Warehouse management functionality requires definition of locations and bins . It also involves several types of inventory transactions. These include inventory adjustments, movements, and physical inventory counts, and transactions related to sales order shipments, purchase order receipts, and production order issues and output.
An inventory stocking location is uniquely identified by a location and bin, where a location can have one or more bins. The basic information about a location includes address and communication data and several warehouse management policies. The policies include the shop calendar of working days, the average number of days for handling inbound and outbound shipments, and the use of bins. Bin codes can be used to suggest a walk-through sequence for picking and put-away purposes, so that bin code assignment requires careful consideration. Bins can be defined one-at-a-time or via a mass creation approach. The mass creation approach uses a bin naming system (such as segmentation by rack, section, and level) and number ranges (such as the number range for racks) to automatically create bin codes on a bin creation worksheet.
A bin can be designated as blocked. The blocked status is intended to prevent all inventory transactions, just inbound transactions, or just outbound transactions. The need for preventing inventory transactions, for example, may represent quarantined material for quality management purposes. The inventory in a blocked bin is still considered available by planning calculations.
Authorized Locations for an Item and Stockkeeping Units (SKUs) A relationship between locations and an item can be defined. An item can have one or more authorized locations (termed stockkeeping units ) for the purpose of defining location-specific planning, costing, and warehouse stocking data. Chapters 2 and 3 described this location-specific information about items.
Authorized Bins and the Default Bin for an SKU A relationship between bins and an SKU can be defined. An SKU can have one or more authorized bins (termed fixed bins ) for stocking purposes; all other bins are viewed as unauthorized (and are termed floating bins ) for the item. One fixed bin can also be designated as the preferred bin (termed the default bin ).
However, a warehouse management policy determines whether the default bin is manually assigned or automatically updated based on the last put-away transaction. An SKU s default bin can be manually overridden. The system displays the default bin for every inventory transaction (thereby minimizing additional data entry) and it provides the basis for sorting information in bin location sequence (thereby improving efficiencies for pick and put-away purposes).
Warehouse management involves complete and accurate reporting of inventory transactions. The basic inventory transactions include inventory adjustments, movements, receipts, shipments, production order issues and output, and physical inventory counts. The basic inventory transactions are summarized in Figure 7.1. Chapter 9 covers inventory transactions related to transfer orders.
Inventory Adjustments Inventory adjustments serve a variety of purposes, such as loading initial inventory balances , reporting inventory corrections, and reporting scrap. Inventory adjustments are recorded on the Item Journal window. An adjustment type can be positive or negative, and each adjustment minimally identifies an item, quantity and UM, stocking location (location and bin), and a user -assigned document number for reference purposes. An item s tracking policy enforces identification of the lot and/or serial numbers . For a negative adjustment, the user can view an item s existing inventory by bin and by lot/serial number. The adjustment entries in an Item Journal can be maintained and printed prior to posting.
Inventory Movements Inventory movements between bins within a location and movements between locations are recorded on the Item Reclassification Journal window. Each movement minimally identifies an item, quantity and UM, the old and new stocking locations (site and bin), and a document number for reference purposes. An item s tracking policy enforces identification of the lot and/or serial numbers. The movement entries in an Item Reclassification Journal can be maintained and printed prior to posting.
Inventory movement transactions are required for a variety of purposes. For example, they can record movements to restock primary bins from overflow or bulk storage bins. Other examples involve moving material from the receiving dock to a bin in the stockroom, or from a stockroom bin to a staging area prior to sales order shipment. The use of warehouse documents provides an alternative approach to recording these inventory movements. For example, a put-away document records material movement from a receiving dock to a bin in the stockroom.
Physical Inventory and Cycle Counting Physical inventories help ensure valid financial reporting of inventory value. Cycle counting can accomplish the same objective and help identify the source of inventory errors.
The preparation and reporting for a physical inventory are performed on the Physical Inventory Journal window. The first step involves defining a batch name for the physical inventory and the identification of items to be counted. Items can be manually added to the batch or automatically added via a calculate inventory function. In most cases, all items and their stocking locations with an inventory balance should be added automatically. Printing a list of these items to be counted (such as the Physical Inventory List report) or a card for each item provides a turnaround document for reporting actual counts. In either case, the turnaround document should provide information about the item, each stocking location with an inventory balance, and (if applicable ) the lot and serial numbers. Actual counts that identify differences can then be entered for the batch name on the Physical Inventory Journal window. The information can be reviewed via test reports and then posted.
The preparation and reporting for a cycle count follows a similar pattern, but requires several initial preparation steps. The initial preparation involves two steps for assigning a cycle count frequency and a next counting period to each item. A user-defined code defines the desired counting frequency per year (such as 4) and this code must be assigned to each item. Using a function to calculate counting period, the system calculates the date range constituting the item s next counting period.
Preparation and reporting for a cycle count are performed on the Physical Inventory Journal window as well. The first step involves defining a batch name for the cycle count and the identification of items to be counted. Items can be manually added to the batch or selected from a list of items that need to be counted (based on today s date and the date range of the items next accounting period). The list of items displays the date last counted and the list gets calculated via a calculate counting period function. After selecting or manually adding items to the batch, the batch can be printed as a turnaround document for reporting actual counts. Actual counts that identify differences can then be entered for the batch name on the Physical Inventory Journal window. The information can be reviewed via test reports and then posted. An extra step must be performed after posting cycle counts: an item s next counting period must be recalculated on the item master using the same function mentioned above to calculate counting period.
Purchase Order Receipts The receiving process may involve a single transaction for recording receipts or two transactions ”one transaction to receive the material and a second transaction to move the material to its stocking location. These are called a one-step and two-step receiving process, respectively.
The basic approach focuses on reporting receipts against line items on an individual purchase order, and the receipt transaction typically represents a one-step receiving process. In many cases, the printed purchase order provides a turnaround document for reporting each item s actual receipt quantity and placement in a bin location. The receipt information is entered on the Purchase Order window (or an equivalent Order Receipt window) and posting the data creates a posted receipt and updates inventory balances. For correcting mistakes, the user can undo a purchase order receipt (using the Posted Receipts window) anytime prior to posting the vendor s invoice. When a vendor s invoice accompanies the material, it can also be entered at the same time as the receipt transaction.
Sales Order Shipments The shipping process may involve a single transaction for recording shipment or two transactions ”one transaction to pick and move material from a stockroom, and a second transaction to record shipment. These are called a one-step and two-step shipping process, respectively.
Picking and shipping activities focus on individual sales orders and the shipment transaction typically represents a one-step shipping process. In many cases, the printed sales order serves as a pick list and turnaround document for recording actual quantities shipped from stocking locations. Actual shipment data is entered on the Sales Order window (or an equivalent version for shipping purposes), and posting the data creates a posted shipment and updates inventory balances. For correcting mistakes, the user can undo a sales order shipment (using the Posted Shipments window) anytime prior to posting the sales invoice. Some situations require an invoice to accompany the shipment, so that posting can optionally create the sales invoice.
Production Order Issues and Output The component requirements for a released production order include manually picked and auto-deducted components. A printed pick list provides one method for communicating the need to manually pick components for a production order. The pick list identifies components in the order-dependent bill. Actual component usage can then be entered and posted on the Consumption Journal window. This window is also used to report over- and underconsumption of auto-deducted components .
Components are typically issued from the manufacturing location specified for the production order line item. However, the source location for a component can be manually specified in the order-dependent bill. In some cases, the source location for components is always different than the manufacturing location for the production order. This alternate source of components can be designated for the SKU (using the policy on components at location) so that the order-dependent bill and planning calculations correctly identify component requirements.
Reporting actual output from a production order includes the quantity completed (both good and scrapped) and the placement of good items in a stocking location. Actual quantities and stocking locations are entered and posted on the Output Journal window.
Other Transactions Other transactions shown in Figure 7.1 include returns to vendor, returns from customers, and transfer order shipments to and receipts from another location. Production order issues and output represent inventory transactions related to an outside operation.
Transaction Audit Trails The system automatically maintains several audit trails related to inventory transactions, as described below.
Inventory Transaction Audit Trail for an Item. An item s transaction audit trail identifies every inventory-related transaction, including transactions related to adjustments, sales orders, purchase orders, component issues to a production order, and output from a production order. Additional transactions reflect physical inventory. These aspects of an inventory transaction audit trail are termed item ledger entries and physical inventory entries, respectively, and the transaction type is termed ledger entry type.
An item s inventory transaction audit trail may include lot and/or serial numbers based on the item tracking policies. The system provides separate access to these item tracking entries.
Financial Transaction Audit Trail for an Item. The financial equivalents for an inventory transaction audit trail are termed item value entries. An item s value entries identify and segment the financial impact for each inventory-related transaction, such as segmenting a purchase order receipt into direct and indirect costs. With standard costing, item-related value entries also identify variances and changes to standard cost that revalue existing inventory.
Current inventory balances can be viewed in several ways, such as by item, SKU, bin, and item tracking summary.