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Introduction to Inventory Management

A double-entry inventory has no stock input, output (disparition of products) or transformation. Instead, all operations are stock moves between locations (possibly virtual).

Operations

Stock moves represent the transit of goods and materials between locations.

Production Order
Consume:
2 Wheels: Stock → Production
1 Bike Frame: Stock → Production
Produce:
1 Bicycle: Production → Stock
Configuration:
Stock: the location the Manufacturing Order is initiated from
Production: on the product form, field “Production Location”
Drop-shipping

1 Bicycle: Supplier → Customer

Configurarion:
Supplier: on the product form
Customer: on the sale order itself
Client Delivery
Pick
1 Bicycle: Stock → Packing Zone
Pack
1 Bicycle: Packing Zone → Output
Shipping
1 Bicycle: Output → Customer
Configuration:
on the pick+pack+ship route for the warehouse
Inter-Warehouse transfer
Transfer:
1 Bicycle: Warehouse 1 → Transit
1 Bicycle: Transit → Warehouse 2
Configuration:
Warehouse 2: the location the transfer is initiated from
Warehouse 1: on the transit route
Broken Product (scrapped)

1 Bicycle: Warehouse → Scrap

Configuration:
Scrap: Scrap Location when creating the scrapping
Inventory
Missing products in inventory
1 Bicycle: Warehouse → Inventory Loss
Extra products in inventory
1 Bicycle: Inventory Loss → Warehouse
Configuration:
Inventory Loss: “Inventory Location” field on the product
Reception
1 Bicycle: Supplier → Input
1 Bicycle: Input → Stock
Configuration:
Supplier: purchase order supplier
Input: “destination” field on the purchase order

Analysis

Inventory analysis can use products count or products value (= number of products * product cost).

For each inventory location, multiple data points can be analysed:

  • inventory valuation
  • value creation (difference between the value of manufactured products and the cost of raw materials used during manufacturing) (negative)
  • value of lost/stolen products
  • value of scrapped products
  • value of products delivered to clients over a period
  • value of products received from suppliers over a period (negative)
  • value of products in transit between locations
Location Value
Physical Locations $1,000
 Warehouse 1 $600
 Warehouse 2 $400
Partner Locations - $1,500
 Customers $2,000
 Suppliers - $3,500
Virtual Locations $500
 Transit Location $600
 Initial Inventory $0
 Inventory Loss $350
 Scrapped $550
 Manufacturing - $1,000

Procurements & Procurement Rules

A procurement is a request for a specific quantity of products to a specific location. They can be created manually or automatically triggered by:

New sale orders
Effect
A procurement is created at the customer location for every product ordered by the customer (you have to deliver the customer)
Configuration
Procurement Location: on the customer, field “Customer Location” (property)
Minimum Stock Rules
Effect
A procurement is created at the rule’s location.
Configuration
Procurement location: on the rule, field “Location”
Procurement rules
Effect
A new procurement is created on the rule’s source location

Procurement rules describe how procurements on specific locations should be fulfilled e.g.:

  • where the product should come from (source location)
  • whether the procurement is MTO or MTS

Routes

Procurement rules are grouped in routes. Routes define paths the product must follow. Routes may be applicable or not, depending on the products, sales order lines, warehouse,…

To fulfill a procurement, the system will search for rules belonging to routes that are defined in (by order of priority):

Warehouses

Warehouse Route Example: Pick → Pack → Ship

Picking List:
Pick Zone → Pack Zone
Pack List:
Pack Zone → Gate A
Delivery Order:
Gate A → Customer

Routes that describe how you organize your warehouse should be defined on the warehouse.

A Product

Product Route Example: Quality Control

Reception:
Supplier → Input
Confirmation:
Input → Quality Control
Storage:
Quality Control → Stock
Product Category

Product Category Route Example: cross-dock

Reception:
Supplier → Input
Cross-Docks:
Input → Output
Delivery:
Output → Customer
Sale Order Line

Sale Order Line Example: Drop-shipping

Order:
Supplier → Customer

Push Rules

Push rules trigger when products enter a specific location. They automatically move the product to a new location. Whether a push rule can be used depends on applicable routes.

Quality Control
  • Product lands in Input
  • Push 1: Input → Quality Control
  • Push 2: Quality Control → Stock
Warehouse Transit
  • Product lands in Transit
  • Push: Transit → Warehouse 2

Procurement Groups

Routes and rules define inventory moves. For every rule, a document type is provided:

  • Picking
  • Packing
  • Delivery Order
  • Purchase Order

Moves are grouped within the same document type if their procurement group and locations are the same.

A sale order creates a procurement group so that pickings and delivery orders of the same order are grouped. But you can define specific groups on reordering rules too. (e.g. to group purchases of specific products together)