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08dis60s-inventory management

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08dis60s-inventory management

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Unit 8Inventory Management

    4/29/2010

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    Unit 8Inventory Management Unit Introduction ........................................................................................................ 1

    Unit Objectives ..................................................................................................... 1

    Terminology .......................................................................................................... 2 What is Inventory? ..................................................................................................... 4

    Inventory Management Product Integration ............................................................... 5

    Types of Inventory ................................................................................................ 6

    Nettable and Allocatable Inventory ...................................................................... 7 Inventory Management Setup .................................................................................... 8

    Item Master Maintenance ..................................................................................... 9

    Alternate Items ................................................................................................... 10

    Item Unit of Measure Options ............................................................................. 11

    Purchase Unit of Measure............................................................................. 11

    Stocking Unit of Measure .............................................................................. 12

    Selling Unit of Measure ................................................................................. 12

    Alternate Units of Measure ........................................................................... 12

    Unit of Measure Maintenance ....................................................................... 13 Planning and Inventory Control Levels .................................................................... 14

    Warehouse Master Maintenance ....................................................................... 19

    Managed versus Non-Managed Warehouses .............................................. 20

    Warehouse Capacity Analysis ...................................................................... 21

    Current Utilization ......................................................................................... 21

    Location Maintenance ........................................................................................ 22 Transaction Effects Overview .................................................................................. 23

    BPCS Reserved Transactions ............................................................................ 24 Inventory Management Review ............................................................................... 26

     Table of Contents 8-i

List of Figures

    Figure 8-1. Inventory Examples ................................................................................ 4 Figure 8-2. BPCS Inventory Management Product Integration ................................. 5 Figure 8-3. Examples of Nettable and Allocatable Inventory .................................... 7 Figure 8-4. Inventory Management Setup ................................................................. 8 Figure 8-5. Item Master Maintenance ....................................................................... 9 Figure 8-6. Unit of Measure Maintenance ............................................................... 13 Figure 8-7. The Six Levels of Inventory .................................................................. 14 Figure 8-8. Physical versus Logical Warehouses ................................................... 16 Figure 8-9. Warehouse Master Maintenance.......................................................... 19 Figure 8-10. Managed versus Non-Managed Warehouses .................................... 20 Figure 8-11. Warehouse Capacity Analysis ............................................................ 21 Figure 8-12. Methods of Posting Inventory Transactions ....................................... 23 List of Tables

    Table 8-1. Alternate Item Reserved Status Codes .................................................. 10 Table 8-2. Transaction Effects ................................................................................ 25 8-ii Supply Chain Management WorkshopStudent Guide

Unit Introduction

    This unit is designed to reinforce BPCS Inventory Management. You will have a basic understanding of the inventory product through practical experience or SSA's Concepts and Applications (C & A) course.

    The purpose of this unit is to give an overview of BPCS Inventory Management, integration, and setup. First, we will define what inventory is: its benefits and key concepts. Second, we will explain system codes, ABC control, and unit of measure. Third, we will discuss inventory levels, transaction effects, and history.

    Unit Objectives

    At the end of this unit you will be able to:

    ? Define inventory.

    ? Create an Item Master.

    ? Build a warehouse.

    ? Explain the set up and impact of inventory transaction effects.

     Inventory Management 8-1

    Terminology

    Listed below are terms presented in this unit.

A monetary unit used for ledger journal entries. Base Currency

    Any item used to make another item. Component

    A grouping of warehouses, typically representing a manufacturing Facility

    plant or distribution center, used for planning and costing.

    Products ready for shipment and carried in inventory in anticipation Finished Goods

    of customer orders.

    A monetary unit used for sales history and product costing. Global Currency

    Inventory assigned to a specific order at the lot/location level. Hard Allocation

    Inventory in the delivery, transfer, or distribution process. In-Transit

    Any stock at any stage in the supply chain. Inventory may consist of Inventory

    finished goods, intermediate products, or raw materials.

    BPCS supports six stocking levels: item, facility, warehouse, Inventory Stocking

    location, lot, and container. Levels

    Any manufactured or purchased part associated with a BPCS item Item

    number.

    An alphanumeric code identifying an item. Every item must have a Item Number

    unique item number.

    A physical or logical stocking position or area within a warehouse. Location

    BPCS allows inventory transfers that update both from and to Location Transfers

    inventory locations with a single transaction.

    Logical warehouses describe the condition of inventory; for example, Logical Warehouses

    work-in-process, goods in transit, or in inspection. BPCS allows

    physical and logical warehouses.

    A particular batch of an item such as pharmaceuticals perishables. Lot

    BPCS allows lot tracking and control at the item level with inventory Lot Control/Tracking

    transactions requiring lot number entry and lot notes associated with

    each lot.

    8-2 Supply Chain Management Workshop?Student Guide

A warehouse designated to be under the controls of the Warehouse Managed Warehouse

    Management product. BPCS Multiple Currency product if installed, processes transactions Multiple Currency

    in domestic or foreign currencies. All histories are kept in a standard

    global currency. Inventory included in the onhand balance for Material Requirements Nettable

    Planning netting calculations when considering requirements and

    planned orders. A warehouse which is not designated to be under the controls of Non-Managed

    Warehouse Management. Warehouse

    A subsystem of Inventory Management allowing the user to update Physical Inventory

    the system inventory values with an actual physical count of the

    inventory.

    Physical warehouses group the stock's geographic locations such as a Physical Warehouse

    stockroom, warehouse, or storage facility. Physical warehouses can

    contain consignment inventory and floor stock.

    A system used to increase stock clerk efficiency when picking items Pick Sequencing

    from various warehouses, zones, or locations. BPCS supports

    warehouse zoning and picking logic.

    Purchased material used in components or finished goods. Raw Material

    Inventory used as a buffer against demand uncertainty and used as a Safety Stock

    reorder flag when inventory balance is at or below safety stock.

    A monetary unit reflecting the value of a transaction for the currency Transaction

    associated. Currency

    A grouping of inventory locations or stocking positions. A Warehouse

    warehouse may represent a physical space or a logical condition for

    inventory.

    Inventory within the manufacturing process used in the production Work-in-Process

    process. (WIP)

     Inventory Management 8-3

What is Inventory?

    Inventory is any stock at any stage in the supply chain. This includes finished goods,

    subassemblies, components, and raw materials. Inventory has an intrinsic value and

    incorporates added value. The investment in inventory typically represents one of the largest

    single areas of capital in a business, often more than 25 percent of total assets.

    Inventory should be an asset. However, if inventory is not properly managed, it can become a

    liability. BPCS Inventory Management provides the opportunity to save money and minimize

    risk by controlling inventory with informed planning and production.

    The figure illustrates an inventory example.

    Finished Goods

    Raw Materials

    ComponentsSubassemblies

    Figure 8-1 Inventory Examples 8-4 Supply Chain Management Workshop?Student Guide

Inventory Management Product Integration

    The Inventory Management product is the central product to the BPCS supply chain

    management, manufacturing, and financial products. The inventory files provide data to a

    wide range of BPCS products and programs. At the same time, other BPCS products access

    and modify the data in the inventory files. This integrated relationship is the key to BPCS

    versatility.

    This figure illustrates the relationship of Inventory to other BPCS products. Other BPCS

    products, not shown in this figure, also integrate with Inventory:

    ? Multiple Currencies

    ? Advanced Process Industries

    ? Performance Measurement

    ConfigurableForecastingCostPromotions,EnterpriseAccountingPurchasingDeals andAccounting

    Pricing

    DistributionOutbound

    ResourcesLogistics

    PlanningManagement

    CustomerMaterial

    OrderRequirementsInventoryProcessingPlanning

    Shop FloorManufacturing

    Control/DataJIT RepetitiveManagement

    Billing andAccountsSalesPayableMasterAnalysisCapacityProductionPlanningScheduling

    Figure 8-2 BPCS Inventory Management Product Integration

     Inventory Management 8-5

Types of Inventory

    There are two types of inventory: movement and organization. Movement inventory is

    inventory consisting of work-in-process and in-transit. Organization inventory is any type of

    inventory that has cycle stock, safety stock, or anticipated stock.

    Movement Inventory

    Movement inventory is work-in-process and in-transit inventory.

    ? Work-in-process is inventory within the manufacturing process.

    ? In-transit is inventory in the delivery, transfer, or distribution process.

    Organization Inventory

    Organization inventory is cycle stock, safety stock, or anticipation stock.

    ? Cycle stock is manufactured stock or excess stock purchased to meet immediate

    requirements.

    ? Safety stock is used as a buffer against demand uncertainty.

    ? Anticipation stock is built-up in expectation of seasonal or promotional demands.

    8-6 Supply Chain Management Workshop?Student Guide

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