Substitute Variance in Production Order _ Standard MS Dynamics AX 2012

The common sources for a production-substitution variance includes the following:

  • Issue a material component that is not in the production BOM.
  • Add a component manually to the production BOM, and report it as consumed.
  • Add an operation manually to the production route, and report it as consumed.
  • Select a different BOM version when you are creating the production order, where the BOM version differs from the one that is used in the standard cost calculation.

These causes have been identified and highlighted by Microsoft, plus the information is also available on Tech Net. However, I have more findings on Substitute variance that cause this kind of variance and how it is different from Quantity variance.

A simple understanding on this variance is

Substitute variance will surely occur if there is a change in process adopted

If you save it in your mind, you will never be puzzled as why this variance is coming along while ending your production order.

People get confused between Quantity  variance and Substitute variance, How;

If someone changes the QTY on the picking list journal , post it manually, production order will end up having Quantity variance but if you are posting a route card journal manually and you change the number of hours on any operation from the estimated time then this will draw a Substitute variance on your production order.

Confusion starts here and the first question comes in your mind is that,

I am changing QTY which are also some values on picking list journal causing me a Quantity variance while on the other hand, I am doing same sort of stuff where I am changing the number of hours on my defined operations and it is causing “Substitute variance” .

Although, I am not changing or removing any operation but just changing process time slightly, so why system is not considering this  as Quantity variance”. 

In Standard AX 2012, how System is checking Substitute variance: 

  • At time of posting the route card journal, system will check as what processes are required to produce a finished good, system will check what operations are performed and how many hours a resource (machine/worker) will work on that particular operation to get that work done.  At this level,  system is doing a comparison between estimate and actual posting of the route transaction. If system finds any differences, then it will post these differences into Substitute variance.(Note: Estimates are the number of hours you defined against each operation with your route) 

Hence, the change in Hours or addition of hours or addition of new operation will always be considered as a process change by the system (that is how system considering the change) and for this vary reason it will drag this type of changes in Substitute variance.

Below is the standard script by Microsoft that is calculating different type of variances, where the highlighted lines are related to our scenario:

error-_-prod

Hope that this builds up the logic behind the calculation of Substitute variance on a production order in AX 2012. 

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