
6. Select the Transfer > Start button.
7. Select the Transfer > Complete button.
8. Select Kanban for Item number SCPS_UPSCL.
9. Select the Transfer > Start button.
11. Select the Close button to close the Kanban board for transfer
jobs.
7-23

Step by Step: Plan the Kanban Jobs
Follow these steps to plan the Kanban jobs.
3. Select Work cell as SCC_SC1.
5. Select the Kanban for SCPS_CSCL.
6. Drag the Kanban onto Today.
7. Select the Kanban for SCPS_CSCR.
Step by Step: Start the Kanban Process Jobs

Follow these steps to start the Kanban process jobs.
manufacturing > Kanban board for process jobs
6. Select the Manufacture > Start button.
8. Select the Manufacture > Start button.
9. Select the Close button to close the Kanban board for process
jobs.
Step by Step: Release Purchase Orders

Follow these steps to release purchase orders.
Lean manufacturing > Subcontracting documents.
2. Select the Production flow as Speaker covers coating.
3. Select Minimum job status as In progress.
4. Ensure Release purchase orders is selected.
7-24

Step by Step: Complete the Kanban Process Jobs
Follow these steps to complete the Kanban process jobs.
manufacturing > Kanban board for process jobs
3. Select the Manufacture > Complete button.
6. Select the Close button to close the Kanban board for process
jobs.
Step by Step: Generate Receipt Advices

Follow these steps to generate receipt advices.
Lean manufacturing > Subcontracting documents.
2. Ensure Production flow is set to Speaker covers coating.
3. Select Minimum job status as Completed.
4. Deselect Release purchase orders field.
5. Select Receipt advices field.
7-25
Subcontracting as an Alternate Resource

Microsoft Dynamics AX 2012 allows you to schedule Kanbans on alternate
resources. This functionality allows the value stream manager to use alternate
resources to balance the workload throughout his or her organization.
To optimize the throughput in any process, the Kanban schedule board has the
function use alternative Kanban rule. This function allows the planner to
reschedule a Kanban that was originally created for one work cell to an
alternative work cell. This cell could be an alternate in-house resource or a
subcontracting resource; the process for the planner is the same for both.

The planner can assign an alternate Kanban rule to the Kanban job straight from
the Kanban schedule board. This is done by selecting the Kanban job and
selecting the Use alternative kanban rule button.
7-26

Open Kanban
The planner can also change the Kanban rule by right-clicking on the Kanban
and selecting Open kanban. The Assign > Use alternative kanban rule button
can then be used to assign an alternate Kanban rule to the Kanban job.
FIGURE 7.11 OPEN KANBAN
Alternate Kanban Functionality

To use the alternate Kanban functionality, certain prerequisites have to be met in
the Kanban rules.
Alternate Kanban rules only work with scheduled or event Kanbans,

not with fixed quantity Kanbans.
Alternate Kanban rules must have the same of these functions:

o Product selection
o Replenishment strategy (scheduled or event)
o Supplied location (site, warehouse, location)
o Type of event (sales, BOM, Kanban, minimum stock)
The Kanban rule of a Kanban can be changed to an alternative

Kanban rule if this occurs:
o
o
o
The Kanban has handling a unit status of Not assigned

The Kanban jobs are not planned
The Kanban has replenishment status of Scheduled or Event
7-27

When you change a Kanban rule, the conversion will perform these tasks:
7-28
Delete old Kanban jobs and Kanbans
Create new Kanban jobs and Kanbans
Preserve the Kanban quantity and due date
Transfer the event pegging to the new Kanban, for events
Lab 7.2 - Using an Alternate Subcontractor

This lab facilitates the assigning of Kanban jobs to an alternate subcontractor.
Scenario
Pierre is reviewing demand on the Kanban board, when he gets a call from his
subcontractor. The subcontractor informs Pierre that they have a machine
breakdown. Pierre reschedules the demand to use his alternate subcontractor.
FIGURE 7.12 ALTERNATE PRODUCTION FLOW WITH SUBCONTRACTED

ACTIVITY
Challenge Yourself!
Use these steps to create the Kanban jobs and reschedule the Kanban jobs to an
alternate subcontractor.
be received from the subcontractor.
o Product: SCPS_CSCL
7-29

2. On the Kanban schedule board assign the Kanban job to an
alternative Kanban rule.
Step by Step: Create Kanban Tickets for Manufacturing

Kanbans
Follow these steps to create Kanban tickets for manufacturing Kanbans.
Kanban rules
Step by Step: Assign and Plan Alternative Kanban Rule

Follow these steps to assign and plan an alternative Kanban rule.
6. Select the Plan > Use alternative kanban rule button.
8. Select the alternative Kanban rule 000042_1015.
7-30
Cost Accounting of Subcontracted Services

Activity-based subcontracting in Microsoft Dynamics AX 2012 introduces new
costing concepts. The process activities is used as part of the cost calculation for
the finished product based off the production flow using a new cost group type of
direct outsourcing. Receipts for subcontractor services and invoices are directly
contributing to the cost of the production flow. Output product receipts and
vendor invoices are reconciled against the work in progress (WIP) accounts.
Variances are accounted for in the backflush costing process.
Direct Outsourcing Cost Group Type

A new cost group type for subcontracted work has been introduced in Microsoft
Dynamics AX 2012. The cost group type of direct outsourcing is assigned to
all work provided by subcontracting work cells.
To properly calculate the item cost for subcontracting, a few prerequisites must
be set up:
A cost group type of direct outsourcing is assigned to all

subcontracting work cells.
Subcontracting must be activated in the costing sheet, with the cost

groups for direct outsourcing associated with them.
Kanban rules are created with the subcontracting activities in the

production flow.
FIGURE 7.13 COSTING SHEET SETUP FOR SUBCONTRACTING
Cost Calculation
When calculating the item cost based on the production flow, Microsoft
Dynamics AX 2012 uses the subcontracting service activity settings to define the
item cost. The cost breakdown shows the service item instead of the work cell as
a resource.
7-31

NOTE: Subcontracted transfers are not calculated in the item cost.
FIGURE 7.14 ITEM COST CALCULATION
Subcontracting Cost Flow

Activity-based subcontracting in Microsoft Dynamics AX 2012 accounts for cost
contributions to production flows based on subcontracted production flow
activities. The cost contribution of subcontracted activities is estimated at
standard cost of the service using the service quantity calculation for the quantity
used for the BOM-calculation. By default this is the inventory default order
quantity of the item.
When you receive material back from the subcontractor, and after you post the
receipt advisory advice or a vendor packing slip on a purchase order that was
created for a subcontracted activity, Microsoft Dynamics AX 2012 accounts for
the value of the receipt in the WIP accounts of the production flow. This debits
the actual production flow work in process for the service that is provided by the
subcontractor to the company.
Deviations of invoices to the receipts are also accounted as variances to the
production flow. The new cost category introduced in Microsoft Dynamics AX
2012 allows for transparent tracking of the value of subcontracted work that is
allocated to WIP and consumed each period.
7-32

Diagram: Subcontracting Cost Flow
This diagram depicts the accounting that is associated with the subcontracting
cost flow.
FIGURE 7.15 SUBCONTRACTING COST FLOW
The backflush costing for Lean manufacturing at the end of a costing period
calculates the actual variances of the products to standard cost for products that
are produced out of the production flow during the costing period.
Scenario: Subcontracting Cost Flow

This scenario depicts the subcontracting cost flow, where material is left over in
the WIP accounts throughout the subcontracting process.
In this scenario, the product that is being manufactured out of the subcontracting
process is SCPS_PSCL_CR, a chrome cover left. The subcontractor performs the
chroming process. The finished chrome cover left has a standard cost of $ 0.90.
This standard cost is calculated as such:
Direct material = $ 0.10; calculated with1 unit for each product of

item SCPS_UPSCL, unpainted cover left with a cost of $0.10.
Indirect cost = $ 0.20; calculated with 200 percent of direct material

cost.
Direct outsourcing = $ 0.60; calculated as 1 unit of service for the

subcontracted chroming activity for each product at a cost of $0.60.
Currently, two Kanbans for 50 units each have been initiated, one Kanban of 50
units have been produced, and three Kanbans of 50 units of raw materials have
been replenished into the production flow. One hundred (100) units of service for
the subcontracting chroming process have been received at $0.65 for every unit.
7-33

Fifty (50) of these units were invoiced at $0.70 for every unit. This figure shows
the subcontracting costs that are associated with this flow.
FIGURE 7.16 SUBCONTRACTING COST FLOW SCENARIO
Scenario: Subcontracting Cost Flow: Steps

These steps show what occurs within the subcontracting process and the
subsequent results of those actions.
1. The subcontractor delivers 50 units at a standard cost of $.90 for
each unit. This results in a WIP credit of $45 and a finished goods
debit of $45.
2. The product receipt for 100 service units is received at $0.65 for each
unit, resulting in a liability credit of $65 and a debit to WIP of $65.
3. The vendor invoice is received for 50 units at $.70 for each unit,
resulting in a variance of $0.05 for each unit. This credits the liability
account for $2.50 and debits the WIP account for $2.50.
Scenario: Subcontracting Cost Flow - Backflush Costing

At period-end, backflush costing is run, and in this scenario, the status of
products is then considered.
7-34
45 units of unpainted cover left remain unused in the production flow
50 units of chrome cover left are still in process in the production

flow
50 units of chrome cover left have been received as output of the

production flow

Scenario: Subcontracting Cost Flow - Backflush Costing:
Contributed Costs
The contributed costs are from the 95 units of unpainted covers left in WIP and
the 50 units of chroming service still in WIP. Ninety-five units of unpainted
covers remain as work in progress by period end.
The direct material = $9.50; calculated at 95 units of unpainted cover

left at a standard cost of $0.10.
The indirect cost = $19; calculated at 200 percent of $9.50 remaining

in the production flow work in progress.
Direct outsourcing = $30; calculated at 50 units at a standard cost of

$0.60.
FIGURE 7.17 BACKFLUSH COSTING
Scenario: Subcontracting Cost Flow - Backflush Costing:

Realized Cost
The realized cost for the period is then calculated as $54, taking this into account:
Realized direct material cost for the period = $5.50; calculated at 150
units at $ 0.10 $9.50 =$5.50
Realized indirect cost for the period = $11; calculated at 200 percent
of $15 $19 = $11
Realized direct outsourcing =$ 37.5; calculated at $65 + $2.50 - $30
The output of the period is $45, calculated at the 50 units of chrome cover left
received out of the production flow at $.90 standard cost for each unit.
The resulting variance to standard cost is then $9.
7-35
Summary
Activity Based Subcontracting included set up and configuration of
subcontracting activities in production flows, how to use alternate process flows
with subcontracting activities, how to use the Kanban board for process jobs for
subcontracting activities, subcontracting cost flow scenarios for Microsoft
Dynamics.
This lesson included several labs to set up, plan, and implement against
subcontracting Kanban jobs by using the Kanban schedule board, the Kanban
board for process jobs, and the Kanban board for transfer jobs.
7-36
Test Your Knowledge

1. What are the steps that are required to configure the system for
subcontracting Kanbans after negotiating with the vendor?
2. Describe how the contract details for a subcontractor are stored with
Dynamics AX?
3. Describe how you link a vendor to the work cell?
7-37

4. What periodic process do you use to generate purchase orders for
subcontracting?
5. On which form would you find the function that allows you to switch to an
alternate subcontractor Kanban rule?
6. What new cost group type was introduced in Microsoft Dynamics AX 2012?
7-38

chapter
1.
2.
3.
7-39
Solutions
Test Your Knowledge
1. What are the steps that are required to configure the system for
subcontracting Kanbans after negotiating with the vendor?
MODEL ANSWER:
Create the service item (product)
Create the agreement and agreement line for the vendor by using the service
item
If the subcontracted activity is taken place at a location that is provided by
the vendor, create a resource group with the role of a work cell for the vendor
facility that provides the service
Create a new version of a production flow (or a new production flow)
Create a new production flow activity and relate the agreement to the
activity
Connect the subcontracted activity to the other activities of the production
flow, and then validate and activate the flow
Validate and activate flow
2. Describe how the contract details for a subcontractor are stored with
Dynamics AX?
MODEL ANSWER:
The purchase agreement contains all the pricing information for the
associated service, which is provided by the subcontractor.
3. Describe how you link a vendor to the work cell?
MODEL ANSWER:
Link the vendor as a resource and then link the resource to a resource group
type work cell.
4. What periodic process do you use to generate purchase orders for
subcontracting?
MODEL ANSWER:
Create purchase documents for subcontracting. Navigate to Production
control > Periodic > Lean manufacturing > subcontracting documents.
7-40

5. On which form would you find the function that allows you to switch to an
alternate subcontractor Kanban rule?
MODEL ANSWER:
The Kanban schedule board has the function to choose an alternate Kanban
rule.
Navigate to Production control > Common > Lean manufacturing > Kanban
schedule board
6. What new cost group type was introduced in Microsoft Dynamics AX 2012?
MODEL ANSWER:
The cost group type of direct outsourcing, which is assigned to all
subcontracting work cells.
7-41
7-42
CHAPTER 8: PRODUCTION FLOW COSTING

Objectives
The objectives are:
Describe the concept of backflush costing and how it is used in

Dynamics AX 2012.
Describe conversion cost for items produced by a Kanban in a

production flow.
Describe the different calculation methods of standard costs for items

produced with a Kanban job.
Understand how costs are reported to the general ledger when

producing items using Lean process flows.
Demonstrate how to view the costing for a Kanban job based on a

subcontracted activity.
Describe production flow periodic posting using the backflush

costing calculation.
Introduction
Production Flow Costing explains the costing setup required for production
flows in Microsoft Dynamics AX 2012 and the subsequent flow of costs
originating from transactions used to process Kanbans within those production
flows.
Backflush costing
Conversion costs for Lean produced items
Standard cost calculation for an item produced using a production

flow
Ledger entries created from processing a production flow
WIP costs accumulated during the processing of a production flow
Backflush costing calculation
In Microsoft Dynamics AX 2012, costing for Lean manufacturing operations

uses the cost accumulation method backflush costing. Backflush costing is used
to simplify and in some cases eliminate the need for systematic and sequential
reporting of resource usage (material and operation resources) for a production
flow.
8-1

Under the backflush costing method, the direct and indirect material at standard
cost for items supplied is accumulated in the production flows work in progress.
Conversion costs (direct and indirect manufacturing costs) are absorbed at
standard cost upon crediting production flow work in progress for completed
quantities.
Backflush Costing
Backflush costing in Microsoft Dynamics AX 2012 can be defined by:
Allows simplified reporting on material and operation resources,

such as reporting consumption on empty bins or else not reporting
consumptions and eliminate the need for reporting usage of operation
resources.
BOM calculation for items produced through production flows
Accounts for moving direct material cost to work in progress, for

products contributed to production flow, but whose physical flow in
the production flow is not reported or maintained (simplified
backflush costing journal entries).
Cost accounting through substituting the production flow definition

for routes.
Cost accounts the direct material cost resulting from products, whose
physical flow in the production flow is maintained through on-hand
inventory (no backflush).
Values the production flow output (quantities produced), at the

products standard cost.
Absorbs and applies to production flows WIP account, the standard

conversions costs (direct and indirect manufacturing cost) for the
production outputs from a production flow.
Allows an end of period backflush costing process, for computing

the variances to standard cost for quantities of products produced for
the period, and the correction of the financial situation (relatively to
the omitted journal entries for the product cycle).
Products and Material in Work in Progress

The reduction of batch sizes down to the ideal state of a single piece flow in Lean
manufacturing can cause a significant increase of transactions if each picking
process, or Kanban registration, causes transactions for the consumed items.
The production flow architecture enables the transfer of material to the
production flow with withdrawal Kanbans in storage or transport handling unit
sizes. The value of the issued material is added to the WIP account related to the
production flow similar to material issued to a production order. The same
principle can be applied for products and semi-finished products, unless they are
created, transferred, or consumed in a production flow, inventory transactions are
optional. When the products are posted to inventory, the WIP account to the
production flow is deducted by the related standard cost.
8-2

Periodic Backflush Costing
Periodic backflush costing of the production flow allows calculating the
production variances to standard cost for the production flow and period while
creating ledger entries to account for unused and in-process quantities that are
still in the production flow at end of period.
Standard Cost Requirement

Production flow activities and resource usage will be cost accounted at standard
cost. Therefore, Lean manufacturing activities and resource usage will be cost
accounted at standard cost and support full absorption. Full absorption implies
that both direct and indirect cost contribute to the inventory value. Standard cost
implies that a pre-determined cost is used to value resources (material, operation
resource and indirect cost). Variance to standard cost captures the difference
arising between the realized cost and the predetermined standard cost.
The creation of an item relation between a Kanban rule and a collection of items
(a specific item, a group of items or all) for a production flow is restricted to only
allow items being held at standard cost.
NOTE: A standard cost must be established for an item prior to the creation and
processing of Kanban jobs. For purchased items, this is a simple cost creation.
For manufactured items, a BOM calculation must be performed.
Exception for Transfer Jobs

One exception to the standard cost requirement is for withdrawal Kanbans.
Withdrawal Kanbans for non-standard cost products may be created if the update
on-hand pick and receipt are both set to yes. This will allow moving a nonstandard cost product from one inventory location into another, but will not allow
movement of a non-standard cost product into or out of WIP.
Standard Cost Inventory Model

All products related to the production flow need to be assigned to an inventory
model group with inventory model standard cost. Standard cost is maintained
per site and activated as of date. For product masters, it can be selected if the cost
is maintained per variant or per product master.
Standard Cost for Materials

A cost group must be set up for purchased material that identifies the material
category for costing. The cost group allows an aggregated view on cost, WIP and
variances by material category. The standard cost for material is maintained and
activated manually.
8-3

Standard Cost for Finished Products
The standard cost for products is calculated with the cost calculation based on the
BOM and either the production flow and Kanban rules or the route.
NOTE: The use of routes to calculate an item's standard cost is likely to
introduce variances for the product produced.
Standard Cost for Subcontracted Services

Subcontracted services in Lean manufacturing are by definition non-tangible
products of type service. This implies an inventory model group with stocked
product = False. For the cost calculation for output products based on production
flow a standard cost needs to be maintained for the services related to
subcontracted activities. The cost group assigned to the services is used to
determine cost variances of the subcontracted services.
Applied Conversion Costs on Lean Manufacturing

In Lean manufacturing for Microsoft Dynamics AX 2012, conversion costs are
not applied according to the product's standard cost conversion cost. Instead,
conversion costs are calculated and applied according to the effective production
flow's planned operation resource usage for the product at the standard rate for
operating resources.
This can result in variances to standard cost on conversion cost, when the
standard cost of products is not revised according to the changed to production
flow.
Components for Lean Manufacturing

Costing for Lean manufacturing consists of these types of costs:
Material costs
Manufacturing costs (also called "labor costs")
Indirect costs
Outsourcing costs
A costing version, cost categories, cost groups and the costing sheet must be set
up prior to calculating the item's cost and activating that into a standard cost
which is required to create Kanban rules.
8-4

Costing Setup for Lean Manufacturing
The Costing version is the main repository for maintaining costs of all types.
Cost groups serve as a classification of element of costs and are the basis for
cost breakdown analysis. They are also used to identify the basis for indirect cost
calculation. Rules for calculating indirect costs are defined in the Costing sheet.
Cost categories are used to define costs and ledger accounts for resources/work
cells.
Application of Costs and Variances

Direct manufacturing costs are applied upon reporting completed quantities of
product, using the production flow planned usage of the operation resource at the
operation resource standard rate (cost category rate).
A cost category needs to be assigned to the run time category of the work cell.
The cost categories for setup and quantity are not considered in costing for Lean
manufacturing. The WIP accounts per resource group are ignored in backflush
costing. For subcontracted activities, no cost category is needed as the cost
group assigned to the active service is used instead.
FIGURE 8.1 COST CATEGORY ILLUSTRATION
8-5

Indirect Manufacturing Costs
Indirect manufacturing costs are applied upon the debiting or crediting of WIP
according the costing sheet definition.
FIGURE 8.2 COSTING SHEET ILLUSTRATION
Production variances on direct manufacturing and indirect manufacturing costs

capture the difference between the applied conversion costs for the production
flow and the products standard cost conversion cost.
Production Group
The production group associated to the production flow defines the work in
progress related ledger accounts. The production group setup is used to resolve
the ledger accounts for posting in general ledger posting originating from the
production flow for these posting types:
Ledger - Items
Ledger - Resources
Ledger - Lean subcontracting
Ledger - Indirect
The Production groups form can be accessed from Production Control >
Setup > Production > Production groups.
8-6

Inventory Posting Profile
If accounts are not defined for a production group named for the production flow,
the system falls back to the posting profile for resolving the ledger accounts for a
particular posting type.
The posting profiles can be accessed from Inventory and warehouse
management > Setup > Posting > Posting.
Demonstration 8.1: Set up Ledger Posting for Lean

Manufacturing
Scenario: In this scenario, accounts will be set up that will be used to post
material, labor, indirect and outsourcing costs.
Use these steps to set up the ledger posting accounts on the production group,
inventory posting profiles and cost categories:
1. Navigate to Production control > Setup > Production >
Production groups.
2. View the accounts for various posting types. Change accounts if
desired.
3. Close the Production groups form.
Posting > Posting.
5. View the accounts for various posting types. Change them if needed.
6. Switch to the Standard cost variance tab on the Posting form.
desired.
8. Rounding Variance account is mandatory for posting backflush
costing.
9. Close the Posting form.
10. Navigate to Production control > Setup > Routes > Cost
categories.
11. Select Cost category SC_Coat.
desired.
13. Close the Cost categories form.
8-7

Calculation of Standard Cost
The standard cost for products produced within a production flow is calculated
with the cost calculation based on the BOM and either the production flow and
Kanban rules or the route. Additionally, the standard cost calculation can be run
for a single item or for a group of items. The different settings available for cost
calculation are shown in this table:
8-8
BOM
Calculation for
Single or
Multiple Items
Cost Calculation Source
Coverage Settings
Run for a
single item
Planned cost for the product is

computed according to the route
structure selected.
Not Applicable.
Run for a
single item

computed according to the
selected production flow for the
chosen calculation date.
Not Applicable.
BOM
calculation is
run on a range
of products

computed according to the
default production flow for the
site and product, treating
composed components produced
in the production flow as
phantoms, when those are not
maintained with an inventory on
hand in the production flow.
Item coverage or
default order settings
for the site are set with
planned order type =
Kanban.
BOM
calculation is
run on a range
of products

computed according to the active
route and BOM.
Item coverage or
default order settings
for the site are set with
planned order type =
Production.
BOM
calculation is
run on a range
of products

computed according to the route
if a valid one can be found. If a
valid one cannot be found and a
default production flow has been
defined for the site and product,
the production flow will be used
to calculate the cost.
No item coverage and

no default order
settings are defined.

Calculation Based on the Production Flow
In Microsoft Dynamics AX 2009, routes were required to calculate conversion
costs when performing a cost calculation for product manufactured using
production orders. Lean manufacturing for Microsoft Dynamics AX 2012 now
allows for substitution of production order routes with the production flow
definition for the calculation of costs of products manufactured using production
flows. The cost calculation for products manufactured through a production flow
can be done based on the production flow itself. To be able to perform the cost
calculation, a Kanban rule needs to be created that defines how the product is
supplied out of the production flow and what activities should be used to
calculate the conversion cost.
If a product can be supplied out of multiple production flows at the same site at
the calculation date, the default production flow can be selected for the BOM
calculation. The default production flow can be configured per item in the
Default production flow form.
If multiple Kanban rules exist for the same product in the product in the same
production flow that are active at the calculation date, the calculation picks the
first Kanban rule that is active for the calculation.
NOTE: If products can be produced in many different flows and activity
variants, it may be useful to create a specific production flow for costing that
only includes the activities and Kanban rules needed for costing. This also allows
different throughput ratios to be set for the calculation than what are applied in
the actual production.
8-9

Default Production Flow
The default production flow can be named per site on the Default production
flow form.
FIGURE 8.3 DEFAULT PRODUCTION FLOW
The cost calculation will use the default production flow to determine the cost
when the cost calculation is run for a range of products and the item coverage
setting is set to a Planned order type of Kanban or when there is not a route
defined for the item.
Calculation Based on the Route

The calculation based on a route is equally valid than the calculation based on a
production flow. The route should use resource requirements for resource groups
and use the same work cells or at least the same cost categories to avoid
systematic variances. Again, cost categories for setup and quantity should be
avoided. It adds no value to calculate the cost in a more granular breakdown than
can be provided by Lean manufacturing cost backflushing.
8-10

Choosing the Calculation Method
To determine the better option to calculate the cost production flow or route
consider the results of the cost breakdown. The version that comes closer to
reality and in the end of the day and results in less variances is the better option.
In a Lean manufacturing environment where a product is supplied by a single
production flow and a single Kanban rule, the calculation is probably more
accurate based on the production flow. A product that can be supplied by Lean
manufacturing and production orders on the same site or can have multiple
production flows or multiple Kanban rules in the same flow might be more
accurate to calculate on a route version that is specifically built for the cost
calculation, not the production as such.
To calculate products with subcontracting, the production flow calculation has to
be used. In Microsoft Dynamics AX 2012, the cost models for subcontracting
with production orders and subcontracting in Lean manufacturing are not
compatible. Production orders calculate subcontracted services as materials. Lean
manufacturing introduces a new Cost group type direct outsourcing for
subcontracted services.
8-11

Flattening of BOM during Cost Calculation for Lean Items
When items produced in a production flow are designated as non-inventory
controlled by deselecting the Update on hand inventory selection defined for
the production flow activity, these items are treated similarly to a phantom
component when they are included within a BOM. When one of these
components is encountered in a BOM calculation, the system explodes through
the item's BOM and lifts the components one level up in the BOM as though they
were components of the parent instead of components of the composed item.
FIGURE 8.4 ACTIVITY DETAILS - UPDATE ON-HAND INVENTORY SETTING
The setting for Update on hand inventory can significantly change the financial
postings as described in the section "Reporting Production Flow Activities:
Variations When Reporting Production Flow Activities" within this chapter.
When this flag is unchecked, the items are considered as not inventory
controlled.
8-12
Lab 8.1 - Configure Standard Costing in Microsoft Dynamics

AX 2012
Costing for Lean manufacturing in Microsoft Dynamics AX 2012 is based on the
framework for standard costing and requires standard costing to be configured.
This lab facilitates the configuration of a new costing version for products
manufactured using a production flow.
Scenario
Contoso has recently began transitioning several value streams to Lean processes
and have defined several production flows and their associated activities within
Microsoft Dynamics AX 2012. With the implementation of Lean manufacturing,
Pierre needs to configure a costing version to work with. In order to set up the
costing needed for these production flows, Pierre will work with Phyllis to set up
the costing version, cost groups, cost categories and the costing sheet.
Create a new costing version for calculating standard costs for products
manufacturing using a production flow. New cost groups LeanMaterialCosts,
LeanManufacturingCosts, LeanIndirectCosts and LeanOutsourcingCosts will be
set up. Cost categories will be set up and named L_Work and L_Lab. The
costing sheet will then be set up to use the new cost categories created.
Two production flow scenarios will be used for this lab:
Speaker covers paintshop PF (Simple production flow with one

activity)
Contoso speaker covers coating production flow
NOTE: This exercise is not specific to Lean manufacturing, but describes the
configuration of standard costing in general.
8-13

Diagram: Speaker Covers Paintshop PF - Simple
Production Flow
This figure depicts the scenario for Speaker covers paintshop PF, which is an
example of a simple production flow.
FIGURE 8.5 SPEAKER COVERS PAINTSHOP PF - SIMPLE PRODUCTION

FLOW
8-14

Diagram: Contoso Speaker Covers Coating Production
Flow
This figure depicts the scenario for the Contoso speaker covers coating
production flow.
FIGURE 8.6 CONTOSO SPEAKER COVERS COATING PRODUCTION FLOW
Challenge Yourself!
Use these steps to create a new costing version for calculating standard costs for
products manufacturing using a production flow.
1. Create a new standard cost type Costing version LeanStd.
2. Create new Cost groups for material costs, labor costs, indirect costs
and outsourcing costs.
3. Create a new Cost category and activate a price of 10.0.
4. Assign the Cost category to the Work cell SCPS_Cover.
5. (Optional) Set up the costing sheet set overhead of 5% over
material costs and a rate of $1 over manufacturing costs.
6. Assign the material cost group to items SCPS_UPSCR and
SCPS_PSCR.
Step by Step: Costing Version Setup

Use these steps to set up the costing version.
Costing > Costing versions.
2. Create a new record.
3. Enter Costing type as "Standard cost".
4. Enter Version as "LeanStd".
5. Enter Name as "Lean Standard Costing Version".
6. Set Block activation to No.
7. Close the Costing version setup form.
8-15

Step by Step: Cost Group Setup
Use these steps to set up the cost group.
Costing > Cost groups.
2. Create a new record in the Cost groups form.
3. Enter Cost group as "L_Mat".
4. Enter Name as "Lean Material Costs".
5. Select Cost group type Direct materials.
7. Enter Cost group as "L_Lab".
8. Enter Name as "Lean Manufacturing Costs".
9. Change Cost group type from Undefined to Direct manufacturing.
10. Select Behavior as Variable cost.
12. Enter Cost group as "L_Ind".
13. Enter Name as "Lean Indirect Costs".
14. Enter Cost group type as "Indirect".
16. Enter Cost group as "L_Out".
17. Enter Name as Lean Outsourcing Costs".
18. Change Cost group type from Undefined to Direct outsourcing.
19. Change Behavior to Variable cost.
20. Close the Cost groups form.
Step by Step: Set up Shared Categories and Cost

Categories
Use these steps to set up shared categories and cost categories.
1. Navigate to Production control > Setup > Routes > Shared
categories.
2. Create a new record in the Shared categories form.
3. Enter Category ID as "L_Work".
4. Enter Category name as "Lean Work Cells".
5. Select Can be used in Production field.
6. Close the Shared categories form.
7. Navigate to Production control > Setup > Routes > Cost
categories.
9. Create a new record in the Cost categories form.
10. Enter Category ID as "L_Work".
11. Switch to the Production tab on the Cost categories form.
8-16

12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
Enter Cost group as "L_Lab".

Save the record in the Cost categories form.
Select the Price button.
Enter Version as "Lean Std".
Enter Site as "2".
Enter Price as "10.00".
Save the record in the Cost category price form.
Select the Activate button.
Close the Cost category price form.
Close the Cost categories form.
Step by Step: Select Resource Group Cost Categories

Use these steps to select resource group cost categories.
Resources > Resource groups.
2. Select Resource group SCPS_Cover.
3. Select the Operation FastTab and select the Run time category as
L_Work.
4. Save the record in the Resource groups form.
5. Close the Resource groups form.
Step by Step: Costing Sheet Setup - Part 1

Use these steps to set up Part 1 of 2 of the costing sheet.
Costing > Costing sheets.
2. Switch to the Cost groups FastTab on the Costing sheet setup form.
3. Drag L_Mat cost group from the right grid to the Material Costs
Total material cost node in the tree.
4. Drag L_Lab cost group from the right grid to the Manufacturing
Total manufacturing cost node in the tree.
5. Right-click on the Var_OVH Variable costs overheads tree node
and select Create command.
6. Enter Select node type as "Surcharge".
8. Switch to the Edit FastTab on the Costing sheet setup form.
9. Enter Subtype as "Level".
10. Switch to the Calculation tab on the Costing sheet setup form.
11. Enter Code as "COGM - L_Mat".
12. In the bottom grid, enter Version as "LeanStd".
13. Enter Site as "2".
14. Enter Percent as "5.00".
8-17

Step by Step: Costing Sheet Setup - Part 2
Use these steps to set up Part 2 of 2 of the costing sheet.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
Switch to the Edit tab on the Costing sheet setup form.

Switch to the Posting tab on the Costing sheet setup form.
Enter Estimated indirect absorption as "600510".
Enter Estimated indirect absorption offset as "150200".
Enter Indirect absorption as "600510".
Enter Indirect absorption offset as "510240".
Right-click on the Var_OVH Variable costs overheads tree node
and select Create command.
Enter Select node type as "Rate".
Switch to the Edit FastTab on the Costing sheet setup form.
Switch to the General tab on the Costing sheet setup form.
Enter Subtype as "Process".
Switch to the Calculation tab on the Costing sheet setup form.
Enter Code as "COGM - L_LAB".
Enter Version as "LeanStd".
Enter Site as "2".
Enter Amount as "1".
Switch to the Posting tab on the Costing sheet setup form.
Enter Estimated indirect absorption as "600510".
Enter Estimated indirect absorption offset as "150200".
Enter Indirect absorption as "600510".
Enter Indirect absorption offset as "510240".
Select the Activate button.
Save the record in the Costing sheet setup form.
Select the Yes button to save the record in the Costing sheet setup
form.
Select the Close button to close the infolog.
Step by Step: Product Details

Use these steps to specify product details.
Released products.
2. Find Product SCPS_UPSCR.
3. Double-click or press Enter on the selected record in the Released
product details form.
4. Switch to the Manage costs FastTab on the Released product
details form.
8-18

5.
6.
7.
8.
9.
10.
11.
12.
13.
Select the Product > Maintain > Edit button.

Enter the Cost group as L_Mat.
Close the Released product details form.
Select Product SCPS_PSCR.
Double-click or press Enter on the selected record in the Released
product details form.
Switch to the Manage costs FastTab on the Released product
details form.
Select the Product > Maintain > Edit button.
Enter the Cost group as L_Mat.
Close the Released product details form.
8-19
Lab 8.2 - Calculation of Standard Cost Based on a Production

Flow
This lab facilitates the calculation of standard cost based on a production flow.
Scenario
In this scenario, you will activate a standard cost for raw material and calculate
standard cost for the produced product based upon parameters established in
Lab 8.1: Configure Standard Costing in Microsoft Dynamics AX 2012.
Challenge Yourself!
Use these steps to activate the standard cost and calculate the standard cost for
the produced product.
1. Activate standard cost of 7.00 for Item number SCPS_UPSCR.
2. Calculate and activate standard cost for Item number SCPS_PSCR
based on Production flow Speaker covers coating.
3. View the detailed cost calculation with breakdown per cost group.
Step by Step
Use these steps to activate the standard cost and calculate the standard cost for
the produced product.
Released products.
2. Find Item number SCPS_UPSCR.
3. Select the Manage costs button.
4. Select Set up > Item price button.
5. Create a new record.
6. Select Version LeanStd.
7. Select Site 2.
8. Enter the Price as "7.00".
9. Select Incl. in unit price as yes.
10. Select File and then select Save.
12. Close the Item price form.
13. Select Item number SCPS_PSCR.
14. Select the Manage costs > Set up > Item price button.
15. Select the Calculation button.
16. Select Costing version as LeanStd.
17. Select Color as Blue.
18. Select Site as 2.
8-20

19. Select Yes in the BOM and/or production flow numbers form
when prompted with the question "Insert the active versions for bill
of materials and production flows?".
8-21
Reporting Production Flow Activities

The reporting of production flow activities encompasses starting, picking and
completing both withdrawal and process Kanbans. This section describes the
ledger entries occurring during the posting of materials and resources within a
production flow.
Typical Production Flow Transactions

This table summarizes the accounting entries occurring for typical transactions
when processing Kanbans.
8-22
Scenario Description
Result
Ahmed reports a Kanban transfer

job, recording movements of
materials and parts that replenish the
production flow and or store its
produced goods.
An issue transaction and a receipt

transaction are posted, debiting and
crediting the inventory cost accounts
including labor and indirect costs. No
costs are posted to WIP in this
scenario.
Shannon reports a Kanban process

job, recording quantities of material
picked for an activity.
A credit is posted to the product

inventory cost account and a debit is
posted to the production flows WIP
account.
Ahmed reports a scan empty

transaction, reporting a bin or
container as having been emptied.
The location type is "Kanban
supermarket" for the location being
emptied.
A credit is posted to the product's

inventory cost account and a debit is
posted to the production flow WIP
account.
Shannon reports a Kanban job of

type process (receipt) recording
quantities of the product, resulting
from an activity.
A credit is posted to the production

flow WIP account and a debit is
posted to the products inventory cost
account.

Variations when Reporting Production Flow Activities
This table summarizes settings which affect postings for Kanbans.
Scenario
Result
Update on hand on pick

and Update on hand on
receipt are not inventory
controlled.
No inventory transactions are recorded and the

system does not cost account the transaction.
Update on hand on pick is

not inventory controlled but
Update on hand on receipt
is.
System credits the production flows WIP cost

account and debits product inventory cost
account.
Update on hand on pick is

inventory controlled but
Update on hand on receipt
is not.
System credits product inventory cost account

and debits the production flows WIP cost
account.
Update on hand on pick

and Update on hand on
receipt are inventory
controlled.
System cost accounts a transfer, crediting

destination product inventory cost account and
debiting product inventory destination cost
account.
Transaction is cost
accounted as picking list and
costing sheet is set to apply
to production flow.
System invokes the costing sheet for the picking

list and computes indirect costs.
As a result, the system credits indirect cost
absorption cost account and debits production
flow work in progress cost account.
Production flow activities

use operation resources
which have cost categories.
System computes, records and posts conversion

costs, on the basis of the produced product's
standard cost share of direct manufacturing cost
per cost category.
As a result, system credits the cost category
absorption cost account and debits the
production flow WIP account.
8-23

This figure illustrates how costs are posted to the ledger differently based on the
inventory control settings.
FIGURE 8.7 FLOW OF COSTS TO THE LEDGER AND THE IMPACT OF

INVENTORY CONTROL
Ledger Transactions for Withdrawal Type Activities

The ledger entries for withdrawal type Kanbans vary based on whether the items
are inventory controlled or not.
Inventory Controlled Transfers within a Single Entity

For inventory controlled transactions (as set on the Kanban rules form) these
entries occur when posting a transfer Kanban.
Account
Debit
Quantity * standard cost
Product - Inventory
Product - Inventory
Credit
Inventory Controlled Transfers across Entities

If the goods move across a different site within the same legal entity, these
entries occur when posting a withdrawal Kanban.
Account
Debit
Quantity *
standard cost
emitting
organization
Product Inventory
or WIP, Shipping
Organization
Product Inventory
or WIP, Receiving
Organization
8-24
Credit

recipient Organization

Account
Debit
Cost Change
Variance, Receiving
Organization
Quantity * (standard cost

emitting Organization
Standard cost recipient
Organization)
Credit
Non Inventory Controlled Transfers from Inventory to a

Production Flow
The entry for non-inventory controlled transfers will move the transfer from
inventory into WIP.
Account
Debit
Quantity *
standard cost
Product Inventory
Production Flow
Direct Material Period - WIP
Credit
Kanban Scan Empty Transactions for Location Type

Kanban Supermarket
Emptying a Kanban will produce this entry when a location type of Kanban
supermarket is used.
Account
Debit
Quantity *
standard cost
Product Inventory
Production Flow
Direct Material Period - WIP
Credit
NOTE: Emptying Kanban handling units for any other type of location but
Kanban supermarket will have no inventory transaction and thus not create the
transaction described in this section. Emptying handling units on Kanbans that
are posted to WIP (update on-hand on receipt = no) will cause backflush costing
to consider the material as consumed from WIP. Kanbans that are not empty will
be considered as remaining in WIP at backflush costing.
8-25

Production Completion Transactions
When reporting completions for a manufacturing Kanban where the product's
receipt type will be inventory controlled, this entry occurs.
Account
Debit
Product Inventory
Credit
Products standard
cost
Production Flow Product - Period WIP
Kanban Job Picking Activity

When an inventory transaction is recorded for a Kanban job picking activity this
entry occurs.
Account
Debit
Quantity *
standard cost
Product Inventory
Production Flow Direct Material Period - WIP
8-26
Credit

Production Flow Standard Cost Transactions
As transactions are posted for a production flow, they can be viewed from the
Standard cost transactions form. The form can be accessed from Production
control > Setup > Lean manufacturing > Production flows and selecting the
Costing > Standard cost transactions menu button. Voucher transactions can
be viewed for the transactions on this form by selecting the Ledger > Voucher
menu button.
FIGURE 8.8 PRODUCTION FLOW STANDARD COST TRANSACTIONS FORM
8-27

Production Flow WIP Value
The current value of WIP can be viewed for a particular production flow in the
Current WIP balances form.
FIGURE 8.9 PRODUCTION FLOW WIP VALUE FORM
Viewing the WIP Balance of a Production Flow

To view the WIP value for a production flow, use these steps:
Production flows.
2. Select the Costing > Current WIP balances menu button.
8-28
Lab 8.3 - End a Kanban Process Job and Observe Posted

Costs
This lab facilitates the ending of a Kanban process job and observation of posted
costs.
Scenario
In this scenario, you will observe costs that are recorded and posted for an
individual Kanban based upon parameters established in Lab 8.1: Configure
Standard Costing in Microsoft Dynamics AX 2012 and Lab 8.2: Calculation of
Standard Cost Based on a Production Flow.
Challenge Yourself!
Use these steps to end a Kanban process job and observe posted costs:
1. Create a new fixed Kanban for Item number SCPS_PSCR in Color
Blue.
2. Complete the Kanban process job of the newly created Kanban.
3. View the production flow's current WIP balance, standard cost
transactions, labor transactions and indirect fixed cost transactions.
4. View corresponding ledger vouchers and observe postings that have
been made.
Step by Step
Use these steps to end a Kanban process job and observe posted costs:
Kanban rules.
3. Enter the Kanban rule 000034_1015 to find the Kanban rule for
product SCPS_PSCR Blue.
7. Enter Number of new kanbans as "1".
13. Select Work Cell SCPS_Cover.
8-29

15. Select a Kanban job for SCPS_PSCR with a Kanban job color of
Blue.
16. Select the Manufacture tab.
18. Close the Kanban board for process jobs.
Production flows.
20. Find the Production flow Speaker covers paintshop PF.
21. Select the Costing > Standard cost transactions menu button.
22. Select the Ledger > Voucher menu button.
23. Close the Voucher transactions form.
24. Close the Standard cost transactions form.
25. Select the Costing > Indirect cost transactions menu button.
26. Close the Indirect cost transactions form.
27. Select the Costing > Route transactions menu button. Review the
transactions created from this lab.
28. Close the Route transactions form.
31. Select the Refresh button and note the values of WIP which will be
used in "Lab 8.5: Perform Periodic Backflush Costing".
32. Switch to the General tab on the Price calculation form.
33. Switch to the Costing sheet tab on the Price calculation form.
34. Close the Price calculation form.
35. Close the Production flows form.
8-30
Subcontracting
Lean manufacturing for Microsoft Dynamics AX 2012 provides a new
architecture to control subcontracting work and the related purchase and receipt
process.
Earlier versions of Microsoft Dynamics AX modeled subcontracting of
operations for production orders based on a service item that had to be put into
the BOM. The effect on costing is that subcontracted services are accounted in
the cost category for material, not labor. In addition, a service is booked to
inventory and deducted to support the process.
As part of Lean manufacturing for Microsoft Dynamics AX 2012, an alternative
solution for subcontracting is implemented. The solution models the
subcontracting work as a service that is related to an activity of a production
flow. A new cost category of subcontracting is introduced and the subcontracting
services are no longer part of a BOM. The cost accounting of subcontracted work
is completely integrated in the new costing for a Lean manufacturing solution of
8-31
Lab 8.4 - Costing for a Subcontracted Activity

This lab facilitates viewing the costing for a Kanban job based on a
subcontracted activity.
Scenario
In this scenario, you will view the costing for a Kanban job based on a
subcontracted activity using parameters established in Lab 8.1: Configure
Standard Costing in Microsoft Dynamics AX 2012 and Lab 8.2: Calculation of
Standard Cost Based on a Production Flow.
Challenge Yourself!
Use these steps to view the costing for a Kanban job based on a subcontracted
activity.
1. Create a scheduled Kanban for Kanban rule transfer to 4101 for
Item number SCPS_UPSCR.
2. Create a scheduled Kanban for Kanban rule coating 4101 for Item
number SCPS_CSCR.
3. Complete the Kanban transfer job to transfer the materials to the
subcontractor.
4. Complete the Kanban process job.
5. View the current WIP balance for the production flow.
6. Run subcontracted documents creation to create a purchase order for
the subcontracted service.
7. Post a receipt for that purchase order.
8. Again view the current WIP balance for the production flow.
Step by Step: Create Kanbans

Use these steps to create the scheduled Kanbans:
Kanban rules.
2. Select the Filter button.
3. Select the Production flow Speaker cover coating.
5. Find the Kanban rule 000044_1015 for Product SCPS_UPSCR with
First plan activity Transfer to 4101.
9. Enter Due date/time as today's date.
8-32

11. Change to Kanban rule for Product SCPS_CSCR with First plan
activity Coating 4101.
15. Change Due date/time to today's date.
Step by Step: Transfer and Produce Kanbans

Use these steps to transfer the materials to the subcontractor and produce the
Kanbans:
manufacturing > Kanban board for transfer jobs.
2. Select the Change filtering options button.
3. Select the Production flow Speaker covers coating.
5. Select the first transfer job for Item number SCPS_UPSCR.
7. Close the Kanban transfer board form.
9. Switch to the View tab on the Kanban schedule board.
10. Select the Change work cell button.
11. Change Work cell to SCC_SC1.
13. Switch to the Plan tab on the Kanban schedule board.
14. Drag an unplanned Kanban for Item number SCPS_CSCR to
today's date to schedule.
15. Close the Kanban schedule board form.
18. Change Work cell to SCC_SC1.
20. Switch to the Manufacture tab on the Kanban board for process
jobs.
21. Select the Kanban for Item number SCPS_CSCR.
23. Close the Kanban board for process jobs form.
8-33

Step by Step: Review Subcontracting Costing Before and
After Receipt of PO
Use these steps to review subcontracting costing before and after receipt of
purchase order.
Production flows.
2. Select the Production flow for Speaker covers coating.
5. Select the Refresh button.
7. Select the Production flow for Speaker covers coating.
8. Select the Costing > Current WIP balances menu button noting the
values in WIP.
10. Select the Refresh button.
12. Close the Production flows form.
13. Navigate to Production control > Periodic > Lean manufacturing
> Subcontracting documents.
14. Select Receipt advices checkbox.
15. Change To date to today's date.
17. Inside the infolog, select the Purchase order that was created.
18. Select the Show button.
19. Select the Receive > Journals > Product receipt button.
20. Switch to the Lines tab on the Product receipt journal form.
21. Close the Product receipt journal form.
22. Close the Purchase order form.
23. Close the Latest purchase orders form.
24. Close the Infolog.
Production flows.
26. Select the Production flow Speaker covers coating.
29. Select the Refresh button and note the values of WIP after receipt of
the subcontract PO.
8-34
Backflush Costing
The periodic consolidation of the cost for a production flow or "backflush
costing" re-calculates the actual cost of material and products in WIP based on
the status of Kanban jobs and handling units in the production flow and
determines variances for the products supplied by the production flow.
End of Period - Backflush Costing

At the end of a costing period, backflush costing is run for the period for all
production flows of the legal entity in the same batch run. When the backflush
costing calculation is started, the last date of the backflush costing period must be
selected. Backflush costing is run either from the Backflush costing
calculation form or as a batch job.
NOTE: Unless the job is started at the end of the manufacturing day, you should
always select a day in the past for the job. It is not possible to post transactions
to a period (day) where the backflush costing calculation was run.
The backflush costing process executes these steps:
1. Determines the production flow's unused quantities as of the period
end date.
2. Calculates the production flows net realized usage over the period.
3. Clears the WIP from the realized resource consumptions and
products.
4. Calculates the production variances to standard cost for each cost
group.
NOTE: After the backflush costing process is run, the unused quantities at the
date of the costing run can be viewed from the production flow's WIP display.
Calculation of the Production Flow's Net Realized Usage

over a Period
The net realized usage over the period is calculated per item and item
dimensions. The net realized usage is the difference between the total quantities
for each item, accumulated over the period in production flows WIP at standard
cost, minus the sum of unused quantities still in the production flow at the period
end date, valued at those items standard cost.
The WIP still in the production flow corresponds to the item and item dimension
quantities on production picking list inventory transaction in a physically updated
state for the production flow.
8-35

Clearing Production Flow's Work in Progress for the
Period
For consumed components for the period, the net realized quantities of material
consumed by the production flow over the period are financially updated. These
transactions are processed in First in First out (FIFO) order up until reaching the
net realized quantities for the period. The inventory transactions are split to
allow unused quantities in production flow WIP to remain physically updated.
It also allows net realized usage quantities to be "financially updated".
For completed production quantities of the period, the inventory transactions for
the completed quantities for the period are financially updated.
The applied conversion cost transactions recorded for the period are financially
updated for all direct manufacturing costs and all indirect costs minus indirect
costs that resulted from the unused quantities.
Calculation for Unused Quantities

Backflush costing calculates the unused quantities of materials still in the
production flow at the period end date. To accomplish this, equivalent quantities
of materials for non-completed products still in process are calculated.
Example: Calculation for Unused Quantities

This is an example of how to calculate for 20 units of a product "FG_B" with
these BOM levels.
BOM Level
Component
Quantity
Equivalent Quantity
FG_B
20
SF_01
40
SF_02
20
MAT_01
100
MAT_02
120
The calculated material usage is expressed in accordance to the production flow

effective at the time and whether on-hand inventory is maintained or not. Subassemblies and semi-finished products produced in the production flow and
whose physical flow is governed by activities that are not inventory controlled
are converted in equivalent quantities of their components.
For instance, if product SF_02 is produced in a production flow, but activities
governing its physical flow are not inventory controlled, then the 20 units of
SF_02 are needed and are converted in equivalent units of its components. This
is in order to provide a list of equivalent units of products that can match and
compare with the products quantities contributions recorded in the production
flow work in progress.
8-36

Calculation of Unused Quantities: Released to Production
In effect, the non-inventory controlled items are treated as phantoms. The
calculated equivalent quantities of materials are corrected according to whether
the quantities of components have been released to production. For example, if a
component has not yet been effectively released from inventory to the production
flow, then its components should not be considered as remaining unused
quantities (as those are still in inventory and not in the production flow's WIP).
Financial Update for Completed Quantities

The financial update of inventory transactions for completed quantities reverse
the physical ledger postings and repost as financially updated. The inventory
transactions receipt status is updated to "purchased". An example of the voucher
entries for the financial update of completed quantities is shown in this table.
Posting Type
Debit
Production,
Report as Finished
Credit
Period quantity
completed @ standard
cost
Production Offset
Report as Finished
Period quantity
cost
Production Receipt
Period quantity
cost
Production Offset,
Receipt
Period quantity
cost
Financial Update for Consumed Products

The financial update of inventory transactions for consumed products reverses
the physical ledger postings and reposts as financially updated and the inventory
transactions receipt status is updated to "sold". An example of the voucher
entries occurring for consumed products is shown in this table.
Posting Type
Debit
Production,
Picking List
Period net realized

quantity @ standard cost
Credit
Production Offset
Account Picking
list
Period net realized

Production Issue
Period net realized

8-37

Posting Type
Debit
Production Offset
Account Issue
Period net realized

Credit
Clearing WIP for Conversion Costs - Direct Manufacturing

Clearing WIP for the production flow's direct manufacturing conversion costs
reverses the physical ledger postings and reposts them as financially updated.
The conversion cost transaction is updated to "cost accounted". An example of
the voucher entries that occur for clearing WIP conversion cost for direct
manufacturing conversion is shown in this table:
Posting Type
Debit
Applied direct
manufacturing
conversion cost.
Production WIP
Production WIP
Issue
Applied direct
manufacturing
conversion cost.
Applied direct
manufacturing
conversion cost.
Production Offset
Account Work
Center Issue
Production Work
Center Issue
Credit
Applied direct
manufacturing
conversion cost.
Clearing WIP for Conversion Costs - Indirect

Manufacturing
Clearing WIP for the production flow's indirect manufacturing conversion costs
reverses the physical ledger postings and reposts them as financially updated.
The conversion cost transaction is updated to "cost accounted". An example of
the voucher entries that occur for clearing WIP conversion cost for indirect
manufacturing conversion is shown in this table.
Posting Type
Debit
Applied direct
manufacturing
conversion cost.
Production
Indirect WIP
Offset
Production
Indirect WIP Issue
Production
Indirect
Absorption
8-38
Credit
Applied direct
manufacturing
conversion cost.
Applied direct
manufacturing
conversion cost.

Posting Type
Debit
Production
Indirect
Absorption Offset
Applied direct
manufacturing
conversion cost.
Credit
NOTE: The indirect manufacturing cost, accumulated over the period are all
cleared from WIP. The indirect cost for unused materials will need to be reinstated.
Re-instating Indirect Cost for Unused Material Quantities

To reset the indirect manufacturing costs for the unused quantities still in
production flow work in progress, which had been cleared from WIP, this occurs:
Compute the indirect cost for reported unused quantities in the

production flow at the period end based on the cost sheet setup.
Insert a new conversion cost transaction (of type indirect cost) in the
physically updated stage for the calculated indirect cost. This
example shows the voucher entries that are created from this
calculation.
Posting Type
Debit
Production
Indirect WIP
Offset
Indirect cost for unused

quantities.
Indirect cost for unused
quantities.
Production
Indirect WIP Issue
Credit
Insert a new negative conversion cost transaction (of type indirect

cost) for the calculated indirect cost in the financially updated stage.
This results in these postings:
Posting type
Debit
Production
Indirect
Absorption
Minus (indirect cost for

unused quantities).
Production
Indirect
Absorption Offset
Credit
Minus (indirect cost for

unused quantities).
8-39

Calculation of Production Variances to Standard Cost
The production variance to standard cost for the production flow is calculated by
comparing the production flows quantities of completed products for the period
at their standard cost versus the production flow's realized resource usage to WIP
over the period at standard cost.
The variances calculated for a production flow are calculated by comparing:
The aggregate of a production flows completed quantities whose

inventory transactions have been financially updated for the period
at the detailed standard cost or according the standard cost roll up
when no detailed standard cost exist.
The net realized usage over the period calculated by the aggregate of
material quantities whose inventory transactions have been
financially updated, at their respective standard cost roll up, and the
aggregate of conversion cost having been financially updated minus
the conversion cost transactions physically updated for the unused
materials.
Calculation of Production Variances to Standard Cost:

Backflush Costing
Variances are produced per cost groups and variance types and recorded when
the backflush costing calculation is performed.
An example of the entries at the end of period backflush costing and the
correction of inventory balances is shown in this table.
Account
Debit
Production Flow Direct

Material - Period WIP
Unused + in process
materials by end date @
standard cost.
Period balance on direct
material.

Material - Period +1
WIP
Unused material by end date

@ standard cost.
Production Flow Period

Direct Material
Production Variances
Credit
Period
balance on
direct
material.
NOTE: Variances to standard are not booked for manufacturing conversion

costs.
8-40

Standard Cost Revaluations
A change in the value of a standard cost for a product will revalue the inventory
and the WIP including the production flow's WIP. Any differences between the
new standard and the old standard are booked as a revaluation variance. An
example of the entries for the standard revaluation is shown in this table.
Account
Debit
Quantity in
WIP * Old
standard cost

Material - Period WIP
Material Period WIP
Material Period
Revaluation Variance
Credit
Quantity in WIP * New

standard cost
Quantity in
WIP * (New
standard cost
Old standard
cost)
8-41
Lab 8.5 - Perform Periodic Backflush Costing

This lab facilitates the performance of periodic backflush costing.
Scenario
In this scenario, you will create a Kanban for a subcontracted item, start the
Kanban, run periodic backflush costing and analyze the variances and unused
quantities based upon parameters established in Lab 8.1: Configure Standard
Costing in Microsoft Dynamics AX 2012, Lab 8.2: Calculation of Standard
Cost Based on a Production Flow and Lab 8.3: End a Kanban Process Job and
Observe Posted Costs.
Challenge Yourself!
Use these steps to perform periodic backflush costing.
1.
2.
3.
4.
Create a new Kanban for Item number SCPS_PSCR in Color Blue.

Start the Kanban process job.
Run periodic backflush costing for todays date.
View the unused quantities for the Production flow Speaker covers
paintshop PF.
5. View the variances for the Production flow Speaker covers
paintshop PF.
Step by Step
Use these steps to create a Kanban for the item, start the Kanban, run periodic
backflush costing and analyze the variances and unused quantities.
Kanban rules.
3. Enter the Kanban rule 000034_1015 to find the Kanban rule for
product SCPS_PSCR Blue.
7. Enter Number of new kanbans as 1.
9. Select the Close button for the Infolog.
13. Select Work cell SCPS_Cover.
8-42

14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.

Select the first Kanban for Product SCPS PSCR Blue.
Select the Manufacture > Production > Start button.
Close the Kanban board for process jobs form.
Navigate to Production control > Periodic >
Lean manufacturing > Backflush costing calculation.
Select the Production flow period costing button.
Select OK in the Cost the Production Flows form when prompted
with this message: "When running backflush costing on today's date,
no further registration of Kanban jobs is possible".
Close the Backflush costing calculation form.
Navigate to Production control > Setup > Lean manufacturing >
Production flows.
Select the Production flow Speaker covers paintshop PF.
Select the Costing > Current WIP balances menu button.
Select the Refresh button to see the unused materials value
remaining in the value of WIP for the production flow. Compare the
WIP values to the ones noted in "Lab 8.3: End a Kanban Process Job
and Observe Posted Costs".
Close the Price calculation form.
8-43
Summary
Production Flow Costing provided an overview of how costs flow to the ledger
when processing Kanbans and performing end of period backflush costing in
Microsoft Dynamics AX 2012. It included these key points:
Backflush costing allows the accumulation of resource usage by an

organizations operating units.
Standard costing is required for all items produced and transferred in

a production flow with the exception of withdrawal Kanbans where
the update on-hand pick + receipt is set to yes.
Conversion costs are applied based on the production flow's planned

operation resource usage at the standard conversion cost rate.
Standard costs for items produced in a production flow can be

calculated by using a routing or can be based on the production flow
activity times.
Each production flow's current WIP value can be viewed from the
production flow Costing button.
The end of period backflush costing routine determines the

production flow's unused quantities, calculates the net realized usage,
clears the WIP from the realized resource consumption and
calculates production variances to standard.
This lesson included several labs to set up costing, execute Kanban jobs and view
the transactions flowing to the ledger. Also included was a description of how
the end of period backflush job relieves WIP and creates variances for a
production flow.
8-44
Test Your Knowledge

It would be of added benefit to place each question into a familiar context and
relate it to a company or industry with which you are familiar.
1. Define backflush costing and describe how it is used in Microsoft Dynamics
AX 2012.
2. Define which Kanban types do not require standard cost in Microsoft

Dynamics AX 2012.
3. Define the four types of cost components of Lean manufacturing.
8-45

4. Describe the four steps of the end of period backflush costing process.
5. Describe what occurs when standard costs are revalued in relation to

production flows.
8-46

chapter
1.
2.
3.
8-47
Solutions
Test Your Knowledge
1. Define backflush costing and describe how it is used in Microsoft Dynamics
AX 2012.
MODEL ANSWER:
Backflush costing is defined by: accumulates cost for resource usage by
production flow over period; allows simplified reporting of material and
operation resource usages within the production flow; accounts for direct
material cost to work in progress, for products supplied to production flow,
but whose physical flow in the production flow is not reported or maintained
(simplified backflush costing journal entries) and accounts for the direct
material cost resulting from products, whose physical flow in the production
flow is maintained through on-hand inventory (no backflush); values
production flow output (quantities produced) at the products standard cost;
absorbs and applies to production flows WIP account, the standard
conversions costs (direct and indirect manufacturing cost) for the production
outputs from a production flow; and allows an end of period backflush
costing process for computing variances to realized costs of quantities
produced for the period, and the correction of the financial situation
(relatively to the omitted journal entries for the product cycle).
2. Define which Kanban types do not require standard cost in Microsoft
Dynamics AX 2012.
MODEL ANSWER:
Withdrawal Kanbans for non-standard cost products may be created if the
update on-hand pick and update receipt are both set to yes. This will allow
moving a non-standard cost product from one inventory location into another
but will not allow movement of a non-standard cost product into or out of
WIP.
3. Define the four types of cost components of Lean manufacturing.
MODEL ANSWER:
The four types of costs for Lean manufacturing are: material costs,
manufacturing costs (also called "labor costs"), indirect costs and outsourcing
costs.
8-48

4. Describe the four steps of the end of period backflush costing process.
MODEL ANSWER:
1. Determines the production flow's unused quantities as of the period end
date.
2. Calculates the production flows net realized usage over the period.
3. Clears the WIP from the realized resource consumptions and products.
4. Calculates the production variances to standard cost for each cost group.
5. Describe what occurs when standard costs are revalued in relation to
production flows.
MODEL ANSWER:
A change in the value of a standard cost for a product will revalue the
inventory and the WIP including production flow's WIP. Any differences
between the new standard and the old standard are booked as a revaluation
variance.
8-49
8-50
CHAPTER 9: KANBAN QUANTITY CALCULATIONS

Objectives
The objectives are:
Define how to set up and configure Kanban quantity calculation

policies.
Describe how to create the Kanban quantity calculation to generate,

calculate and update Kanban rules.
Introduction
Kanban Quantity Calculations covers the setup and process of calculating
Kanban quantities in Microsoft Dynamics AX 2012.
Kanban quantity calculation policies
Calculating Kanban quantities
Determining the Kanban quantity is one of the most important tasks of Kanban
planning. Microsoft Dynamics AX 2012 provides the capability to calculate the
Kanban quantity by taking forecast, actual demand from open orders, lead time to
replenish the item and historical demands into account. Kanban calculations can
be used with Kanban rules of replenishment strategy "fixed.
9-1
Kanban Quantity Calculation Policies

In Microsoft Dynamics AX 2012, a Kanban quantity calculation policy is used to
define the parameters for the Kanban quantity calculation and group the Kanban
rules that are usually calculated in the same regularity with the same parameters.
The Kanban quantity calculation policy is then associated with the Kanban rules
and used to perform the Kanban calculation.
Kanban Quantity Calculation Policies Form

New Kanban quantity calculation policies are set up in the Kanban quantity
calculation policies form. You can locate this form by navigating to
Production > Setup > Lean manufacturing > Kanban quantity calculation
policies.
To create a new policy, select the New button and use the Kanban quantity
calculation policies form to create and define a new Kanban quantity calculation
policy.
FIGURE 9.1 KANBAN QUANTITY CALCULATION POLICIES
Once you have entered the parameters for the Kanban quantity calculation policy,
the formula created using this policy can be previewed in the Formula section of
the form.
Kanban Quantity Calculation Policies Form: Fields

There are thirteen fields on the Kanban quantity calculation policies form.
These are:
9-2
Name
Description
Master plan
Minimum kanban quantity
Safety factor
Include safety stock
Service level
Period
Period: Days behind
Period: Days ahead
Season
Season: start day and month
Season: end day and month
Descriptions of the fields on the Kanban quantity calculation policies form are
Kanban Quantity Calculation Policies Form: Fields: Name,

Description, Master Plan, and Minimum Kanban Quantity
Kanban Quantity Calculation Policies Form: Fields: Safety Factor,

Include Safety Stock, and Service Level
Kanban Quantity Calculation Policies Form: Fields: Period, Period:

Days Behind, and Period: Days Ahead
Kanban Quantity Calculation Policies Form: Fields: Season, Season:

Start Day and Month, and Season: End Day and Month
Kanban Quantity Calculation Policies Form: Fields: Name,

Description, Master Plan, and Minimum Kanban Quantity
These are the descriptions for the fields of Name, Description, Master plan, and
Minimum kanban quantity that appear on the Kanban quantity calculation
policies form.
Field
Description
Name
Identification of the Kanban quantity calculation policy.
Description
Description of the Kanban quantity calculation policy.
Master plan
Actual demand is determined from the result of a master

plan. Assign the master plan or forecast plan to be used
when calculating Kanban quantities for this policy.
Minimum
kanban quantity
The additional number of Kanbans that are added in the

Kanban quantity calculation.
9-3

Kanban Quantity Calculation Policies Form: Fields: Safety
Factor, Include Safety Stock, and Service Level
These are the descriptions of the fields of Safety factor, Include safety stock,
and Service level that appear on the Kanban quantity calculation policies form.
Field
Description
Safety factor
Safety factor is used in the calculation of the fixed

Kanban quantity, for example if the 0.1 is used 10% is
added to the calculated demand.
Include safety
stock
When Include safety stock is not selected, the demand

during lead time is considered constant, so the
calculation of safety stock is not included in the
calculation. In this case the formula equals:
Kanban quantity = (Average demand * Lead time *
(Safety factor +1)) (Product quantity per handling
unit) + 1
When Include safety stock is selected, the variation in
demand during lead time should be included by
calculating and adding safety stock.
Kanban quantity = (Average demand * Lead time *
(Safety factor +1) + Safety stock) (Product quantity
per handling unit) + 1
The safety stock is calculated considering the demand,
variance and service level.
Service level
If Include safety stock is selected, a service level must

be defined. If, for example, the value 90 is used, the
fixed Kanban quantity is calculated from an assumption
that the probability of not experiencing stock out is
90%.
Kanban Quantity Calculation Policies Form: Fields:

Period, Period: Days Behind, and Period: Days Ahead
These are the descriptions of the fields of Period, Period: Days behind, and
Period: Days ahead that appear on the Kanban quantity calculation policies
form.
9-4
Field
Description
Period
Defines the period code for the calculation of demand.

If the field is selected, the related fields of Days ahead
and Days behind are enabled to define the period for
the calculation.

Field
Description
Period: Days
behind
Days behind looks at inventory transactions or Kanban

jobs, in case the Kanban is not updating inventory. If,
for example, a sales order has been shipped and
invoiced 20 days before the calculation date and the
demand period is 30, the already fulfilled demand from
the sales order will be included.
Period: Days
ahead
Days ahead from the calculation date that demand will

be included in the calculation of the fixed Kanban
quantity, the result is dependent on the plan that has
been used.
If, for example, a sales order has a requested ship date
20 days from the calculation date and the demand
period is 30, the demand and derived demands from the
sales order will be included.
Kanban Quantity Calculation Policies Form: Fields:

Season, Season: Start Day and Month, and Season: End
Day and Month
These are the descriptions of the fields of Season, Season: start day and month,
and Season: end day and month that appear on the Kanban quantity
calculation policies form.
Field
Description
Season
Defines the period code for the calculation of demand.

If the field is selected the related fields of Start day
and month and End day and month are enabled.
Season: start
day and month
Start day and month specifies the start day of the

season. This day will be the starting day for calculating
fulfilled demand from the present year and demand
from the next year.
Season: end day

and month
End day and month specifies the end day of the

season. This day will be the ending day for calculating
fulfilled demand from the present year and demand
from the next year.
Kanban Quantity Simple Formula

The parameters configured in the Kanban quantity calculation policy build the
formula to use when calculating the Kanban quantities. An example of a simple
formula only includes the average daily demand and does not include safety
factor or safety stock. This would be useful in scenarios where average daily
demand during the lead time is considered constant.
9-5

Kanban quantity = (Average daily demand * Replenishment lead time of
Kanban rule) (Product quantity per handling unit or a Minimum
Kanban Quantity)
Kanban Quantity Including Safety Stock

Where demand during the lead time has a greater variation, including the safety
stock and a service level in the calculation of the Kanban quantity is
recommended. This formula includes the safety stock in the Kanban quantity
calculation.
Kanban quantity = (Average daily demand * Lead time of Kanban rule +
Safety stock) (Product quantity per handling unit or a Minimum
Kanban Quantity) + 1
Kanban Quantity Including Safety Factor and Safety Stock

A safety factor can be applied to both types of equations. It can also be used as
an alternative to safety stock in the calculation. The safety factor is configured in
the Kanban quantity calculation policy and adds a certain percentage to the
calculated demand.
Kanban quantity = (Average daily demand * Lead time of Kanban rule *
(Safety factor + 1) + Safety stock) (Product quantity per handling unit
or a Minimum Kanban Quantity) + 1
9-6

Associating Kanban Policy to Kanban Rule
The Kanban quantity calculation policy is associated with the Kanban rule to
define which parameters to use when calculating the Kanban quantity. This is
done on the Kanban quantity calculation policies FastTab on the Kanban rule.
Demonstration 9.1: Creating Kanban Quantity Calculation

Policies
Follow these steps to create a Kanban quantity calculation policy.
Kanban quantity calculation policies.
2. Select the New button to create a new Kanban quantity calculation
policy.
3. Enter a Name for the policy (for example, enter Kanban Quantity
Calculation).
4. Enter the Master plan to use when reviewing demand (for example,
select 20).
5. Enter a Minimum kanban quantity to be included in the
calculations (for example, enter 1).
6. Enter a Safety factor to be used in the formula if applicable else set
as 0 (for example, enter 2).
7. Select the Include safety stock field if safety stock should be
included in the calculation (not used in this example).
a. If Include safety stock field is selected, select the Service level
to include in the safety stock calculation (not used in this
example).
9-7

8. Select the Period field if the calculation should use a period to
define the demand (for example, select Period).
a. If the Period field is selected, enter the Days behind to
designate how many days backwards from the calculation date
that fulfilled demand will be included in the calculation (for
example, enter 5).
b. If the Period field is selected, enter the Days ahead to designate
how many days forward from the calculation date that future
demand will be included in the calculation (for example, enter
30).
9. Select the Season field if the calculation should use a season start
and end date to define the demand (not used in this example).
a. If the Season field is selected, enter the Start day and month to
specify the start day of the season. This day will be the starting
day for calculating fulfilled demand from the present year and
demand from the next year (not used in this example).
b. If the Season field is selected, enter the End day and month to
specify the end day of the season. This day will be the ending
day for calculating fulfilled demand from the present year and
demand from the next year (not used in this example).
10. Close the Kanban quantity calculation policies form.
Kanban rules.
12. Find the Kanban rule to associate with the Kanban quantity
calculation policy (for example, find Kanban rule 000035_1015).
13. In the Kanban quantity calculation policies FastTab, select the
Add button.
14. Select the Kanban quantity calculation policy to associate with the
Kanban rule (for example, select Kanban Quantity Calculation).
Scenario: Creating Kanban Quantity Calculation Policies

Contoso has been struggling with defining the right Kanban quantity for the
Kanban work cells. This has led to stock outs in the work cells or an unnecessary
buildup of Kanban inventory. It has been decided to calculate the Kanban
quantity in a systematic way and to categorize the Kanban rules in different
Kanban calculation policies.
There is a huge variation in the demand for Contosos products between the first
and second half year. In the first six month of the year, the demand is very stable.
In the second half year, the demand is unstable and stock outs in the Kanban
work cells are experienced.
9-8

Scenario: Creating Kanban Quantity Calculation Policies:
Steps
It is Pierres goal to define Kanban quantity calculation policies for the first and
second half of the year with two determining parameters for calculating the right
Kanban quantities. The scenario steps are:
1. Pierre creates a Kanban quantity calculation policy for 1st half year.
He sets up a period from 1st of January to 30th June. As the demand
is stable in the 1st half year, Pierre does not select to include the
calculation of safety stock in the policy.
2. Pierre creates a Kanban quantity calculation policy for 2nd half year.
He sets up a period form 1st of July to 31st of December. As the
demand is unstable in the 2nd half year, Pierre selects to include the
calculation of safety stock in the policy.
3. Pierre associates the Kanban quantity calculation policies to the
Kanban rules.
Calculating Kanban Quantities

To calculate the Kanban quantities for Kanban rules, a Kanban quantity
calculation is created and associated with the Kanban quantity calculation policy.
The process of running the calculation includes generating the list of Kanban
rules associated with the Kanban quantity calculation policy, calculating the
Kanban rules, and updating the Kanban rules.
Kanban Quantity Calculation Form

When a Kanban quantity calculation is created, a Kanban quantity calculation
policy is associated with the calculation. The periods of the Kanban quantity
calculation are preset based on the Kanban quantity calculation policy and can be
overwritten manually before calculating. To create a new Kanban quantity
calculation, navigate to Production > Periodic > Lean manufacturing >
Kanban quantity calculation and select the New button.
9-9

The Kanban quantity calculation form is where the inputs into the calculation
are configured.
FIGURE 9.3 KANBAN QUANTITY CALCULATION
Kanban Quantity Calculation Form: Fields

There are nine fields on the Kanban quantity calculation form. These are:
Name
Policy
Status
Rule effective date
Rule active as of date
Fulfilled demand period start date
Fulfilled demand period end date
Demand period start date
Demand period end date
Descriptions of the fields on the Kanban quantity calculation form are

9-10
Kanban Quantity Calculation Form: Fields: Name, Policy, and Status
Kanban Quantity Calculation Form: Fields: Rule Effective Date and

Rule Active as of Date
Kanban Quantity Calculation Form: Fields: Fulfilled Demand Period

Start Date and Fulfilled Demand Period End Date
Kanban Quantity Calculation Form: Fields: Demand Period Start

Date and Demand Period End Date

Kanban Quantity Calculation Form: Fields: Name, Policy,
and Status
These are the fields of Name, Policy, and Status that appear on the Kanban
quantity calculation form.
Field
Description
Name
Identification of the Kanban calculation.
Policy
This field has reference to the Kanban calculation policies. The

Kanban quantity will be calculated based on the determining
parameters set up on the chosen policy. Only fixed quantity
Kanban rules associated with the chosen policy will be
included in the calculation. The field should be mandatory.
Status
The Kanban quantity calculation can be in these three states:

1. Created
2. Calculated
3. Updated
Created is the initial status. When lines have been created
and the user calculates the lines for the first time, the status is
Calculated. When the user chooses to replace Kanban rules,
generated from the Kanban calculation, the calculation shifts
status from Calculated to Updated.
Kanban Quantity Calculation Form: Fields: Rule Effective

Date and Rule Active as of Date
These are the fields of Rule effective date and Rule active as of date that appear
on the Kanban quantity calculation form.
Field
Description
Rule
effective
date
When the user chooses to replace Kanban rules, generated from

the Kanban calculation, the new rules will be active on the
specified Rule effective date.
Rule
active as
of date
The Rule active as of date determines which fixed Kanban

rules that are going to be selected when Kanban calculation
lines are generated. Only rules that are active on the selection
date will be generated. This date is defaulted by the Rule
effective date.
9-11

Kanban Quantity Calculation Form: Fields: Fulfilled
Demand Period Start Date and Fulfilled Demand Period
End Date
These are the fields of Fulfilled demand period start date and Fulfilled
demand period end date that appear on the Kanban quantity calculation form.
Field
Description
Fulfilled
demand
period start
date
The Fulfilled demand period start date determines the date

from when transactions, representing fulfilled demand,
should be included in the calculation of the fixed Kanban
quantity.
Fulfilled
demand
period end
date
The Fulfilled demand period end date determines the date

until when transactions, representing fulfilled demand,
should be included in the calculation of the fixed quantity
Kanban.
Kanban Quantity Calculation Form: Fields: Demand

Period Start Date and Demand Period End Date
These are the fields of Demand period start date and Demand period end date
that appear on the Kanban quantity calculation form.
Field
Description
Demand
period start
date
The Fulfilled demand period start date determines the date

from when transactions, representing demand, should be
included in the calculation of the fixed Kanban quantity.
Demand
period end
date
The Fulfilled demand period end date determines the date

until when transactions, representing demand, should be
included in the calculation of the fixed Kanban quantity.
Kanban Quantity Proposals FastTab

The Kanban quantity calculation proposals are generated under the Kanban
quantity proposals FastTab of the Kanban quantity calculation form. To
generate the list of all Kanban rules that apply to the Kanban quantity calculation
policy, select the Generate button.
The generation will search the Kanban rules against the subsequent policies and
generate a list of Kanban rules that apply in the Kanban quantity calculation
lines.
9-12
The Kanban quantity calculation policy of the Kanban calculation

should match the Kanban quantity calculation policy associated with
the Kanban rule.
The Kanban rules must have an active date before or on the Rule
active as of date field on the Kanban quantity calculation. Only
rules that are active on this date will be selected.
Additional Kanban rules can be added to the Kanban calculation by selecting the
Add button. Kanban rules can be removed from the Kanban calculation by
selecting the Remove button.
FIGURE 9.4 KANBAN QUANTITY PROPOSALS FASTTAB
Kanban Quantity Proposals FastTab: Fields

This table describes the fields on the Kanban quantity proposals FastTab.
Field
Description
Kanban rule
Kanban rule included in the Kanban calculation.
Item number
Item number associated with the Kanban rule.
Product
quantity
The product quantity is defaulted from the relating

Kanban rule.
Kanban
quantity
The Kanban quantity is defaulted from the relating

Kanban rule.
Calculation of Kanban Quantity Proposals

Once the list of Kanban rules is generated, the Calculate button is used to
perform the Kanban quantity calculation. The results update the Kanban quantity
proposals of the Kanban rules. When the Kanban calculation lines are calculated
for the first time, the status of the Kanban calculation changes from Created to
Calculated. The calculation can also be configured to perform in a batch job.
Calculation of Kanban Quantity Proposals: Fields

There are six fields associated with the calculation of Kanban quantity proposals.
These are:
Fulfilled demand
Demand
Safety stock
9-13
Product quantity
Kanban quantity
Unrounded
Descriptions of the fields associated with Kanban quantity proposals are

Calculation of Kanban Quantity Proposals: Fields: Fulfilled Demand,

Demand, and Safety Stock
Calculation of Kanban Quantity Proposals: Fields: Product Quantity,

Kanban Quantity, and Unrounded
Calculation of Kanban Quantity Proposals: Fields:

Fulfilled Demand, Demand, and Safety Stock
These are the fields of Fulfilled demand, Demand, and Safety stock that are
associated with the calculation of Kanban quantity proposals.
Field
Description
Fulfilled
demand
The calculated average daily fulfilled demand in the defined

period for fulfilled demand on the Kanban calculation.
Demand
The calculated average future demand in the defined period

for demand on the Kanban calculation.
Safety
stock
The calculated safety stock in the defined period. Safety

stock is only calculated if this is configured in the policy of
the Kanban calculation. The defined period to calculate
safety stock is from: Fulfilled and future demand in the
period start date to demand period end date.
Calculation of Kanban Quantity Proposals: Fields:

Product Quantity, Kanban Quantity, and Unrounded
These are the fields of Product quantity, Kanban quantity, and Unrounded
that are associated with the calculation of Kanban quantity proposals.
9-14
Field
Description
Product
quantity
The product quantity is defaulted to the Kanban calculation

from the relating Kanban rule. It is possible to change the
value on the line, and in that case a new value for the
Kanban quantity is calculated. The value can only be edited
if the status of the Kanban calculation is Calculated.
Kanban
quantity
The Kanban quantity is calculated by the Kanban

calculation rounded up. It is possible to change the value of
the Kanban quantity, and in that case a new value for the
product quantity is calculated. The value can only be edited
if the status of the Kanban calculation is Calculated.

Field
Description
Unrounded
This field shows the unrounded calculated value of the

Kanban quantity.
Calculating Safety Stock

In the general formula for calculating safety stock, it is assumed that both lead
time and material demands are not constant, but vary over time and that the
variation of these sizes will follow a normal distribution. Within Microsoft
Dynamics AX 2012, it is assumed that lead time does not vary over time, thus the
deviation over lead time will be zero. The safety stock formula used in the
calculation is shown in this figure.
FIGURE 9.5 SAFETY STOCK CALCULATION
The service factor is calculated from a chosen cycle service level that is
designated on the Kanban quantity calculation policy. For example, a 90%
service level results in a service factor (z) of 1.29. The higher z is, the lower the
risk of stocking out, but the higher the average inventory level is.
Calculating Average Daily Demand

The average daily demand for the periods in the Kanban calculation is calculated
for both inventory controlled and non-inventory controlled Kanban rules. These
consider both fulfilled demand and future demand.
Average daily demand = Demand (period) / number of working days in the
period.
For inventory controlled (last activity of the Kanban rule updates inventory):
Fulfilled demand is calculated from the inventory transaction table.
Demand is calculated from the required transactions according to the

plan provided in the Kanban quantity calculation policy. If no plan
is given, the demand is determined from the inventory transaction
table.
9-15

For non-inventory controlled Kanban jobs:
Fulfilled demand is calculated from Kanban jobs in job status

Completed.
Demand is calculated from Kanban jobs where the job status is less
than Completed.
Updating Kanban Rules

To update the Kanban rules, select the Kanban rules to update and select the
Update button. The Kanban rules can only be updated when the calculation is in
status Calculated. When the rules are updated, the Kanban calculation changes
from status Calculated to Updated. The update can also be configured to
perform in a batch job.
Demonstration 9.2: Calculating Kanban Quantities

Scenario: Pierre has defined his Kanban calculation policies and is ready to
calculate the Kanban rules for the first half of the year.
Follow these steps to calculate Kanban quantities.
Lean manufacturing > Kanban quantity calculation.
3. Enter the Name for the Kanban calculation (for example, enter
Kanban Quantity 1).
4. In the Policy field, enter the Kanban quantity calculation policy that
should be used in the Kanban quantity calculation (for example,
enter Kanban Quantity Calculation).
5. Once the Policy is entered, the dates will prepopulate.
6. Review the dates on the General tab and update if needed.
7. Switch to the Kanban quantity proposals FastTab on the Kanban
8. Select the Generate button to generate the list of Kanban rules to
calculate.
9. Review the list and add or remove Kanban rules as needed using the
Add and Remove button (Optional).
10. Select the Calculate button to calculate the Kanban quantities with
the Kanban quantity calculation policy and date inputs.
11. Select the OK button on the Calculation of Kanban quantities
form.
12. Review the Kanban quantity proposals and update or recalculate if
required.
9-16

13. Select the Kanban rules to update (for example, checkmark Kanban
rule 000035_1015).
14. Select the Update button.
15. Select the OK button on the Making proposed Kanban quantities
effective form.
NOTE: Try reducing the Kanban quantity or change the lead time on the
Kanban rule and re-calculate to see different results.
9-17
Lab 9.1 - Calculating Kanban Quantities

This lab facilitates the calculation of Kanban quantities.
Scenario
In "Chapter 1: Lean Manufacturing Concepts and Overview: Scenario: Simple
Production Flow", the Contoso speaker cover paint shop was introduced where
speaker covers were painted and placed into a buffer inventory. The speaker
cover paint shop is picking unpainted covers from the warehouse. The painted
covers are supplied to a supermarket where they can be picked for other
manufacturing processes or for sales.
Pierre has created a Kanban quantity calculation policy for the painted speaker
covers that looks backwards 5 days and forwards 30 days when considering
demand as the speaker covers under fixed quantity Kanban rules have constant
daily demand.
Challenge Yourself!
Pierre is now ready to run the Kanban quantity calculation to calculate the
Kanban quantities for the speaker covers. Follow these steps to calculate the
Kanban quantities:
1. Review the Speaker Covers Kanban quantity calculation policy and
ensure these settings:
o Master plan: 20
o Minimum kanban quantity: 1
o Safety factor: 2.0
o Period: checked
o Days behind: 5
o Days ahead: 30
2. Create 5 sales order lines to create sales order demand with these
settings:
o Item number: SCPS_PSCR
o Color: Blue
o Quantity: 500
o Site: 2
o Requested ship dates: Starting today with each line one week in
the future.
3. Create a new Kanban quantity calculation against the Painted
Covers Kanban quantity calculation policy, generate, calculate and
update the Kanban rules.
9-18

NOTE: Change the parameters and repeat the exercise to see the different effects
the Kanban policy can have in calculating Kanban quantities. Try a safety factor
of 3.0 or change the sales order line quantities and recalculate.
Step by Step: Review Kanban Quantity Calculation Policy

Use these steps to review the settings for the Kanban quantity calculation policy.
Kanban quantity calculation policies.
2. Find and highlight the Painted Covers Kanban quantity calculation
policy.
3. Review the settings in the Kanban quantity calculation policy.
4. Close the Kanban quantity calculation policies form.
Step by Step: Sales Order Demand

Use these steps to create sales order demand.
sales orders.
2. Select the Sales order > New > Sales order button.
3. Select the Customer account 1202.
4. Select the OK button to accept the defaults.
6. Enter the Quantity 500.
7. Select the Color as Blue.
10. Select Add line button.
12. Enter the Quantity 500.
13. Select the Color as Blue.
16. Open the Line details FastTab.
17. Select the Delivery tab.
18. Enter the Requested ship date as today.
19. If the Available ship and receipt dates infolog appears, select the
Disable dlv. date control button.
20. Repeat 10 through 19 with delivery dates one week apart into the
future from the previous sales line delivery date for a total of 5 sales
lines.
9-19

Step by Step: Kanban Quantity Calculation
Use these steps to calculate Kanban quantities.
Lean manufacturing > Kanban quantity calculation.
3. Enter Name as Painted Covers 1.
4. Select Policy Painted Covers.
5. Switch to the Kanban quantity proposals tab on the Kanban
6. Select the Generate button.
7. Select the Calculate button.
8. Select the OK button on the Calculation of Kanban quantities
form.
9. Select the Kanban rule for Item number SCPS_PSCR Color Blue
with a quantity in the Demand field.
10. Select the Update button.
11. Select the OK button on the Making proposed Kanban quantities
effective form.
12. Close the Kanban quantity calculation form.
9-20
Summary
Kanban Quantity Calculations provided an overview of the setup and process
of calculating Kanban quantities in Microsoft Dynamics AX 2012.
This lesson also included a lab on calculating Kanban quantities for the Contoso
speaker cover scenario.
9-21
Test Your Knowledge

It would be of added benefit to place each question into a familiar context and
relate it to a company or industry with which you are familiar.
1. What does the Kanban quantity calculation policy control?
2. What is the formula used when Include safety stock is selected?
3. How are Kanban quantity calculation policies associated with Kanban rules?
9-22

4. Describe the process of running the Kanban quantity calculation.
5. How is the average daily demand calculated for non-inventory controlled

Kanban rules?
6. How is the average daily demand calculated for inventory controlled Kanban
rules?
9-23

chapter
1.
2.
3.
9-24
Solutions
Test Your Knowledge
1. What does the Kanban quantity calculation policy control?
MODEL ANSWER:
The Kanban quantity calculation policy controls the parameters used for the
Kanban quantity calculation. The Kanban quantity calculation policy is
associated with the Kanban rule and used to perform the Kanban
calculations. It defines the formula to be used in the calculation, and the
horizons to be considered for fulfilled and future demand.
2. What is the formula used when Include safety stock is selected?
MODEL ANSWER:
Kanban quantity = (Average daily demand * Product lead time + Safety
stock) (Product quantity per handling unit) + Minimum Kanban Qty
3. How are Kanban quantity calculation policies associated with Kanban rules?
MODEL ANSWER:
The Kanban quantity calculation policy is associated with the Kanban rule.
One rule can have multiple calculations associated with it. This is done on
the Kanban quantity calculation policies FastTab on the Kanban rule.
4. Describe the process of running the Kanban quantity calculation.
MODEL ANSWER:
To calculate the Kanban quantity for Kanban rules, a Kanban quantity
calculation is created and associated with the Kanban quantity calculation
policy. The process of running the calculation includes generating the list of
Kanban rules associated with the Kanban quantity calculation policy,
calculating the Kanban rules, and updating the Kanban rules.
9-25

5. How is the average daily demand calculated for non-inventory controlled
Kanban rules?
MODEL ANSWER:
period.
For non-inventory controlled Kanban jobs:
Fulfilled demand is calculated from Kanban jobs in job status Completed.
Demand is calculated from Kanban jobs where the job status is less than
Completed.
6. How is the average daily demand calculated for inventory controlled Kanban
rules?
MODEL ANSWER:
period.
For inventory controlled (last activity of the Kanban rule updates inventory):
Fulfilled demand is calculated from the inventory transaction table.
Demand is calculated from the required transactions according to the plan
provided in the Kanban quantity calculation policy. If no plan is given, the
demand is determined from the inventory transaction table.
9-26
COURSE: 80310
LEAN MANUFACTURING
IN MICROSOFT DYNAMICS AX2012
INSTRUCTOR NOTES
Last Revision: August 2011

This courseware is provided as-is. Information and views expressed in this courseware, including URL and other
Internet Web site references, may change without notice.
Unless otherwise noted, the examples depicted herein are provided for illustration only and are fictitious. No real
association or connection is intended or should be inferred.
This courseware does not provide you with any legal rights to any intellectual property in any Microsoft product.
Complying with all applicable copyright laws is the responsibility of the user. Without limiting the rights under
copyright, no part of this courseware may be reproduced, stored in or introduced into a retrieval system, or
transmitted in any form or by any means or for any purpose, without the express written permission of Microsoft
Corporation.
Copyright 2011 Microsoft Corporation. All rights reserved.
Microsoft, Microsoft Dynamics, Microsoft PowerPoint Microsoft SQL Server data management software
and Microsoft Dynamics AX are trademarks of the Microsoft group of companies. All other trademarks are
property of their respective owners.
This course content is designed for Microsoft Dynamics AX 2012.
Contents and Timeline Chart

INSTRUCTOR NOTES
Introduction to Instructor Notes
Introduction slide: Lean Manufacturing Functions and Features
10
12
13
14
15
16
17
18
** Intended for Instructor Preparation Only **
Page
Timeline
Total Class Presentation: 24 hours
Chapter Description
Minutes to Complete Chapter
Page
Number
Introduction slide: Lean Manufacturing

Functions and Features
Presentation 20 minutes
Chapter 1: Lean Manufacturing Concepts

and Overview
Presentation:120 minutes
Presentation: 180 minutes
10
Chapter 3: Use and Manage Kanban
12
Chapter 4: Fixed Quantity Kanban
13
Chapter 5: Event Kanban
14
Chapter 6: Schedule Kanban
15
16
17
18
Page
ii
Instructor Notes
INTRODUCTION TO INSTRUCTOR NOTES

Objectives
The goals of this chapter are to:
Provide instructors with guidance on how to use instructor notes
Provide guidance on how to use the training manuals

introductory chapter
Set expectations of instructors for pre- and post-class tasks
Set expectations of how to begin class
Introduction
This chapter serves as introductory guidance to instructors teaching Microsoft
Dynamics class. The purpose of this chapter is to create consistency between all
classes. A participant attending a development class for software solution A
should experience the same class beginning as a participant attending an
application class for software solution B.
This chapter provides the following information:
How to use the Introduction chapter
Pre-class tasks
How to begin class
How to use the instructor notes
Post-class tasks
Page
Pre-Class Tasks
There are several tasks that instructors should take care of to ensure a smooth
start-up to the class. These include, but are not limited to:
Contact training center in advance contact the training

center several days prior to the beginning of class and verify
these things:
o
o
o
Center has correct VPC image

Image will be installed before your arrival
Training room has white boards, markers, flip charts, and
audiovisual equipment as you required to deliver the class
Confirm the date and time that you want to arrive at the center
Check the training room before class go to the training

center and check your room the day before class starts. Verify
that equipment is available and images are loaded. Always test
the image during this inspection visit. This is also the time to set
out participant materials at the participant desks, prepare name
cards, prepare white boards and flip charts for use, and to test
audiovisual equipment.
Arrive early the first day of class leave yourself time to take
care of last minute details. Give yourself time to start up your
instructor machine, open your PowerPoint slide deck, and ready
your notes.
Prepare a parking lot it is strongly encouraged to designate a

flip chart page or a section of a white board as a parking lot for
unanswered questions. This will enable the instructor to set aside
questions that cannot be immediately answered or that require
answers that may take longer than the class timeline will allow.
Display the Welcome slide the Welcome slide is the first slide
in each class slide deck. This slide should be on display as
participants enter the room.
Ensure participant sign-in ensure that participants sign the

class roster provided by the training center as they enter the
training room
Please check on PartnerSource to see if there is a training Extension that goes

with this course. The Extension is to be used in conjunction with the courseware,
not as stand-alone training manual. You can download the Extension from
PartnerSource: https://mbs.microsoft.com/partnersource go to Communities then
Training then Training materials. Make sure to provide the course participants
with the Extension as part of the student materials. Besides the training manuals
the Extensions also include Syllabus and Instructor Notes to help the instructor
prepare for the training.
Page
Instructor Notes
Beginning the Class

Introductions
The beginning of class is guided by the first few slides of the PowerPoint slide
deck. Display the Introductions slide and introduce yourself using the bullets on
the slide. The instructor should include information about the qualifications the
instructor has to teach the class.
Allow participants time to introduce themselves using these same bullets.
Class Logistics
Display the next slide and go through the logistics of times, breaks, and
bathrooms. This is also a good time to start setting expectations for participation:
class will start on time and participants are expected to shut off mobile phones
and email at that time.
Introduce the Class

The remaining slides will introduce the table of contents of the class. It is a good
idea to have the participants open the training manual and browse the table of
contents while you review the topics that will be covered in class.
The Introduction Chapter

There are no planned slides for the Introduction chapter. Instructors should use
their discretion to call out the highlights from the chapter.
The introduction chapter contains information about:
Microsoft Dynamics training offerings make participants

aware of the information for their later reference
Microsoft Dynamics certifications make participants aware

of the information for their later reference; stress that 100% of
the questions on certification exams are incorporated into the
content provided in the training manual
Class prerequisites - use the information to assist in the

expectation setting for the class; this will ensure that all
participants understand what the expected level of expertise is
for taking part in the class.
Chapter contents a summary of each chapter as well as

information about the organization of the chapter; in particular
discuss the three levels of labs
Give the participants time to write down their objectives for the class. This will
help them focus on the information and skills they wish to learn during the class.
Page
How to Use Instructor Notes

Instructor notes are provided by Microsoft Dynamics content developers to serve
as a guide for instructors. They are the communication link between developers
and instructors.
Content developers write instructor notes to:
Provide guidance on which topics should be emphasized during

class
Provide clarification on how to use examples and case studies

provided in the content
Provide approximate timelines for presentation and completion

of material
Provide guidance on how to augment the presentation of the

content with Microsoft PowerPoint slides
Provide tips and tricks to augment participant learning
Inform instructors of any special requirements of the class
Provide any additional files that are to be used with a chapter
Instructor notes do not have to be followed verbatim. They are suggestions for
how to present the material included in the training manual and must be adapted
to the individual skills and knowledge of the instructor.
However, the instructor notes are written by seasoned training professionals that
are themselves trained on the best practices in classroom training presentation.
Also the content developers have tapped into the various expert resources of
Microsoft Business Solutions consulting, development, and support professionals
as well as Microsoft Business Solutions Partner professionals to include the most
relevant information possible for instructors to use in their presentations.
Therefore it is important for instructors to incorporate the guidance provided by
the instructor notes into their presentations.
Organization of Instructor Notes

Instructor notes are written in the order in which the material is presented in the
training manual. Instructions and suggestions can be cross-referenced with the
training manual topic by topic, and in many cases paragraph by paragraph.
Instructor notes will suggest the appropriate time to display the slides that
accompany each chapter. Slides are provided to give instructors visual references
for participants while the instructor explains the topic being presented.
Instructor notes will also provide any additional information needed to set the
stage for participants to engage in the labs.
Page
Instructor Notes
Using Callouts
Callouts are used to draw attention to useful information. During class, consider
highlighting call-outs as appropriate. Below is an example of how callouts are
used throughout the training material.
CAUTION: Cautions are found throughout the training courseware and are preceded by
the word CAUTION in bold. Cautions are used to remind you of a specific result of a
specific action which may be undesirable.
HINT: Hints are found throughout the training courseware and are preceded by the
word HINT in bold. Hints are used to suggest time-saving features or alternative
methods for accomplishing a specific task.
NOTE: Notes are found throughout the training courseware and are preceded by the
word NOTE in bold. Notes are used to provide information which, while not critical, may
be valuable to an end user.
EXAMPLE: Examples are found throughout the training courseware and are preceded
by the word EXAMPLE in bold. Examples bring to light business scenarios that may
better explain how an application can be used to address a business problem.
BEST PRACTICES: Best Practices call out background information and best practices
about security, where appropriate, so that users can judge risks and benefits and make
informed choices (used to emphasize the secure choice over the insecure choice when
coding, installing, upgrading, configuration, and set up of the system.) As the instructor
make sure you call out these things as part of Best practices when implementing an ERP
system.
Example of a best practice call out box:

BEST PRACTICES: Before your deployment is complete, be sure to apply the latest
service packs and relevant security patches to your system. Keeping current on the latest
service packs, in particular, is one of most important things you can do in managing the
security of your system
Page
Post-Class Tasks
Post-class tasks can vary depending on the class delivered and the training center
used, but generally include the following:
Page
Evaluations administer any evaluations required for the class,

including the standard Microsoft Dynamics post-class
evaluation. It is a good idea to direct the participants to the
evaluations in the middle of the last day of class so participants
have time to thoughtfully fill out the evaluation.
Parking lot take down any remaining parking lot issues and
determine how answers will be distributed to participants.
Obtaining participant email addresses and sending out a group
email with follow-up answers is often a simple solution.
Closure with training center make a final visit to the training

center contact person to ensure the training center knows the
class is completed and any final issues can be addressed
Instructor Notes
INTRODUCTION SLIDE: LEAN MANUFACTURING

FUNCTIONS AND FEATURES
Overview
The goals of this slide are:
Explain that Lean manufacturing for Microsoft Dynamics AX is

built on 4 pillars:
o
o
o
o
Mapping the Lean organization

Planning and scheduling
Kanban and pull based execution
Costing for Lean manufacturing
Timeline
How to Teach this Slide

Introduce and explain that the Lean solution within Microsoft Dynamics
AX2012 was designed with these objectives in mind.
Explain that Lean principals are fundamental for understanding the
purpose and capabilities of Lean manufacturing for Dynamics AX 2012.
Page
CHAPTER 1: LEAN MANUFACTURING CONCEPTS

AND OVERVIEW
Chapter Overview
The goals of this chapter are:
Explain Lean basic concepts.
Explain the Value Stream theory.
Describe the production flow concept and how it is used in

Explain the Kanban concept and how it is used in Microsoft

Dynamics AX 2012.
Describe the Simple Production Flow example and introduce the

Contoso scenario.
Describe the High Level Production Flow example and introduce

the Contoso scenario.
Set up time units to be used in Microsoft Dynamics AX 2012.
Set up the production flow model and explain the capacity

settings.
Set up work cells as resource groups.
Set up Lean schedule groups.
Describe the new inventory breakdown concept for Lean

Describe standard costing and backflush costing and how they

are used for Lean manufacturing in Microsoft Dynamics AX
2012.
Timeline
How to Teach this Chapter

Introduce and explain the five Lean principals. Explain the connection
with Kanban systems, production flows, and Value Streams.
Describe the replenishment strategies that can be applied using Lean
Describe a simple production flow example and a high level production
flow example and introduce the Contoso scenario.
Page
Instructor Notes
Set up production flow models, work cells as resource groups, Lean
scheduled groups and explain the capacity settings.
Describe the new warehouse concept for Lean manufacturing in Microsoft
Dynamics AX 2012.
Page
CHAPTER 2: PRODUCTION FLOWS

Chapter Overview
Introduce students to the production flows as the foundation of

Lean manufacturing.
Create a new production flow version.
Set up takt/cycle times.
Set up process type activities.
Set up single transfer type activities.
Set up a two activity production flow containing transfer and

process type activities.
Define predecessors/successors.
Describe activity relations and constraints.
Describe picking activities and setup required.
Describe semi-finished product and setup required.
Describe costing implications.
Timeline

Explain that a production flow is the mainstay of Lean manufacturing in
Microsoft Dynamics AX 2012, it defines the flow of material and products
throughout work cells and locations for a specific production or supply
scenario and can be described as a sequence or small network of process
or transfer activities.
Discuss production flows as the foundation of Lean manufacturing, because they:
Page
10
Support the Kanban rules in defining the activities that a Kanban

goes through.
Provide capacity and takt calculations
Instructor Notes
Complete all demonstrations and labs to teach the concepts of production
flows, activities and how they are linked. Discuss the scenarios to show
the various elements of semi-finished activities in production flows.
Page
11
CHAPTER 3: USE AND MANAGE KANBANS

Chapter Overview
Describe manufacturing Kanbans and explain the different ways

they can be used to streamline business processes using
Define withdrawal Kanbans and explain how they are used to

move materials.
Describe fixed quantity Kanbans and how they compare to fixed

bin and fixed card Kanban systems.
Define event Kanbans and describe how they can be used to

trigger pull events.
Describe scheduled Kanbans and when they should be used.
Describe subcontracting scenarios using Kanbans.
Timeline

Help students understand Kanban basics, discuss the types and triggering
mechanisms for Kanbans within Lean manufacturing for Microsoft
Dynamics AX 2012.
Discuss manufacturing and withdrawal Kanbans.
Discuss fixed quantity Kanbans, event Kanbans, scheduled Kanbans, and

Go through each scenario to reiterate how each type of Kanban can be
used in various manufacturing scenarios.
Page
12
Instructor Notes
CHAPTER 4: FIXED QUANTITY KANBANS

Chapter Overview
Describe how fixed quantity Kanbans are used in Microsoft

Dynamics AX 2012.
Define how to set up and configure fixed quantity Kanban rules.
Review the planning process for a fixed quantity Kanban.
Explain how to use the Kanban schedule board in the planning

process for fixed quantity Kanbans.
Explain how to use printing pick lists and Kanban cards to signal
processes on the shop floor.
Describe how to use the Kanban board for process jobs when
using fixed quantity Kanbans.
Describe the processing of fixed quantity Kanbans.
Timeline

Overview
Help students understand a fixed quantity Kanban rule relates to a fixed
number of handling units; meaning, the numbers of active Kanbans are
constant. A fixed quantity Kanban is a make-to-stock scenario.
Whenever the products of a Kanban are consumed and handling units is
manually emptied, a new Kanban of the same type is created.
Complete all demonstrations and labs to teach the concepts of fixed
quantity Kanban rules, how they are set up and how they are processed.
Page
13
CHAPTER 5: EVENT KANBANS

Chapter Overview
The goal of this chapter is to:
Describe how event Kanbans are used in Microsoft Dynamics

AX 2012.
Define how to set up and configure event Kanban rules and the
corresponding event types.
Describe how to use the Kanban board for process jobs when
you use event Kanbans.
Describe the processing of event Kanban jobs.
Demonstrate how to set up and process a sales line event.
Demonstrate how to set up and process a sales line event with

Capable to Promise (CTP).
Demonstrate how to set up and process a Kanban line event.
Demonstrate how to set up and process a BOM line event.
Demonstrate how to set up and process a stock replenishment

event.
Timeline

Overview
Help students understand event Kanbans are only created out of related
demand, so event Kanbans belong to the category of make-to-order. Event
Kanbans are created when certain events occur. In Microsoft Dynamics AX 2012,
these events include when you create sales lines, estimate production orders,
create upper level Kanban demand, or when you reach a certain level of on hand
inventory
Complete all demonstrations and labs to teach the concepts of Kanban line
events, sales line events, BOM line events and minimum stock events,
how they are set up and how they are processed.
Page
14
Instructor Notes
CHAPTER 6: SCHEDULED KANBANS

Chapter Overview
Describe the behavior of planned orders of type Kanban.
Describe the Supply schedule form and the relationship with

scheduled Kanbans.
Describe how scheduled Kanbans are used in Microsoft

Dynamics AX 2012.
Define how to set up and configure scheduled Kanban rules.
Describe the planning process for a scheduled Kanban.
Describe the planning considerations for scheduled Kanbans.
Timeline

Overview
Help students understand how Master Planning based requirements from
demand forecast, supply forecast, or from any other demand are used to create
planned orders of type Kanban. Create planned orders of type Kanban based on
the Kanban rule and follow the standard Master Planning logic and horizons.
Introduce the Supply schedule form.
Master Planning item coverage settings determine how the planned orders are
created and whether they are automatically or manually firmed.
Go through the planning of the Kanbans including planned orders and the Supply
schedule form. Help students understand the processing of the Kanbans
explaining the various Kanban boards.
Complete all demonstrations and labs to teach the concept of scheduled

Kanbans, how they are set up and how they are processed.
Page
15
CHAPTER 7: ACTIVITY BASED SUBCONTRACTING

Chapter Overview
Describe how to set up subcontracting vendor payments.
Describe how to configure a resource group/work cell as

subcontracted.
Describe how activity-based subcontracting is used in Microsoft

Dynamics AX 2012.
Define how to set up and configure subcontracting activities in

production flows.
Define how to use alternate process flows with subcontracting

activities.
Describe how to use the Kanban board for process jobs for
Timeline

Overview
Help students understand how subcontracting for Lean manufacturing in
Microsoft Dynamics AX 2012 separates the material flow from the purchase
process of the services.
Model the subcontracting work as a service that is related to an activity of a
production flow.
Introduce the new cost group type, direct outsourcing, and explain how the cost
accounting of subcontracted work is completely integrated in the new costing for
Lean manufacturing in Microsoft Dynamics AX 2012.
Complete all demonstrations and labs to teach the concept of activity

based subcontracting, the setup required and how Kanbans are processed
using subcontracted activities.
Page
16
Instructor Notes
CHAPTER 8: PRODUCTION FLOW COSTING

Chapter Overview
Describe the concept of backflush costing and how it is used in

Dynamics AX 2012.
Describe conversion cost for items produced by a Kanban in a

production flow.
Describe the different calculation methods of standard costs for

items produced with a Kanban job.
Understand how costs are reported to the general ledger when

producing items using Lean process flows.
Demonstrate how to view the costing for a Kanban job based on

a subcontracted activity.
Describe production flow periodic posting using the backflush

costing calculation.
Timeline

Overview
Help students understand how the new production flow costing method is
implemented in Microsoft Dynamics AX 2012. Introduce the concept of
backflush costing and how it is used with the production flow as the cost
accumulator. Describe the calculation methods for standard costs for
items produced using a Kanban job.
Show and describe the production flow backflush costing topic, analyzing
the WIP inside the production flow and the variances produced.
Complete all demonstrations and labs to teach the concept of production
flow costing, the setup required and the processes used to run backflush
costing.
Page
17
CHAPTER 9: KANBAN QUANTITY CALCULATIONS

Chapter Overview
The goal of this chapter is to:
Define how to set up and configure Kanban quantity calculation

policies.
Describe how to create the Kanban quantity calculation to

generate, calculate and update Kanban rules.
Timeline

Overview
Explain why it is important to recalculate inventory levels on a periodic
basis.
Explain how to use the Kanban calculations to adjust Kanban rules. Go
through the setup and processing of the calculations.
Set up a Kanban calculation policy and discuss the different results
achieved with greater variability of demand or different rules.
Complete all demonstrations and labs to teach the setup required and the
processes used to recalculate Kanban quantities.
Page
18

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COURSE: 80310

Last Revision: August 2011

Chapter 1: Lean Manufacturing Concepts and Overview

Chapter 2: Production Flows

Chapter 3: Use and Manage Kanbans

Lean Manufacturing in Microsoft Dynamics AX 2012

Chapter 4: Fixed Quantity Kanbans

Chapter 5: Event Kanbans

Chapter 6: Scheduled Kanbans

Chapter 7: Activity Based Subcontracting

Chapter 8: Production Flow Costing

Chapter 9: Kanban Quantity Calculations

Lean Manufacturing in Microsoft Dynamics AX 2012

Microsoft Dynamics Courseware

Lean Manufacturing in Microsoft Dynamics AX 2012

Microsoft Dynamics Courseware Contents

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Quick Interaction: Lessons Learned

Lean Manufacturing in Microsoft Dynamics AX 2012

Chapter 1: Lean Manufacturing Concepts and Overview

CHAPTER 1: LEAN MANUFACTURING CONCEPTS

Explain Lean basic concepts.

Explain the Value Stream theory.

Describe the production flow concept and how it is used in Microsoft

Explain the Kanban concept and how it is used in Microsoft

Describe the Simple Production Flow example and introduce the

Set up time units to be used in Microsoft Dynamics AX 2012.

Set up work cells as resource groups.

Set up Lean schedule groups.

Describe the new inventory breakdown concept for Lean

Lean basic concepts

Value Stream theory

Introduction to production flows

Setup specific to Lean manufacturing and interconnectivity with

Lean Manufacturing in Microsoft Dynamics AX 2012

Five Lean Principles

Identify the Value Stream

(Womack & Jones, 2003)

Lean Principle: Identifying Value

The customer defines the value of product in a Lean supply chain.

Value-adding activities transform the product closer to what the

An activity that does not add value is considered to be waste.

Chapter 1: Lean Manufacturing Concepts and Overview

The Value Stream is the sequence of processes from raw material to

The Value Stream can include the complete supply chain.

Value Stream Mapping is an important tool to help model the Lean

Lean Principle: Creating Flow

Make the value process flow.

The waiting time of work in progress between processes is

Lean Principle: Introducing Pull

Lean Principle: Striving for Perfection

Lean Manufacturing in Microsoft Dynamics AX 2012

Lean Enterprise: Value Stream

Lean planning and forecasting (takt, cycle time, throughput,

Lean accounting /Value Stream costing

Cell and Line Design

Product family or Value Stream identification

Value Stream Mapping

Strategy and subcontract issues

Plant layout and location of supermarkets

Activity timings and sampling

Calculate takt and cell cycle time

Identify any constraints