1. The Conversion Business Process
Chapter 11
The Conversion Business Process

2. Chapter Learning Objectives
Identify the activities and documents common to most conversion business processes
Recognize the similarities and differences between various types of conversion processes
Explain the various components of the REA ontology in the conversion business process
Create a REA business process level model for an enterprise’s conversion process
Identify common information needs within the conversion process
Create database queries to retrieve conversion process information from a relational database

3. Conversion Process in an Enterprise Value System

4. Conversion Process in an Enterprise Value Chain

5. Conversion Cycle Core REA Pattern

6. Conversion Cycle Extended Business Process Level Pattern
Note: Links from machine operation to production supervisor and to production employee and from labor operation to production supervisor and to production employee should also be included. Also, there may exist machinery requisitions and labor requisitions that serve as commitments to the machine operation and labor operation events.

7. Cookie Baking Conversion Business Process Level Model

8. 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

9. Relational Tables Encompassing Production Run Event

10. 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)

11. Move Ticket for Material Issuance

12. Relational Tables Encompassing Material Issuance Event

13. 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

14. Job Time Ticket for Labor Operation

15. Relational Tables Encompassing Labor Operation Event

16. 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)

17. Relational Tables Encompassing Machine Operation Event

18. 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

19. Production Order

20. Relational Tables Encompassing Production Order Event

21. 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

22. Materials Requisition

23. Relational Tables Encompassing Materials Requisition Event

24. 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

25. 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

26. 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

27. 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

28. Bill of Materials
Captures Linkage (Raw Materials-Finished Goods) information

29. Operations List
Captures Linkage (Labor Type-Finished Goods) Information

30. Relational Tables Encompassing Linkage Relationships: Ingredients-Cookies

31. Relational Tables Encompassing Linkage Relationships: Labor Types-Cookies

32. 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

33. Resource Query Types
Detailed status information at one or more points in time for each resource instance
Detailed status information at one or more points in time for only those resource instances meeting specified criteria
Summarized status information at one or more points in time for all resource instances
Summarized status information at one or more points in time for only those resource instances meeting specified criteria

34. Conversion Cycle Resource Queries
List of machinery owned by an enterprise
Average age of machinery on a specified date
List of raw materials normally stocked by an enterprise
List of finished products normally produced by an enterprise
Average standard cost of labor types for an enterprise

35. Event Query Types Detailed information about each event instance
e.g., what happened, when and where did it happen, etc.
Detailed information about each event instance that meets specified criteria
e.g. events of a specified type that occurred during a specified time period or that occurred at a specified location
Summarized information for all instances of an event type for a specified time period
e.g. total of the event instances during a specified time period
Summarized information for only those instances of an event type for a specified time period that meet specified criteria
e.g. average dollar value of the event instances for a specified location during a specified time period

36. Event Queries in the Conversion Process
Length of a specific production run
End time minus start time
Average length of production runs during a specific time period
Total number of production runs that occurred at a specific plant or workstation or during a specific time period
Date and/or time an issuance of materials occurred

37. Count number of ingredient issuances made to Workcenter E

38. When did the most recent Ingredient Requisition occur?

39. Agent Query Types
Detailed status information at one or more point in time for each employee
Detailed status information at one or more points in time for each employee who meets specified criteria
Summarized status information at one or more points in time for all employees
Summarized status information at one or more points in time for all employees who meet specified criteria

40. Conversion Cycle Agent Queries
List of employees including selected attributes such as addresses and telephone numbers

41. Conversion Cycle Duality Relationship Queries
Identification of labor operations related to one or more specific production runs
Identification of machine operations related to one or more specific production runs
Calculation of the time taken for a labor (or machine) operation as a percentage of a complete production run
Count of the number of raw material issuances (or labor operations or machine operations) related to a specific production run

42. Which labor operations related to batch WJ1

43. How many ingredient issuances were associated with each cookie batch?

44. Conversion Cycle Fulfillment Relationship Queries
Identification of unfulfilled commitment events
E.g. production orders for which production runs have not yet occurred
Identification of fulfilled commitment events
E.g. material requisitions for which material issuances have occurred
Identification of economic events for which commitments were not made
E.g. production runs that were not ordered

45. Conversion Cycle Fulfillment Relationship Queries
Calculation of length of time between commitment and economic events
E.g. length of time elapsed between material requisition and material issuance
Identification of causes of economic events
E.g. which production order led to a production run
Identification of results of commitment events
E.g. which material issuance filled a material requisition

46. Query to Identify Untriggered Ingredient Issuances

47. Conversion Cycle Reservation Queries
What resources or resource types is a commitment event agreeing to increase or decrease?
E.g. what finished good or finished good type is a production order committing to produce?
What quantity of a resource or resource type is a commitment event agreeing to increase or decrease?
E.g. What quantity of each material type is a material requisition committing to use up?
What dollar value of a resource or resource type is a commitment event agreeing to increase or decrease?
E.g. What is the dollar value of the finished goods a production order is committing to produce?

48. Conversion Cycle Reservation Queries
When did an event commit to increase or decrease a specific resource or resource type?
E.g. When did a materials requisition commit to using up a specific material type?
Where did an event commit to increase or decrease a specific resource or resource type?
E.g. To which materials warehouse location was a materials requisition issued?

49. Query to identify quantities and descriptions of ingredients to be used up by issuance #1002

50. Conversion Cycle Participation Queries
Which agent(s) participated in a specified event?
E.g. Which production supervisor authorized a machine operation?
How many events of a specified type has a specified agent participated?
E.g. On how many production orders has a production employee been scheduled to work?
What is the total dollar value of events of a specified type in which a specified agent has participated for a specified time period?
E.g. What is the total dollar value of all material issuances approved by a production supervisor?

51. Query to identify names of baking employees who participated in baking order #PO2

52. Conversion Cycle Participation Queries
When did a specified event in which a specified agent participated occur?
E.g. When was the most recent production order supervised by a specific production supervisor
Where did a specified event in which a specified agent participated occur?
E.g. at which location did the most recent material issuance by a specific inventory clerk occur

53. Conversion Cycle Linkage Queries
What raw materials are needed to produce a specific type of finished good?
E.g. what ingredients are in chocolate chip cookies
What quantity of each raw material is needed to produce a specific type of finished good?
E.g. how much butter is in a batch of snickerdoodles
Which finished goods contain a specific type of raw material?
E.g. which of our cookies contain nuts
What labor types are needed to produce a specific type of finshed good?
E.g. what types of labor go into a batch of molasses cookies

54. Query to identify descriptions of finished cookie types that require labor type “frost cookies”

55. Summary
We discussed the conversion process and how it fits in at the value system and value chain levels
We discussed the extended REA pattern at the business process level
We examined documents typically used to represent events and discussed related resources and agents
We examined examples of relational database tables for the conversion cycle and discussed data input into those tables
We systematically discussed types of queries for the conversion process to support decision-makers in various functional areas
We provided selected examples of queries of various types

56. Chapter 11
End of Chapter