How to add an outsourced manufactured goods to product assumptions?

Product card for outsourced manufactured goods product

Demand assumptions settings for outsourced manufactured goods product

Collection terms (Product Sales Terms) for outsourced manufactured goods product

By-products settings for outsourced manufactured goods

Unit (Unit conversion rates) for outsourced manufactured goods product

Other expenses (Product-driven expenses) for outsourced manufactured goods product

How to add an outsourced manufactured goods to your Product assumptions?

To add a outsourced manufactured goods:

1. Click PRODUCTS assumptions in the Business Concept section.
   
    
   
   In some cases, you will encounter the Product List. Also, simply click Add New Product To Begin Working or Add New Product to begin working.
   
   
   
   
2. In the Add New Product window, click Manufactured Goods.
   
   
3. Select subtype of product as a outsourced manufactured goods, Click OUTSOURCED.
   
   
   WHAT IS A "OUTSOURCED MANUFACTURED GOODS" PRODUCT TYPE IN DECISION CRITICAL?
   
   Outsourced Manufactured Goods: Contracted Production with Own Materials: This product type represents complete, finished products manufactured by a third-party supplier using your raw materials.  This differs from "Outsourced Semi-Finished Products" where the supplier also provides the materials.

   Imagine you manufacture a specific type of bottled beverage (finished product). You might outsource the bottling process (labor and equipment) to a third-party manufacturer, but you provide them with your own custom recipe, ingredients, and bottles. The finished bottled beverage would be considered an "Outsourced Manufactured Good" in your production system.
   
   
4. Enter the details of your manufactured goods: 
   
   
   
   

   1. Product Name: Clearly identify the physical product you're selling. (e.g., Custom bike)

   2. Main Unit of Measure: Specify the primary unit used to measure and track your manufactured goods. (e.g., Piece)

   3. Default Sale Price: Define the standard price at which you sell the manufactured goods to your customers per unit based on your chosen main unit of measure. (e.g., $5,990 USD per Piece)
      
      

5. Once you finished entering the details, click "CREATE PRODUCT AND PROCEED TO PRODUCT CARD" to proceed to the Product card (we recommend this). If you are not willing to proceed to the Product card, click "CREATE PRODUCT AND RETURN TO LIST OF PRODUCTS" to return to the Products list. In case you are willing to go to the Product card at a later time, you can do so.
   
   
6. Add your product settings to the product card.
   
   
   Product card is a blueprint for each unique product in your company.
   It serves as a centralized location within a scenario, where you define key assumptions about that product. For each product, the product card will be different based on the type of product.
   
   
   
   Here are the essential settings you'll need for your manufactured goods:
   
   
   1. Production: While you won't directly manage production, you might need to specify lead time requirements for your outsourced manufacturer to deliver the finished product.
   2. Demand (Market Demand Assumptions): Similar to other manufactured goods, forecast customer demand for your custom bike. Use models like "Constant Demand" or "Seasonal Demand" to predict future sales.
   3. Collection Terms: Define when revenue is recognized for the sale of your custom bike (e.g., "On Delivery" when the customer receives the bike, or "On Account" if you offer credit terms).
   4. Units (pcs): remains the primary unit of measure for tracking your custom bike inventory.
   5. Storage Rules: Define how you manage your custom bike inventory levels, considering factors like lead time from the outsourced manufacturer and anticipated customer demand.
   6. By-products: This section can be relevant in some outsourced manufacturing scenarios. For example, if your custom bike frame uses a specific type of metal tubing during production, there might be scrap metal generated as a by-product.
   7. Bill of materials: While you wouldn't be directly managing production, it's still beneficial to create a bill of materials listing all the raw materials and components needed for your product.
   8. Product-driven Expenses (if any): This section allows you to define any additional costs associated with your manufactured goods.
      
      
7. After you have finished setting up the Product card, simply return to the Product list and you will be able to see the product you just created on the list.
   
   

Product card for outsourced manufactured good

Here are the essential settings in product card you'll need for your manufactured goods:

1. Production

2. Demand (Market Demand Assumptions)

3. Collection Terms

4. Units (pcs)

5. Storage Rules

6. By-products

7. Bill of Materials

8. Other expenses (product-driven expenses)

Read the full instructions of each settings step-by-step below.

Production settings for outsourced manufactured goods 

While you won't directly manage the production process for your outsourced manufactured goods, Decision Critical empowers you to optimize your inventory levels. This section focuses on settings the minimum number of finished goods you want to have on hand at any given time.

To add production settings:

1. Navigate to Production settings in the Product card and set the minimum number of finished goods.
   
   
   To set the minimum number of finished goods:
   1. Within the product card, locate the text "Target: 0 Months inventory."
   2. Click directly on the "0 Months"(date unit) to edit to set the minimum number of finished goods you want to keep in stock in the target inventory section. This ensures you have enough products to avoid stockouts while keeping inventory costs. 
      
      1. Click date unit > select between Days and Months, for example if you want to set it 3 month, select Months
      2. Click the duration number and enter the number, for example if you want to set it 3 month, enter 3. 

Demand settings for outsourced manufactured goods 

In any given month, the number of manufactured goods you can sell is limited by the minimum of two factors: what you have in stock (availability) and what customers want to buy (demand).

To add a market demand assumptions: 

1. Click ADD DEMAND TO ACTIVATE SALES
   
   
   
2. In MARKET DEMAND ASSUMPTIONS window, Click on "Select Channel" and choose the specific channel. (If this is your very first time setting up demand assumptions, you can starting with the default channel. However, we recommend setting up additional channels yourself. You can find more information in the "Here's a tips" section.)
   
   
   
   
3. Select the demand assumptions and enter the details of the selected sales channel.
   
    
   1. Constant Demand: Demand for your product remains consistent over time.
   2. Step Growth: Demand for your product increases in steps or jumps at specific points in time.
   3. Linear Demand Growth: Demand for your product increases steadily over time at a constant rate.
   4. Phased Linear Demand: Demand for your product exhibits periods of constant linear growth followed by plateaus or slower growth phases.
   5. Seasonal Demand: Demand for your product fluctuates predictably throughout the year based on seasonal trends.
   6. Segment Dynamics: Demand for your product varies depending on specific customer segments you target.
   7. Demand Funnel (various growth types): This models the conversion process of potential customers into paying customers, considering different growth patterns at each stage of the funnel (e.g., Constant demand for website visitors, Step growth for qualified leads).
   8. Geographic Demand: Demand for your product varies depending on the geographic location of your customers.
      
      
4. Once you have finished entering the details, click "CREATE DEMAND".
   
   
5. Check the demand of your selected channel.
   
   
   
   This might includes:
   
   1. Demand Overview: After you've selected and configured the sales channel and demand type, you'll see a summary of the forecasted demand for your outsourced manufactured good. This summary displays:
      
      
      
      1. Year (Y..): The year in the forecast (e.g., Y1 for the first year).
      2. Units: The total number of units demanded for that year.
      3. Currency (Price): The currency and sales price per unit (excluding VAT).
         
         

   2. Detailed Breakdown (Click to Expand): This summary provides a high-level overview. By clicking on this section (it might appear collapsed or expandable), you'll be able to see a more detailed breakdown of the demand forecast:
      
      
      

      1. Month: Each month within the forecast year will be listed.
      2. Demand per Month: The specific number of units demanded for each month.
      3. Unit Price per Month: The sales price per unit for each month (excluding VAT). This allows you to see if there are any price fluctuations planned throughout the year.
         
         
6. Click "UPDATE AND CONTINUE" to save and return to Product card. (Click RESET in case you want to cancel and return)
   
   
   
   
   
   
   To cancel and return: click RESET, on the top left. 
   
   

Collection terms settings for outsourced manufactured goods

Collection terms (or Product Sales Terms) settings within the product card in Decision Critical helps you define how revenue for your product is recognized. Here's a breakdown of the key aspects:

Channels and Collection Terms:

• Channels: These represent the different ways customers can purchase your product. Common channels might include direct sales, online sales, or through partner resellers.
• Collection Terms: This specifies when revenue is recognized for each channel. Decision Critical likely uses a standard term (e.g., "month" or "year") after delivery, indicating when payment is typically collected after the product is delivered.

To set the collection terms:

1. Open Collection terms by clicking the list icon at the right side of Collection terms.
   
   
2.  In PRODUCT SALES TERMS window, specify channel you are want to set, then set its collection point and enter the collection terms. 
   
   
   
   The key takeaway here is that you have the flexibility to adjust the standard collection rule for each channel. Here are the customization options Decision Critical might offer: 
   
   
   1. Collection Point: Here, you can choose when revenue is recognized:
      1. On Account: Revenue is recognized when the customer receives an invoice for the product.
      2. On Delivery: Revenue is recognized when the product is delivered to the customer. (so you don't need to set its collection period)
      3. Prepayment: Revenue is recognized when the customer pays for the product upfront, before delivery.
   2. Collection Terms: After selecting the collection point, you can define the specific timeframe for revenue recognition. 
      
      
3. Once you finished, you can return to Product card to save. 

Units (unit conversion rates) settings for outsourced manufactured goods 

In Unit conversion rates window:

• Allow partial units: Enable this option if you want to allow buyers to purchase your product in smaller quantities (applicable only to specific units you choose). This provides greater flexibility for your customers.
  
  
• Alternate unit: This feature allows you to define additional units for your product alongside the primary unit. You can then set a conversion rate (CR) for each alternate unit, indicating how many units of the alternate unit are equivalent to one unit of the general unit. 
  
  
  • To enable alternate unit: Click "alternate unit not set" > select the alternate unit > enter the conversion rate.
    
    
    
    
    

Example: Manufactured Goods with Batch Options

Imagine you produce custom furniture (e.g., chairs). You can offer different unit options for purchasing your furniture:

• Primary Unit: Piece (represents an individual chair)
• Alternative Unit: Batch (represents a group of chairs sold together)
• Conversion Rate: 1 Batch = 5 Pieces
  
  

With this setup, customers can see the price per chair (in Pieces) but also have the option to view pricing for a set of chairs (in Batches). The conversion rate clarifies that 1 Batch is equivalent to 5 Pieces.

By utilizing these options, you can cater to diverse customer needs. Some customers might prefer buying individual chairs, while others might want a set at a discounted price per chair. The conversion rate ensures clear communication about the quantity difference between the units. This flexibility allows you to potentially attract a wider customer base.

Storage rules settings for outsourced manufactured goods 

Storage rules

• Storage Unit: "Store as (general unit)" indicates that product are stored and tracked in inventory using the general unit (e.g., piece). This aligns with how you would typically count buttons.
  
  
  • Storage Efficiency: Quantity per Square Meter
    
     
    
    • In "NA", You will need to enter a numerical value representing the maximum number of units that can be efficiently stored in a space of one square meter (m²).
      
      

  • Storage Options:
    
    
    

    • Store outside: This option might be selected if products are typically stored in an external warehouse or storage facility. To enable this option, just checking its box. 
    • Store off-site: This could indicate that products are stored in a separate location from the main production facility. To enable this option, just checking its box. 
      
      

Here's a practical example:

Imagine you can neatly stack 100 buttons on a single square meter of space. You would then enter "100" in the "NA" field. This would indicate that you can store a maximum of 100 buttons per square meter in your inventory.

By-products settings for outsourced manufactured goods 

What are By-products?

By-products are secondary or incidental items produced during the manufacturing process of your main product. They are often unplanned or unintended results.

Why Track By-products?

• Cost Management: By-products can have a value or disposal cost associated with them. Factoring this into your calculations helps determine overall production costs more accurately. For example, you might be able to sell scrap metal for recycling, generating some revenue.
• Sustainability: By-products can sometimes be reused or recycled, minimizing waste and promoting a more sustainable production process.

To add By-products

1. Open By-products by clicking the list icon at the right side of By-products.
   
   
2. In BY-PRODUCTS window, click "+ADD BY-PRODUCTS".
   
   
3. Create the by-products by enter the name.
   
   
4. Once you have added all the by-products, return back to BY-PRODUCTS window.
5. Click "ADD NEW PRODUCT"
6. Select by-product and raw materials that are equivalent for "(By-products) that equivalent to item (Raw materials)" then add its quantity with unit:
   
   
   
   

   For example
   
   
   If the manufactured process produced "Scrap metal" as the by-products and one scrap metal is equal 0.5 kilogram, you will need to enter:
   
   By-products (e.g., Scrap metal)
   Raw materials (e.g., Metal)
   Quantity per unit (e.g., 0.5 per KG)

Bill of materials (BOM) settings for outsourced manufactured goods 

Bill of materials

This allows you to define the raw materials and components directly used in manufacturing your product (by third-party). This information is essential for accurate production planning, cost estimation, and inventory management.

Key Elements in the Image:

• Direct Material: This column lists all the raw materials or components required to produce one unit of your finished goods (you need to add the raw material manually.
• Quantity: This column specifies the exact amount of each direct material needed to produce one unit of the product.
• Unit Type: This will defines the unit of measurement for each direct material. Examples might include grams, meters, liters, or units.
• Total Cost: This column will display the calculated total cost per unit for each direct material. (It will be automatically calculated based on your entered data and material cost information)

Adding Direct Materials:

Add direct material button; "+ ADD DIRECT MATERIAL", allows you to add new lines to the table for each additional raw material or component required in your product's production process.

To add direct material:

1. Open Bill of material by clicking the list icon at the right side of bill of material.
   
   
2. In DIRECT MATERIALS, Click "+ ADD DIRECT MATERIAL" to add new direct material list.
3. Add raw material by clicking add button (+) near column "Direct material"
   
   
4. In ADD RAW MATERIAL window, enter material's name in "Material name" (e.g., Plastic) then set its cost and unit (e.g., cost: 0.2, unit: gram). 
   
   
5. Once you finished entering raw material details, return back to DIRECT MATERIALS.
6. Add the raw material to Direct Material by selecting it from the drop-down list.
   
   
   
   
7. Then set the quantity and unit type of the direct material (Total cost will be automatically calculated).
   
   
8. Once you have finished, you can close the window to save and return to product card. The newly added bill of materials will be on the list.
   
   

Here's a practical example:

Other expenses (product-driven expenses for all channels) settings for outsourced manufactured goods 

Other expenses (all channels)

The "Other expenses (all channels)" section within your product listing allows you to define additional costs directly associated with the production, packaging, or delivery of your good. These expenses are considered variable costs, meaning they fluctuate based on the quantity of the product sold. 

To add product-driven expenses:

1. Open PRODUCT-DRIVEN EXPENSES by clicking the list icon on the right side of Other expenses (all channels).
   
   
2. In PRODUCT-DRIVEN EXPENSES window, click "+ ADD EXPENSES" to add new expenses. To add expenses:
   1. Enter expenses name (e.g., Packaging Materials).
   2. Select expenses rule: On shipment or On production.   
   3. Select a calculation method and set the number of expenses (e.g., $0.05 per piece).
   4. Set the activity group.
      
      
3. Once you finished adding expenses, return back to PRODUCT-DRIVEN EXPENSES. 
   
   
4. Review the expenses you added, and then return to the product card. The newly added product-driven expenses will be listed.
   
   

Here's what you can specify for each expense:

• Expense Name: Give your expense a clear and descriptive name (e.g., "Packaging Materials," "Shipping per Unit").
• On Shipment: This rule applies to expenses incurred during the fulfillment process, such as packaging, shipping, and warehousing. These costs are typically expensed in the period the product is shipped to the customer. (e.g., Shipping costs, Packaging materials)
• Expense Rule: Give pre-defined "Expense Rules" to categorize your product-driven expenses. These rules help streamline expense tracking and reporting by grouping similar cost components. Here are the three common expense rule types:
  • On Purchase, Expense on Period: This rule applies to costs incurred at the time of product purchase that are expensed immediately in the current accounting period. These expenses are typically not capitalized into the product's value. (e.g., Transaction fees for buying inventory)
  • On Purchase, Capitalize into Product: This rule applies to costs that become part of the product's cost basis. These costs are added to the initial purchase price and are reflected in the product's inventory valuation. (e.g., Import duties, Material costs)
    
    

• Calculation Method: Choose how the expense is calculated:
  • Per Unit Cost: This method assigns a fixed cost per unit of your product sold (e.g., "$2 USD per Piece").
  • %(Percentage) of Amount Sold: This method calculates the expense as a percentage of the base wholesale cost per unit (e.g., "10% of Wholesale Cost for Packaging").
    
    
• Activity Group: Categorize the expense by its nature. Common categories include:
  • General: Expenses that apply broadly to your business operations.
  • Administrative: Administrative costs associated with managing your product.
  • Selling: Costs related to marketing and selling your product.
  • Production: Costs incurred during the production or delivery of your product.
  • Non-Operating: Expenses not directly related to your product's core operations.

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