Production Order

Most factories can say what a production order is. Fewer can say what happens to stock when someone presses Release. In Business Central the answer depends on a setting. In SAP it depends on how goods are issued.

That gap is where stock records drift. When components are consumed at the wrong moment, or never recorded, the book quantity stops matching the shelf. The error then flows into the monthly production account that a registered manufacturer keeps under Goods and Services Tax (GST) rules, where quantities of raw materials used and goods made must be shown.

This page gives you a one-page template, a six-point release check and a worked example with 90 rejects. It is written for small and mid-size manufacturers in India who record production in Tally, Excel or a first inventory system. Each test can be run before you release an order, so the document guards your stock instead of just describing it.

• A production order tells the shop floor to make a stated quantity of one item by a due date, using a bill of materials (BOM, the component list for one unit).
• "Released" means work may start. Test material availability yourself before you release.
• The name varies: SAP and Business Central say production order, and ERPNext says work order.
• Record actual consumption, good output and scrap, because registered manufacturers must keep monthly production accounts under Rule 56(12) of the Central GST (CGST) Rules.

It names the item, the BOM, the dates and the cost, then collects what was actually used and produced. Orders come from planning, from a sales order or by hand (Microsoft Learn). A one-page version needs these fields:

Released means the order is authorised for execution, not that its materials are ready. Business Central's documentation says a released order "doesn't necessarily mean that materials are picked or the project moves to its first operation" (Microsoft Learn). Business Central, SAP and Dynamics 365 treat release as permission to start; they differ on when stock moves.

Released means work may start, not that materials are ready

Business Central offers three consumption methods, where Forward and Backward are flushing (automatic consumption): Manual (consumption journal), Forward (consumed at release, unless routing link codes are used) and Backward (consumed when the order is finished). SAP backflushes when an operation or the order is confirmed. So test material availability yourself before releasing.

Run six tests and release only when all pass.

Is the BOM version current?

Pass: the order carries the version approved today. Fail: the BOM was edited since the last order for this item.

Are all components available?

Pass: for every line, on-hand stock not committed elsewhere is at least order quantity × BOM quantity per unit × (1 + scrap allowance). Fail: any line is short, so wait or split the order.

Is there a partial-start rule?

Pass: the order lists which components must be on hand to start and which may follow. Fail: the order lists no start-critical components.

Is the issue method set for each component?

Pass: each component line shows manual, at start or at finish, and the method was reviewed for this order. Backflush only components with steady usage. Fail: any component's issue method is blank or was not reviewed for this order.

Is there a scrap route?

Pass: a scrap location exists and the order records a scrap allowance. Either finish the order and move rejects to the scrap location, or move rejected materials from work in progress to scrap and short-close the order (closing it below the ordered quantity). Fail: there is no scrap location, or no allowance on the order.

Are the output location and due date set?

Pass: finished goods have a named location, and the due date falls after the longest supplier lead time among short components. Fail: either is missing.

Planned use is 1,000 × 2.0 = 2,000 m. Actual use is 2,150 ÷ 910 = 2.36 m per good unit. A system that backflushes BOM quantity on good output alone would deduct 910 × 2.0 = 1,820 m. Stock would then be overstated by 2,150 − 1,820 = 330 m, about 15% of the cable issued, which a cycle count would expose later.

Those figures are what GST asks for. Under Rule 56(12) of the CGST Rules, 2017, a registered manufacturer maintains "monthly production accounts showing quantitative details of raw materials or services used in the manufacture and quantitative details of the goods so manufactured including the waste and by products thereof" (Central Board of Indirect Taxes and Customs, Rule 56, as reproduced by TaxGuru, October 2026).

A production order is not a purchase order, and in many systems it is the same document as a work order.

• Work order. ERPNext uses "work order" for the plan to make a stated quantity, and generates job cards (per-operation tasks) from it (ERPNext documentation). Treat the terms as one document unless your system splits it by operation.
• Purchase order. It buys components from a supplier; a production order makes items in-house and can trigger purchases for short components. See the purchase order process.

Arka Inventory builds production on bills of material, and it starts on the Advance plan. As of October 2026, Advance costs US$499 a month billed yearly, with two user licences included and extra users at $52 a month (pricing).

Its manufacturing feature covers process, discrete and assembly manufacturing. It shows the cost of production and work in progress. Arka Inventory supports standard and order-based bills of material. It lets you check material availability against the bill of materials before production starts and record the materials used for each production batch.

There is a 15-day free trial with full access and no credit card. Onboarding takes at least two weeks, depending on data readiness.