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The Conversion Business Process. Conversion Process in an Enterprise Value Chain. Conversion Cycle Core REA Pattern. Conversion Cycle Extended Business Process Level Pattern. Cookie Baking Conversion Business Process Level Model. Conversion Cycle Events. Economic Increment Event
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Conversion Cycle Events • Economic Increment Event • Production Run; the event that produces a finished product resource • Represents a batch or job in a job-order-costing environment (and may be labeled as such) • Represents a machine run in a process-costing environment, or some equivalent time period such as a growing season • Data typically captured include an assigned identifier, starting date/time and ending date/time of the event, and data as to the resources and agents involved in the production run
Conversion Cycle Events • Economic Decrement Event • Materials Issuance • Represents the using up of raw materials in the production process. Those raw materials are usually transformed into finished goods and lose their own identity and nature in the process. • Is usually symbolized by a move ticket or similar document • Data typically captured include date/time of issuance; origin and destination of the issuance, the underlying production order, and the agents involved in authorizing it (supervisor) and executing it (inventory clerk)
Conversion Cycle Events • Economic Decrement Event • Labor Operation • Represents the performance of a particular activity in the conversion process by a production employee, thereby using up that person’s labor • Is usually symbolized by a job time ticket or time track form • Data typically captured include the starting and stopping times for the labor operations and descriptions of the labor operations on a specific date by a specific employee
Conversion Cycle Events • Economic Decrement Event • Machine Operation • Represents the performance of a particular activity in the conversion process by a machine, thereby consuming part of the machine’s useful life • Is usually symbolized by an entry on the WIP job ticket • Data typically captured includes the starting and stopping dates and times for the machine operations, what machines were involved, who authorized them (supervisor) and who executed them (production employee)
Conversion Cycle Events • Increment Commitment Event • Production (Job) Order • A commitment event that schedules a work-in-process job, committing to a future increase in finished products • Is usually symbolized by a Production Order number and data such as what finished good is being produced, what quantity is being produced, who approved it, the order date and requested completion date. The production order document may also summarize data such as what specific labor operations and materials are needed
Conversion Cycle Events • Decrement Commitment Event • Raw Materials (or Labor or Machine) Requisition • Is a Commitment event whereby the production commits to transfer materials from the materials warehouse to the production floor, thus it commits to a future decrease in materials (or labor or machinery). • If insufficient materials are on-hand in the warehouse or if insufficient labor is available, this may trigger activities in the purchasing or payroll departments; however, those activities are part of the acquisition/payment and payroll processes, not the conversion process • Is usually symbolized by a materials requisition document • Data captured typically include the date/time of requisition and information about the resources and agents involved in the event
Conversion Cycle Relationships • Duality • Transformations are more complex than transfers found in other processes • Involve materials use, labor use, and equipment consumption • Often compromised such that only materials use is tracked directly, with labor and equipment consumption costs assigned via some allocation scheme • Often labor operations and machine operations are not maintained separately from work-in-process job because they are subsumed into the job; relationships of the production run to the labor type and machine resources are often maintained
Conversion Cycle Relationships • Stock-flow • Materials and labor are typically used up completely in the material issuances and labor operations; such stock flows are called Use • Machines are typically only partially used up in machine operations, such a stock flow is called Consume • Finished goods are produced by the production run (similar to inventory being purchased in acquisition cycle) • Fulfillment • Material issuances fulfill raw material requisitions • Production runs fulfill production orders
Conversion Cycle Relationships • Reservations • Raw materials are reserved for use via the requisition event • Finished Goods are reserved for availability via the production order • Participation relationships • Typically all agents in the conversion cycle are internal agents • Usually includes a direct association relationship (responsibility) between production supervisors and employees
Conversion Cycle Relationships • Linkages • Between Materials and Finished Goods • Contains information needed for Bill of Materials, I.e., a finished good is composed of what raw material items (in what quantities) • Between Labor (type) and Finished Goods • Contains information needed for Operations List, I.e., a what labor operations are needed to produce a finished good
Bill of Materials Captures Linkage (Raw Materials-Finished Goods) information
Operations List Captures Linkage (Labor Type-Finished Goods) Information
Relational Tables Encompassing Linkage Relationships: Ingredients-Cookies
Relational Tables Encompassing Linkage Relationships: Labor Types-Cookies
Conversion Cycle Relationships • Reciprocal • Production orders trigger the requisitioning of materials; this reciprocal relationship represents a schedule of what is to be produced and what will need to be used and consumed to accomplish the production. • Custody • Companies often give custody of materials (and possibly finished goods) to a set of inventory clerks to protect the goods from theft or other misappropriation
