Category: articles

GTU code – what is it, what are the designations and when to use them?

Post author By Maksymilian Śniegocki
Post date November 28, 2024

Spis treści

What is a GTU code?
GTU codes – To whom do they apply?
What GTU designations are applicable?
What is the GTU code on the invoice? What should you keep in mind?
Lack of GTU designation vs. JPK correction

GTU codes are special designations intended to classify goods and services in transactions subject to VAT. They are mandatory for certain types of goods and services, and their use is intended to help tax authorities identify potentially risky areas of business activity. These codes are assigned to transactions within JPK_V7M (monthly) or JPK_V7K (quarterly), the modern tax reporting form.

GTU codes are used only for specific goods and services indicated in the regulations. They do not apply to all transactions – their application is limited to cases specified by the legislator. Any entrepreneur who sells goods or services from the GTU list must assign the corresponding code to his transaction when submitting the JPK_V7 file.

What is a GTU code?

A GTU code is a designation assigned to a specific group of goods or services that are particularly relevant from a fiscal perspective. These codes allow for detailed data analysis on sales of goods and services, making it easier for tax authorities to monitor turnover and identify potential tax abuses, such as VAT carousels.

The obligation to use GTU codes applies to transactions related to certain types of goods (e.g., fuels, precious metals, tobacco products) and services (e.g., legal, consulting, or transportation services). The GTU code does not have to be visible on the invoice but should be included in the JPK_V7 file sent to the authority.

GTU codes – To whom do they apply?

The obligation to use GTU codes applies to VAT taxpayers who sell goods or provide services covered by the obligation to mark them. Only some companies will have to use these codes, which are assigned only to strictly defined groups of goods and services.

Businesses that must use GTU codes include:

Sellers of goods covered by GTU designations, such as fuels, precious metals, excise goods, or electronics.
Providers of services listed in the regulations, including legal, consulting, or transportation services.
If a business does not sell goods or services listed in the GTU, it is not required to use these codes in its VAT returns.

What GTU designations are applicable?

GTU codes are divided into 13 groups, each corresponding to certain goods or services. Here is the list of applicable GTU designations:

GTU_01 - Beverage motor fuels and their derivatives, heating oils.
GTU_02 - Energy products, such as coal and coke.
GTU_03 - Lubricating oils and lubricating preparations.
GTU_04 - Tobacco products, e-cigarette liquids, dried tobacco.
GTU_05 - Waste and secondary raw materials (e.g., scrap metal).
GTU_06 - Precious metals and goods made from them.
GTU_07 - Electronics (e.g., phones, computers, cameras).
GTU_08 - Vehicles and their parts that are subject to VAT.
GTU_09 - Medicines and medical products that may be traded for reimbursement.
GTU_10 - Buildings, structures, and their parts.
GTU_11 - Legal services.
GTU_12 - Consulting services.
GTU_13 - Transportation and warehouse management services.

Entrepreneurs should carefully check whether their business involves the sale of goods or provision of services from the above list to mark transactions correctly.

What is the GTU code on the invoice? What should you keep in mind?

Although the GTU code does not have to be visible on the invoice itself, it is essential for reporting within the JPK_V7 file. In practice, the entrepreneur should ensure that the accounting system or invoicing software allows the appropriate codes to be assigned to transactions.

Here are some critical rules regarding GTU codes on an invoice:

GTU codes vs. customer - The GTU code is an internal designation of the taxpayer that does not need to be shared with the contractor.
Cooperation with the accounting office - If a business uses an accounting office, it should provide invoices with GTU designations or information on the type of goods and services covered.
Correctness of data—Entering an incorrect GTU code may require a correction of the JPK.

Lack of GTU designation vs. JPK correction

Incorrect GTU designation or its absence in the JPK_V7 file can lead to errors in tax reporting. If a JPK file is found to have been sent with an incorrect GTU code, the entrepreneur must file a correction.

JPK correction due to a missing or incorrect GTU designation should be done as soon as possible. To avoid problems, entrepreneurs should:

articles Business knowledge

Correction note – what it is and who issues it

Post author By Maksymilian Śniegocki
Post date November 21, 2024

Spis treści

What is a correction note?
Correction note – what is it used for?
Who issues the correction note?
Correction note – what must it contain?

A correction note is a tool used to correct minor errors on invoices. Although most often used by invoice recipients, a correction note is a document that requires the invoice issuer to agree to make changes. Here, we discuss exactly what a correction note is, what functions it performs, who can issue it, and what elements it must contain.

A correction note is a document that allows you to correct minor mistakes on an invoice. It is an alternative to the correction invoice, which the seller issues in case of more serious errors, such as an incorrect amount of tax or inaccurate value of goods. The correction note is often used when the invoice contains minor errors in formal data, such as typos in the contractor’s name, an incorrect address, or a VAT number.

Unlike a correction invoice, which the seller issues, a correction note is issued to the recipient, i.e., the buyer. Thus, it is a tool that allows you to quickly and easily correct an invoice without involving the issuer in correcting formal errors.

What is a correction note?

A correction note is a document that corrects incorrect formal data on an invoice. In the case of minor mistakes, such as a wrong address, VAT number, or a typo in the company name, the buyer of goods or services has the right to issue a correction note and send it to the invoice issuer. This avoids issuing a correction invoice involving a more complex accounting process.

The correction note allows you to correct such elements as:

Note that a correction note is not a document that corrects values on an invoice. It cannot be used to correct such elements as unit price, quantity of goods, gross value, or VAT amount. A correction invoice is used for such corrections, which the seller must issue.

Correction note - what is it used for?

The correction note is used in situations where there are minor formal errors on the invoice that do not affect the amount of the transaction or the value of the tax. It is a document that aims to keep financial records in order while making life easier for both parties to the transaction. Correction notes allow you to easily and quickly correct errors that could lead to misunderstandings or problems during a tax audit.

In practice, the correction note is a convenient solution, as it can be a simple process of correcting the entire document. Its issuance is relatively simple, and it is possible to avoid re-generating the invoice.

Who issues the correction note?

The correction note is issued by the recipient of the invoice, i.e., the buyer of goods or services. It is worth noting that the seller cannot issue a correction note. If the seller notices errors on the invoice that cannot be corrected with a correction note, he must issue a correction invoice.

The procedure for issuing a correction note is as follows:

The buyer notices an error in the invoice that can be corrected with a correction note (e.g., a mistake in the address or VAT number).
The buyer issues a correction note indicating the erroneous information and the correct version.
The correction note is then sent to the seller, who should accept it and acknowledge receipt.

Although the seller’s acceptance of the correction note is not formally required, it is recommended from the legal and accounting security perspective. Confirmation of acceptance of the correction note can be done electronically, for example, by email, which facilitates the workflow process.

Correction note - what must it contain?

For a correction note to be a valid and formally correct document, it should contain certain elements. The essential elements that must be included on the correction note include:

Date of issue of the correction note - Each note should be dated clearly to indicate when it was issued.
Correction note number - Each note should have its own individual number. Numbering can be done in any way, but it must be consistent and allow for document identification.
Purchaser's data - Full name of the purchaser, address, and Tax Identification Number.
Seller's data - The seller's full name, address, and Tax Identification Number.
The number of the invoice to which the correction note relates - The note must indicate the number of the invoice being corrected so that the documents can be unambiguously linked.
Description of the error - The correction note should specify exactly what is wrong with the invoice and indicate the correct version of the information.
Signature of the person issuing the note - Although formally, the signature is not required, it is worthwhile that an authorized person sign the correction note for the security of the document and compliance with internal regulations.

articles Business knowledge

Production planning programs – how to choose the right solution?

Post author By Maksymilian Śniegocki
Post date November 14, 2024

Table of content

Production planning software – the principle of operation
Features of a good production management program
Production planning software – solutions available on the market
What should you look for when choosing a system for production?
Production planning programs – what to choose?

Choosing the right production planning program can significantly affect the efficiency of a company’s production processes. A well-chosen system allows for better work organization, resource optimization, and reduction of production costs. Before choosing the right program, it is worth analyzing your company’s specifics and needs. Is it mass production, unit production, or perhaps of a project nature? What are the main challenges they face? What functions will be necessary for daily tasks?

The next step is to determine the budget and expected implementation time. Some systems, especially the more complex ones, require a more extended implementation period and human resource commitment. It’s also worth consulting other company departments—for example, IT and finance—to assess whether the company has sufficient resources to support the implementation and whether the system is compatible with other tools used in the company.

Production planning software - the principle of operation

Production planning programs are designed to streamline and automate production management processes. Their primary operating principle is based on collecting and analyzing data on production, resources, orders, and time. Based on this data, the system creates a production schedule that considers all essential aspects, such as the availability of machinery, raw materials, employees, and order deadlines.

These systems can operate in real-time, allowing production plans to be monitored and updated according to the current situation. An example would be if one of the critical raw materials is unavailable – the program automatically adjusts the schedule so that production can run smoothly.

Features of a good production management program

Good production scheduling software should meet several basic requirements to support production process management effectively. Among the most important features are:

Intuitiveness and ease of use - The program should be easy to use so that even people not directly involved in IT can use it. An intuitive interface allows employees to be trained faster and minimizes the risk of errors.
Flexibility and scalability - It is worth choosing a system that can be customized to meet the company's individual needs and that will grow with the business. Scalability is essential if the company plans to increase production.
Integration with other systems - Good software should be able to integrate with different tools, such as ERP (Enterprise Resource Planning), CRM (Customer Relationship Management), or SCM (Supply Chain Management) systems, to enable a smooth flow of information.
Analytical functionalities - Production management software should allow data analysis and reporting, facilitating better decision-making and quick response to changes.
Technical support and upgrades - The system should be updated regularly, and the vendor should offer technical support to solve problems quickly.

Production planning software - solutions available on the market

There are many production planning solutions available on the market, which differ in functionality and the way they work. Depending on the size and needs of the company, one can choose ERP-type programs such as SAP, Microsoft Dynamics 365, or Oracle, which offer extensive production management modules and can be tailored to the company’s specific requirements.

APS (Advanced Planning and Scheduling) systems are also available for companies looking for more specialized tools, such as Preactor or Asprova. These advanced solutions focus mainly on optimizing production schedules and managing resources.

What should you look for when choosing a system for production?

Choosing the right production scheduling software requires considering several vital aspects:

Specificity of production - Not all software is universal. It is advisable to choose a solution dedicated to the specifics of the company's industry, as this will allow for more precise management of production processes.
Costs - Purchase and implementation costs can vary depending on the sophistication of the system. The cost of the license, training employees, and ongoing maintenance of the system should be considered.
Ability to integrate - The program should cooperate with other systems used in the company. Lack of integration can lead to problems with information flow and slow processes.
Technical support and availability of updates - A good software provider should provide technical support to resolve any problems that may arise quickly and regular system updates.
Data security - The system should provide adequate protection, primarily if the company processes sensitive production or customer data.

Production planning programs - what to choose?

The right production planning program should depend on the company’s size, specifics, and business goals. Small companies often need more straightforward production planning and monitoring systems without significant investments. For larger manufacturing companies that need to manage complex processes, sophisticated ERP or APS systems will be a better choice.

OptiFlow - Production Planning

Check out the artificial intelligence production planning solution from INLOGICA!

articles Business Central Business knowledge Recommended

Business Central Team Members License – A cost-effective solution for teams ready for the challenge!

Post author By Maksymilian Śniegocki
Post date November 14, 2024

Table of content

Business Central Team Member – It has more features and less paperwork
What possibilities does the Business Central Team Members license offer?
Why choose the Business Central Team Members license?

Business Central Team Member - It has more features and less paperwork

Are you looking for an effective and affordable way to engage more employees with Business Central? This license is an excellent option for you. It’s worth noting that it’s not the same as the Dynamics 365 Team Members license – as it offers a unique set of features tailored to tasks that support teams’ daily work.

What possibilities does the Business Central Team Members license offer?

Broad access to data: Users can freely read data in Business Central, facilitating the efficient flow of information.
Update critical information: The license allows users to update existing data, such as payment deadlines or contact information for customers and suppliers. This allows the team to respond quickly to ongoing changes without involving other users.
Approving and rejecting tasks: Team members can approve or reject tasks within workflows assigned directly to them. This solution streamlines decision-making processes and allows them to focus on priority activities.
Flexibility in sales and purchase offers: Users can create, edit, and delete sales and purchase offers, enhancing their role in the sales process while better managing daily transactions.
Handling personal data: The ability to create, edit, and delete personal data gives companies confidence that their database is always up-to-date and complies with legal requirements.
Editing timesheets: Team members can submit their timesheets for approval. This simplifies time management and optimizes the work recording process.
Integration with Power Apps and Power Automate: The license allows you to use Dynamics 365 Power Apps and Power Automate to automate processes and create simple applications to support your team's work.
Customization: The module can be extended with additional tables (up to 15), which can be used to customize the system further to meet your team's specific needs.

Why choose the Business Central Team Members license?

The Business Central Team Members license is the ideal solution for companies that want to involve a wider team in working with the ERP system. It provides access to key features while maintaining full control over permissions. With this license, a company can take full advantage of Dynamics 365 Business Central without incurring high costs.

By opting for Business Central Team Members, you invest in efficiency, control, and scalability – a solution ideal for modern teams.

Ask our expert for details: https://inlogica.com/en/microsoft-products/microsoft-licenses/

articles Business knowledge Dynamics 365/AX Recommended

Final consultations for e-Invoices (KSeF)

Post author By Maksymilian Śniegocki
Post date November 8, 2024

Spis treści

What solutions does the Ministry propose?
Key Changes in KSeF
New e-Invoice Structures – what and when.

What solutions does the Ministry propose?

The Ministry of Finance has announced the launch of final consultations on implementing the mandatory National e-Invoice System (KSeF). The draft’s work considers the specifics reported by Local Government Units (LGUs) and entrepreneurs’ demands. Comments on the draft law can be submitted until November 19, while business solutions can be submitted until November 22.

Key Changes in KSeF

Phased Implementation of KSeF:

Transition Period:

Support for the “digitally excluded”:

New e-Invoice Structures - what and when.

The proposed changes also apply to the structure of e-invoices. The modifications are expected to streamline the process of marking up TSU invoices, allow the addition of attachments, and introduce a new “employee” role. The latest FA (3) and FA_RR (1) structure will be effective from 2026, with the final version to be implemented before the mandatory KSeF.

This consultation is a crucial step to ensure the quality of solutions before the system is implemented.

Get ready for KSeF!

Check out the solution for KSeF from INLOGICA for Microsoft Dynamics 365/AX systems.

articles Business knowledge

Advance payment invoice vs. final invoice – differences, application

Post author By Maksymilian Śniegocki
Post date November 7, 2024

Table of content

Advance invoice vs. final invoice – differences, application.
What is an advance invoice used for?
Final invoice – the most critical information
Advance payment invoice and VAT
What are the differences between the advance payment invoice and the final invoice?
When to issue a final invoice?

The advance and final invoices are two documents that play a crucial role in business transactions. Although both relate to sales transactions, their purpose, application, and detailed information differ. This article will look at these differences and the uses of both types of invoices.

Advance invoice vs. final invoice - differences, application.

An advance invoice is a document a seller issues when he receives an advance payment for a future transaction. It is a form of payment confirmation that usually does not complete the transaction, but it is the first step in its implementation. On the other hand, a final invoice, also known as a sales invoice, is issued at the end of a transaction when the delivery of goods or services has already been completed, and the total amount to be paid is known.

The main differences between the two types of invoices are the timing of their issuance, the data they contain, and the function they perform in the sales process.

What is an advance invoice used for?

The advance invoice is designed to document the buyer’s advance payment. It is used in cases where the transaction is carried out in several stages or when the value of the service or goods is significant and requires an advance payment before delivery. With an advance invoice, the seller has formal confirmation of receipt of the advance payment, which facilitates subsequent settlement and provides assurance that the transaction is secured.

The advance invoice is also essential for the buyer, as it is a document on which he can claim a VAT refund if the seller fails to fulfill the contract.

Final invoice - the most critical information

The final invoice is a document that summarizes the entire transaction, including the goods or services supplied and the final amount to be paid. It contains all the necessary information, such as the details of the seller and buyer, a description of the goods or services, unit prices, VAT rates, and the due date.

The final invoice should be issued at the end of the transaction after the delivery of goods or services has been completed. It is a crucial document for both parties to the transaction, formalizing all obligations and confirming the performance of the contract.

Advance payment invoice and VAT

The advance invoice impacts VAT settlement. When an advance invoice is issued, the seller is obliged to pay VAT on the value of the advance. This means the seller should show this VAT in his tax return, even if the total transaction still needs to be completed.

On the other hand, in the case of a final invoice, VAT is settled on the total value of the transaction, considering the previously reported VAT from the advance invoice. In practice, if the buyer has made an advance payment, the VAT from this advance payment should be deducted from the VAT shown on the final invoice.

What are the differences between the advance payment invoice and the final invoice?

The main differences between an advance invoice and a final invoice include:

purpose: an advance invoice documents an advance payment made by the buyer, while a final invoice summarizes the entire transaction.
the time of issuance: The advance invoice is issued before the transaction is completed, while the final invoice is issued after the transaction is completed.
the information in the document: the advance invoice contains information on the advance payment, while the final invoice includes complete details on the goods or services delivered and the final amount to be paid.

When to issue a final invoice?

The final invoice should be issued after the completion of the transaction, that is, after the delivery of goods or the performance of services. The final invoice must contain all relevant information, such as:

If the transaction was completed in several stages, the final invoice should consider any advance payments previously made by the buyer.

In summary, the advance and final invoices are vital in the business process. Understanding and correctly issuing them is essential for any organization to manage its finances and effectively meet its tax obligations.

articles Business knowledge Recommended

VAT in the Digital Age: ViDA package approved

Post author By Maksymilian Śniegocki
Post date November 6, 2024

Table of content

What does the ViDA (VAT in the Digital Age) package mean?
How is it worth preparing for this?
ViDA Package Implementation Schedule

What does the ViDA (VAT in the Digital Age) package mean?

On November 5, 2024, at the ECOFIN (Economic and Financial Affairs Council) meeting, EU member states voted on new VAT regulations. This package includes three main areas of change:

Digital VAT Reporting:

Changes in the Digital Platforms Area:

Single VAT Registration (SVR):

How is it worth preparing for this?

These changes will come into effect gradually. It is worth thinking about a partner who will take care of:

ViDA Package Implementation Schedule

These changes may require your company to prepare for the new legal and technical requirements. Plan to implement the necessary solutions to help you adapt to the new tax reality.

articles Business knowledge

Production marshaling – what is it, and what is the application?

Post author By Maksymilian Śniegocki
Post date November 4, 2024

Table of contents

What is a production route?
Technological (production) route – what is it used for?
Types of times within the production route.
How does the technological route affect production efficiency?
Production marshaling vs. ERP system

What is a production route?

A production route, or technological route, is a detailed production plan that includes the sequence of operations needed to produce a product. It provides information on:

Technological processes specify the following steps to process raw materials and semi-finished products.
Machinery and resources indicate each operation's machinery, equipment, and resources.
Production times consider the time required for each operation, which enables precise planning.
Technological requirements include quality, technical control, and safety requirements.

Technological (production) route - what is it used for?

The technological route is used mainly in production planning to accurately determine the following work stages and the resources needed. Here are the most critical applications of the production marshal:

Production scheduling: With a production marshal, you can accurately determine the production duration, allowing you to plan the work schedule better.
Resource allocation: A production marshal identifies the resources, such as machinery, tools, and personnel, needed at each production stage, which helps optimize their use.
Progress monitoring: Production marshaling allows one to keep track of a production unit's stage, which helps to monitor the work on an ongoing basis and make changes when necessary.
Quality control: The marshaling also considers quality control steps, ensuring that products meet appropriate standards and norms.
Cost reduction: The production marshal helps reduce operating costs by optimizing processes and allocating resources.

Types of times within the production route.

There are several types of times within the production route that are important to the efficiency of the entire production process:

Preparatory time (setup time): This is the time needed to prepare a machine or workstation before production begins. It includes setting up tools, checking parameters, and preliminary quality control.
Processing time: This is the time it takes to properly process materials at each stage of production, including processes such as cutting, welding, assembly, or painting.
Transportation time refers to moving raw materials, semi-finished products, or products between production stations.
Waiting time is when a semi-finished product waits for the next operation. This often results from a lack of available resources or machine downtime.
Inspection time refers to the time spent inspecting the quality of products at various stages of production.

How does the technological route affect production efficiency?

Technological marshaling directly impacts production efficiency, as it helps optimize each process stage. The main ways in which it affects production efficiency are:

Minimizing downtime: With precise planning of time and resources, machine downtime and waiting for resources can be reduced.
Optimization of resources: Marshaling enables better management of the availability of machines, tools, and personnel, leading to more efficient use.
Better quality control: Including quality control steps in the marshaling helps avoid errors and losses associated with defective products.
Reduced operating costs: Optimization of production processes and reduction of downtime allow for reduced costs, which improves production profitability.
Process scalability: Marshaling makes it easier to scale production processes, which is essential when product demand increases.

Properly planned production marshaling can significantly increase productivity, resulting in better financial results and greater customer satisfaction.

Production marshaling vs. ERP system

Modern manufacturing companies are increasingly using ERP (Enterprise Resource Planning) systems to manage all aspects of the business comprehensively, including production marshaling. ERP systems, such as SAP, Oracle, or Microsoft Dynamics, integrate manufacturing, logistics, and financial processes, enabling precise production planning and monitoring.

What are the benefits of manufacturing markup in an ERP system?

Process automation: ERP automates the processes involved in marshaling planning and monitoring, which eliminates the risk of errors resulting from manual data entry.
Real-time data access: ERP provides access to data at every production stage, allowing for real-time progress tracking and decision-making based on up-to-date information.
Integration with other modules: ERP systems integrate manufacturing marshaling with other areas such as warehousing, procurement, and sales to manage the entire supply chain better.
Reporting and analysis: ERP systems generate reports and studies on marshaling performance to identify areas for optimization.
Resource management: ERP enables better resource management and work scheduling, which increases production efficiency and allows better utilization of machinery and employees.

articles Business knowledge

BOM (bill of materials) – what it is, types, benefits

Post author By Maksymilian Śniegocki
Post date October 24, 2024

Table of contents

What is a BOM?
What is the material BOM is used for?
Bill of materials – is it necessary?
Construction of the BOM document
Types of material balances
The benefits of creating a BOM for manufacturing

BOM (Bill of Materials) is a crucial document used in manufacturing and logistics. It lists all components, materials, and raw materials needed to produce the final product. Many manufacturing companies base their processes on the BOM to manage resources and costs and ensure a smooth production process.

A thorough understanding of a BOM and its benefits allows companies to plan, produce, and deliver better products to market.

What is a BOM?

A BOM, or bill of materials, describes a product’s complete structure and contains information about all the elements necessary to produce it. The BOM includes raw materials, semi-finished products, parts, technical documentation, and instructions. It is a tool for determining the bill of materials and a way to describe precisely how the various components are related.

A BOM usually consists of several levels, depending on the complexity of the product. Each level describes different components, which can be independent products or intermediates that will be combined to make the final product.

What is the material BOM is used for?

A material BOM serves many functions in a manufacturing and logistics company. It is crucial in planning, production, and resource management processes. The BOM helps in:

Production planning - The BOM provides insight into what resources are needed at various production stages, facilitating demand planning.
Cost control - The detailed information in the BOM allows for accurate calculation of the costs of raw materials, semi-finished products, and labor associated with manufacturing a product.
Inventory management - The BOM facilitates inventory management, enabling the company to monitor and optimize the number of raw materials and components available in stock.
Production process management - The BOM allows for monitoring production progress and identifying potential problems related to material shortages.

Bill of materials - is it necessary?

The BOM is essential for effective production process management in most manufacturing companies. Introducing a BOM into production allows for a better understanding of all the stages a product goes through, from raw material to finished product. Regardless of the production volume or the product’s complexity, a BOM is the foundation of an efficient production line.

With a BOM, controlling the entire production process is easy. Introducing even a minor change to one component without updating the BOM can result in production problems, delays, and increased costs. This is why keeping the BOM up-to-date and accurately maintained is so important.

Construction of the BOM document

A BOM is usually a hierarchical document that describes the structure of a product in detail. The structure of the BOM may vary from product to product and company to company, but several elements are invariable:

Product identification - The BOM contains information about the product name, part number, version, and technical details.
Component list - The BOM contains a complete list of raw materials, parts, and components needed for production. Each element is assigned to a specific level in the structure.
Quantity specification - The BOM describes how many pieces of a component are needed to produce one piece of the final product.
Description of relationships between components - The BOM indicates which elements are related to each other, allowing you to understand the assembly and production process better.
Production time and costs - More advanced BOMs also include information on production times, downtime, and costs associated with the manufacture of components.

Types of material balances

BOMs can take various forms, depending on the needs of the enterprise. The most common types of BOMs include:

Production BOM - Describes the components and raw materials needed to produce a specific product. It focuses on physical materials and assembly steps.
Engineering BOM (EBOM) – This material balance is created at the product design stage. It describes all the components that must be considered during production based on engineering specifications.
Marketing BOM (MBOM): This includes packaging, labeling, and product delivery information. It focuses on marketing components such as packaging and promotional materials.
Service BOM - Describes the components needed to service and repair a product after manufacture.

The benefits of creating a BOM for manufacturing

Creating a BOM has many benefits, especially for manufacturing companies:

Better control over production - the BOM enables accurate planning and monitoring of all production stages, avoiding delays and problems with material supply.
Cost reduction - The BOM allows you to manage resources more precisely, leading to financial savings.
Increased efficiency - A BOM allows for better inventory and raw material flow management, resulting in greater production efficiency.
Improved communication - A BOM facilitates cooperation between different departments in a company, such as production, logistics, marketing, or engineering.
Faster implementation of changes - If changes need to be made to a product, a BOM allows new components to be introduced quickly and accurately without the risk of errors.

In summary, the BOM is integral to production and logistics, enabling effective management of resources, costs, and production processes. With it, manufacturing companies can plan and achieve their goals effectively.

articles Business knowledge

ABC analysis – what is it, and when can it be useful?

Post author By Maksymilian Śniegocki
Post date October 17, 2024

Table of contents

ABC analysis – what does it mean?
What is the ABC method based on?
ABC classification – how do you prepare the breakdown?
ABC method – examples
ABC analysis – when is it worth conducting?

ABC analysis, also known as the Pareto method, is one of the most popular techniques for managing inventory, production, and logistics. It involves dividing an assortment of products into three groups according to their value to the company. The ABC method allows us to manage resources better and focus on the items that generate the most benefit or require the most attention. It will enable companies to optimize their operations, improve efficiency, and better allocate resources.

ABC analysis - what does it mean?

The name “ABC” refers to three main categories for allocating goods or resources:

A - essential items that account for the most significant portion of value, but their number is usually the smallest. Usually, about 20% of the inventory generates 70-80% of the value.
B - the intermediate category, i.e., products or resources with moderate value for the company. This is about 30% of goods, which generate about 15-25% of value.
C - the least important products, which generate the least amount of value, but their number is the highest. About 50% of inventory creates only 5-10% of value.

ABC analysis, also called Pareto analysis, is based on the Pareto principle, in which 20% of causes are responsible for 80% of effects. Applying this method to companies allows them to focus on the most critical resources that significantly impact financial performance.

What is the ABC method based on?

The ABC method involves analyzing an assortment of products based on their value. The principle is simple – products or resources are classified according to their value to the company’s total revenue or cost. The process consists of several steps:

Identifying products or resources: The first step is determining the complete list of goods, resources, or services to analyze.
Calculating the value of each product: each product should be evaluated based on its contribution to the value of sales, purchase costs, revenue generated, or another critical indicator.
Sorting the products: after calculating the value for each item, the products should be sorted from highest to lowest value.
Categorization: The products are then classified according to the 80/20 rule. The most important 20% of the elements (category A) account for most of the value, the next 30% (category B) are intermediate elements, and the remaining 50% (category C) account for the smallest part of the value.

ABC classification - how do you prepare the breakdown?

Preparing ABC classification in practice requires following several key steps:

Gather data: Collect all necessary data on inventory or products. This could include sales, purchase costs, margins, or the frequency of use of goods.
Calculate each item's contribution to the total value. Each item should be evaluated in terms of its value to the company, such as revenue or production costs.
Divide the elements into groups: divide the assortment according to the Pareto principle - 20% of the resources generate 80% of the value (group A), 30% of the resources generate 15-25% of the value (group B), and 50% of the resources are responsible for only 5-10% of the value (group C).
Apply the classification in practice: Products from group A should receive the most attention—it is worth using more advanced management strategies for them, while items from group C can be managed more simply due to their lower importance.

ABC method - examples

Example 1: Inventory management

Imagine a company that sells electronics. An ABC analysis shows that A products (e.g., laptops and smartphones) account for 20% of the product mix but generate 80% of revenue. B products (e.g., accessories) are 30% of the assortment, generating 15-20% of revenue, and C products (e.g., cables, cases) are 50% of the assortment, generating only 5-10% of income. In this case, the company can focus its activities on group A to better manage resources and optimize sales.

Example 2: Manufacturing

In the case of a manufacturing company, ABC analysis can look at the raw materials used in the production process. A-grade raw materials are the most essential and most expensive or frequently used items. B-grade raw materials are of average value, and C-grade raw materials are rarely used and account for a small percentage of total costs.

ABC analysis - when is it worth conducting?

ABC analysis is helpful in many cases, and its application can help a company at various stages of its operations:

Inventory management: A company can use ABC analysis to better manage its inventory. Instead of paying the same attention to every product, it can focus on the essential items that bring the most benefit.
Production optimization: For manufacturing companies, ABC analysis can help identify the most essential raw materials critical to the production process.
Resource management: The analysis can also help manage time, costs, and even employees - identifying the areas that generate the most value for the company.
Purchasing planning: In logistics and sales, the ABC method allows for better purchase planning so the company can avoid overstocking low-value goods.

In summary, ABC analysis is a versatile tool that can be used in various aspects of a business. It helps identify critical resources, better manage them, and focus attention on elements that have the most significant impact on company performance. In practice, it is one method that leads to more effective management and operations optimization.