Business Central Manufacturing: How the Production Order Process Works

The manufacturing module in Business Central is known to be complex and feature-rich, but that does not mean you will have to deal with a difficult and rigid set of capabilities; quite the opposite. While enterprise-tier ERP like D365 Supply Chain Management requires extensive configuration and sometimes weeks of training, Business Central provides flexibility and advanced capabilities to manage production orders, from production planning to costing, that even non-technical teams can learn in just a few days.

This post covers a typical production order process flow in Business Central.

How production orders work in Business Central: an overview for production managers

A production order in Business Central is the document that drives everything on the shop floor, from the components that need to be picked to the operations that need to run, to the finished goods that land in inventory.

Users can create orders manually from the Production Order page, generate orders from a sales order through the Sales Order Planning page, or produce orders in bulk from the Planning Worksheet after an MRP or MPS run. Once created and scheduled, the production manager releases the order to the shop floor, at which point the team can begin recording what they use and what they produce. Consumption and output flow directly into inventory and the G/L in real time.

The BOM and routing: what they mean for your production order

When a production order is created, Business Central copies the production BOM and routing onto the order; these are visible on the Components and Routing tabs. The BOM determines which components get pulled and in what quantities. The routing determines the sequence of operations, which work centres and machine centres are involved, and how long each step should take.

Firm Planned Production Order

In some organisations, this is set up by the production manager; in others, it belongs to R&D or sales, particularly where items are made to order, for a specific client or project. Whoever owns the setup, both the production BOM and routing are integral to the product design: they drive what the team picks, how procurement plans, and what finance sees in the cost of the finished item.

Production BOMs and Routings are not set in stone. Business Central allows the shopfloor manager to change or update components and operations during the planning phase or even after production has started. This flexibility helps organisations deal with material availability constraints, machines under maintenance or absences.

Production Order Components

Every change to a production order results in costs being updated in real-time. That means inventory and labour costs (linked to work and machine centres) will be visible in real-time.

More about labour costs in this other post: Understanding Labour Absorption.

Production order statuses: what each change commits

A production order moves through five statuses that have a different purpose and control what actions users can perform.

Simulated orders are used for quotes and costing: they are used when the team wants a cost estimate for a proposed item without committing anything to planning. Companies that manufacture expensive products or made-to-order items start production planning with simulated orders before confirming the final price to their customers or prospects.

A Planned order provides info about material and capacity requirements planning, showing total load by work centre and machine centre, but it is deleted the next time planning runs. The purpose of a Planned Production order is to give input to procurement and the load of the various work centres. Used when production lifecycles span weeks or months and serve as a costing and planning simulation before procurement can commit to sourcing the materials. After that, planned orders can be confirmed and become Firm Planned.

Firm Planned orders do the same capacity work but are not erased during subsequent planning runs, making it the right status for orders that have been confirmed and need to hold their place in the schedule. Organisations that distinguish between MPS and MRP typically use Firm-Planned production orders to confirm the schedule so that procurement can start sourcing the materials.

Once the production schedule and materials required are confirmed, the order can be released. Released orders are the only status where the shopfloor team can register consumption and output, and where automatic flushing can occur.

The Finished order closes production: the team cannot make further postings, and actual costs are finalised, including posting against variance if the item uses the standard costing method.

More about inventory costing methods in this post: Inventory Costing Methods in BC.

When should you change the production order status?

The status of a production order should mirror the production planning process of the organisation, and it is not fixed. Some companies skip Simulated and Planned orders, and they create Firm Planned orders directly from the MPS. Other companies create released production orders manually. Also, a production order can go from Planned to Released without going through the Firm Planned status. BC allows this flexibility because it is designed for SMBs, where changes in the process are often required.

There are no strict rules about changing production order status. A released production order can stay in this status even if materials are not available, because the system does not differentiate between Firm Planned and Released orders for planning purposes. Production managers can reschedule operations for released orders and move operations to different work centres. The only real limitation is when a production order is set as Finished. That closes production, and no more operations or consumption can be registered. If needed, a manager can reopen finished production orders by changing the status back to Released.

How components are consumed

Components are consumed in one of three ways, determined by the flushing method set on each component.

Manual consumption requires the team to record material consumed via the consumption journal or the production journal. This method is preferred when quantities vary from the BOM or when substitutions are made. Forward flushing posts the expected quantity of materials automatically when the order is released or after the operation has started. Backward flushing records actual material consumed when the order status changes to Finished, or when the current operation is completed.

Learn more about the flushing method in this other post: Manufacturing Flushing Methods in Business Central.

The flushing method is copied from the item card when the order is refreshed, but can be changed per component directly on the production order.

Flushing Methods on Production Order Components

Choosing the right flushing method is typically a job for shopfloor managers and can change over time. There are also flushing methods that use warehouse activities to back or forward flush components. For example, some components can be automatically flushed once a pick is registered, which shows how the system is designed to accommodate operational changes or constraints and give shopfloor managers the tools they need to support operations.

A common mistake is to treat flushing methods as a product dimension or a design element of components, whereas they are operational configuration details for manufacturing operations.

Recording output: how finished goods enter inventory

Output is how finished goods enter inventory in Business Central. The production team records quantity produced and time spent on each routing operation via the output journal or the production journal.

The same three flushing methods apply to output as to consumption: The Manual method requires the team to record what was produced using the output journal or the production journal. With Forward Flushing, BC posts output automatically when the order is released. Backwards flushing posts it when the order is finished.

Partial postings are allowed throughout the run, so the manager can record output in batches as production progresses.

Production Journal

Inventory and costs are updated in real time with every transaction; shopfloor managers can see how the team is progressing at every stage of the process.

Closing the production order

Changing the status of a production order to Finished completes the operation and costing lifecycle of the produced item. BC compares actual costs posted; materials consumed, capacity used, subcontracting, against the standard costs from the BOM and routing, and posts the variances to the relevant G/L accounts if the item produced used the standard costing method. After this point, the team cannot register further consumption or output. Finished production orders remain available for reporting and for tracking back to the originating sales order, purchase order, or other production orders in a multi-level BOM.

In BC, leaving orders as released even after production is complete is not uncommon, and it's often a design choice. To finish a production order means to reconcile and close WIP inventory and labour. In some organisations, this task is reserved for finance personnel, not manufacturing.

What to check on a production order: key fields and enquiries

The Production Order Statistics page is the first place to look. It shows expected and actual costs side by side, materials, capacity, and overhead, so the manager can see immediately whether the order is running to standard or diverging. The Components tab shows expected and remaining quantities and flushing method per component, confirming what the floor needs to pick. The Routing tab shows the operation sequence, the work or machine centre assigned to each step, and the scheduled start and end dates.

In 2025, Microsoft released a series of native Power BI reports for manufacturing in Business Central covering work centre loads, variance analysis, scrap, and released order progress. These reports give the production manager a live view across all active orders without opening each one individually.

Power BI Manufacturing Report

Next Steps

If you are considering Business Central for your organisation or are already live but feel you are not using the full capabilities of your system, reach out to our team.