Inventory Control – Rajawali Adikarya

What Is?

All Businesses who sell or manufacture products require Inventory. As Inventory is an asset which ties up capital, it must be managed smartly to ensure effective utilization of capital. There are many costs associated with holding Inventory. These include, capital, insurance, holding costs, obsolescence, shrinkage and theft. Other costs include costs of not having the right product at the right time. This can result in manufacturing delays and lost sales.

It is therefore essential to have an effective tool to manage Inventory. A system is required which will identify the individual component items. The item master includes information on the type of product (manufactured, bought, etc.), buying rules, preferred supplier, lead times, tracking, etc. This information is vital to plan requirements and to manage the items.

Inventory is the heart of the system and Integrates with a number of other solutions (Purchase Orders, Sales Orders, Work in Progress, Bill of Materials, General Ledger).

All movement (receipts, issues to Work in Progress, transfers to other warehouses, adjustments, expense issues, etc.) of items must be updated in the system. This provides management with a tool to manage Inventory.

In order to ensure that the physical stock and the computer stock are accurate, stock takes should be taken on a regular basis (daily, weekly, monthly, quarterly or annually). The frequency of the stock take will be determined by the nature of the business.

In summary a business needs a means to record and process all Inventory transactions and to reflect these entries accurately in the General Ledger.

The Inventory system provides an efficient method for recording all movement types which affect Inventory. Included are facilities for maintaining, verifying and reporting Inventory item master information.

In addition, this solution offers a two-step receipting process; allowing users to receipt items into inspection and after the items have been checked to accept them into Inventory. Items which fail quality checks can be sent back (suppliers for purchases and Work in Progress for manufactured items).

For each Inventory item, a detailed record is kept of all movements of the item. This provides a history to facilitate purchasing and manufacturing. If items are manufactured for stock, this history will help with the creation of a forecast.

Inventory can be defined as those stocks or items used to support production (raw materials and Work in Process items), supporting activities (maintenance, repair, and operating supplies), and customer service (finished goods and spare parts). Demand for Inventory is dependent and independent. Inventory functions are anticipation, hedge, cycle (lot size), fluctuation, (safety, buffer, or reserve), transportation (pipeline), and service parts.

Inventory management is the branch of business management concerned with the planning and control of Inventories.

Inventory control is the activities and techniques of maintaining the desired levels of items whether raw materials, Work in Process, or finished products. A synonym for Inventory control is materials control.

Inventory buffer is Inventory used to protect the throughput of an operation or the schedule against the negative effects caused by statistical fluctuations. Synonyms for Inventory buffer are safety stock, buffer stock or fluctuation Inventory.

Inventory turnover is the number of times that an Inventory cycles, or ‘turns over’, during the year. A frequently used method to compute Inventory turnover is to divide the average Inventory level into the annual cost of sales.

For example:

An average Inventory of 3 million divided into an average cost of sales of 21 million means that Inventory turned over seven times.

Inventory accounting is the branch of accounting dealing with valuing Inventory. Inventory may be recorded or valued using either a perpetual or a periodic system. A perpetual Inventory record is updated frequently or in real time, while a periodic Inventory record is counted or measured at fixed time intervals, e.g. every two weeks or monthly.

Inventory valuation is the value of the Inventory at either its cost or its market value. Because Inventory value can change with time, some recognition is taken of the age distribution of Inventory. Therefore, the cost value of Inventory is usually computed on a first-in-first-out (FIFO), last-in-first-out (LIFO) basis, average cost basis, last cost basis, or a standard cost basis to establish the cost of goods sold.

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SYSPRO Solution

SYSPRO Inventory enables effective customer servicing and improved profits by providing superior Inventory that optimizes stocking levels.

It forms the core of the accounting, distribution and manufacturing facilities and is designed to Integrate with all the major functions of the systems and to provide flexible reporting on Inventory holdings. All movements against Inventory items are recorded and can be reported on. Features include multiple warehouses and bin numbers, multiple costing methods, a full Cardex facility, a stock take system and extensive reporting.

Process Flow

Orders are received via post, fax, Email, or salesperson. The order gets entered and a pre-delivery document is printed for the stores, where the stock is dispatched. If there are any stock shortages, the buyer or planner creates purchase and work orders. When the goods arrive at the stores, they are receipted into stock and receipts or GRN documents are printed. Back orders are also filled.

Integration

The Inventory solution can be installed standalone, or integrated with other solutions in the SYSPRO system, including:

Lot Traceability

Inventory stock items are flagged as traceable against which transactions are recorded.

General Ledger

Inventory and GRN transactions are recorded in the General Ledger.

Inventory Optimization

Inventory Optimization uses movement information resident in Inventory.

Purchase Orders and Blanket Purchase Orders

Inventory stock code and warehouse information is used by Purchase Orders, while Purchase Orders provides outstanding Purchase Order quantities and due dates in the Inventory queries.

Landed Cost Tracking

Stock code and tariff code information is stored in Inventory.

Sales Analysis

Uses stock code and product class information.

Sales Orders and Blanket Sales Orders

Uses stock code quantity and warehouse information.

Return Merchandise

Uses stock code quantity and warehouse information.

Bill of Materials

Uses stock code and part category information.

Engineering Change Control

Stock code revision/release numbers are stored in Inventory and used in ECC.

Quotations

Uses stock code and warehouse information.

Product Configurator

Uses stock code and warehouse information.

Work in Progress

Issue and receipt stock to and from jobs.

Issues and receipts stock to and from jobs.

Requirements Planning

Uses stock code quantity and warehouse information.

SYSPRO Factory Scheduling

Uses stock code and warehouse information.

Accounts Receivable and Sales Orders

Inventory integrates with Accounts Receivable and Sales Orders when you process transactions for stocked items using the Sales Order Entry program from either of these modules.

In the multi-period accounting facility, there is a relationship between the Accounts Receivable and Inventory modules in that the quantity on hand of the stocked item is always reduced or increased in the selected Accounts Receivable financial period if the Inventory module is in a later financial period.

In addition, invoicing cannot take place if the current Inventory period is more than one month ahead of the Accounts Receivable period.

Bill of Materials

Once you have run the cost implosion in the Bill of Materials module, you can transfer the bill of material costs to the unit cost field of stock items.

General Ledger

SYSPRO enables you to determine whether you want Inventory to be integrated to the General Ledger and if so, whether the integration is to be in real-time or in batch mode, and whether the transactions are to be posted in detail or in summary (see General Ledger Integration in this document).

You use the Inventory tab of the General Ledger Integration program (SYSPRO Ribbon bar > Setup > General Setup > GL Integration) to define the general ledger accounts to be used when processing Inventory transactions.

Warehouses : Use the Warehouse Maintenance program to indicate the general ledger accounts required for each warehouse. The Warehouse Control and Warehouse Variance accounts are specified per warehouse. If the other GL accounts are not specified against the warehouse, then the accounts specified in the General Ledger Integration are used.

Inventory interfaces : Use the Inventory Ledger Interface program to define the interface ledger accounts required when processing non sales-related inventory transactions.

Lot Traceability

If any discrepancies exist between lot quantities and warehouse quantities, then the lot quantities are assumed to be correct, and the Inventory quantities are adjusted accordingly.

Purchase Orders

Purchase Orders integrates with Inventory when items are received into stock against a purchase order placed with a local or foreign supplier.

Return Merchandise

When you select the Credit option while processing a Return Merchandise Receipt, you can optionally select to return the item to stock or, if the item being returned is an assembly, to return its components into stock

Work in Progress

Using the Job Issues program, you can issue stocked items to a job as components. You can receipt the finished items into stock using the Job Receipts and the WIP Inspection Maintenance programs. When both the Inventory and Work in Progress modules are installed, Work in Progress transactions cannot be processed unless both modules are in the same financial period.

Essential and recommended modules

None.

Inventory Integration to other SYSPRO solutions

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