Introduction

Enterprise Resource Planning (ERP) systems have traditionally been the domain of large corporations with deep pockets and dedicated IT teams. Small and medium businesses (SMBs) — particularly in India's manufacturing sector — have long relied on spreadsheets, standalone billing software, and manual registers to manage their operations. This approach works until it doesn't: orders get missed, stock counts diverge from reality, GST returns become a monthly fire drill, and the owner spends evenings reconciling numbers instead of growing the business.

Udyamo ERP Lite was built to change that. It is an open-source, manufacturing-first ERP designed specifically for Indian SMBs with 20 to 500 employees. Built on modern technology (Ruby on Rails 8, PostgreSQL, Hotwire, and Tailwind CSS), it brings together manufacturing, inventory, accounting, sales, purchases, tax compliance, HR, and asset management into a single, integrated system.

What This Book Covers

This book serves two purposes:

1. ERP Education — Each chapter begins with the underlying concepts. Whether it is double-entry accounting, bill of materials, or GST input credit, you will understand the why before the how.

2. Practical User Guide — Every concept is followed by step-by-step instructions for performing the task in Udyamo ERP Lite. Navigation paths, field descriptions, and workflow explanations are included throughout.

Who This Book Is For

• Business owners and directors who want to understand what ERP can do for their operations
• Operations and production managers who will use the manufacturing, inventory, and quality modules daily
• Accountants and finance staff responsible for invoicing, payments, GST returns, and financial reporting
• HR and admin personnel managing employees, payroll, and compliance
• IT administrators setting up users, roles, and permissions

How This Book Is Organized

The book is divided into 10 parts covering 50 chapters:

A Glossary at the end provides quick definitions for 80+ ERP, manufacturing, accounting, and Indian compliance terms.

Conventions Used in This Book

Throughout this book, you will encounter the following conventions:

• Navigation paths are written as Menu > Submenu > Action — for example, Inventory > Items > Add New
• Field names appear in bold — for example, fill in the Item Name field
• Button labels appear in bold — for example, click Save
• Tables describe form fields, their purpose, and expected values
• Screenshot placeholders indicate where the application interface would appear

Tip: Callout boxes like this provide practical advice and shortcuts.

Warning: Boxes like this highlight common mistakes and pitfalls to avoid.

Required: Boxes like this list prerequisites you must complete before proceeding.

Prerequisites

To follow along with the practical exercises in this book, you will need:

• A running instance of Udyamo ERP Lite (self-hosted or cloud)
• A modern web browser (Chrome, Firefox, Edge, or Safari)
• An account with Owner or Admin role for setup chapters
• Basic familiarity with web applications

Let's begin with understanding what ERP is and why your business needs it.

What is ERP and Why SMBs Need It

Enterprise Resource Planning (ERP) is a class of software that integrates all core business processes — manufacturing, inventory, sales, purchasing, accounting, human resources, and compliance — into a single, unified system. For small and medium businesses (SMBs) in manufacturing, an ERP replaces the patchwork of spreadsheets, paper registers, and disconnected software tools that typically accumulate as a company grows.

This chapter traces the evolution of ERP, explains what it does in practical terms, and makes the case for why manufacturing SMBs — especially those operating in India — cannot afford to ignore it.

What You Will Learn

• The historical evolution from MRP to modern cloud ERP
• What an ERP system actually does and the modules it encompasses
• Why SMBs hit a growth ceiling without integrated systems
• How ERP compares to spreadsheet-based management
• Common myths about ERP adoption and the reality behind them

Prerequisites

No technical prerequisites. This chapter is conceptual and intended for business owners, operations managers, and anyone evaluating ERP for the first time.

A Brief History of ERP

The roots of ERP lie in manufacturing. Understanding this history helps explain why ERP systems are structured the way they are and why manufacturing remains the domain where ERP delivers the most value.

1960s — Material Requirements Planning (MRP). The earliest precursor to ERP emerged when manufacturers needed a systematic way to calculate raw material requirements based on production schedules. MRP systems answered a simple but critical question: given a production plan and a bill of materials, what materials do we need to order, and when? These early systems ran on mainframes and were accessible only to large corporations.

1980s — Manufacturing Resource Planning (MRP II). MRP evolved into MRP II by expanding scope beyond materials. MRP II incorporated capacity planning, shop floor scheduling, and basic financial tracking. A factory could now plan not just what materials to buy, but how to allocate machine time, labour, and capital. This was the first step toward integrating the factory floor with the back office.

1990s — Enterprise Resource Planning (ERP). The term "ERP" was coined by the Gartner Group in 1990. ERP extended MRP II to cover the entire enterprise: sales, purchasing, human resources, accounting, and more. Software vendors like SAP, Oracle, and Baan built monolithic systems that promised a single source of truth for every business transaction. These systems were powerful but expensive, often requiring years of implementation and millions of dollars in licensing and consulting fees.

2010s — Cloud ERP and the SMB Opportunity. Cloud computing changed the economics of ERP. Software-as-a-Service (SaaS) models eliminated the need for on-premises servers and large IT teams. Vendors began targeting SMBs with simpler, more affordable solutions. Open-source ERP projects emerged, further lowering the barrier to entry. Today, a 50-person factory can run a capable ERP system for a fraction of what a large enterprise paid in the 1990s.

What Does an ERP System Do?

At its core, an ERP system provides a shared database and a set of integrated modules that cover every major business function. When a sales order is created, the inventory module knows to reserve stock. When production consumes raw materials, the accounting module records the cost. When an invoice is generated, the tax module calculates GST. Every transaction flows through the system in real time, eliminating manual data entry and reconciliation.

The core modules found in a typical ERP system include:

Why SMBs Need ERP

Many SMB owners believe ERP is only for large enterprises. In practice, the problems ERP solves are felt most acutely by growing SMBs. Here are the core pain points:

Data silos. Production data lives in one spreadsheet, inventory in another, and accounting in a third. No one has a unified view of the business. When the sales team promises a delivery date, they have no way to verify whether raw materials are available or whether the factory has capacity.

Manual errors. Every time data is copied from one system to another — or from a paper register to a spreadsheet — errors creep in. A transposed digit in a stock register can cascade into incorrect purchase orders, wrong invoicing, and GST filing mismatches.

Compliance burden. Indian SMBs face a dense regulatory environment: GST with its multiple return types, TDS obligations, PF and ESIC contributions, and e-way bill requirements for goods movement. Managing compliance manually is not just inefficient — it is risky. Penalties for late or incorrect filings can be significant.

Growth ceiling. There comes a point where spreadsheets and manual processes simply cannot scale. A factory running 10 production orders a week might manage with spreadsheets. At 50 orders a week, the system breaks down. Orders get missed, materials run out unexpectedly, and the owner spends more time firefighting than running the business.

ERP vs. Spreadsheets

The following comparison illustrates why growing SMBs outgrow spreadsheets:

Benefits of ERP for Manufacturing SMBs

Single source of truth. Every department — from the shop floor to the accounts team — works with the same data. When production reports output, inventory updates automatically, and the cost flows into the general ledger without manual intervention.

Automated workflows. Purchase orders can be generated from material requirements. Invoices can be created from delivery notes. Salary slips can be calculated from attendance and statutory rules. Automation reduces labour, speeds up processes, and eliminates transcription errors.

Real-time visibility. Dashboards show current stock levels, pending production orders, outstanding receivables, and cash positions. Managers can make decisions based on what is happening now, not what happened last month when the spreadsheet was last updated.

Compliance readiness. With GST calculations built into invoicing, TDS sections mapped to vendor payments, and PF/ESIC rules embedded in payroll, the system generates compliant documents and returns as a by-product of normal operations.

Scalability. An ERP system that works for 20 employees works for 200. Adding new product lines, opening a second warehouse, or onboarding more customers does not require rebuilding the system — it requires adding data.

Common ERP Myths Debunked

Tips & Best Practices

Tip: Start by mapping your current pain points — late deliveries, stock mismatches, GST filing delays — and evaluate how an ERP addresses each one specifically. This keeps the evaluation grounded in real business needs rather than feature checklists.

Tip: Involve your shop floor supervisor and your accountant in the ERP evaluation process. These are the people who will use the system daily, and their buy-in is critical for successful adoption.

Quick Reference

ERP for Manufacturing — The Big Picture

Manufacturing is where ERP was born, and it remains the domain where ERP delivers the greatest return. A factory is a complex system: raw materials arrive, machines transform them, labour adds value, quality checks verify standards, finished goods move to warehouses, and invoices flow to customers. Every one of these steps generates data that must be recorded, tracked, and reconciled. Without an integrated system, this data lives in fragments — a stock register here, a production log there, an accounts ledger somewhere else.

This chapter explains why manufacturing demands a specialized ERP, introduces the key concepts that drive manufacturing operations, and shows how an ERP connects the factory floor to the general ledger.

What You Will Learn

• Why generic business software falls short for manufacturing
• Core manufacturing concepts: BOM, MRP, production planning, shop floor control, WIP, and quality management
• How job work and subcontracting operate in the Indian manufacturing context
• How material and data flow from production through to accounting
• What distinguishes manufacturing ERP from general-purpose business tools

Prerequisites

Read Chapter 1: What is ERP and Why SMBs Need It for foundational ERP concepts.

Why Manufacturing Needs Specialized ERP

A trading company buys and sells finished goods. Its core ERP needs are inventory, invoicing, and accounting. A manufacturing company does all of that and more: it transforms raw materials into finished products through a series of planned, tracked, and quality-controlled operations. This transformation process introduces complexity that generic business software cannot handle.

Consider a steel fabrication shop. It purchases mild steel sheets, angles, and channels. It cuts, welds, drills, and finishes these materials into structural components. Each product has a specific bill of materials. Each production run consumes materials, uses machine time, and requires labour. Some operations are outsourced to job workers. Quality inspections happen at multiple stages. The finished product must be costed accurately — including material, labour, overhead, and job work charges — before it can be invoiced.

No spreadsheet or generic invoicing tool can manage this end-to-end. Manufacturing ERP exists precisely for this purpose.

Key Manufacturing Concepts

Bill of Materials (BOM)

A Bill of Materials is the recipe for a product. It lists every raw material, sub-assembly, and component required to manufacture one unit of a finished product, along with the quantity of each. For example, a BOM for a steel bracket might specify 2 kg of MS flat bar, 4 bolts, and 0.5 hours of welding time.

BOMs can be multi-level. A finished product may contain sub-assemblies, each of which has its own BOM. An ERP system maintains these hierarchies and uses them to calculate material requirements, production costs, and purchase needs.

Material Requirements Planning (MRP)

MRP is the process of determining what materials to procure and when, based on production plans and existing stock. Given a set of production orders and their BOMs, the MRP engine calculates the total material demand, subtracts what is already in stock or on order, and generates purchase requisitions for the shortfall.

For a food processing unit planning to produce 1,000 packets of a spice blend next week, MRP would check the BOM for each ingredient, compare requirements against current stock, account for materials already on order from vendors, and flag any shortages that require immediate procurement.

Production Planning and Shop Floor Control

Production planning determines what to produce, in what quantity, and by when. A production order is the central document — it specifies the product, quantity, BOM, target start date, and target completion date.

Shop floor control tracks the execution of production orders: which operations are in progress, which are complete, what materials have been consumed, and what output has been produced. In an ERP system, the production order moves through states — draft, released, in progress, completed — providing real-time visibility into factory operations.

Work-in-Progress (WIP)

At any given time, a factory has materials that have entered production but are not yet finished goods. This is Work-in-Progress. WIP has financial implications: the materials consumed are no longer raw material inventory, but they are not yet finished goods either. An ERP system tracks WIP to ensure accurate inventory valuation and costing.

Quality Management

Manufacturing requires quality checks at multiple points: incoming raw material inspection, in-process checks during production, and final inspection before dispatch. An ERP system records quality inspections, links them to production orders and batches, and can block dispatch of items that fail inspection.

For an auto parts manufacturer, a quality inspection might verify dimensional tolerances, surface finish, and hardness values against specification. The inspection record becomes part of the product's traceability chain.

Job Work and Subcontracting

Job work is a defining feature of Indian manufacturing. A company sends raw materials or semi-finished goods to an external contractor (job worker) for specific operations — heat treatment, plating, machining, embroidery — and receives the processed goods back. This is governed by specific GST provisions (challan-based movement under GST rules).

An ERP system tracks job work orders: what materials were sent, to which contractor, for what process, when they are due back, and at what cost. This is critical for both operational control and GST compliance, as job work movements require proper documentation.

How ERP Connects the Factory Floor to Accounting

The true power of manufacturing ERP lies in integration. Every physical event on the factory floor has a corresponding financial entry. Here is how data flows through the system:

Raw Material Purchase
    │
    ▼
Vendor Bill → Accounts Payable (Ledger Entry)
    │
    ▼
Stock Receipt → Inventory Increase (Stock Ledger Entry)
    │
    ▼
Production Order Created (BOM exploded)
    │
    ▼
Material Issued to Production → Inventory Decrease + WIP Increase
    │
    ▼
Job Work Order (if applicable) → Material Sent to Contractor
    │
    ▼
Job Work Receipt → Material Returned + Job Work Cost Recorded
    │
    ▼
Quality Inspection → Pass / Fail / Rework
    │
    ▼
Production Completed → WIP Decrease + Finished Goods Increase
    │
    ▼
Sales Order → Delivery → Inventory Decrease
    │
    ▼
Sales Invoice → Accounts Receivable (Ledger Entry) + GST Output
    │
    ▼
Payment Received → Bank Entry → Receivable Cleared

At every stage, the ERP system creates the appropriate stock ledger entries and journal entries automatically. The accountant does not need to manually post material consumption or production costs — the system handles it as a natural consequence of recording operational events.

Manufacturing ERP vs. Generic Business Software

The Indian Manufacturing Context

India's manufacturing sector is dominated by MSMEs (Micro, Small, and Medium Enterprises). According to government data, MSMEs contribute approximately 30% of India's GDP and nearly half of total exports. The Make in India initiative has further emphasized the importance of a strong domestic manufacturing base.

Yet most Indian manufacturing SMBs operate with minimal or no ERP. Common reasons include perceived high cost, complexity of implementation, and lack of software that understands Indian manufacturing workflows — including GST implications for job work, TDS on contractor payments, and statutory compliance for PF and ESIC.

A manufacturing ERP built for Indian SMBs must handle these realities natively, not as afterthoughts or add-on modules. It must understand that a 50-person factory in Rajkot or Ludhiana has different needs from a 5,000-person plant in Detroit, but its operational challenges are no less real.

Tips & Best Practices

Tip: Before evaluating any ERP, document your current manufacturing process from raw material receipt to finished goods dispatch. Include every handoff point, every register, and every approval. This map becomes your requirements document.

Tip: Pay special attention to job work processes. If your factory relies heavily on subcontracting, the ERP must support job work order tracking with proper GST challan management. This is a common gap in ERP systems not designed for Indian manufacturing.

Warning: Do not confuse a good invoicing tool with a manufacturing ERP. If the software cannot manage BOMs, production orders, and material consumption, it is not a manufacturing ERP — regardless of what the marketing says.

Quick Reference

Introducing Udyamo ERP Lite

Udyamo ERP Lite is an open-source, manufacturing-first Enterprise Resource Planning system built specifically for Indian small and medium businesses. It fills a gap that has persisted for years in the Indian software market: the absence of an affordable, capable ERP that understands the realities of running a 20-to-500-person manufacturing operation in India.

This chapter introduces Udyamo ERP Lite — its purpose, its design philosophy, the modules it provides, and the technology that powers it.

What You Will Learn

• What Udyamo ERP Lite is and the problem it solves
• The technology stack and why it was chosen
• All available modules and what each one covers
• Core design principles that guide the product
• System requirements and deployment options

Prerequisites

Read Chapter 1: What is ERP and Why SMBs Need It and Chapter 2: ERP for Manufacturing for context on ERP concepts and manufacturing workflows.

Why Udyamo ERP Lite Was Built

The Indian manufacturing SMB faces a difficult choice when it comes to ERP software. At one end of the spectrum are enterprise-grade systems like SAP and Oracle, which are powerful but prohibitively expensive and complex for a 50-person factory. At the other end are lightweight invoicing and accounting tools that handle billing and GST but have no understanding of production orders, bills of materials, or job work.

In between, there are a handful of ERP products that attempt to serve SMBs, but many of these are either proprietary (with opaque pricing and vendor lock-in), poorly adapted to Indian tax and compliance requirements, or designed primarily for trading rather than manufacturing.

Udyamo ERP Lite was created to address this gap directly. It is built from the ground up for Indian manufacturing SMBs. Every design decision — from the data model to the user interface — reflects the workflows, compliance requirements, and operational realities of running a factory in India.

The name "Udyamo" derives from the Sanskrit root for enterprise and effort, reflecting the spirit of Indian entrepreneurship that the software aims to serve.

Open Source and the MIT License

Udyamo ERP Lite is released under the MIT License, one of the most permissive open-source licenses available. This means:

• You can use the software for any purpose, including commercial use, at no cost.
• You can modify the source code to suit your specific needs.
• You can distribute the software, with or without modifications.
• There is no vendor lock-in. Your data and your customizations belong to you.

Open source also means transparency. The codebase is available for inspection, which builds trust — particularly important for software that handles financial data and tax compliance.

Technology Stack

Udyamo ERP Lite is built on a modern, proven technology stack chosen for reliability, developer productivity, and ease of deployment.

Rails 8 was chosen for its convention-over-configuration philosophy, which allows rapid development without sacrificing code quality. PostgreSQL provides the data integrity and transactional guarantees that financial and manufacturing data demands. Hotwire delivers a responsive user experience while keeping the architecture simple — there is no separate frontend application to build, deploy, and maintain.

Module Overview

Udyamo ERP Lite ships with the following integrated modules, covering 49 data models across all major business functions:

Design Principles

Five principles guide every aspect of Udyamo ERP Lite:

Manufacturing-first. The system is designed around the production order as a central document. BOMs, material consumption, job work, quality inspections, and production costing are first-class features, not afterthoughts bolted onto an invoicing tool.

India-first. GST (with CGST, SGST, and IGST), TDS sections, PF, ESIC, and e-way bills are built into the core data model. The system understands Indian tax rules, Indian financial year conventions (April to March), and Indian document numbering requirements. Amounts are in INR. State codes follow Indian standards.

Simple yet complete. The system aims to cover 90% of what a manufacturing SMB needs without the complexity that makes enterprise ERP systems intimidating. Every screen has a clear purpose. Every workflow has a defined path. There are no hidden configuration labyrinths.

Role-based access. Not everyone should see everything. A shop floor supervisor needs access to production orders and quality inspections. An accountant needs access to the general ledger and GST returns. A sales executive needs access to customers and invoices. Udyamo uses roles and role assignments to ensure each user sees exactly what they need — no more, no less.

Audit trail by default. Every significant action in the system is logged. Activity logs record who did what and when. This is not optional or configurable — it is built into the foundation of the application. For manufacturing SMBs facing audits from tax authorities, customers, or quality certifiers, this traceability is invaluable.

System Requirements

Udyamo ERP Lite is a web application. Users access it through a standard web browser. There is no software to install on individual computers or phones.

Server requirements:

Client requirements:

• A modern web browser: Chrome, Firefox, Safari, or Edge (latest two versions)
• Screen resolution of 1280x720 or higher (responsive design supports tablets and phones, but desktop is recommended for data-heavy operations)
• Stable internet connection (for cloud-hosted deployments)

Deployment Options

Udyamo ERP Lite can be deployed in several ways depending on your infrastructure preferences and technical capabilities:

Self-hosted on a VPS or dedicated server. Install the application on a cloud virtual machine (AWS EC2, DigitalOcean Droplet, or any VPS provider) or an on-premises server. This gives full control over data and infrastructure.

Containerized deployment. Use Docker and Docker Compose for a reproducible, isolated deployment. This simplifies setup and makes it easier to manage updates.

Managed hosting. For organizations without in-house IT, managed hosting options (provided by the community or service partners) offer a hands-off deployment experience.

Tip: For most SMBs, a self-hosted deployment on a cloud VPS with 4 GB RAM is sufficient to support 20-50 concurrent users. Start with the smallest viable configuration and scale as your data and user base grow.

Tips & Best Practices

Tip: Take advantage of the demo mode to explore the system before entering real data. Demo mode populates the application with sample data — products, BOMs, customers, vendors, and transactions — so you can experience every module without risk.

Warning: Open source does not mean unsupported. Engage with the community, read the documentation, and consider professional assistance for your initial setup if your team lacks Ruby on Rails experience.

Tip: Enable only the modules you need during initial setup. Udyamo allows you to toggle manufacturing, inventory, and accounting modules independently. Start with what matters most and expand over time.

Quick Reference

Getting Started — Sign Up, Login & Dashboard

This chapter walks you through your first interaction with Udyamo ERP Lite: accessing the application, signing up for an account, logging in, and navigating the dashboard. By the end of this chapter, you will know how to move around the system confidently and understand what information is available at a glance.

What You Will Learn

• How to access the Udyamo ERP Lite application
• How to sign up for a new account and log in
• What the dashboard shows and how to read each tab
• How to navigate the application using the sidebar menu
• How to manage your profile settings

Prerequisites

• Udyamo ERP Lite must be deployed and accessible via a web browser. See Chapter 3: Introducing Udyamo ERP Lite for system requirements and deployment options.
• A modern web browser (Chrome, Firefox, Safari, or Edge).
• Your organization's Udyamo URL (provided by your administrator).

Accessing the Application

Udyamo ERP Lite is a web application. There is no software to download or install on your computer. Open your web browser and navigate to the URL where your organization's instance is hosted. This might be a custom domain (e.g., erp.yourcompany.com) or a cloud-hosted address provided during setup.

Signing Up

If your organization has just deployed Udyamo ERP Lite for the first time, the first user will need to create an account. Subsequent users are typically created by an administrator.

Step-by-step: Creating your first account

1. Navigate to the application URL in your browser.
2. On the login page, click the Sign Up link.
3. Enter the following information:
   • Email address — Use your business email. This will be your login identifier.
   • Password — Choose a strong password (minimum 8 characters, including at least one uppercase letter, one number, and one special character).
   • Password confirmation — Re-enter the same password.
4. Click Sign Up to create your account.
5. You will be redirected to the setup wizard (covered in Chapter 5) if this is a fresh installation, or to the dashboard if the organization is already configured.

Tip: The first user to sign up on a fresh installation automatically becomes the organization administrator. This user has full access to all modules and settings. Choose this person carefully — it should be someone responsible for the overall system configuration.

Required: A valid email address is mandatory. If email delivery is configured on the server, you may receive a confirmation email that must be verified before you can log in.

Logging In

For returning users, the login process is straightforward.

Step-by-step: Logging in

1. Navigate to the application URL.
2. Enter your email address and password.
3. Click Log In.
4. If your credentials are correct, you will be redirected to the dashboard.

If you have forgotten your password, click the Forgot your password? link on the login page. Enter your email address, and the system will send a password reset link (provided email delivery is configured).

Warning: After multiple failed login attempts, your account may be temporarily locked for security purposes. If this happens, wait a few minutes before trying again or contact your administrator.

The Dashboard

The dashboard is the first screen you see after logging in. It provides a real-time overview of your organization's key metrics across four tabs: Financial, Inventory, Manufacturing, and Sales. The tabs that appear depend on which modules are enabled for your organization.

Financial Tab

The Financial tab presents a summary of your organization's financial health.

This tab gives the business owner or finance manager an immediate sense of cash flow and financial position without needing to open detailed reports.

Inventory Tab

The Inventory tab shows the current state of your stock.

Low stock alerts are particularly valuable for manufacturing operations. If a critical raw material runs low, production orders may be delayed. This tab surfaces that risk before it becomes a problem.

Manufacturing Tab

The Manufacturing tab focuses on production activity.

For a factory manager, these two numbers define the day. Active production orders indicate workload. Pending inspections indicate potential bottlenecks — finished goods cannot be dispatched until they pass inspection.

Sales Tab

The Sales tab summarizes commercial activity.

Tip: Make the dashboard your starting point each day. A quick glance at all four tabs — Financial, Inventory, Manufacturing, Sales — takes less than a minute and gives you a complete picture of where the business stands right now.

Navigation: The Sidebar Menu

The primary navigation in Udyamo ERP Lite is a sidebar menu on the left side of the screen. The sidebar organizes all modules and their sub-sections into a clear hierarchy.

The sidebar structure follows the module organization:

The sidebar items visible to each user depend on their assigned role. A shop floor supervisor will see Manufacturing and Inventory sections. An accountant will see Accounting, Tax, and possibly Sales and Purchases. An administrator sees everything.

Tip: Learn the sidebar structure early. Knowing where each function lives will save you time as you work with the system daily. The hierarchy mirrors the natural flow of business operations: manufacturing produces goods, inventory tracks them, sales sells them, purchases procures materials, and accounting records everything financially.

Profile Settings

Every user can access their profile settings to manage personal account details.

Step-by-step: Accessing and updating your profile

1. Click on your name or avatar in the top-right corner of the screen.
2. Select Profile from the dropdown menu.
3. On the profile page, you can:
   • Update your name as it appears in the system.
   • Change your email address (may require re-verification).
   • Change your password (you must enter your current password for confirmation).
4. Click Save to apply changes.

Required: Changing your password requires entering your current password. If you have forgotten your current password, use the password reset flow from the login page instead.

First Login Walkthrough

Here is a consolidated walkthrough for your very first session with Udyamo ERP Lite:

1. Open your browser and navigate to the application URL.
2. Sign up with your business email and a strong password.
3. Complete the setup wizard if prompted (see Chapter 5 for full details).
4. Arrive at the dashboard. Review each tab — Financial, Inventory, Manufacturing, Sales.
5. Explore the sidebar. Click through each section to familiarize yourself with the module structure. You do not need to enter any data yet; simply note what is available.
6. Check your profile settings. Verify your name and email are correct.
7. Log out by clicking your name in the top-right corner and selecting Log Out. Then log back in to confirm your credentials work.

This entire process should take no more than 10 to 15 minutes. Once complete, you are ready to proceed with first-time organization setup.

Tips & Best Practices

Tip: Bookmark the application URL in your browser for quick access. If you use the system daily — and you should — having it one click away removes friction.

Tip: If you are the administrator, create user accounts for your team before they need to start using the system. Pre-configure roles so that each person sees only the modules relevant to their job. This reduces confusion during onboarding.

Warning: Do not share login credentials between users. Each person should have their own account. Shared accounts undermine the audit trail — if a problem occurs, you will not be able to determine who performed the action.

Quick Reference

First-Time Setup — Organization, Modules & Financial Year

After your first login, the most important step is configuring your organization in Udyamo ERP Lite. The setup wizard guides you through entering your company details, enabling the modules you need, setting the financial year, and configuring tax parameters. Getting this right at the start ensures that every document, calculation, and report the system produces is accurate and compliant.

This chapter walks through each step of the initial setup process in detail.

What You Will Learn

• How to complete the setup wizard from start to finish
• How to configure your organization profile (name, GSTIN, PAN, address, logo)
• How to enable and disable modules (manufacturing, inventory, accounting)
• How to set the financial year and its start month
• How to configure GST settings (GSTIN, state code, registration type)
• How to use demo mode for exploration and training
• How to configure document number ranges

Prerequisites

• You must be logged in as the organization administrator (the first user account).
• Read Chapter 4: Getting Started for login and navigation basics.

The Setup Wizard

Udyamo ERP Lite includes a setup wizard that appears automatically on the first login to a fresh installation. The wizard walks you through the essential configuration in a logical sequence. If you need to return to these settings later, they are accessible through the Settings section in the sidebar.

The setup wizard covers the following steps in order:

1. Organization profile
2. Module selection
3. Financial year configuration
4. GST configuration
5. Review and confirm

Tip: Complete the setup wizard in one sitting. While you can return to settings later, having the core configuration in place from the start prevents issues with document numbering, tax calculations, and module availability.

Step 1: Organization Profile

The organization profile contains the basic information that identifies your company. This data appears on invoices, purchase orders, reports, and other printed documents.

Step-by-step: Configuring the organization profile

1. In the setup wizard (or navigate to Settings > Organization), you will see the organization profile form.
2. Fill in the following fields:

3. Click Save & Continue to proceed to the next step.

Required: GSTIN and PAN are mandatory fields. These are used for GST return preparation, e-way bill generation, and TDS compliance. Ensure the GSTIN matches your GST registration certificate exactly.

Warning: The GSTIN you enter here determines the default state code for your organization. If your business is registered in multiple states under different GSTINs, the primary GSTIN should be the one for your principal place of business. Multi-GSTIN support can be configured in advanced settings.

Step 2: Module Selection

Udyamo ERP Lite allows you to enable or disable major modules based on your business needs. This controls which sections appear in the sidebar and which features are active in the system.

The three toggleable modules are:

Step-by-step: Enabling modules

1. On the module selection screen, you will see toggle switches for each module.
2. Enable the modules that apply to your business:
   • For a manufacturing company, enable all three: Manufacturing, Inventory, and Accounting.
   • For a trading company, enable Inventory and Accounting. Leave Manufacturing disabled.
   • For a company that wants to start simple, enable only Accounting and add modules as you grow.
3. Click Save & Continue.

Tip: If you are unsure which modules to enable, start with all three enabled. You can disable a module later if you find you do not need it. It is easier to explore the system with all features visible and then narrow down, rather than discovering later that a feature you need was hidden behind a disabled module.

Warning: Disabling a module hides its menu items and features, but does not delete any data associated with it. If you disable Manufacturing after creating production orders, the data is preserved. Re-enabling the module makes everything visible again.

Step 3: Financial Year Configuration

Indian businesses operate on a financial year that typically runs from April to March. Udyamo ERP Lite needs to know your financial year configuration to correctly organize transactions, generate period-based reports, and manage year-end processes.

Step-by-step: Setting the financial year

1. On the financial year configuration screen, set the following:

2. Click Save & Continue.

Required: The financial year start month is critical. Almost all Indian businesses use April as the start month (financial year April to March). This aligns with the GST return calendar and the Income Tax assessment year. If your business follows a different convention for any reason, set the appropriate month here.

Tip: The current financial year label is used in reports, document numbering, and GST returns. Ensure it matches the actual financial year you are currently operating in. For example, if the current date is January 2026, the active financial year is 2025-26.

Step 4: GST Configuration

GST configuration ensures that every invoice, bill, and tax document your system generates is compliant with Indian GST law.

Step-by-step: Configuring GST settings

1. On the GST configuration screen, verify or enter the following:

2. Review the pre-filled values. The GSTIN and state code are typically carried forward from the organization profile you entered in Step 1.
3. Select your Registration Type:
   • Regular — For businesses above the GST threshold that charge and collect GST.
   • Composition — For businesses under the composition scheme with simplified compliance.
   • Unregistered — For businesses below the threshold (limited functionality for GST features).
4. Click Save & Continue.

Warning: The registration type affects how the system calculates taxes on invoices. A Regular registration applies CGST + SGST for intra-state transactions and IGST for inter-state transactions. A Composition registration applies a flat rate. Choosing the wrong type will result in incorrect tax calculations on every document.

Step 5: Review and Confirm

The final step of the setup wizard presents a summary of all your configuration choices.

1. Review each section: Organization Profile, Module Selection, Financial Year, and GST Configuration.
2. If anything needs correction, click the Edit button next to the relevant section to go back and make changes.
3. Once satisfied, click Complete Setup.

The system will apply your configuration and redirect you to the dashboard. Your organization is now ready for use.

Demo Mode

Udyamo ERP Lite includes a demo mode that populates the system with realistic sample data. This is invaluable for training, evaluation, and experimentation.

Step-by-step: Activating demo mode

1. Navigate to Settings > Organization (or access via the setup section).
2. Locate the Demo Mode section.
3. Click Activate Demo Mode.
4. The system will generate sample data including:
   • Sample items (raw materials and finished goods)
   • Sample BOMs for finished goods
   • Sample customers and vendors
   • Sample production orders in various states
   • Sample invoices and bills
   • Sample journal entries

Deactivating and resetting demo mode:

Warning: Resetting demo mode deletes all demo data permanently. If you have made changes to demo records that you want to keep, export them before resetting. Do not activate demo mode on an instance that already contains your real business data.

Tip: Use demo mode to train your team. Let each department head explore their relevant module with realistic data before switching to live operations. A shop floor supervisor can practice creating production orders. An accountant can explore the journal entry workflow. A sales executive can try creating invoices. This hands-on experience significantly reduces the learning curve.

Settings and Additional Configuration

Beyond the setup wizard, the Settings section provides access to additional configuration options.

Number ranges control the automatic numbering of documents such as invoices, purchase orders, production orders, and journal entries. Each document type has its own number range with a configurable prefix and starting number.

Tip: Configure number ranges before you start entering live data. Changing the numbering scheme after transactions have been recorded can create gaps or inconsistencies in your document sequence, which may raise questions during audits.

Post-Setup Checklist

After completing the setup wizard, the following tasks should be completed before entering live transactions:

1. Create user accounts for your team members (Settings > Users).
2. Configure roles and assign them to users (Settings > Roles).
3. Set up the Chart of Accounts if the default does not match your accounting structure.
4. Create item master data (raw materials, finished goods, consumables).
5. Enter opening stock balances if you have existing inventory.
6. Create customer and vendor records for your active business partners.
7. Set up BOMs for your manufactured products.
8. Configure number ranges for all document types.

This post-setup work is covered in detail in subsequent chapters of this guide.

Tips & Best Practices

Tip: Take a screenshot of your setup wizard summary before clicking Complete Setup. This gives you a reference of your initial configuration that you can compare against later if questions arise.

Tip: If you are migrating from another system (spreadsheets, Tally, or another ERP), plan your data migration before completing setup. The financial year, chart of accounts, and opening balances must align with your previous records for a smooth transition.

Warning: Do not skip the GST configuration step even if you plan to configure it later. Invoices and bills created without proper GST settings will have incorrect tax calculations and will need to be revised.

Quick Reference

What is Inventory Management?

Every manufacturing business — whether it makes hydraulic cylinders, auto components, or textile machinery — holds inventory. Raw materials sit in the warehouse waiting to be consumed. Semi-finished parts move between work stations on the shop floor. Finished goods await dispatch. Consumables like lubricant oil, welding rods, and packaging boxes are used daily but often tracked poorly. All of this is inventory, and how you manage it determines whether your cash works for you or sits idle on shelves.

Inventory management is the practice of ordering, storing, tracking, and controlling stock so that the right materials are available in the right quantity, at the right location, at the right time — without tying up more cash than necessary.

What You Will Learn

• The different types of inventory in a manufacturing business
• Why inventory management matters for profitability and operations
• Core inventory concepts: SKU, batch tracking, valuation methods, reorder points
• The categories of inventory costs
• How ERP replaces manual tracking with real-time, data-driven control

Prerequisites

• A basic understanding of manufacturing operations (covered in Chapter 2)
• Familiarity with the Udyamo ERP Lite interface (covered in Chapter 4)

Types of Inventory

Manufacturing businesses hold several categories of inventory, each with different characteristics and tracking needs.

Raw Materials

These are the inputs you purchase from vendors and consume in production. Examples include MS (mild steel) plates, MS round bars, aluminum ingots, copper wire, rubber sheets, and chemical compounds. Raw materials represent the starting point of your manufacturing process and are typically the largest category of inventory by value.

Work-in-Progress (WIP)

WIP consists of items that have entered production but are not yet complete. A steel plate that has been cut and drilled but not yet painted or assembled is WIP. Tracking WIP accurately is critical for understanding production costs and identifying bottlenecks.

Semi-Finished Goods

These are intermediate products that have completed some production stages and may be stocked before further processing. In Udyamo ERP Lite, these are tracked using the semi_finished item type. For example, a machined shaft that will later be assembled into a gearbox is a semi-finished good.

Finished Goods

Products that have completed all production stages and are ready for sale or dispatch. A fully assembled hydraulic press, a set of precision bearings, or a batch of CNC-machined flanges — these are your finished goods.

Consumables

Items used in operations but not directly part of the finished product. Examples: lubricant oil for machines, cutting tools, welding electrodes, safety gloves, packaging boxes, and cable ties. Consumables are easy to overlook but can represent significant expenditure over time.

MRO (Maintenance, Repair & Operations)

A subset of consumables specifically tied to equipment maintenance — spare belts for conveyors, replacement filters, greasing materials, and electrical fuses. Some businesses track MRO separately; others group them with consumables.

Why Inventory Management Matters

Poor inventory management silently erodes profitability. Here is how:

Cash Tied Up in Stock

Every rupee sitting in your warehouse as excess stock is a rupee not available for operations, vendor payments, or growth investment. Indian SMBs frequently carry 20–40% more inventory than needed simply because they lack visibility into what they have and what they actually need.

Stockouts and Production Delays

When a critical raw material runs out, production stops. If you discover the shortage of M10 bolts only when the assembly line needs them, you face either expensive emergency procurement or idle labour and machines. A single day of production downtime can cost a small manufacturer lakhs in lost output.

Overstocking and Obsolescence

Buying in bulk to get vendor discounts sounds prudent — until the material specification changes, demand shifts, or the stock degrades. Steel can rust if stored improperly. Rubber compounds have shelf life. Electronic components become obsolete. Excess stock is not an asset; it is a liability disguised as one.

Inaccurate Costing

If you do not know exactly how much raw material went into a product, you cannot accurately cost it. This means your pricing may be based on guesswork, and you may be selling products at a loss without knowing it.

Key Inventory Concepts

SKU (Stock Keeping Unit)

An SKU is a unique identifier for each distinct item you track. In Udyamo ERP Lite, this corresponds to the Item Code field. A well-structured SKU system — for example, RM-STL-MS-PLT-6MM for a 6mm MS plate — makes searching, reporting, and auditing dramatically easier.

Stock-Keeping and Perpetual Inventory

There are two broad approaches to tracking stock:

• Periodic inventory — You count stock at intervals (weekly, monthly) and update records. The gap between counts is a blind spot.
• Perpetual inventory — Every purchase, sale, production, and transfer updates stock in real time. Udyamo ERP Lite uses perpetual inventory through its Stock Ledger, giving you an accurate running balance at all times.

Valuation Methods

How do you value stock when the same item was purchased at different prices over time?

• FIFO (First In, First Out) — Oldest stock is assumed to be consumed first. Common and generally recommended.
• LIFO (Last In, First Out) — Newest stock is assumed consumed first. Less common in India.
• Weighted Average — Each receipt recalculates the average cost. Simple and widely used by Indian SMBs.

Batch Tracking

When you receive MS rods from a vendor, each lot may have a different heat number, grade certificate, or quality test result. Batch tracking lets you trace every unit of stock back to its origin — essential for quality issues, recalls, and warranty claims. Udyamo ERP Lite supports batch tracking through the batch_number field on stock ledger entries.

Reorder Point and Safety Stock

The reorder point is the stock level at which you should place a new purchase order. Safety stock is the buffer you maintain to absorb variability in demand or supplier lead time. Together, they prevent stockouts without excessive overstocking.

Reorder Point = (Average Daily Usage x Lead Time in Days) + Safety Stock

Lead Time

The number of days between placing a purchase order and receiving the goods. A vendor in the same city may deliver in 2 days; imported specialty steel may take 45 days. Lead time directly affects how early you must reorder.

Inventory Costs

Inventory costs extend far beyond the purchase price of materials.

For most Indian manufacturers, carrying cost alone runs 15–25% of inventory value per year. Reducing excess stock by even 10% can free up significant working capital.

How ERP Transforms Inventory Management

Without ERP, inventory management relies on stock registers, Excel sheets, and periodic physical counts. The problems are predictable: data entry errors, stale information, no location-level visibility, and no automatic alerts.

With Udyamo ERP Lite, inventory management becomes real-time and integrated:

• Automatic stock updates — Purchases, sales, production, and transfers update stock instantly through the Stock Ledger
• Location-level tracking — Know exactly how much stock is at each warehouse, shop floor, or distribution center
• Batch and expiry tracking — Trace every item back to its source; get warnings before stock expires
• Reorder alerts — The system notifies you when stock falls below the reorder level
• Integrated costing — Stock values flow directly into accounting, ensuring accurate product costing and financial reports
• GST-ready — Every item carries its HSN code and GST rate, so tax calculations are automatic on every transaction

The chapters that follow will walk you through setting up and using each of these capabilities. You will start by creating your item catalog, then define units and locations, and finally learn to read and act on stock movements and alerts.

Tips & Best Practices

Tip: Before you start entering items into the ERP, spend time designing your item code structure. A consistent naming convention (e.g., category-subcategory-specification) saves enormous time in searching and reporting later.

Tip: Conduct a physical stock count before going live with the ERP. Opening balances entered during setup must match reality, or every subsequent report will be unreliable.

Warning: Do not try to track every nut, bolt, and washer individually if the cost is trivial. Focus tracking effort on items that represent significant value or are critical to production. Low-value consumables can be tracked in bulk.

Quick Reference

Items — Raw Materials, Finished Goods & More

The Item master is the central catalog of everything your business buys, makes, stocks, and sells. Every transaction in Udyamo ERP Lite — purchase orders, production orders, invoices, stock movements — references an item from this catalog. A well-structured item master is the foundation of reliable inventory, accurate costing, and compliant GST filing.

This chapter covers how to create and manage items in Udyamo ERP Lite, including the different item types, HSN and GST configuration, specifications, and stock tracking options.

What You Will Learn

• The concept of an item master and why it matters
• The five item types supported in Udyamo ERP Lite
• How to assign HSN codes and GST rates for Indian tax compliance
• How to configure units of measurement, specifications, and tracking options
• Step-by-step instructions for creating items of each type
• Field reference for the Item form

Prerequisites

• Udyamo ERP Lite is set up with your organization details (Chapter 5)
• At least one Unit of Measurement exists in the system (Chapter 8 covers creating units — you may set up basic units first)
• You have Owner or Admin role access

The Item Master Concept

Think of the item master as your business's product and material dictionary. Every distinct thing you deal with gets a single entry here. When a purchase officer creates a purchase order for "MS Plate 6mm", they select it from the item master. When the production team consumes that plate, the same item record is referenced. When the accountant reviews stock valuation, the same item and its transactions appear.

This single-source-of-truth approach eliminates a common problem in manual systems: the same material being recorded as "MS Plate 6mm", "Mild Steel Plate 6 mm", and "M.S. Plate 6MM" in different registers, making consolidation impossible.

Item Types

Udyamo ERP Lite classifies items into five types. Choosing the correct type is important because it affects how the item appears in transactions and reports.

Tip: Use the service type for items that do not involve physical stock. Services are not tracked in the stock ledger, so the Track Stock option is typically disabled for them.

HSN Code and GST Rate

Every item in Udyamo ERP Lite carries an HSN Code (Harmonized System of Nomenclature) and a GST Rate. These fields are critical for Indian tax compliance.

HSN Code

The HSN code is a standardized numerical code that classifies goods for GST purposes. The code determines the applicable GST rate and is mandatory on invoices for businesses with turnover above the prescribed threshold.

Examples of common HSN codes in manufacturing:

Warning: HSN codes and GST rates are set by the government and may change. Always verify the current rate on the CBIC (Central Board of Indirect Taxes and Customs) website or consult your tax advisor before setting up items.

GST Rate

Enter the GST rate as a percentage. Common rates are 5%, 12%, 18%, and 28%. For items with 0% GST (exempted or nil-rated), enter 0. The GST rate you set on the item is used as the default when creating invoices and bills, ensuring consistent tax calculation.

Unit of Measurement

Each item is linked to a Unit — the standard measure in which you buy, stock, and sell that item. You select from the units you have already created in the system (see Chapter 8).

Common assignments:

Tip: Choose the unit that matches your primary procurement and consumption pattern. If you buy steel by the kilogram and consume it by the kilogram, use kg. If you buy bearings individually, use pcs.

Specifications (JSONB)

The Specifications field stores structured attribute data in JSON format. This is useful for recording technical details that vary between items but follow a consistent pattern within a category.

Example specifications for a bearing:

{
  "bore_diameter_mm": 25,
  "outer_diameter_mm": 52,
  "width_mm": 15,
  "type": "deep_groove_ball",
  "brand": "SKF",
  "load_rating_kn": 14.8
}

Example specifications for an MS plate:

{
  "thickness_mm": 6,
  "grade": "IS 2062 E250",
  "width_mm": 1250,
  "length_mm": 2500,
  "surface": "hot_rolled"
}

Specifications make it easy to filter and compare items without encoding every detail into the item name or code.

Stock Tracking and Expiry Tracking

Track Stock

When Track Stock is enabled (the default for physical items), every purchase, sale, production, and transfer updates the stock ledger and running balance for this item. Disable this only for services or items you intentionally do not want to track at the stock level.

Track Expiry

Enable Track Expiry for items that have a shelf life — chemicals, adhesives, rubber compounds, paints, and certain lubricants. When enabled, you can record the expiry date on each stock ledger entry, and the system can alert you to approaching expirations.

Reorder Level and Max Stock Level

• Reorder Level — The stock quantity at which the system generates a low-stock alert. Set this based on your average consumption and vendor lead time (see Chapter 11 for details).
• Max Stock Level — The upper bound for stock. Useful for items with storage constraints or shelf-life limitations.

Step-by-Step: Creating Items

Creating a Raw Material

1. Navigate to Inventory > Items
2. Click Add New
3. Fill in the fields:
   • Item Name: MS Plate 6mm
   • Item Code: RM-STL-MS-PLT-6MM
   • Item Type: Raw Material
   • HSN Code: 7208
   • GST Rate: 18
   • Unit: kg
   • Description: Mild steel hot-rolled plate, 6mm thickness, IS 2062 E250 grade
   • Specifications: {"thickness_mm": 6, "grade": "IS 2062 E250", "surface": "hot_rolled"}
   • Reorder Level: 500
   • Max Stock Level: 5000
   • Track Stock: Enabled
   • Track Expiry: Disabled
   • Active: Enabled
4. Click Save

Creating a Finished Good

1. Navigate to Inventory > Items
2. Click Add New
3. Fill in the fields:
   • Item Name: Hydraulic Cylinder HC-50
   • Item Code: FG-HYD-CYL-HC50
   • Item Type: Finished Good
   • HSN Code: 8412
   • GST Rate: 18
   • Unit: pcs
   • Description: 50-ton hydraulic cylinder, double-acting, 150mm bore
   • Specifications: {"bore_mm": 150, "stroke_mm": 300, "capacity_ton": 50, "type": "double_acting"}
   • Reorder Level: 5
   • Max Stock Level: 50
   • Track Stock: Enabled
   • Track Expiry: Disabled
4. Click Save

Creating a Consumable

1. Navigate to Inventory > Items
2. Click Add New
3. Fill in the fields:
   • Item Name: Hydraulic Oil ISO VG 68
   • Item Code: CON-OIL-HYD-VG68
   • Item Type: Consumable
   • HSN Code: 2710
   • GST Rate: 18
   • Unit: ltr
   • Description: Hydraulic oil, ISO VG 68 grade, for hydraulic press and cylinder testing
   • Reorder Level: 50
   • Max Stock Level: 500
   • Track Stock: Enabled
   • Track Expiry: Enabled
4. Click Save

Creating a Service Item

1. Navigate to Inventory > Items
2. Click Add New
3. Fill in the fields:
   • Item Name: CNC Machining Charges
   • Item Code: SVC-MCH-CNC
   • Item Type: Service
   • HSN Code: 9988
   • GST Rate: 18
   • Unit: hrs
   • Description: CNC machining service charges for job work
   • Track Stock: Disabled
   • Track Expiry: Disabled
4. Click Save

Tip: Service items do not appear in stock reports. Use them for service-based line items on invoices and bills.

Tips & Best Practices

Tip: Design a consistent item code structure before you start entering items. A common pattern is: [TYPE]-[CATEGORY]-[SUBCATEGORY]-[SPECIFICATION]. For example: RM-STL-MS-ROD-12MM (raw material, steel, mild steel, rod, 12mm).

Tip: If you are migrating from a legacy system or spreadsheets, prepare a clean spreadsheet with all item data first. Map each column to the corresponding Udyamo field. This avoids errors and omissions during data entry.

Warning: Do not create duplicate items for the same physical material. If the same MS plate is purchased from two different vendors, it is still one item. Vendor-specific details belong on the purchase order, not the item master.

Tip: Start with your most frequently transacted items — typically 50 to 100 items will cover 80% of your transactions. You can always add more items later. Do not let the quest for a complete catalog delay your ERP go-live.

Tip: Use the Active toggle to retire items you no longer deal in, rather than deleting them. Deactivated items are excluded from selection dropdowns but remain visible in historical transactions.

Quick Reference — Item Fields

Units of Measurement

Units of measurement are the language of inventory. When you say you have "500" of an item in stock, the obvious question is: 500 what? Kilograms? Pieces? Litres? Metres? Without a standardized unit system, inventory records become ambiguous, purchase orders lead to disputes, and production planning falls apart.

In Udyamo ERP Lite, every item is linked to a unit. This chapter explains how to set up and manage units of measurement for your manufacturing business.

What You Will Learn

• Why standardized units of measurement matter in manufacturing ERP
• Common units used in Indian manufacturing
• The concept of base units
• How to create and manage units in Udyamo ERP Lite
• Practical considerations for unit selection

Prerequisites

• Udyamo ERP Lite is set up with your organization details (Chapter 5)
• You have Owner or Admin role access

Why Standardized Units Matter

Consider a simple scenario: your purchase team orders "100 MS rods" from a vendor. The vendor ships 100 kilograms of MS rods. The purchase team expected 100 pieces. The discrepancy causes delays, incorrect billing, and frustration on both sides.

This is not a hypothetical example. Unit mismatches are among the most common sources of error in manufacturing operations. A robust ERP system enforces a single, unambiguous unit for every item, and that unit is used consistently across all transactions — purchases, production, sales, and stock records.

Standardized units also enable:

• Accurate stock valuation — You cannot calculate the value of stock if the quantity is ambiguous
• Reliable consumption tracking — Production must consume materials in the same units they are stocked
• Consistent reporting — Inventory reports, purchase summaries, and sales analytics all depend on comparable units
• GST compliance — Invoices and e-way bills require quantity in a recognized unit

Common Units in Manufacturing

The following table lists units frequently used by Indian manufacturing businesses:

Tip: You do not need to create every possible unit upfront. Start with the units you will use immediately — typically 8 to 12 units cover most manufacturing needs. You can always add more later.

Base Units

In Udyamo ERP Lite, each unit has a Base Unit flag (boolean). A base unit is one of the fundamental measurement types in your system. For example, kg might be your base unit for weight, ltr for volume, and pcs for count.

Marking a unit as a base unit serves as a reference point. When you have multiple units in the same measurement family (kg and g, ltr and ml), the base unit flag identifies the primary unit. This distinction is useful for future unit conversion features and reporting.

Tip: For most manufacturing businesses, marking kg, ltr, mtr, pcs, and sq.m as base units is a sensible starting point.

Step-by-Step: Creating Units

Creating a Base Unit (Kilogram)

1. Navigate to Inventory > Units
2. Click Add New
3. Fill in the fields:
   • Name: Kilogram
   • Abbreviation: kg
   • Base Unit: Enabled
4. Click Save

Creating Additional Units

Repeat the process for each unit your business needs. Here is a recommended initial set:

Required: You must create at least one unit before you can create items (Chapter 7). If you are setting up the system for the first time, create your units first.

Unit Selection Guidelines

Choosing the right unit for each item requires thought. Consider the following:

Match Your Procurement Unit

If you purchase MS rods by the kilogram, set the unit to kg. If you purchase bearings by the piece, set the unit to pcs. The item's unit should match the most common unit used in purchase transactions.

Match Your Consumption Unit

If production consumes steel in kilograms, the unit should be kg. If the production team draws 5 pieces of a component per assembly, the unit should be pcs. Ideally, procurement and consumption use the same unit.

When Procurement and Consumption Units Differ

Occasionally, you may buy in one unit and consume in another — for example, purchasing paint in litres but consuming it in millilitres, or buying wire in rolls but consuming it in metres. In such cases, choose the unit that is most practical for day-to-day operations. If you consume in ml but buy in ltr, consider whether tracking in ltr at a higher level is sufficient, or if ml-level precision is genuinely needed.

Avoid Ambiguity

"Piece" and "Number" are often used interchangeably. Choose one convention and stick with it. If your business uses "nos" on all invoices, make that your standard count unit. Consistency prevents confusion.

Tips & Best Practices

Tip: Create all your units before entering items. This avoids the interruption of having to create units mid-way through item setup.

Tip: Keep abbreviations short and consistent. Use lowercase abbreviations (kg, ltr, pcs) as they are easier to read in tables and reports.

Warning: Once a unit is assigned to items and transactions exist, changing the unit on an item can cause inconsistencies. Choose units carefully during initial setup. If a correction is needed later, it is better to create a new item with the correct unit and retire the old one.

Tip: If your business exports goods, check whether your units align with international standards. The metric system (kg, ltr, mtr) is universally understood. Non-standard units like "bundle" or "box" may need clarification on export documentation.

Quick Reference — Unit Fields

Warehouses & Locations

A manufacturing business rarely stores everything in one place. Raw materials may arrive at a central receiving warehouse. Semi-finished parts move to the shop floor for further processing. Finished goods are stored in a separate dispatch warehouse or a distribution center closer to customers. Some businesses maintain multiple sites across different cities.

Udyamo ERP Lite tracks inventory at the location level. Every stock movement — whether a purchase receipt, production output, transfer, or sale — is recorded against a specific location. This gives you precise visibility into what is where, at all times.

What You Will Learn

• The concept of locations and why location-level inventory tracking matters
• The three location types in Udyamo ERP Lite
• Hierarchical locations using parent-child relationships
• Location-based access control through user assignments
• Step-by-step instructions for creating warehouses, shop floors, and distribution centers

Prerequisites

• Udyamo ERP Lite is set up with your organization details (Chapter 5)
• You have Owner or Admin role access

Why Location-Level Tracking Matters

Without location tracking, your stock records show a single aggregate number for each item. You might know you have 2,000 kg of MS plates in total, but not how much is in the main warehouse versus on the shop floor versus at a branch in another city.

This leads to problems:

• Blind transfers — Materials are moved between locations without a record, and stock counts at each location diverge from reality
• Misplaced stock — An item shows as available, but nobody can find it because it was moved without updating records
• Inaccurate dispatch planning — The dispatch team at one warehouse sees total stock across all locations and commits to deliveries they cannot fulfil locally
• Security gaps — Without location-level control, any user can view or transact stock at any location, even if they should only manage their own site

Udyamo ERP Lite solves these problems by making Location a required dimension on every stock ledger entry.

Location Types

Udyamo ERP Lite supports three types of locations, each representing a different function in your operations.

Warehouse

A storage facility for incoming materials, finished goods, or both. Warehouses are the most common location type. A typical manufacturing business has at least one raw material warehouse and one finished goods warehouse.

Examples:

• Main Warehouse (for raw materials)
• Finished Goods Warehouse
• Spare Parts Store
• Packing Material Store

Shop Floor

The production area where manufacturing happens. Tracking stock on the shop floor lets you see how much material has been issued to production and what is available for further operations.

Examples:

• Machine Shop Floor
• Assembly Line — Bay 1
• Welding Section
• Paint Shop

Distribution Center

A facility focused on outbound logistics — storing finished goods for dispatch to customers or regional distribution. Distribution centers are typically separate from the manufacturing plant.

Examples:

• Mumbai Distribution Center
• Delhi Regional Warehouse
• Pune Dispatch Hub

Hierarchical Locations

Udyamo ERP Lite supports hierarchical locations through the parent_id field. This lets you model complex facility structures where locations contain sub-locations.

Example hierarchy:

Pune Factory (Warehouse)
├── Raw Material Store (Warehouse)
│   ├── Steel Section (Warehouse)
│   └── Electrical Section (Warehouse)
├── Production Block A (Shop Floor)
│   ├── CNC Section (Shop Floor)
│   └── Assembly Section (Shop Floor)
└── Finished Goods Store (Warehouse)

When you create a sub-location, you select its Parent Location from the existing locations. This creates the hierarchy.

Tip: Start with a flat structure (no hierarchy) if your business has a single manufacturing site with a few distinct areas. Introduce hierarchy only when you genuinely need to track stock at finer granularity. Overcomplicating the location structure adds unnecessary data entry overhead.

Location-Based Access Control

Udyamo ERP Lite restricts stock visibility and transaction capability by location through user-location assignments. This means:

• A warehouse manager at the Mumbai distribution center sees only the stock at that location
• A shop floor supervisor at Assembly Line Bay 1 can issue and receive materials only at that location
• The plant head or owner can be assigned to all locations for a complete view

This is configured through the User Location Assignments feature, which links users to the locations they operate. Access control is covered in detail in Chapter 48, but it is important to plan your location structure with access control in mind from the start.

Tip: When setting up locations, list which users or roles need access to each one. This planning step ensures that user-location assignments are complete and correct when you begin transacting.

Address Fields

Each location has address fields to capture its physical location:

These fields are useful for logistics planning, e-way bill generation (which requires dispatch and delivery addresses), and general recordkeeping.

Step-by-Step: Creating Locations

Creating a Warehouse

1. Navigate to Inventory > Locations
2. Click Add New
3. Fill in the fields:
   • Name: Main Raw Material Warehouse
   • Location Type: Warehouse
   • Parent Location: (leave blank — this is a top-level location)
   • Address: Plot 47, MIDC Industrial Area, Phase II
   • City: Pune
   • State: Maharashtra
   • Pincode: 411026
   • Active: Enabled
4. Click Save

Creating a Shop Floor

1. Navigate to Inventory > Locations
2. Click Add New
3. Fill in the fields:
   • Name: Machine Shop Floor
   • Location Type: Shop Floor
   • Parent Location: (leave blank, or select the parent factory location if using hierarchy)
   • Address: Plot 47, MIDC Industrial Area, Phase II
   • City: Pune
   • State: Maharashtra
   • Pincode: 411026
   • Active: Enabled
4. Click Save

Creating a Distribution Center

1. Navigate to Inventory > Locations
2. Click Add New
3. Fill in the fields:
   • Name: Mumbai Distribution Center
   • Location Type: Distribution Center
   • Parent Location: (leave blank)
   • Address: Unit 12, Bhiwandi Warehouse Complex
   • City: Mumbai
   • State: Maharashtra
   • Pincode: 421302
   • Active: Enabled
4. Click Save

Creating a Sub-Location (Hierarchical)

1. Navigate to Inventory > Locations
2. Click Add New
3. Fill in the fields:
   • Name: Steel Section
   • Location Type: Warehouse
   • Parent Location: Main Raw Material Warehouse
   • Address: (inherits from parent — fill if different)
   • City: Pune
   • State: Maharashtra
   • Pincode: 411026
   • Active: Enabled
4. Click Save

The Steel Section now appears as a child of the Main Raw Material Warehouse.

Planning Your Location Structure

Before creating locations in the system, consider these questions:

1. How many physical sites does your business have? Each site typically becomes a top-level location.
2. Within each site, how many distinct storage and production areas need separate stock tracking? Each becomes a location or sub-location.
3. Do different teams manage different areas? If yes, separate locations enable access control.
4. Will stock be transferred between areas? Every transfer between locations creates a stock ledger entry, so you need both source and destination locations defined.
5. Do you need dispatch/delivery addresses for e-way bills? Each location with a unique address should be a separate location.

A practical starting configuration for a single-site manufacturer:

A multi-site manufacturer might use:

Tips & Best Practices

Tip: Keep location names descriptive but concise. "Main Warehouse" is better than "Warehouse 1" (which tells you nothing) or "Central Raw Material Receiving and Storage Warehouse Block A" (which is too long for dropdown menus and reports).

Warning: Do not create too many locations at the start. Every location adds a dimension to your stock tracking, and every stock movement must specify a location. If you create 20 sub-locations but your team only realistically tracks stock at 5 points, you will have inaccurate records at the granular level. Start with the minimum number of locations that reflect your actual operations, and expand as needed.

Tip: Deactivate locations you no longer use by setting Active to disabled. Deactivated locations are excluded from selection dropdowns in new transactions but remain visible in historical data.

Tip: If your business has a single small workshop with no meaningful separation between storage and production, a single location (e.g., "Workshop") is perfectly acceptable. Do not force hierarchy where none exists.

Quick Reference — Location Fields

Stock Ledger & Stock Movements

The stock ledger is the heart of inventory management in Udyamo ERP Lite. It is a perpetual, transaction-level record of every stock movement — every purchase that adds stock, every sale that reduces it, every production run that transforms raw materials into finished goods, every transfer that moves items between locations, and every adjustment that corrects discrepancies.

If the item master (Chapter 7) is your catalog of what you track, and locations (Chapter 9) define where you track it, the stock ledger records how much of each item is at each location and why it changed.

What You Will Learn

• The concept of a stock ledger and perpetual inventory
• The six transaction types that create stock movements
• How each transaction type affects stock quantities
• Running balance calculation
• Batch tracking and expiry date recording
• Reference linking — tracing stock movements back to their source transactions
• How to view and interpret the stock ledger

Prerequisites

• Items are created in the system (Chapter 7)
• Locations are created in the system (Chapter 9)
• You have access to at least one location via user-location assignment

What is a Stock Ledger?

A stock ledger is a chronological record of all quantity changes for every item at every location. Each row in the ledger — called a Stock Ledger Entry — represents a single stock movement. Together, these entries provide a complete audit trail of your inventory from the moment you enter opening balances through every subsequent transaction.

Unlike a periodic system where you count stock at intervals and hope the numbers are right, a perpetual stock ledger updates in real time. When a purchase is received, stock goes up immediately. When an invoice is raised, stock goes down immediately. You never need to wonder what the current stock position is — the ledger tells you.

Transaction Types

Every stock ledger entry has a transaction_type that describes why the stock changed. Udyamo ERP Lite supports six transaction types.

Opening

Opening entries record the stock you had when you started using the system. These are typically entered once during initial setup, representing the physical stock counted before go-live.

Example: You count 2,500 kg of MS Plate 6mm in the Main Warehouse during setup. You create an opening entry for 2,500 kg at that location.

Purchase

Purchase entries are created when you receive goods against a purchase order or record a vendor bill. Each purchase receipt adds stock at the receiving location.

Example: You receive 1,000 kg of MS Round Bar 12mm from a vendor at the Main Warehouse. A purchase entry of +1,000 kg is recorded.

Sale

Sale entries are created when you raise a sales invoice and dispatch goods. Each sale reduces stock at the dispatch location.

Example: You invoice and dispatch 50 pcs of Hydraulic Cylinder HC-50 from the Finished Goods Store. A sale entry of -50 pcs is recorded.

Production

Production creates two types of stock movements:

• Consumption — Raw materials and semi-finished goods are consumed (stock decreases)
• Output — Finished goods or semi-finished goods are produced (stock increases)

In the stock ledger, production entries can appear as positive (for output) or negative (for consumption), depending on how the production order processes material issues and finished good receipts.

Example: A production order for 20 pcs of Hydraulic Cylinder HC-50 consumes 600 kg of MS Plate 6mm (outward) and produces 20 pcs of HC-50 (inward).

Transfer

Transfer entries move stock from one location to another. Each transfer creates two ledger entries: a negative entry at the source location and a positive entry at the destination location. The total stock across all locations remains unchanged.

Example: You transfer 200 kg of MS Plate 6mm from the Main Warehouse to the Machine Shop Floor. The warehouse balance drops by 200 kg; the shop floor balance increases by 200 kg.

Adjustment

Adjustment entries correct discrepancies found during physical stock counts or handle exceptional events like damage, theft, or write-offs. Adjustments can increase or decrease stock.

Example: During a physical count, you find 480 kg of MS Plate 6mm on the shop floor, but the system shows 500 kg. You create a negative adjustment of 20 kg with a note explaining the discrepancy (e.g., "Wastage during cutting — not recorded on production orders").

Warning: Adjustments should be used sparingly and always with explanatory notes. Frequent adjustments indicate a process problem — material movements are not being recorded correctly. Investigate and fix the root cause rather than relying on adjustments to correct chronic discrepancies.

Transaction Type Summary

Running Balance

Every stock ledger entry includes a running_balance field. This is the cumulative stock quantity for that item at that location after the current entry is applied.

Example sequence for MS Plate 6mm at Main Warehouse:

The running balance at any point tells you the exact stock available. This is the number shown in stock reports and used for reorder level comparisons.

Tip: If the running balance ever shows a negative number, it means stock was dispatched or consumed without sufficient quantity being available. This indicates a process issue — either a receipt was not recorded or a dispatch happened before goods were received. Investigate immediately.

Batch Tracking

The batch_number field on each stock ledger entry lets you trace stock back to a specific lot or consignment. This is essential for:

• Quality traceability — If a customer reports a defect, you can identify which batch was used and check other products made from the same batch
• Vendor accountability — You can trace a defective batch back to the specific vendor delivery
• Regulatory compliance — Some industries require batch-level traceability

Example: You receive MS Round Bar from two different heats:

When this material is consumed in production, the batch number is carried forward, allowing you to trace which heat number went into which finished product.

Tip: Not every item needs batch tracking. Use it for items where traceability matters — metals with heat/lot numbers, chemicals with batch certificates, items subject to quality recalls. For generic consumables like cable ties or packaging tape, batch tracking adds overhead without meaningful benefit.

Expiry Date Tracking

For items with Track Expiry enabled (set on the item master), each stock ledger entry can include an expiry_date. This is critical for:

• Chemicals and adhesives — Epoxy resins, sealants, and paints degrade over time
• Lubricants — Hydraulic oils and greases have shelf life specifications
• Rubber compounds — Natural and synthetic rubber compounds lose properties over time
• Paints and coatings — Shelf life typically 12 to 24 months

The expiry date, combined with batch tracking, lets you implement FIFO (First Expiry, First Out) practices — consuming the oldest stock first to minimize waste.

Example:

When consuming this oil, you should draw from LOT-HO-2024-03 first, as it expires earlier.

Reference Linking

Every stock ledger entry includes reference_type and reference_id fields that link it back to the source document that caused the movement. This creates a complete audit trail.

When you view a stock ledger entry, you can click through to the reference document to see the full details of the transaction — who initiated it, what was the total value, which vendor or customer was involved, and what approvals were obtained.

Tip: Reference linking is one of the most powerful features of ERP-based inventory management. When a discrepancy arises, you do not need to hunt through paper files. Every stock movement is linked to its source, creating a clear chain of evidence.

Viewing the Stock Ledger

Stock Ledger Report

To view the stock ledger for a specific item:

1. Navigate to Inventory > Items
2. Select the item you want to inspect (e.g., MS Plate 6mm)
3. View the Stock Ledger tab or section on the item detail page

The report shows all stock ledger entries for that item, typically with these columns:

Filtering the Stock Ledger

You can filter the stock ledger by:

• Location — See movements only at a specific warehouse or shop floor
• Date range — Focus on a specific period (e.g., current month)
• Transaction type — View only purchases, or only adjustments

Current Stock Summary

For a quick snapshot of current stock across all locations:

1. Navigate to Inventory > Items
2. The item list or item detail page shows the current stock quantity — the latest running balance aggregated across locations

To see a location-wise breakdown, look for the location-level stock summary on the item detail page.

Understanding Stock Movements

Reading the stock ledger effectively is a skill. Here are common patterns to watch for:

Healthy Pattern

Regular purchases followed by production consumption, with the running balance staying between the reorder level and max stock level. Transfers move stock smoothly from warehouse to shop floor. Adjustments are rare.

Warning Signs

• Running balance frequently near zero or negative — You are cutting it too close. Increase reorder levels.
• Large, infrequent purchases followed by long gaps — You may be over-ordering and tying up cash. Consider smaller, more frequent orders.
• Frequent adjustments — Material movements are not being recorded properly. Retrain staff on the process.
• Stock at one location but needed at another — Transfer planning needs improvement. Review transfer lead times.

Tips & Best Practices

Tip: Review the stock ledger for your top 20 items (by value or transaction frequency) weekly during the first month of ERP usage. This helps you catch process gaps early — missing entries, incorrect quantities, or wrong locations.

Warning: Never manually edit stock ledger entries to "fix" numbers. If there is an error, create a proper adjustment entry with notes explaining the correction. Manual edits break the audit trail and can cause accounting discrepancies.

Tip: Use the Notes field on adjustment entries generously. Six months from now, "Adjustment -20 kg" tells you nothing. "Adjustment -20 kg — wastage from cutting scrap not captured on production order PO-2024-0089, identified during physical count on 20-Apr" tells you exactly what happened and why.

Tip: Conduct periodic physical stock counts (at least quarterly) and reconcile with the system's running balance. Discrepancies should be resolved through adjustment entries. Over time, as your team consistently records every movement, the gap between physical and system stock will shrink.

Quick Reference — Stock Ledger Entry Fields

Low Stock Alerts & Reorder Levels

Running out of a critical raw material at the wrong moment is one of the most expensive mistakes in manufacturing. A missing batch of M10 bolts can halt an entire assembly line. A shortage of hydraulic oil can delay machine testing. A stockout of packaging material can prevent dispatch of finished goods that are ready to ship.

Reorder levels and low stock alerts are your early warning system. Configured correctly, they give you enough lead time to replenish stock before a shortage disrupts production.

What You Will Learn

• The concept of reorder levels and how they prevent stockouts
• How to calculate reorder points using consumption data and lead times
• The role of safety stock as a buffer
• Max stock level and its use in preventing overstocking
• How to configure reorder levels per item in Udyamo ERP Lite
• How low stock alerts work in the system
• Best practices for setting levels across different item categories

Prerequisites

• Items are created with stock tracking enabled (Chapter 7)
• You have a basic understanding of the stock ledger (Chapter 10)
• You know your approximate consumption rates and vendor lead times

The Reorder Level Concept

The reorder level (also called the reorder point) is the stock quantity at which you should initiate a new purchase order. When the running balance of an item at any location drops to or below the reorder level, the system flags it as a low-stock item.

The goal is simple: order early enough that new stock arrives before the existing stock runs out, but not so early that you accumulate unnecessary inventory.

A Practical Example

Your manufacturing line consumes approximately 100 kg of MS Plate 6mm per day. Your primary vendor takes 7 days to deliver after you place an order. If you wait until stock reaches zero to order, you face 7 days of production downtime.

Instead, you set the reorder level at a point that accounts for the lead time:

Reorder Level = Average Daily Consumption x Lead Time in Days

Reorder Level = 100 kg/day x 7 days = 700 kg

When stock drops to 700 kg, the system alerts you. You place the order. Seven days later, the new stock arrives just as the old stock is about to run out.

Safety Stock

The basic reorder formula assumes that both consumption and lead time are perfectly predictable. In reality, they are not:

• A large order from a customer may spike your consumption of raw materials
• A vendor may deliver 2 days late due to transport issues
• A quality rejection may render part of a delivery unusable

Safety stock is the buffer that absorbs this variability. It is the extra quantity you keep above the bare minimum to protect against unexpected demand or supply delays.

Reorder Level (with safety stock) = (Average Daily Consumption x Lead Time) + Safety Stock

Continuing the example:

• Average daily consumption: 100 kg
• Lead time: 7 days
• Safety stock: 200 kg (approximately 2 days of extra buffer)

Reorder Level = (100 x 7) + 200 = 900 kg

With this configuration, even if the vendor is 2 days late or consumption spikes temporarily, you have enough buffer to avoid a stockout.

How Much Safety Stock?

There is no single formula that works for every item. Consider these factors:

Tip: A common starting point is to set safety stock equal to 1 to 3 days of average consumption for most items, and higher (5 to 7 days) for critical items with unreliable supply. Refine these numbers over time as you gather actual consumption and lead time data from the ERP.

Max Stock Level

The max stock level is the upper limit for stock of an item. It serves as a guideline to prevent over-ordering.

Max stock level is useful in the following situations:

• Storage constraints — Your warehouse can only hold 5,000 kg of a particular item
• Shelf life — An item expires in 6 months, so ordering more than 3 months of consumption is wasteful
• Cash management — You do not want more than a certain rupee value tied up in any single item
• Hazardous materials — Regulatory limits on how much of certain chemicals you can store

Example:

When the max stock level is configured, it provides a reference point for purchase planning. The ideal reorder quantity (also known as the economic order quantity) roughly fills the gap between the current stock and the max stock level.

The Reorder Point Formula

Putting it all together:

Reorder Point = (Average Daily Usage x Lead Time in Days) + Safety Stock

Reorder Quantity = Max Stock Level - Reorder Point

Complete example for Bearing 6205:

When stock of Bearing 6205 drops to 200 pcs, the system alerts you. You place an order for approximately 800 pcs. When the order arrives, stock is replenished close to the max level.

Configuring Reorder Levels in Udyamo ERP Lite

Reorder levels are set on the Item master. To configure them:

1. Navigate to Inventory > Items
2. Select the item (e.g., MS Plate 6mm)
3. Click Edit
4. Set the following fields:
   • Reorder Level: 900 (the quantity at which a low-stock alert is triggered)
   • Max Stock Level: 5000 (the upper stock limit)
5. Click Save

Required: The item must have Track Stock enabled for reorder levels to be meaningful. Items with stock tracking disabled (such as service items) do not participate in stock alerts.

Repeat this process for each item that needs reorder monitoring. Focus on items that are:

• Critical to production (raw materials for your main products)
• Expensive (where stockouts or overstocking have significant financial impact)
• Long lead time (where you need early warning to order in time)

Low Stock Alerts and Dashboard

When the running balance of an item at any location drops to or below the reorder level, Udyamo ERP Lite flags it as a low-stock item.

How Alerts Work

The system compares the current running balance (from the stock ledger) against the reorder level set on the item. When the balance meets or falls below the threshold:

• The item appears on the Low Stock dashboard or alert list
• The alert includes the item name, current stock, reorder level, and the location(s) affected

Viewing Low Stock Items

1. Navigate to Inventory > Items or the Dashboard
2. Look for the low-stock indicator or filter for items below reorder level
3. Review the list and initiate purchase orders for the flagged items

The low stock view typically shows:

Tip: Make it a daily practice — ideally first thing in the morning — for your purchase team to review the low stock dashboard. This simple habit prevents most stockout situations.

Best Practices for Setting Reorder Levels

Categorize Items by Criticality

Not all items deserve the same attention. Use a simple ABC classification:

Account for Seasonal Demand

If your business has seasonal patterns — for example, higher demand for agricultural machinery before the planting season — adjust reorder levels seasonally. A static reorder level that works in a slow quarter may be dangerously low in a peak quarter.

Factor in Vendor Reliability

If a vendor has a history of late deliveries, increase the lead time assumption in your reorder calculation. It is better to carry a little extra stock than to shut down production because you trusted an optimistic lead time.

Review and Adjust Quarterly

Reorder levels are not set-and-forget. Review them at least quarterly using actual data from the ERP:

• Has your average daily consumption changed?
• Has the vendor's lead time improved or worsened?
• Have you experienced any stockouts since the last review?
• Are you carrying excess stock that is tying up cash unnecessarily?

Udyamo ERP Lite's stock ledger provides the data you need to answer these questions. Calculate the actual average daily consumption from the last 90 days and compare it against your current reorder level assumptions.

Long Lead Time Items Need Special Attention

Items that take 30 to 60 days to procure — imported specialty steel, custom castings from distant foundries, or specialized electronic components — require careful planning. For these items:

• Set reorder levels generously (include ample safety stock)
• Monitor stock levels more frequently
• Maintain relationships with multiple suppliers if possible
• Consider keeping a strategic reserve beyond the calculated safety stock

Tips & Best Practices

Tip: Start with conservative (higher) reorder levels during the first three months of ERP usage. As you build confidence in the system and gather actual consumption data, you can fine-tune levels downward to reduce carrying costs.

Warning: Setting a reorder level of zero effectively disables the alert for that item. If you intentionally do not want alerts for an item, leave the reorder level blank or at zero. But do not set it to zero by accident for a critical material.

Tip: For items with multiple vendor options, your safety stock can be lower because you can source from an alternate vendor if the primary one delays. For single-source items, increase safety stock — you have no fallback.

Tip: Align your reorder quantities with vendor minimum order quantities and pricing tiers. If a vendor offers a price break at 1,000 kg, and your calculated reorder quantity is 900 kg, it may be cost-effective to order the full 1,000 kg — provided it does not exceed your max stock level or storage capacity.

Warning: Do not ignore low stock alerts because they happen too frequently. If alerts are firing constantly for many items, it means either your reorder levels are set too high (causing false alarms) or your procurement process is too slow. Fix the root cause: adjust levels or speed up ordering.

Quick Reference

Introduction to Manufacturing in ERP

Manufacturing is the heart of any production business. It is where raw materials are transformed into finished goods that generate revenue. Yet in many Indian SMBs, the manufacturing function operates in a silo — production schedules live in the supervisor's notebook, material consumption is tracked on paper registers, and quality records are filed away in cabinets never to be seen again.

An ERP system brings manufacturing into the same integrated environment as inventory, accounting, sales, and purchasing. When a production order consumes raw materials, the stock ledger updates in real time. When finished goods are produced, the cost is calculated automatically from the bill of materials. When a quality inspection fails, the rejection is recorded and linked to the production batch.

This chapter introduces the core manufacturing concepts that Udyamo ERP Lite implements, and explains how they connect to form a complete manufacturing workflow.

What You Will Learn

• What Material Requirements Planning (MRP) means and how ERP implements it
• The difference between production planning and production scheduling
• How work-in-progress (WIP) tracking works in an ERP context
• The end-to-end manufacturing workflow in Udyamo ERP Lite
• How manufacturing connects to inventory, accounting, sales, and purchasing modules
• The Indian MSME manufacturing context and why ERP matters for it

Prerequisites

• Familiarity with basic ERP concepts (see Chapter 1 — What is ERP and Why SMBs Need It)
• Understanding of inventory management fundamentals (see Chapter 6 — What is Inventory Management?)
• Items, units, and locations should be set up in the system (see Chapters 7-9)

Material Requirements Planning (MRP)

Material Requirements Planning is the calculation engine at the core of manufacturing ERP. MRP answers three fundamental questions:

1. What materials are needed to produce the required finished goods?
2. How much of each material is needed, accounting for current stock and scrap?
3. When must each material be available on the shop floor?

MRP works backward from demand. If a customer orders 500 MS flanges to be delivered on 15 March, and each flange requires 2.5 kg of MS plate, 4 bolts, and 1 gasket, the system calculates total material requirements, checks existing stock, and identifies shortfalls that need to be procured. If MS plate has a lead time of 7 days, the system knows the purchase order must be placed by 6 March at the latest.

In Udyamo ERP Lite, the building blocks of MRP are:

• Bill of Materials (BOM) — defines what components go into a finished product and in what quantities
• Production Orders — specify what to produce, how much, and when
• Material Issues — record the actual handover of materials from the warehouse to the production floor
• Stock Ledger — provides real-time visibility into available stock for MRP calculations

Production Planning vs. Scheduling

These terms are often used interchangeably, but they refer to different levels of decision-making:

Udyamo ERP Lite focuses on production planning through production orders with planned start and end dates. Detailed shop floor scheduling at the machine and operation level is beyond the scope of ERP Lite — most Indian SMBs with 20 to 200 employees manage scheduling through their production supervisor's daily coordination, with the ERP providing the planning framework.

Capacity Planning Basics

Capacity planning ensures that your factory can actually produce what the production plan calls for. There is no point planning 1,000 units per week if your machines and workforce can only handle 600.

Capacity planning operates at two levels:

• Rough-cut capacity planning — a high-level check at the planning stage. Does the factory have enough total machine hours and labour hours to meet the production plan for the month?
• Detailed capacity planning — a granular check at the scheduling stage. Is Machine A available on Tuesday afternoon for the cutting operation?

For most Indian MSMEs, rough-cut capacity planning is sufficient. The production manager knows the factory's approximate weekly capacity from experience. The ERP system helps by providing visibility into the volume and status of open production orders, so the manager can see whether the factory is overloaded or underutilized.

Work-in-Progress (WIP) Tracking

Work-in-progress represents materials that have been issued to production but have not yet been converted into finished goods. WIP is both a physical reality on the shop floor and an accounting concept on the balance sheet.

In Udyamo ERP Lite, WIP tracking works through the interplay of three records:

1. Material Issue — when raw materials leave the warehouse and enter the production floor, a material issue records the transfer. Stock is deducted from the warehouse location.
2. Production Order (In Progress) — while the production order is in the "in_progress" status, the materials are considered work-in-progress.
3. Production Completion — when the production order is marked as completed, the finished goods are received into stock. The WIP is resolved.

Shop Floor Control

Shop floor control is the process of monitoring and managing what actually happens during production. It bridges the gap between the production plan (what should happen) and production reality (what actually happens).

In an ERP context, shop floor control includes:

• Tracking production order status — is the order planned, in progress, on hold, or completed?
• Recording actual dates — when did production actually start and end, versus the planned dates?
• Managing exceptions — putting a production order on hold when a machine breaks down, then resuming it after repair
• Material consumption — tracking what materials were actually consumed versus what was planned
• Quality checks — inspecting production output during and after the manufacturing process

How Manufacturing Connects to Other Modules

The true power of ERP lies in integration. Manufacturing does not operate in isolation — it touches every other module in the system.

The Manufacturing Workflow in Udyamo ERP Lite

The end-to-end manufacturing workflow follows five stages:

1. Plan — Create a Bill of Materials (BOM) that defines the components and quantities needed to produce a finished good. Create a Production Order that specifies what to produce, how much, and when.

2. Issue Materials — Create a Material Issue to formally transfer raw materials from the warehouse to the production floor. This deducts stock from the source location and creates an audit trail.

3. Produce — Start the production order. The status changes from "planned" to "in_progress". Track actual start and end dates. Handle exceptions by putting orders on hold and resuming them.

4. Inspect — Create Quality Inspections at any stage — incoming (raw materials), in-process (during production), or final (before dispatch). Record pass/fail results, severity levels, and corrective actions.

5. Receive into Stock — Complete the production order. Finished goods are added to inventory at the designated location.

For outsourced manufacturing, the workflow includes two additional elements:

Job Work Orders — send materials to an external contractor for processing. Track what was sent, when it is expected back, and what was actually received.

Job Work Receipts — record the return of processed goods from the contractor, including accepted and rejected quantities.

Manufacturing in the Indian MSME Context

India's MSME manufacturing sector has unique characteristics that shape how ERP should work:

Job work is pervasive. Many Indian manufacturers outsource specific processes — heat treatment, surface finishing, electroplating, machining — to specialized contractors. The GST framework includes specific provisions for job work under Section 143 of the CGST Act, requiring careful tracking of materials sent and received.

Batch production is common. Rather than continuous production lines, most Indian MSMEs run batch production — producing a quantity of one product, then switching to another. Production orders in Udyamo ERP Lite are designed for this batch-oriented workflow.

Quality awareness is growing. With increasing participation in automotive, aerospace, and export supply chains, Indian MSMEs are adopting formal quality management practices. ERP-integrated quality inspections replace paper-based quality registers and enable traceability from raw material to finished product.

Regulatory compliance drives adoption. GST has been a significant driver of ERP adoption among Indian MSMEs. The requirement to file accurate returns with detailed transaction data has pushed businesses away from manual record-keeping toward integrated systems.

Tips & Best Practices

Tip: Before diving into individual manufacturing features, map out your complete production process on paper — from raw material receipt to finished goods dispatch. Identify which steps happen in-house and which are outsourced. This map will guide your ERP configuration.

Tip: Start with a simple, single-level BOM for your highest-volume product. Get the full workflow working — BOM, production order, material issue, completion — before adding complexity with multi-level BOMs or job work.

Warning: Do not skip the material issue step, even if it feels like unnecessary paperwork. Without formal material issues, your stock records will drift from reality, your production costing will be inaccurate, and you will lose visibility into material consumption and waste.

Quick Reference

Bill of Materials (BOM)

A Bill of Materials is the foundation of manufacturing in any ERP system. It is the recipe, the formula, the blueprint — the structured list of every component, raw material, and sub-assembly required to produce a finished good, along with the exact quantity of each. Without an accurate BOM, production planning is guesswork, material procurement is reactive, and cost estimation is unreliable.

In Udyamo ERP Lite, the BOM is the starting point for production orders, material requirements calculations, and production costing. This chapter covers the concept in depth and walks through creating a BOM step by step.

What You Will Learn

• What a Bill of Materials is and why it matters for manufacturing
• BOM structure: parent item, components, quantities, and units
• How scrap percentage accounts for material waste
• The role of optional items in a BOM
• Multi-level BOM concepts
• BOM versioning and why it is necessary
• How BOM cost is calculated
• The BOM approval workflow: draft, approved, archived
• Step-by-step: creating a BOM for a steel flange in Udyamo ERP Lite

Prerequisites

Required: Before creating a BOM, ensure the following are set up in your system:

• All finished goods and raw material items exist in the Item Master (see Chapter 7)
• Units of measurement are configured (see Chapter 8)
• You understand the manufacturing workflow overview (see Chapter 12)

What is a Bill of Materials?

Think of a BOM as a recipe card in a commercial kitchen. A recipe for a particular dish lists every ingredient, the quantity of each, and sometimes notes about substitutions or preparation. A BOM does the same for a manufactured product.

Consider a steel fabrication shop that manufactures MS (Mild Steel) flanges. Each flange requires:

• 3.2 kg of MS Plate (10 mm thick)
• 8 pieces of Hex Bolts (M12 x 40 mm)
• 8 pieces of Hex Nuts (M12)
• 1 piece of Rubber Gasket (150 mm)
• 0.5 litres of Rust-Preventive Primer

The BOM captures this information in a structured format that the ERP system can use for planning, costing, and material issuance.

BOM Structure

Every BOM in Udyamo ERP Lite has two parts:

The Parent Item — the finished good that the BOM produces. This is the item that will be received into stock when the production order is completed. In our example, the parent item is "MS Flange — 150 mm PN16".

The Component Items (BOM Items) — the individual raw materials, consumables, or sub-assemblies that go into making the parent item. Each component line specifies:

Scrap Percentage

No manufacturing process is 100% efficient. When you cut a circular flange from a square plate, the material around the circle is wasted. When you apply primer, some is lost to overspray. Scrap percentage captures this expected waste.

If the BOM specifies 3.2 kg of MS Plate with a 5% scrap percentage, the actual material requirement for one flange is:

3.2 kg + (3.2 kg x 5%) = 3.2 + 0.16 = 3.36 kg

When the system calculates material requirements for a production order of 100 flanges, it will use 3.36 kg per unit (336 kg total) rather than 3.2 kg per unit (320 kg). This prevents material shortages on the shop floor.

Tip: Set scrap percentages based on actual production experience. Track your actual scrap rates over a few production runs before setting the BOM values. Overestimating scrap leads to excess inventory; underestimating leads to production stoppages.

Optional Items

Some components are not required for every unit produced. For example, a protective cap might only be added to flanges destined for export, or a special coating might only be applied when the customer specifies it.

Marking a BOM item as optional means it will appear in the BOM for reference and costing purposes, but the system will not flag it as a shortage if it is unavailable. When creating a material issue for a production order, the production supervisor can choose whether to include optional items based on the specific order requirements.

Multi-Level BOM Concept

In many manufacturing scenarios, a finished product contains sub-assemblies that are themselves manufactured from components. This creates a hierarchy:

MS Flange Assembly (Level 0 — Finished Good)
├── MS Flange Body (Level 1 — Sub-assembly)
│   ├── MS Plate 10 mm (Level 2 — Raw Material)
│   └── Rust-Preventive Primer (Level 2 — Consumable)
├── Bolt-Nut Set M12 (Level 1 — Sub-assembly)
│   ├── Hex Bolt M12 x 40 mm (Level 2 — Raw Material)
│   └── Hex Nut M12 (Level 2 — Raw Material)
└── Rubber Gasket 150 mm (Level 1 — Raw Material)

In a multi-level BOM, each sub-assembly has its own BOM. The top-level BOM references the sub-assembly as a component, and the system can "explode" the BOM to calculate the total raw material requirements across all levels.

Udyamo ERP Lite supports single-level BOMs directly. For multi-level scenarios, you create separate BOMs for each sub-assembly and manage them through linked production orders.

BOM Versioning

Products evolve. An engineering change might replace one grade of steel with another. A cost reduction initiative might substitute a cheaper gasket material. A customer specification might require thicker plate for a high-pressure application.

BOM versioning tracks these changes over time:

Each BOM in Udyamo ERP Lite carries a version field. When you need to modify a BOM, you create a new version rather than editing the approved one. This preserves the historical record — you can always trace back to see which BOM version was used for a specific production order.

BOM Cost Calculation

The total cost of a BOM is calculated as the sum of component costs, adjusted for scrap:

Total BOM Cost = Sum of (Quantity x (1 + Scrap%) x Cost Per Unit) for each component

For our MS Flange example:

This total cost is stored in the BOM's total_cost field and serves as the basis for production costing and pricing decisions.

Warning: BOM cost is only as accurate as the component costs you enter. Review and update component costs periodically, especially for materials with volatile prices like steel, copper, and polymers. Outdated costs lead to incorrect margins and pricing errors.

BOM Approval Workflow

BOMs go through a three-stage lifecycle:

Draft — the BOM is being created or modified. It can be freely edited. Draft BOMs cannot be used to create production orders.

Approved — the BOM has been reviewed and approved for production use. Only approved BOMs can be linked to production orders. Edits are restricted to prevent unauthorized changes to active production recipes.

Archived — the BOM is no longer in active use but is retained for historical reference. Archived BOMs cannot be used for new production orders, but existing production orders that reference them remain intact.

This workflow ensures that production always uses a vetted, approved recipe, and that changes go through a review process rather than being made ad hoc on the shop floor.

Step by Step: Creating a BOM for a Steel Flange

Step 1: Navigate to the BOM list.

Go to Manufacturing > Bill of Materials. You will see a list of existing BOMs (if any). Click New BOM to create a new one.

Step 2: Fill in the BOM header.

Step 3: Add component items.

In the BOM Items section, click Add Item to add each component:

Component 1: MS Plate

• Item: MS Plate 10 mm
• Quantity: 3.2
• Unit: Kg
• Scrap Percentage: 5
• Optional: No
• Cost Per Unit: 72.00
• Notes: Cut to 200 mm x 200 mm blanks

Component 2: Hex Bolts

• Item: Hex Bolt M12 x 40 mm
• Quantity: 8
• Unit: Pcs
• Scrap Percentage: 0
• Optional: No
• Cost Per Unit: 5.50

Component 3: Hex Nuts

• Item: Hex Nut M12
• Quantity: 8
• Unit: Pcs
• Scrap Percentage: 0
• Optional: No
• Cost Per Unit: 2.50

Component 4: Rubber Gasket

• Item: Rubber Gasket 150 mm
• Quantity: 1
• Unit: Pcs
• Scrap Percentage: 0
• Optional: No
• Cost Per Unit: 35.00

Component 5: Primer

• Item: Rust-Preventive Primer
• Quantity: 0.5
• Unit: Litre
• Scrap Percentage: 10
• Optional: No
• Cost Per Unit: 120.00
• Notes: Apply two coats after machining

Step 4: Review the total cost.

The system calculates the total BOM cost as the sum of all component line costs. Verify that the total (406.92 in this example) is consistent with your expected production cost per unit.

Step 5: Save the BOM.

Click Save to save the BOM in draft status. Review all fields and component lines carefully.

Step 6: Approve the BOM.

Once you are satisfied that the BOM is accurate, change the status to Approved. The BOM is now available for use in production orders.

Warning: Once a BOM is approved, modifications should be made by creating a new version rather than editing the approved BOM directly. This preserves the audit trail and ensures production orders reference the correct version.

Tips & Best Practices

Tip: Use consistent naming conventions for your BOMs. Include the product name, variant, and a brief descriptor. For example: "MS Flange 150mm PN16 — Standard" vs "MS Flange 150mm PN16 — Export Grade". This makes it easy to find the right BOM when creating production orders.

Tip: Review BOM costs quarterly, or whenever you negotiate new rates with suppliers. Material prices change — especially for steel, which can fluctuate significantly in the Indian market. Keeping BOM costs current ensures your quotations and pricing reflect actual production costs.

Tip: For products with many variants (different sizes, materials, or finishes), create a base BOM first and then create variant BOMs by adjusting the relevant components. This is faster and less error-prone than building each BOM from scratch.

Warning: Never approve a BOM without verifying quantities against actual production experience. A theoretical BOM based on engineering drawings may differ from what the shop floor actually consumes. Run a small production batch first and adjust quantities and scrap percentages based on real data.

Quick Reference

BOM Item Fields

Production Orders — Planning to Completion

A Bill of Materials defines how to make a product. A Production Order defines what to make, how much, and when. It is the formal instruction to the shop floor to manufacture a specific quantity of a finished good using a specific BOM, within a planned timeframe.

Production orders are the central record for tracking manufacturing activity in Udyamo ERP Lite. They link the BOM to actual production, drive material issues, and provide the basis for production costing and performance analysis. Every unit of finished goods that enters your inventory should trace back to a production order.

What You Will Learn

• What a production order is and when to create one
• The production order lifecycle: planned, in progress, on hold, completed, cancelled
• Priority levels and how to use them
• Planned vs. actual dates and what the gap tells you
• Location assignment for production output
• Step-by-step: creating a production order, starting production, handling holds, and completing the order
• How production numbers are auto-generated

Prerequisites

Required: Before creating a production order, ensure the following:

• At least one BOM exists in Approved status (see Chapter 13)
• The finished good item exists in the Item Master
• Warehouse locations are configured (see Chapter 9)

What is a Production Order?

A production order is an internal document that authorizes the shop floor to manufacture a specific quantity of a product. It answers four questions:

1. What are we making? (The finished good, linked to a BOM)
2. How many are we making? (The quantity)
3. When should production start and finish? (Planned dates)
4. Where will the finished goods be stored? (The output location)

In a steel fabrication shop, a production order might say: "Manufacture 200 units of MS Flange 150mm PN16 using BOM version 2, starting 10 March and finishing by 17 March, with output to the Finished Goods Warehouse."

Production Number

Every production order is assigned a unique production number that serves as its identifier throughout the system. Udyamo ERP Lite auto-generates production numbers in a sequential format. This number appears on material issues, quality inspections, and any other documents linked to the production order.

The Production Order Lifecycle

Production orders move through a defined set of statuses that reflect the real-world progression of manufacturing work:

Planned

The production order has been created but work has not started. At this stage, you can:

• Edit all fields (BOM, quantity, dates, location, priority)
• Review material requirements based on the linked BOM
• Create material issues to prepare raw materials
• Cancel the order if plans change

This is the planning phase. Use it to line up materials, verify capacity, and confirm the production schedule before committing shop floor resources.

In Progress

Production has started. The status changes to "in_progress" when you trigger the Start Production action. At this point:

• The actual start date is recorded automatically
• Material should have been issued to the production floor (via material issues)
• The order is now visible as active work on the shop floor
• Editing is restricted to prevent changes to an active production run

On Hold

Production has been temporarily paused. Common reasons for putting an order on hold:

• Machine breakdown requiring repair
• Quality issue discovered during in-process inspection
• Material shortage mid-production
• Priority change — a more urgent order needs the same resources

The Hold Production action pauses the order. The order remains in the system with all its data intact, waiting to be resumed.

Completed

Production is finished. The Complete Production action:

• Records the actual end date
• Signals that finished goods are ready to be received into inventory
• Closes the production order against further material issues
• Provides the basis for calculating actual vs. planned performance

Cancelled

The production order has been abandoned. The Cancel Production action is used when:

• The customer cancels the underlying sales order
• The product is discontinued
• The order was created in error

Cancelled orders are retained in the system for audit purposes but cannot be reactivated. Any materials already issued should be handled through the material return process.

Status Transition Summary

Warning: Completing a production order is a significant action. Once completed, the order cannot be reopened. Verify that the actual quantity produced is correct and that quality inspections (if required) have been performed before marking the order as complete.

Priority Levels

Not all production orders are equally urgent. Udyamo ERP Lite supports four priority levels:

Priority is an organizational tool. It does not automatically reschedule other orders — that remains the production supervisor's decision. However, filtering and sorting production orders by priority helps the supervisor make informed scheduling decisions.

Tip: Reserve the "urgent" priority for genuine emergencies. If everything is urgent, nothing is urgent. Most production orders should be "medium" priority, with "high" used selectively for time-sensitive work.

Planned vs. Actual Dates

Each production order tracks four dates:

The gap between planned and actual dates is a key performance indicator. Consistently late completions may indicate:

• Unrealistic planning (planned durations are too short)
• Capacity constraints (too many orders competing for the same resources)
• Material availability issues (production waiting for raw materials)
• Quality problems (rework extending production time)

Review planned vs. actual dates regularly to calibrate your planning and identify systemic issues.

Location Assignment

The location field on a production order specifies where the finished goods will be received into stock upon completion. This is typically a finished goods warehouse or a specific storage area within your facility.

Choosing the correct location matters because:

• Stock levels at that location will increase when the order is completed
• Downstream processes (packing, dispatch) will look for finished goods at this location
• Stock valuation reports will reflect the production output at this location

Step by Step: Creating and Managing a Production Order

Creating a Production Order

Step 1: Navigate to production orders.

Go to Manufacturing > Production Orders. Click New Production Order.

Step 2: Fill in the production order details.

Step 3: Save the production order.

Click Save. The system assigns a production number (e.g., PO-2026-0042) and sets the status to Planned.

Starting Production

Step 4: Ensure materials are available.

Before starting production, verify that raw materials have been issued to the production floor. Create a Material Issue if you have not already done so (see Chapter 15).

Step 5: Start the production order.

Click the Start Production button. The system:

• Changes the status to In Progress
• Records the actual start date as today's date
• The production order now appears as active work

Handling a Production Hold

Step 6 (if needed): Put the order on hold.

If production needs to pause — for example, the cutting machine requires maintenance — click Hold Production. Enter a note explaining the reason (e.g., "CNC cutting machine — bearing replacement, expected 2-day downtime").

The status changes to On Hold. The order remains in the system, preserving all data.

Step 7 (when ready): Resume production.

Once the issue is resolved, click Resume Production. The status returns to In Progress.

Completing Production

Step 8: Complete the production order.

When all 200 flanges have been manufactured and passed quality inspection, click Complete Production. The system:

• Changes the status to Completed
• Records the actual end date
• The finished goods (200 units of MS Flange 150mm PN16) are available at the Finished Goods Warehouse

Tip: Before completing the order, verify the produced quantity against the planned quantity. If you produced fewer units due to rejections, note this in the production order notes for future analysis.

Cancelling a Production Order

If a production order is no longer needed (e.g., the customer cancelled their order), click Cancel Production from the planned or on-hold status. Enter a note explaining the reason for cancellation.

Warning: If materials have already been issued to a cancelled production order, you will need to create a material return to move those materials back to the warehouse. Otherwise, your stock records will show materials as consumed when they were not.

Tips & Best Practices

Tip: Use the notes field liberally. Record the sales order number, customer name, any special instructions from the customer, and any deviations from the standard process. These notes become invaluable when reviewing production history months later.

Tip: Create production orders at least 2-3 days before the planned start date. This gives time to check material availability, create material issues, and resolve any shortages before the shop floor is ready to begin.

Tip: Review open production orders at the start of every day with your production supervisor. Filter by priority (urgent and high first) and by planned start date. This daily review is the simplest form of production scheduling and prevents orders from falling through the cracks.

Warning: Avoid creating production orders without linking them to an approved BOM. While the system allows you to select items directly, linking to a BOM ensures consistent material requirements, accurate costing, and a clear audit trail.

Quick Reference

Production Order Actions

Material Issues — Issuing Stock to Production

When a production order is ready to begin, raw materials must move from the warehouse to the production floor. In many Indian factories, this happens informally — the supervisor walks into the store, picks up what is needed, and production begins. There is no record of what was taken, when, or how much.

A Material Issue is the formal, documented transfer of raw materials from a warehouse location to the production floor. It creates a precise record of what was issued, in what quantity, from which location, and against which production order. This seemingly simple document is the link between your inventory records and your production costs.

What You Will Learn

• Why formal material issues matter for stock accuracy and cost control
• The material issue document structure: header and line items
• Linking material issues to production orders
• Source location selection and its impact on stock
• Batch number tracking for traceability
• The material issue lifecycle: draft, issued, returned
• Step-by-step: creating a material issue for a production order

Prerequisites

Required: Before creating a material issue, ensure:

• A production order exists in Planned or In Progress status (see Chapter 14)
• Raw materials are available in the source warehouse location
• Items and units are configured in the system

Why Track Material Issues?

Skipping the material issue step is the most common shortcut in SMB manufacturing — and the most costly in the long run. Here is what you lose without formal material issues:

Stock accuracy degrades. If you do not record material withdrawals from the warehouse, your stock ledger will show quantities that do not match physical reality. The system says you have 500 kg of MS Plate; the warehouse actually has 320 kg because 180 kg was taken to the shop floor without documentation. Now every stock report, reorder alert, and material planning calculation is wrong.

Production costing becomes impossible. If you do not know exactly what materials were consumed for a production order, you cannot calculate the true cost of the finished goods. Are your flanges costing 400 per unit or 450? Without material issue records, you are guessing.

Waste and pilferage go undetected. When there is no formal record of material issuance, there is no way to compare issued quantity against produced quantity. If 340 kg of steel was issued and only 280 kg worth of flanges were produced, where did the remaining 60 kg go? Was it scrap? Rework? Pilferage? Without the material issue record, you will never know.

Audit trail breaks. For cost accounting, tax assessments, and inventory audits, you need a clear trail from raw material receipt to production consumption to finished goods output. Material issues provide this trail.

Tip: Even if your factory is small and the storekeeper is also the production supervisor, create material issues in the system. It takes 2-3 minutes and saves hours of reconciliation later.

Material Issue Structure

A material issue has two sections:

Header

The header contains information about the overall issue transaction:

Line Items (Material Issue Items)

Each line represents a specific material being issued:

Linking to Production Orders

Every material issue should be linked to a production order. This linkage serves several purposes:

• Material planning — you can see at a glance what materials have been issued against a production order and what remains to be issued
• Cost allocation — the cost of issued materials is attributed to the production order, enabling accurate per-unit costing
• Traceability — from the finished product, you can trace back to the exact materials (including batch numbers) that went into making it

When you select a production order on the material issue, the system knows which BOM is being used and can help you determine the required quantities.

Source Location Selection

The Location (From) field specifies which warehouse or storage area the materials are being withdrawn from. This is important because:

• The system deducts stock from this specific location
• If you have multiple warehouses or storage areas, you need to issue from the location that actually holds the materials
• Different locations may hold different batches of the same material

For example, a factory might have a main raw material store and a smaller buffer stock area near the production floor. If the buffer stock has enough MS Plate for the immediate requirement, issue from there. If not, issue from the main store.

Warning: Always issue from the location where the materials are physically stored. Issuing from the wrong location will create mismatches between the system and physical stock counts, leading to confusion during stock audits.

Batch Number Tracking

For materials where traceability is important — steel with mill test certificates, chemicals with expiry dates, food ingredients with lot numbers — the batch number field on each material issue line provides traceability.

When you issue MS Plate from Batch-2026-MS-047, and that batch later turns out to have a quality issue, you can trace:

1. Which material issues used that batch
2. Which production orders received materials from those issues
3. Which finished goods were produced from those orders

This traceability chain is essential for quality recalls, customer complaints, and regulatory compliance in industries like food processing, pharmaceuticals, and automotive components.

Material Issue Lifecycle

Material issues move through three statuses:

Draft

The material issue has been created but materials have not yet been physically handed over. At this stage:

• All fields can be edited
• No stock movement has occurred
• The issue serves as a "picking list" for the storekeeper

Use the draft status to prepare material issues in advance. The production planner can create the draft based on the BOM requirements, and the storekeeper can review it, check physical availability, and make adjustments before confirming.

Issued

The materials have been physically handed over to the production floor. When the status changes to Issued:

• Stock is deducted from the source location
• The stock ledger records the material movement
• The quantities become part of Work-in-Progress

This is the point of no return for stock deduction. Verify quantities carefully before confirming the issue.

Returned

If materials are returned from the production floor to the warehouse — due to production cancellation, excess issue, or quality rejection — the status changes to Returned:

• Stock is added back to the source location
• The stock ledger records the return movement
• The production order's material consumption is adjusted

Tip: Partial returns are common. If you issued 672 kg of MS Plate but only used 650 kg, create a return for the 22 kg excess. This keeps your stock records accurate and your production costing honest.

Step by Step: Creating a Material Issue

Step 1: Navigate to material issues.

Go to Manufacturing > Material Issues. Click New Material Issue.

Step 2: Fill in the header.

Step 3: Add material issue items.

Based on the BOM for 200 flanges (with scrap percentages applied):

Line 1: MS Plate

• Item: MS Plate 10 mm
• Quantity: 672 (3.36 kg per unit x 200 units)
• Unit: Kg
• Batch Number: BATCH-2026-MS-047
• Notes: Mill test certificate available

Line 2: Hex Bolts

• Item: Hex Bolt M12 x 40 mm
• Quantity: 1,600 (8 per unit x 200 units)
• Unit: Pcs
• Batch Number: (leave blank — standard hardware)

Line 3: Hex Nuts

• Item: Hex Nut M12
• Quantity: 1,600 (8 per unit x 200 units)
• Unit: Pcs

Line 4: Rubber Gaskets

• Item: Rubber Gasket 150 mm
• Quantity: 200 (1 per unit x 200 units)
• Unit: Pcs

Line 5: Primer

• Item: Rust-Preventive Primer
• Quantity: 110 (0.55 L per unit x 200 units)
• Unit: Litre
• Batch Number: PRM-2026-012
• Notes: Check expiry date before issuing

Step 4: Save as draft.

Click Save. The material issue is saved in Draft status. No stock movement has occurred yet. This is your chance to review the quantities and have the storekeeper verify physical availability.

Step 5: Confirm the issue.

Once the storekeeper has physically prepared the materials and handed them over to the production team, change the status to Issued. The system deducts the quantities from the Raw Material Store location and records the stock movement in the ledger.

Warning: Do not confirm the issue until the materials have been physically handed over. If the storekeeper discovers that only 600 kg of MS Plate is available (instead of the required 672 kg), adjust the quantity before confirming and plan a supplementary issue for the balance.

Step 6 (if needed): Handle returns.

If production is completed and 15 kg of MS Plate remains unused on the shop floor, create a return. Change the status to Returned for the excess quantity, and the stock will be added back to the Raw Material Store.

Tips & Best Practices

Tip: Create material issues the day before production is scheduled to start. This gives the storekeeper time to pick, weigh, and stage the materials without holding up the production team.

Tip: Use batch numbers consistently, even if they are not legally required for your products. Batch traceability is a competitive advantage when dealing with large customers — automotive OEMs, for instance, increasingly require full material traceability from their suppliers.

Tip: Compare issued quantities against BOM quantities regularly. If you are consistently issuing 10-15% more than the BOM specifies, your scrap percentages need updating — or your process has a waste problem that needs attention.

Warning: Never issue materials in bulk for multiple production orders using a single material issue. Always create one material issue per production order. This enables accurate per-order costing and prevents attribution errors.

Quick Reference

Material Issue Header Fields

Material Issue Item Fields

Quality Inspections

Quality is not something you inspect into a product — it is something you build into the process. But inspections remain the formal mechanism by which a manufacturing business verifies that materials and products meet defined standards. In an ERP system, quality inspections create a documented, traceable record of every quality check, its result, and any corrective action taken.

For Indian manufacturers supplying to automotive, aerospace, or export markets, formal quality records are not optional. Customers expect inspection reports, traceability data, and evidence of quality management. Even for businesses serving domestic markets, systematic quality tracking reduces defects, lowers rework costs, and builds customer confidence.

Udyamo ERP Lite provides a quality inspection module that integrates with production orders, purchase receipts, and other reference documents across the system.

What You Will Learn

• The three types of quality inspections: incoming, in-process, and final
• The inspection workflow: create, inspect, pass or fail
• How to record severity levels and corrective actions
• Linking inspections to production orders, purchase orders, and other references
• Step-by-step: creating and completing a quality inspection
• Building a quality culture through ERP-integrated inspections

Prerequisites

Required: Before creating quality inspections, ensure:

• Production orders or purchase orders exist in the system to link inspections to
• You understand the manufacturing workflow (see Chapter 12)
• Users who will perform inspections have appropriate system access

Why Quality Management in ERP?

In many Indian SMBs, quality management operates on paper — inspection sheets filled out by hand, filed in folders, and rarely reviewed after the fact. This approach has several problems:

No traceability. When a customer reports a defective batch, finding the relevant inspection records means digging through filing cabinets. If the inspector did not note the production order number, the trail goes cold.

No trend analysis. Paper records make it nearly impossible to identify patterns. Is rejection rate increasing? Are certain raw material suppliers causing more quality issues? Are specific production shifts producing more defects? You cannot answer these questions without structured, searchable data.

No accountability. Without formal inspection records in the system, it is difficult to establish who inspected what, when, and what they found. This makes it hard to enforce quality standards consistently.

No integration. Paper-based quality records are disconnected from production and procurement. A failed incoming inspection does not automatically flag the purchase order. A failed in-process inspection does not automatically put the production order on hold. The communication happens informally, and things fall through the cracks.

ERP-integrated quality inspections solve all of these problems by making quality data structured, searchable, traceable, and connected to the rest of the business.

Types of Quality Inspections

Udyamo ERP Lite supports three inspection types, corresponding to the three stages where quality checks typically occur in a manufacturing process:

Incoming Inspection

When: Raw materials or components are received from a vendor.

Purpose: Verify that purchased materials meet specifications before they enter the warehouse and are used in production.

Examples:

• A textile mill receives a consignment of yarn and checks the count, twist, and tensile strength against the purchase order specification
• A food processing unit receives raw spices and checks for moisture content, foreign matter, and microbiological contamination
• A steel fabrication shop receives MS plate and verifies the thickness, grade, and mill test certificate

Reference: Incoming inspections are typically linked to a purchase order or goods receipt note.

Tip: Establish standard inspection criteria for each raw material category. If you always check the same five parameters for MS plate, document them once and use them as a checklist for every incoming inspection. This ensures consistency across different inspectors and shifts.

In-Process Inspection

When: During the manufacturing process, at defined checkpoints.

Purpose: Catch defects early — before more value is added to the product. Reworking a partially machined flange is far cheaper than reworking a fully assembled and coated one.

Examples:

• After the cutting operation, check that flange blanks are within dimensional tolerance
• During mixing in a food processing unit, verify that the temperature and consistency meet the recipe specification
• After welding, perform a visual inspection and dimensional check before proceeding to surface treatment

Reference: In-process inspections are linked to the production order.

Final Inspection

When: After production is complete, before the finished goods are dispatched to the customer or received into finished goods inventory.

Purpose: Confirm that the finished product meets all customer and internal specifications. This is the last gate before the product leaves your control.

Examples:

• A completed MS flange is checked for dimensions, bolt hole alignment, surface finish, and coating thickness
• A batch of packaged food is checked for net weight, labelling accuracy, seal integrity, and appearance
• An auto component is checked against the customer's drawing and specification sheet, with measurements recorded on an inspection report

Reference: Final inspections are linked to the production order and may also reference the customer's sales order.

Inspection Workflow

Every quality inspection in Udyamo ERP Lite follows a three-stage workflow:

Stage 1: Create the Inspection

The quality inspector (or production supervisor) creates an inspection record, specifying:

• The type of inspection (incoming, in-process, or final)
• The reference document (production order, purchase order, etc.)
• The inspection date
• The inspector's name
• Any initial notes or observations

At this point, the inspection result is Pending — the inspection has been initiated but not yet completed.

Stage 2: Perform the Inspection

The inspector physically examines the material or product, performing the required checks. Measurements, observations, and any deviations from specification are noted.

Stage 3: Record the Result

The inspector records the outcome using one of two actions:

• Pass Inspection — the material or product meets all specified requirements
• Fail Inspection — the material or product does not meet one or more requirements

Result Tracking

Severity Levels

When an inspection fails, the severity field classifies how serious the defect is:

Severity classification drives the corrective action. Minor defects may be accepted with a concession note. Major defects typically require rework. Critical defects result in outright rejection.

Warning: Be honest and consistent in severity classification. Downgrading a major defect to minor in order to avoid rework might save time today but creates reliability problems and customer complaints tomorrow. Quality records are auditable — they should reflect reality.

Corrective Actions

The corrective_action field records what will be (or was) done to address a failed inspection. Common corrective actions include:

Always record the corrective action, even if the inspection passes. A pass with a note ("Dimensions within tolerance, but trending toward upper limit — monitor next batch") is more useful than a bare pass result.

Linking Inspections to Reference Documents

Every inspection in Udyamo ERP Lite is linked to a reference document through two fields:

• Reference Type — the type of document (e.g., Production Order, Purchase Order)
• Reference ID — the specific document identifier

This linkage means you can:

• View all inspections for a specific production order from the production order screen
• See the inspection history for materials received from a specific vendor
• Trace a customer complaint back through the final inspection, the production order, and the incoming material inspections

Step by Step: Creating and Completing an Inspection

Creating a Final Inspection for a Production Order

Step 1: Navigate to quality inspections.

Go to Manufacturing > Quality Inspections. Click New Quality Inspection.

Step 2: Fill in the inspection details.

Step 3: Save the inspection.

Click Save. The inspection is created with result Pending.

Step 4: Perform the physical inspection.

The inspector checks the sampled flanges against the specification:

• Outer diameter: 285 mm +/- 1 mm
• Bolt hole PCD: 240 mm +/- 0.5 mm
• Thickness: 22 mm +/- 0.5 mm
• Surface finish: No visible cracks, burrs, or coating defects
• Bolt holes: 8 x M12, evenly spaced

Step 5: Record the result.

If all units pass:

Click Pass Inspection. The result changes to Pass. Add notes: "All 20 sampled units within specification. Dimensions measured with vernier caliper and PCD gauge."

If units fail:

Click Fail Inspection. Then fill in:

Tip: When an inspection fails, do not just record the defect — record the corrective action and ensure it is followed through. An inspection failure without follow-up is worse than no inspection at all, because it creates a false sense of quality management.

Building a Quality Culture

Quality inspections in the ERP system are a tool, not a solution. The tool is only effective when it is part of a broader quality culture:

1. Inspect consistently. Define which production orders require inspections and at which stages. Do not inspect selectively based on who the customer is or how busy the shop floor is.

2. Act on failures. A quality inspection that fails but is followed by no corrective action is just paperwork. Ensure every failure triggers a defined response.

3. Review trends. Periodically review inspection data. Which products have the highest rejection rates? Which vendors supply materials that frequently fail incoming inspection? Which production shifts produce the most defects? The data is in the system — use it.

4. Close the loop. When a corrective action is taken (rework, process change, vendor feedback), document the outcome. Did the rework pass re-inspection? Did the process change reduce the defect rate? This closes the continuous improvement loop.

Tips & Best Practices

Tip: For production orders with large quantities, define a sampling plan. Inspecting every unit is impractical for most SMBs. A sampling plan (e.g., inspect 10% of the batch, minimum 5 units) balances thoroughness with practicality.

Tip: Record the inspector's name on every inspection. This enables accountability and also helps identify training needs — if one inspector's pass rate is significantly higher than others, they may be applying standards differently.

Tip: Use incoming inspections to build a vendor quality scorecard. Over time, you will have data on which vendors consistently supply conforming material and which do not. This data is powerful during vendor negotiations and selection.

Warning: Do not create backdated inspections to fill gaps in your quality records. If an inspection was not performed, it is better to acknowledge the gap than to create a fictitious record. False quality records undermine the entire system.

Quick Reference

Inspection Actions

Job Work — Outsourced Manufacturing

Not everything needs to be manufactured in-house. Indian SMBs routinely send materials to external contractors for specialized processes — heat treatment, electroplating, powder coating, CNC machining, embroidery, dyeing, or any operation that requires equipment the company does not own or capacity it does not have.

This practice is known as job work (also called subcontracting, outsourced processing, or contract manufacturing). It is deeply embedded in India's manufacturing ecosystem, where networks of small, specialized workshops serve larger manufacturers. The GST framework explicitly recognizes job work and provides specific provisions for it under Section 143 of the CGST Act.

Udyamo ERP Lite provides a Contractor management module to maintain your registry of external processors, and Job Work Orders to track the materials you send out and the processed goods you receive back. This chapter covers the contractor master and the concepts behind job work. The next chapter covers job work orders and receipts in detail.

What You Will Learn

• What job work is and why it is prevalent in Indian manufacturing
• Common reasons SMBs use job work
• GST implications of job work in India
• What a Contractor record is and how to manage it
• Active vs. inactive contractor status
• Step-by-step: adding a contractor to the system

Prerequisites

Required: Before setting up job work in the system:

• You should understand the manufacturing workflow (see Chapter 12)
• Items that will be sent for job work should exist in the Item Master
• You should have your contractors' GSTIN and contact details available

What is Job Work?

Job work is a manufacturing arrangement where a principal manufacturer sends raw materials or semi-finished goods to an external contractor (the "job worker") for a specific processing operation. The contractor processes the materials and returns the finished or semi-finished goods to the principal manufacturer.

The key characteristic of job work is that the ownership of the materials remains with the principal manufacturer. The contractor is performing a service (the processing operation) on the principal's materials, not buying and selling goods. This distinction has important implications for accounting, taxation, and inventory tracking.

A Practical Example

A steel fabrication shop manufactures MS flanges. The shop has cutting, drilling, and assembly capabilities in-house, but does not own a heat treatment furnace. The heat treatment step — which hardens the steel and relieves internal stresses — is outsourced to a nearby heat treatment contractor.

The workflow is:

1. The fabrication shop cuts and drills the flange blanks in-house
2. The blanks are sent to the heat treatment contractor
3. The contractor performs the heat treatment process
4. The treated flanges are returned to the fabrication shop
5. The shop performs final assembly, coating, and inspection

The materials (flange blanks) belong to the fabrication shop throughout the process. The contractor provides only the heat treatment service.

Why SMBs Use Job Work

Job work is not a stopgap — it is a strategic manufacturing decision. Indian SMBs use job work for several well-founded reasons:

Specialized equipment. Some processes require expensive, specialized machinery that a small manufacturer cannot justify purchasing. A CNC 5-axis machining centre costs crores. A powder coating plant requires significant capital and space. Job work provides access to these capabilities without the capital investment.

Capacity overflow. During peak demand periods, in-house capacity may not be sufficient. Rather than turning away orders or investing in capacity that will sit idle during lean periods, manufacturers send overflow work to contractors. This flexes capacity up without fixed cost increases.

Cost optimization. Contractors who specialize in a single process often achieve better economies of scale than a manufacturer doing the same process for a fraction of their volume. The unit cost of electroplating 500 parts at a dedicated electroplating shop may be lower than running a small in-house setup.

Focus on core competencies. By outsourcing non-core processes, a manufacturer can focus its capital, management attention, and shop floor space on the operations where it adds the most value.

Speed to market. When launching a new product, outsourcing some processes allows faster start-up than building all capabilities in-house.

GST Implications of Job Work in India

Job work has specific provisions under Indian GST law that manufacturers must understand and comply with:

Section 143 of the CGST Act

Section 143 allows a registered person (the principal manufacturer) to send inputs or capital goods to a job worker for processing without payment of GST at the time of sending. This is a significant provision — it means the outward movement of goods to a job worker is not treated as a supply, and no GST is charged.

However, there are conditions:

Practical Implications for ERP Tracking

These GST provisions make it essential to track:

• What was sent to the job worker (item, quantity, description)
• When it was sent (date — the 1-year clock starts ticking)
• What was received back (quantity, date)
• What is still outstanding at the job worker's premises

Udyamo ERP Lite's job work orders and receipts provide exactly this tracking, ensuring you have the data needed for GST compliance.

Warning: The 1-year time limit for inputs at the job worker's premises is a strict requirement. Set up reminders to track outstanding job work orders and follow up with contractors before the deadline approaches. Failure to comply converts the transaction into a supply, triggering GST liability with interest.

GST on Processing Charges

The job worker charges the principal for the processing service. This charge is subject to GST:

• The applicable rate depends on the nature of the processing service (typically 12% or 18%)
• The principal can claim Input Tax Credit (ITC) on the GST paid on processing charges
• The job worker must be registered under GST if their aggregate turnover exceeds the threshold

The Contractor Master

In Udyamo ERP Lite, a Contractor record represents an external job worker — the person or business that performs outsourced processing operations on your materials.

The contractor master is your registry of all external processors. Maintaining accurate contractor records enables:

• Quick selection when creating job work orders
• GST compliance (GSTIN is captured and validated)
• Performance tracking over time
• Communication management (contact details, address)

Contractor Fields

Active vs. Inactive Contractors

The active field controls whether a contractor appears in selection lists when creating new job work orders. The Toggle Active action lets you switch a contractor between active and inactive status.

When to deactivate a contractor:

• The contractor has shut down operations
• You have permanently stopped using the contractor due to quality or delivery issues
• The contractor's GST registration has been cancelled

Why not delete instead of deactivate? Historical records. If you delete a contractor, you lose the reference on all past job work orders. Deactivating preserves the history — you can still see past job work orders and their details — while preventing the contractor from being used in new transactions.

Tip: Periodically review your contractor list. Deactivate contractors you have not used in over a year. This keeps the selection list clean and relevant for users creating new job work orders.

Step by Step: Adding a Contractor

Step 1: Navigate to the contractor list.

Go to Manufacturing > Contractors. You will see a list of existing contractors. Click New Contractor.

Step 2: Fill in the contractor details.

For this example, we are adding a heat treatment contractor:

Step 3: Save the contractor.

Click Save. The contractor is now available for selection when creating job work orders.

Step 4 (if needed later): Deactivate the contractor.

If you stop using this contractor, navigate to the contractor record and click Toggle Active. The status changes from active to inactive. The contractor will no longer appear in selection lists for new job work orders.

Tips & Best Practices

Tip: Always capture the contractor's GSTIN. Even if the field is not mandatory in the system, the GSTIN is essential for GST-compliant documentation of job work transactions. Verify the GSTIN on the GST portal (gst.gov.in) before entering it.

Tip: Use the Contact Person field to record the person you actually coordinate with at the contractor's facility — this is often different from the proprietor whose name appears on the GST registration. Having the right contact name speeds up communication when following up on deliveries or quality issues.

Tip: Maintain a separate internal note (in the contractor record or in your own files) about each contractor's capabilities, typical lead times, and quality track record. This institutional knowledge helps when deciding which contractor to use for a specific job.

Warning: Do not create duplicate contractor records for the same business. If a contractor changes their address or contact person, update the existing record rather than creating a new one. Duplicates split your job work history and make it difficult to get a complete picture of your dealings with a contractor.

Quick Reference

Contractor Actions

Job Work Orders & Receipts

The previous chapter introduced the concept of job work and the contractor master. This chapter covers the operational side — creating job work orders to send materials to a contractor, and recording job work receipts when the processed goods come back.

A job work order is the formal document that authorizes the movement of your materials to an external contractor's facility for processing. The job work receipt records what was returned — how much was received, how much was acceptable, and how much was rejected. Together, these two records provide complete traceability of outsourced manufacturing activity.

What You Will Learn

• The job work order workflow: create, send, receive, close
• Job work order fields and their purpose
• Tracking sent vs. received quantities
• Recording job work receipts with accepted and rejected quantities
• How to handle quality issues on received goods
• Step-by-step: creating a job work order and recording a receipt
• Managing outstanding job work for GST compliance

Prerequisites

Required: Before creating job work orders:

• At least one contractor exists in Active status (see Chapter 17)
• Items to be sent for processing exist in the Item Master
• Warehouse locations are configured (see Chapter 9)
• You understand the GST implications of job work (see Chapter 17)

The Job Work Order Workflow

The complete job work cycle follows four stages:

Stage 1: Create the Order

The production planner creates a job work order specifying what items are being sent, to which contractor, in what quantity, and when the processed goods are expected back. This is the planning and documentation stage.

Stage 2: Send Materials

The materials are physically dispatched to the contractor's facility. The job work order serves as the basis for the delivery challan (the document accompanying the goods in transit). Stock is transferred out of your warehouse — the items are now at the contractor's premises but still belong to you.

Stage 3: Receive Processed Goods

When the contractor completes the processing and returns the goods, you create a job work receipt. The receipt records the received quantity, the date of receipt, and — critically — how many units were accepted and how many were rejected.

Stage 4: Close and Reconcile

Once all materials have been received back (or accounted for), the job work order can be closed. Any discrepancies between sent and received quantities are investigated and resolved.

Job Work Order Fields

Understanding Each Field

Contractor. Select from the list of active contractors. Only active contractors appear in the dropdown. If you need to use a contractor that has been deactivated, reactivate them first through the contractor master (see Chapter 17).

Item. The item being sent for job work. This could be a raw material (sending MS plate for cutting), a semi-finished good (sending machined flanges for heat treatment), or even a finished good (sending painted products for packaging). The item must exist in the item master.

Quantity. The number of units being sent. This is expressed in the item's default unit of measure.

Sent Date. The date the materials physically leave your premises. This date is important for GST compliance — the one-year clock for return of inputs starts from this date.

Expected Return Date. When you expect the contractor to complete the processing and return the goods. This date drives follow-up and planning. If you need the heat-treated flanges by 20 March to meet a customer delivery, set the expected return date to 18 March to allow time for receiving inspection.

Location. The warehouse location from which the materials are being dispatched. Stock at this location will be reduced when the materials are sent.

Notes. Use this field for processing instructions that the contractor needs. For example: "Heat treatment specification: Normalize at 920 degrees C, air cool. Hardness requirement: 180-220 BHN." These notes can be printed on the delivery challan.

Tracking Sent vs. Received Quantities

One of the most important functions of job work tracking is reconciling what you sent with what you received back. Discrepancies are common and have several causes:

The job work receipt mechanism handles all these scenarios by recording received quantity, accepted quantity, and rejected quantity separately.

Job Work Receipts

A job work receipt is the record of processed goods returning from the contractor. Each receipt captures:

The Relationship Between Quantities

The following rule must hold for every receipt:

Accepted Quantity + Rejected Quantity = Received Quantity

If you receive 195 pieces and 15 fail your incoming quality check:

• Received Quantity: 195
• Accepted Quantity: 180
• Rejected Quantity: 15

Multiple Receipts per Order

A single job work order can have multiple receipts. This is common when:

• The contractor delivers in batches (100 pieces this week, 100 next week)
• You reject pieces and the contractor reworks and returns them separately
• Some pieces require additional processing time

The system tracks the total received across all receipts against the original sent quantity, giving you visibility into what is still outstanding at the contractor's premises.

Quality Check on Received Goods

When processed goods return from a contractor, they should be inspected before being accepted into stock. This is effectively an incoming inspection (see Chapter 16) with the contractor as the "vendor."

The quality check should verify:

• Processing quality — did the contractor perform the specified process correctly? (e.g., is the hardness within the specified range after heat treatment?)
• Dimensional integrity — did the processing operation distort or damage the parts? (e.g., did heat treatment cause warping?)
• Quantity accuracy — does the received count match what the contractor claims to have returned?
• Surface condition — are there any new defects (scratches, dents, contamination) that occurred during processing or transit?

Record the quality check results in the job work receipt through the accepted and rejected quantity fields, and in the notes field. For formal traceability, you can also create a Quality Inspection record linked to the job work order.

Tip: Perform the quality check immediately upon receipt, while the contractor's delivery person is still present if possible. Discovering defects days later makes it harder to establish whether the damage occurred during processing, during transit, or after receipt at your facility.

Step by Step: Creating a Job Work Order

Scenario

Your steel fabrication shop has cut and drilled 200 MS flange blanks. These blanks now need heat treatment at Sagar Heat Treatment Works. You expect the treated flanges back within 5 working days.

Step 1: Navigate to job work orders.

Go to Manufacturing > Job Work Orders. Click New Job Work Order.

Step 2: Fill in the order details.

Step 3: Save the job work order.

Click Save. The system generates an order number (e.g., JW-2026-0015). The materials are now tracked as being at the contractor's premises.

Step 4: Prepare the delivery challan.

Print or generate the delivery challan from the job work order. This document accompanies the goods in transit and must include:

• Your GSTIN and the contractor's GSTIN
• Description and quantity of goods
• HSN code
• Value of goods (even though no sale is occurring, the challan must state the value)
• Statement that the goods are being sent for job work under Section 143 of the CGST Act

Warning: A valid delivery challan is legally required when sending goods for job work. Goods in transit without a proper challan can be detained and penalized during a roadside check by GST authorities.

Step by Step: Recording a Job Work Receipt

Scenario

Sagar Heat Treatment Works returns 195 pieces on 18 March. Five pieces cracked during heat treatment (a known risk with certain geometries). Of the 195 returned, your quality inspector finds that 188 meet the hardness specification and 7 are outside the acceptable range.

Step 1: Open the job work order.

Navigate to Manufacturing > Job Work Orders and open JW-2026-0015.

Step 2: Create a new receipt.

In the Job Work Receipts section, click Add Receipt.

Step 3: Fill in the receipt details.

Step 4: Save the receipt.

Click Save. The receipt is recorded against the job work order.

Understanding the Outcome

After this receipt, the job work order shows:

The 188 accepted pieces proceed to the next production step (final assembly and coating). The 7 rejected pieces need a disposition decision — send back for re-treatment, rework in-house, or scrap.

The 5 pieces that cracked at the contractor's premises should be discussed with the contractor — is this a normal process loss, or was there a process deviation? Your job work order notes should document this conversation and the agreed resolution (credit note from the contractor, replacement, etc.).

Managing Outstanding Job Work

For GST compliance, you need to track materials that are currently at contractors' premises. The key concerns are:

Time limit tracking. Under Section 143 of the CGST Act, inputs must be returned within one year. For each open job work order, calculate how long the materials have been at the contractor.

Outstanding quantity. For each open job work order, the outstanding quantity is:

Sent Quantity - Total Received Quantity (across all receipts) = Outstanding at Contractor

Review outstanding job work orders weekly. Follow up on overdue returns promptly.

Tip: Create a routine — every Monday morning, review all open job work orders sorted by expected return date. Any order past its expected return date should trigger a follow-up call to the contractor. Any order approaching the one-year GST time limit should be escalated immediately.

Tips & Best Practices

Tip: When negotiating with contractors, discuss processing loss expectations upfront. A 2-3% loss rate may be acceptable for heat treatment, but a 10% rate indicates a process problem. Setting expectations in advance avoids disputes when goods are returned.

Tip: Take photographs of materials before sending them for job work, especially for high-value items. This provides evidence of the condition at dispatch and helps resolve disputes about damage during processing.

Tip: For repeat job work (same contractor, same item, same process), track yield rates over time. If the accepted quantity as a percentage of sent quantity is declining, investigate — the contractor may be experiencing equipment issues, staffing changes, or using the wrong process parameters.

Warning: Never lose track of materials at a contractor's premises. Materials at the job worker are still your inventory — they are your assets and they count toward your stock valuation. More importantly, exceeding the one-year time limit without return converts the transaction into a deemed supply, triggering GST liability with interest and potential penalties.

Warning: Ensure that rejected items from job work receipts are properly dispositioned. Do not let rejected stock accumulate in a corner of the warehouse without a decision. Either send it back for rework, rework it in-house, or scrap it and write off the cost. Undecided rejections are a hidden cost.

Quick Reference

Job Work Order Fields

Job Work Receipt Fields

The Sales Cycle in ERP

Every manufacturing business exists to sell what it produces. Whether the product is fabricated steel brackets, CNC-machined shaft components, or packaged food items, the journey from a customer enquiry to cash in the bank follows a predictable sequence of steps. In a manual environment, each step lives in a different register, spreadsheet, or someone's memory. In an ERP system, the entire sequence is connected — each document links to the next, data flows automatically, and nothing falls through the cracks.

This chapter maps the end-to-end sales cycle as implemented in Udyamo ERP Lite and explains why managing sales through an integrated system is fundamentally different from managing sales through disconnected tools.

What You Will Learn

• The complete sales cycle from customer enquiry to payment receipt
• How each document in the cycle links to the next (document flow)
• The difference between make-to-order and make-to-stock selling
• How credit management protects your cash flow
• The sales metrics an ERP system enables automatically

Prerequisites

• A basic understanding of your company's sales process
• Familiarity with the Udyamo ERP Lite dashboard (Chapter 4)

The End-to-End Sales Cycle

The sales cycle in Udyamo ERP Lite follows this sequence:

Enquiry --- A customer contacts you asking about product availability, pricing, or delivery timelines. While Udyamo ERP Lite does not have a formal enquiry module, this is the trigger that starts the process.

Proforma Invoice (Quotation) --- You respond with a proforma invoice detailing the items, quantities, unit prices, applicable taxes (GST with HSN codes), and a validity period. This is not a tax document — it is a price confirmation and commercial offer.

Sales Order --- Once the customer accepts the quotation, you create a sales order. This is a confirmed commitment to supply the specified goods at the agreed terms. A sales order can be created by converting a proforma invoice or by manual entry.

Delivery --- You ship or hand over the goods to the customer. Inventory is adjusted to reflect the outward movement.

Tax Invoice --- You issue a GST-compliant tax invoice. The invoice can be generated from the sales order (fully or partially, depending on how much has been delivered) or created independently. The system calculates CGST, SGST, or IGST based on the customer's location and generates the corresponding accounting journal entry.

Payment Receipt --- The customer pays — in full or in part — by cash, cheque, bank transfer, or UPI. The payment is recorded against the invoice, updating the balance due and the invoice status.

Document Flow — Why It Matters

In Udyamo ERP Lite, every sales document carries references to the documents that came before it and after it. A tax invoice knows which sales order it was created from. That sales order knows which proforma invoice generated it. This chain of references is called the document flow.

Document flow delivers three critical benefits:

1. Traceability. If a customer disputes an invoice amount, you can trace it back to the sales order and the original proforma to verify what was agreed.
2. No duplication. The system prevents you from invoicing the same sales order line item twice. It tracks invoiced quantities against ordered quantities and only allows invoicing for the remaining balance.
3. Status tracking. Each document's status updates automatically based on downstream events. When all items on a sales order are invoiced, the order status changes to "fully invoiced." When an invoice is fully paid, its status changes to "paid."

The following table shows how statuses propagate across the sales cycle:

Make-to-Order vs. Make-to-Stock

Manufacturing businesses typically follow one of two sales strategies, and Udyamo ERP Lite supports both:

Make-to-Stock (MTS). You manufacture finished goods in advance and hold them in inventory. When a customer orders, you fulfil from existing stock. This is common for standardised products — fasteners, fittings, packaged food items. The sales cycle is straightforward: sales order, pick from stock, invoice, and collect payment.

Make-to-Order (MTO). You manufacture only after receiving a confirmed customer order. This is common for custom-fabricated parts, specialised machine components, or products with customer-specific specifications. The sales cycle here is longer: the confirmed sales order triggers a production order (covered in Part 3), production consumes raw materials, finished goods are received into inventory, and only then can you deliver and invoice.

In both cases, the sales documents in Udyamo ERP Lite remain the same. The difference is in timing — whether production happens before or after the sales order.

Credit Management Basics

Extending credit is standard practice in B2B manufacturing sales. A distributor of machined components might expect 30 or 45 days to pay after receiving an invoice. Udyamo ERP Lite helps you manage credit exposure through two fields on the customer master:

• Credit Limit --- The maximum total outstanding amount you are willing to carry for a customer at any point in time. If a customer's unpaid invoices already total their credit limit, the system alerts you before creating new orders.
• Credit Days --- The number of days from invoice date by which payment is expected. This drives the due date calculation on invoices and determines when an invoice is flagged as overdue.

Tip: Set credit limits and credit days on every business customer from the start. It is far easier to enforce credit discipline when the rules are established upfront than to impose limits after a customer has developed a habit of late payment.

Sales Metrics the ERP Enables

Because every transaction flows through a single system, Udyamo ERP Lite can generate sales intelligence that would be impossible with disconnected tools:

These metrics appear in the operational reports covered in Chapter 47.

Tips & Best Practices

Tip: Always start the sales cycle with a proforma invoice, even for repeat customers with standard pricing. The proforma creates a documented record of what was agreed and serves as the foundation for the sales order and invoice.

Tip: Use the expected delivery date on sales orders to plan production and logistics. When sales orders carry realistic delivery dates, your production team can prioritise work accordingly.

Warning: Do not skip the sales order step and jump directly from proforma to invoice unless you are dealing with a simple, immediate sale. The sales order provides a confirmed commitment that helps with production planning, inventory reservation, and partial invoicing.

Quick Reference

Customer Master

The customer master is the foundation of everything in the sales module. Every proforma invoice, sales order, tax invoice, and payment receipt is linked to a customer record. If the customer record is incomplete or inaccurate — a wrong GSTIN, a missing shipping address, an undefined credit limit — the errors cascade into every downstream document.

This chapter explains the customer master concept, walks through the key fields, and provides step-by-step instructions for creating both business and individual customer records in Udyamo ERP Lite.

What You Will Learn

• What the customer master is and why a single, accurate record per customer matters
• The difference between business and individual customer types
• The role of GSTIN, PAN, and address fields in GST compliance
• How credit limit and credit days control credit exposure
• Step-by-step creation of business and individual customer records

Prerequisites

• Access to Udyamo ERP Lite with permission to manage customers
• Understanding of the sales cycle (Chapter 19)
• Your customers' GSTIN and PAN details (for business customers)

The Customer Master Concept

A customer master record is a single, centralised entry for each customer your business sells to. Rather than re-entering customer details on every invoice or sales order, you create the customer once and reference that record throughout the system. When you update a customer's address or GSTIN, the change is reflected everywhere that customer appears.

This approach delivers three benefits:

1. Consistency. The customer's legal name, GSTIN, and address are entered once and used uniformly across all documents. No more invoices with slightly different spellings of the same company name.
2. Compliance. GST returns require exact matching of GSTINs and legal names. A centralised customer master ensures that every invoice carries the correct details.
3. Analysis. With a single customer record, you can track total revenue, outstanding receivables, payment history, and credit utilisation across all transactions for that customer.

Customer Types

Udyamo ERP Lite supports two customer types:

Business. A registered company, partnership firm, LLP, or proprietorship. Business customers typically have a GSTIN (if GST-registered) and a PAN. B2B transactions require the customer's GSTIN on the tax invoice for input tax credit purposes.

Individual. A person buying in their individual capacity. Individual customers may not have a GSTIN. Sales to individuals are B2C transactions where GST is charged but the customer does not claim input tax credit.

Tip: Even if a proprietorship firm is run by a single person, classify it as "business" if it has a GSTIN. The customer type affects how GST is reported — B2B invoices appear in GSTR-1 with the customer's GSTIN, while B2C invoices are reported in aggregate.

Key Fields Explained

Identity and Contact

Required: The Name and Customer Type fields are mandatory. For business customers engaged in B2B transactions, the GSTIN should always be entered to ensure correct GST reporting.

Addresses

Udyamo ERP Lite maintains separate billing and shipping addresses for each customer:

Warning: The billing state is critical for GST calculation. If your business is in Maharashtra and the customer's billing state is also Maharashtra, the transaction is intra-state (CGST + SGST). If the customer's billing state is Gujarat, the transaction is inter-state (IGST). An incorrect state will result in incorrect tax calculation and filing mismatches.

Credit and Payment Terms

Other Fields

Step-by-Step: Creating a Business Customer

This example creates a customer record for a steel fabrication company in Pune that buys machined components from your factory.

1. Navigate to Sales > Customers from the main menu.
2. Click New Customer.
3. Enter the customer details:
   • Name: Sai Engineering Works
   • Customer Type: Business
   • GSTIN: 27AABCS1234F1Z5
   • PAN: AABCS1234F
   • Email: [email protected]
   • Phone: 9876543210
   • Contact Person: Rajesh Patil
4. Enter the billing address:
   • Billing Address: Plot 45, MIDC Phase II
   • Billing City: Pune
   • Billing State: Maharashtra
   • Billing Pincode: 411026
5. Enter the shipping address (if different from billing):
   • Shipping Address: Gate No. 7, Industrial Area
   • Shipping City: Pune
   • Shipping State: Maharashtra
   • Shipping Pincode: 411039
6. Set credit terms:
   • Credit Limit: 500000
   • Credit Days: 30
   • Payment Terms: Net 30 days from invoice date
7. Click Create Customer to save the record.

The customer now appears in your customer list and can be selected when creating proforma invoices, sales orders, and invoices.

Step-by-Step: Creating an Individual Customer

This example creates a customer record for an individual buyer who purchases processed food products directly from your factory outlet.

1. Navigate to Sales > Customers from the main menu.
2. Click New Customer.
3. Enter the customer details:
   • Name: Anita Sharma
   • Customer Type: Individual
   • Email: [email protected]
   • Phone: 9123456789
4. Enter the billing address:
   • Billing Address: 12, Green Park Colony
   • Billing City: Jaipur
   • Billing State: Rajasthan
   • Billing Pincode: 302001
5. Leave GSTIN and PAN blank (not applicable for most individual customers).
6. Leave credit limit at 0 (no credit for walk-in individual customers).
7. Click Create Customer to save.

Tip: For individual customers who make frequent purchases, creating a customer master saves time on every subsequent transaction. For rare, one-time buyers, you may choose to use a generic "Walk-in Customer" record instead of creating individual entries.

Why Accurate Customer Data Matters

Incorrect customer data causes problems at two levels:

Operational problems. A wrong shipping address means goods are delivered to the wrong location. A missing email means invoices cannot be sent electronically. An undefined credit limit means you have no guardrails against over-exposure.

Compliance problems. GST law requires the customer's exact legal name and GSTIN on every B2B tax invoice. Mismatches between the name or GSTIN on your invoice and the customer's actual registration can result in the customer's input tax credit being denied. This creates disputes and damages business relationships.

Tip: When onboarding a new business customer, ask for a copy of their GST registration certificate. This document contains the exact legal name, GSTIN, and registered address you need for accurate invoicing.

Tips & Best Practices

Tip: Periodically review your customer list and deactivate customers who are no longer active. This keeps the selection lists clean and prevents accidental invoicing to defunct entities.

Tip: Always enter both billing and shipping addresses, even if they are the same. Many manufacturing customers have a registered office (billing) at one location and a factory (shipping) at another. Getting this right from the start avoids delivery confusion.

Warning: Never reuse a customer record for a different entity. If a company changes its legal name or GSTIN (due to restructuring, for example), create a new customer record. Reusing the old record will corrupt historical data and create compliance issues.

Quick Reference

Proforma Invoices (Quotations)

Before a sale is confirmed, the customer needs to know what they are buying, how much it will cost, and what taxes apply. A proforma invoice — also called a quotation — serves this purpose. It is a formal document that lists products, quantities, unit prices, and applicable GST, giving the customer a clear picture of the total cost before they commit.

A proforma invoice is not a tax invoice. It does not create any accounting entry, does not affect inventory, and does not appear in GST returns. It is purely a commercial document — a price offer with a defined validity period. Once the customer accepts, the proforma can be converted into a sales order or directly into a tax invoice, carrying all line item details forward automatically.

This chapter explains how proforma invoices work in Udyamo ERP Lite, covers the status lifecycle, and walks through creating, sending, and converting a proforma.

What You Will Learn

• The difference between a proforma invoice and a tax invoice
• When and why to use proforma invoices
• The proforma status lifecycle: draft, sent, converted, expired
• How to add line items with HSN codes, quantities, and tax rates
• How to send a proforma to a customer and download the PDF
• How to convert a proforma into a sales order or directly into an invoice

Prerequisites

• At least one customer record created (Chapter 20)
• Items set up in the item master with HSN codes and tax rates (Chapter 7)
• Understanding of the sales cycle (Chapter 19)

When to Use Proforma Invoices

Proforma invoices are appropriate in the following situations:

Price confirmation for custom work. A customer asks for a quote on 500 custom-machined gear housings. You calculate the cost, add your margin, determine the applicable GST, and send a proforma. The customer reviews, negotiates if needed, and confirms.

Tender or bid responses. When quoting against a requirement from a larger company, the proforma serves as your formal price offer.

Export transactions. Proforma invoices are commonly required for international shipments to support customs clearance, letters of credit, and advance payment processing.

New customer evaluation. Before starting a relationship with a new customer, a proforma establishes the commercial terms clearly and creates a documented starting point.

Tip: Even for repeat customers with established pricing, issuing a proforma for each order creates a clear audit trail and reduces disputes about what was agreed.

Status Lifecycle

A proforma invoice in Udyamo ERP Lite moves through the following statuses:

Draft ──> Sent ──> Converted
                └──> Expired

Warning: Once a proforma is converted, it cannot be edited or converted again. If terms change after conversion, modify the resulting sales order or create a new proforma.

Proforma Invoice Fields

Header Fields

Line Item Fields

Summary Fields

Step-by-Step: Creating a Proforma Invoice

This example creates a proforma for a customer who has requested pricing on machined steel brackets and mounting plates.

1. Navigate to Sales > Proforma Invoices from the main menu.
2. Click New Proforma Invoice.
3. Select the customer:
   • Customer: Sai Engineering Works
   • The billing and shipping addresses auto-fill from the customer master.
4. Set the dates:
   • Issue Date: (defaults to today)
   • Valid Until: Set to 15 days from today (or as per your quoting policy).
5. Add the first line item:
   • Item: MS Bracket Type A
   • HSN Code: 7308 (auto-filled from item master)
   • Quantity: 200
   • Unit Price: 450.00
   • Tax Rate: 18%
   • The system calculates: Tax Amount = 16,200.00, Total = 1,06,200.00
6. Add the second line item:
   • Item: Mounting Plate 6mm
   • HSN Code: 7326 (auto-filled from item master)
   • Quantity: 100
   • Unit Price: 320.00
   • Tax Rate: 18%
   • The system calculates: Tax Amount = 5,760.00, Total = 37,760.00
7. Review the summary:
   • Subtotal: 1,22,000.00
   • Tax Amount: 21,960.00
   • Total: 1,43,960.00
8. Add any notes (e.g., "Delivery within 10 working days from order confirmation. Prices valid for 15 days.").
9. Click Create Proforma Invoice to save as a draft.

Step-by-Step: Sending a Proforma

Once the proforma is saved, you need to communicate it to the customer.

1. Open the proforma invoice from the list.
2. Review the details one final time.
3. Choose one of the following:
   • Click Send Proforma to email the proforma directly to the customer's email address (as recorded in the customer master). The status changes from "Draft" to "Sent."
   • Click Download PDF to generate a PDF file that you can share manually via WhatsApp, email attachment, or print.

Tip: Even if you plan to share the PDF manually, clicking Send Proforma updates the status to "Sent," which provides a clear record that the quotation was communicated. You can also download the PDF after sending.

Step-by-Step: Converting a Proforma

When the customer accepts the proforma, you convert it into the next document in the sales cycle.

Converting to a Sales Order

1. Open the accepted proforma invoice.
2. Click Convert to Sales Order.
3. The system creates a new sales order pre-filled with:
   • The same customer
   • The same line items (items, quantities, prices, tax rates)
   • The same billing and shipping addresses
   • A reference back to the proforma
4. Review the sales order. You can adjust quantities, add expected delivery dates, or modify terms.
5. Save the sales order. The proforma status changes to "Converted."

Converting Directly to an Invoice

For simple, immediate sales where a separate sales order is not needed:

1. Open the accepted proforma invoice.
2. Click Convert to Invoice.
3. The system creates a new tax invoice pre-filled with all proforma details.
4. Review and adjust as needed (e.g., set the due date based on payment terms).
5. Save the invoice. The proforma status changes to "Converted."

Warning: Converting directly to an invoice skips the sales order step. This means you lose the ability to track partial deliveries and partial invoicing. Use direct conversion only for straightforward, single-delivery transactions.

Validity and Expiry

The Valid Until date defines how long the quoted prices are guaranteed. This is important because:

• Raw material costs fluctuate. A quote based on today's steel price may not be viable 60 days later.
• GST rates can change. A rate revision between quoting and invoicing would require a new proforma.
• Production capacity is finite. A quote for delivery in 2 weeks may not be achievable if the customer responds 3 months later.

If the validity date passes without the customer accepting, the proforma status can be marked as "Expired." You can then create a new proforma with updated pricing if the customer re-engages.

Tips & Best Practices

Tip: Standardise your validity period. Most manufacturing SMBs use 15 or 30 days. Shorter periods protect you from raw material price volatility; longer periods give customers more time to decide.

Tip: Include payment terms, delivery timelines, and any special conditions in the Notes field. This ensures the proforma serves as a complete commercial offer, not just a price list.

Tip: Track your quotation conversion rate (percentage of proformas that become sales orders). A low conversion rate may indicate pricing issues, slow response times, or misalignment with customer needs.

Warning: Do not use proforma invoices as a substitute for tax invoices. A proforma is not a legally valid document for GST purposes. The customer cannot claim input tax credit based on a proforma invoice.

Quick Reference

Sales Orders

A sales order represents a confirmed commitment between your business and the customer. While a proforma invoice is an offer that the customer may or may not accept, a sales order is an agreement — you have committed to supply specific goods at specific prices, and the customer has committed to buy them.

In a manufacturing context, the sales order is often the trigger for production. When a make-to-order factory receives a confirmed sales order for 500 custom brackets, that order drives the production plan, material procurement, and shop floor scheduling. Even in make-to-stock environments, the sales order is the authoritative document that tells the dispatch team what to ship, when, and to whom.

This chapter covers sales order creation, the status lifecycle, partial invoicing, and the conversion process from sales order to tax invoice.

What You Will Learn

• The role of sales orders in the sales cycle and production planning
• How to create a sales order from a proforma invoice or from scratch
• The sales order status lifecycle and what each status means
• How partial invoicing works with invoiced vs. pending quantities
• How to confirm a sales order and convert it to a tax invoice

Prerequisites

• At least one customer record created (Chapter 20)
• Items set up in the item master (Chapter 7)
• Understanding of proforma invoices (Chapter 21, optional but recommended)

Why Sales Orders Matter

Without a formal sales order, manufacturing businesses face recurring problems:

• Disputed deliveries. The customer says they ordered 200 pieces; your records show 250. Without a confirmed order document, there is no definitive reference.
• Production misalignment. The shop floor produces what it thinks was ordered, but the actual requirement was different. Rework and delays follow.
• Invoicing errors. Without tracking what has been invoiced against what was ordered, items get billed twice or not at all.
• No visibility into the pipeline. Management cannot see the total value of confirmed orders awaiting fulfilment — a critical metric for capacity planning and cash flow forecasting.

A sales order in Udyamo ERP Lite solves all of these problems by creating a single, versioned, trackable record of what was agreed.

Creating a Sales Order

There are two ways to create a sales order in Udyamo ERP Lite.

From a Proforma Invoice

If you sent a proforma invoice (Chapter 21) and the customer has accepted it:

1. Navigate to Sales > Proforma Invoices.
2. Open the accepted proforma.
3. Click Convert to Sales Order.
4. The system creates a new sales order pre-filled with all details from the proforma — customer, line items, quantities, prices, tax rates, and addresses.
5. Add or update additional fields:
   • Expected Delivery Date: The date by which you plan to deliver the goods.
   • Billing Location: The billing warehouse or branch location (if applicable).
   • Shipping Location: The dispatch warehouse or branch location.
6. Review and click Create Sales Order.

Manual Creation

For orders received verbally, via email, or through any channel where a proforma was not issued:

1. Navigate to Sales > Sales Orders from the main menu.
2. Click New Sales Order.
3. Select the Customer from the dropdown.
4. Set the Order Date (defaults to today).
5. Set the Expected Delivery Date.
6. Add line items:
   • Select the Item from the item master.
   • Enter the Quantity.
   • Enter the Unit Price (may auto-fill from the item master if configured).
   • Select the Tax Rate (auto-fills from the item's default GST rate).
   • The HSN Code auto-fills from the item master.
   • Tax Amount and Total are calculated automatically.
7. Repeat for additional line items.
8. Set billing and shipping locations if applicable.
9. Add any notes (delivery instructions, special requirements).
10. Click Create Sales Order.

Sales Order Fields

Header Fields

Line Item Fields

Summary Fields

Status Lifecycle

Sales orders move through the following statuses:

Draft ──> Confirmed ──> Partially Invoiced ──> Fully Invoiced
                    └──> Cancelled

Step-by-Step: Confirming a Sales Order

A draft sales order is a work-in-progress. Confirming it signals that the order is agreed upon and ready for fulfilment.

1. Open the sales order from Sales > Sales Orders.
2. Verify all details — customer, items, quantities, prices, delivery date.
3. Click Confirm.
4. The status changes from "Draft" to "Confirmed."

Required: A sales order must be in "Confirmed" status before it can be converted to an invoice. Draft orders cannot be invoiced.

Warning: Once confirmed, certain fields (such as the customer and line item details) have limited editability to maintain the integrity of the confirmed agreement. If significant changes are needed, it may be better to cancel the order and create a new one.

Tracking Invoiced vs. Pending Quantities

One of the most valuable features of the sales order is its ability to track how much of each line item has been invoiced. This is managed through the Invoiced Quantity field on each line item.

For example, consider a sales order with two line items:

In this scenario, the Mounting Plate line is fully invoiced, but 200 MS Brackets remain. The sales order status is "Partially Invoiced." When you convert the remaining quantity to an invoice, the system only offers the pending 200 brackets — it will not allow you to invoice the already-invoiced quantities again.

Step-by-Step: Converting a Sales Order to an Invoice

Full Conversion

When all items are ready for invoicing at once:

1. Open the confirmed sales order.
2. Click Convert to Invoice.
3. The system creates a tax invoice with all pending line items and quantities.
4. Review the invoice (set the due date, verify addresses).
5. Save the invoice.
6. The sales order status updates to "Fully Invoiced."

Partial Conversion

When only some items or quantities are ready (common in manufacturing where production batches complete at different times):

1. Open the confirmed sales order.
2. Click Convert to Invoice.
3. The system creates an invoice pre-filled with all pending line items.
4. Adjust quantities on the invoice to reflect only what is being delivered now. For example, change 200 brackets to 100 if only 100 are ready.
5. Remove any line items that are not being invoiced in this batch.
6. Save the invoice.
7. The sales order status updates to "Partially Invoiced."
8. Repeat the process later for the remaining quantities.

Tip: For make-to-order manufacturing, align your invoicing with production batch completions. If a production order yields 300 of 500 ordered brackets, create an invoice for 300. Invoice the remaining 200 when the next batch is complete. The sales order tracks everything automatically.

Expected Delivery Date

The expected delivery date serves two purposes:

1. Customer communication. It sets the customer's expectation for when they will receive the goods.
2. Internal planning. Production and dispatch teams can filter sales orders by expected delivery date to prioritise their work.

Tip: Be realistic with expected delivery dates. Factor in production lead time, raw material availability, and logistics. An unrealistic date creates a cascade of problems — rushed production, quality issues, and disappointed customers.

Tips & Best Practices

Tip: Use the sales order list view to monitor all open orders. Filter by status "Confirmed" or "Partially Invoiced" to see your current fulfilment backlog. This is your order book — the total value represents committed revenue awaiting delivery.

Tip: When creating sales orders from proforma invoices, always review the quantities and prices. Negotiations between the proforma stage and order confirmation may have changed the terms.

Warning: Do not delete a confirmed or partially invoiced sales order. Use the "Cancel" action instead. Cancellation preserves the record for audit purposes, while deletion removes it permanently.

Tip: If a customer wants to amend an order after confirmation (change quantities, add items, or modify prices), the recommended approach is to cancel the existing order and create a new one. This maintains a clean audit trail.

Quick Reference

Sales Invoices & Tax Calculation

The tax invoice is the most important document in the sales cycle. It is the legally mandated document under GST law that records a taxable supply of goods or services. Unlike a proforma invoice (which is an offer) or a sales order (which is a commitment), a tax invoice creates legal and financial consequences — it triggers a GST liability, creates an accounting journal entry, and establishes the customer's obligation to pay.

Every GST-registered business must issue a tax invoice for every taxable supply. The invoice must contain specific information prescribed by the CGST Rules, including the supplier's and recipient's GSTIN, HSN codes, item-wise tax breakup, and the place of supply. Udyamo ERP Lite handles all of this automatically, provided the underlying master data (customer GSTIN, item HSN codes, tax rates) is set up correctly.

This chapter covers invoice creation, GST tax calculation mechanics, the invoice status lifecycle, and the automatic accounting entries that invoices generate.

What You Will Learn

• The legal significance of a tax invoice under GST
• How to create invoices from a sales order or as standalone documents
• GST calculation: CGST + SGST (intra-state) vs. IGST (inter-state)
• The role of HSN codes and tax rates on line items
• Invoice status lifecycle: draft through paid, overdue, and cancelled
• How invoices automatically create journal entries in the accounting module
• How to generate PDF invoices and send them to customers

Prerequisites

• At least one customer record with accurate GSTIN and billing state (Chapter 20)
• Items set up with HSN codes and default tax rates (Chapter 7)
• Understanding of the sales order workflow (Chapter 22, if creating invoices from orders)
• Basic familiarity with the chart of accounts (Chapter 32, helpful but not required)

Invoice vs. Proforma vs. Delivery Note

These three documents serve different purposes and are often confused:

The tax invoice is the only document among these three that has legal standing for GST purposes and creates financial entries in the system.

Creating an Invoice

From a Sales Order

The most common method in a structured sales process:

1. Navigate to Sales > Sales Orders.
2. Open a confirmed sales order.
3. Click Convert to Invoice.
4. The system creates a new invoice pre-filled with:
   • Customer details (name, GSTIN, addresses)
   • Line items with quantities, prices, HSN codes, and tax rates
   • Only the un-invoiced quantities from the sales order
5. Set the Invoice Date (defaults to today).
6. Set the Due Date based on the customer's credit days (e.g., if credit days = 30, the due date is 30 days from the invoice date). The system may auto-calculate this from the customer's payment terms.
7. Review the line items and totals.
8. Click Create Invoice to save.

Standalone Invoice

For direct sales without a preceding sales order:

1. Navigate to Sales > Invoices from the main menu.
2. Click New Invoice.
3. Select the Customer.
4. Set the Invoice Date and Due Date.
5. Add line items:
   • Select the Item.
   • Enter the Quantity and Unit Price.
   • The HSN Code and Tax Rate auto-fill from the item master.
   • Tax Amount and Total are calculated automatically.
6. Add any notes.
7. Click Create Invoice.

GST Tax Calculation

GST calculation on invoices is determined by the place of supply — specifically, whether the transaction is intra-state or inter-state.

Intra-State Supply (CGST + SGST)