Re: Consignment Inventory -- BPCS-L

Thanks for the mental challenge helping me rethink some areas where I too am a bit fuzzy.

Even though the consignment inventory is not on the company's FINANCIAL books, it is in the PHYSICAL inventory. It is on the financial books of the outfit that is supplying it, but not in their physical possession. There may be an obligation to periodically supply that outfit with a report on what quantities we have on-hand. In your case, the telemetry readings relieve you of a burden that other manufacturers have.

When you have inventory in your possession that you do not own until you use it, that sounds to me very much like where we have customers that use us like safety stock, it takes us several days to make their parts, but when they see they about to run out, they call us and expect it shipped the same day. We handle this by having safety stock of their finished goods.

In your reality, you have the same physical raw materials. When not yet using it, it belongs to the supplier. Once you start using it, it belongs to you. At that point in time you might want it to change from zero cost inventory to something with value for the financial books. You may also want notification to go to the supplier at the point when you transfer it to your financial books, because at that point it ought to go onto their financial books.

We have added several ITE inventory transactions that did not come from SSA.
Perhaps you want to add a transaction similar to our REDESIGNATION.

In our reality, we have wire wound clockwise or anti-clockwise on reels, or sitting in barrels ... same wire, but it needs to be on the spools different ways for different machines. Part of our item # is which kind of spool it is on when feeding into machine that needs it to be a certain way. So we have an inventory transaction that transforms 100,000 feet of one item designation to 100,000 feet of another designation.

Another example of redesignation is ... what we ship to customers is THEIR part # ... our end item # is the customer part # ... simplifies communications with the customer. But sometimes what they are ordering is the same stuff as we have internally designated as other than an end item, such as purchased raw materials. We can have the same stuff in the BOM. We move the purchased material to the shipping warehouse and redesignate it as the item # the customer needs.

Our redesignation involves same $ value items. You might want to see if the process can work with a change in $ value. Something like the opposite of our write-off like scrap transaction except not destroyed physical inventory but something that had value that we no longer have need for. This might not be acceptable GAAP.

It may be that when the Supplier fills that tank, you need to do something similar to a cycle count, to tell BPCS that now the tank is full, irrespective of what was there before. Use a separate transaction effect than cycle count adjustment, so you not contaminate your audit trail with unrelated different activity. Do you know when the tank gets filled, so that such a transaction can be done?

RKHBIT wrote:

Have you considered DRP and Resupply orders?


Teunis
I think this is brilliant.

I was also wondering if Outside Operations can apply when it is for the first component of production and the lead times can be kind of long. Consult with the supplier about safety stock options of our MRP, which are much more powerful flexible with facilities than in a single global environment.

Even though DRP+RO is designed for use by our own facilities, I am wondering if it could be used when one side of the equation is an outside partner whose operations not under our control, and not doing the transactions over there that BPCS expects..

With respect to your question about how we do the other stuff. We generate various MRP reports that are aimed at Purchasing and Production people. These reports have been modified to meet their needs, with more info than SSA supplied.

BPCS does not know that our item class XX means consigned parts, or what the significance of that is. Our Purchasing Manager knows it. There is a risk here, where we have rules how we do things that are in the heads of knowledge workers ... what happens if he gets in an accident and we suddenly lose what he knows.

Thus it is perfectly legitimate for Purchase Order to go to the same place as the Customer.

The places that supply Consignment Inventory that we craft into final assemblies for them. They are in RCM as a customer. They are in AVM as a vendor. Same name and address both places.

Thus for replenishing the consignment inventory we are able to use BPCS MRP and PUR the same way as we use it for regular raw materials that are costed. Everyone in our Purchasing Dept and at the Customer knows that this is Consignment Inventory being run through ERP software designed for something else. They handle it Ok ... they know we need their consignment inventory by some deadline so that we won't have material shortage making their end parts.

When the consignment inventory is delivered to our loading dock, the receiving clerk accepts it against the purchase order no different than receiving any other raw materials ... except how we are SUPPOSED to receive resupply orders.

This leaves the 3 way match with the non-existent invoice from the supplier. I not know what all is being done by people in purchasing and accounting, but basically they can get lists of what has been received in recent days on purchase orders, where the material involved is not really purchased from outside vendor, then they have to do the LIKE A/P transaction for the 3 way match to avoid getting BPCS messed up with the appearance of liabilities for inventory aquired but not paid for.

You might want to have your auditors take a look at this concept. It is probably not GAAP so if you are subject to SOX it might not be a valid solution.

There is also the question of proper documentation. We do a lot of exceptions to BPCS where the exceptions are in the heads of knowledge workers, placing us at risk of forgetting vital steps when those people leave us. Perhaps we need to add a bit more stuff to those modified reports.

We could modify the PO so that when the material to be replenished is consignment inventory, the appearance of the form not be confused with a real PO. We have done a modification, for other reasons, that link through BOM to identify what customer item we ordering this raw material "for" which might be extra special nice to place on this replacement form idea.

- Al Macintyre http://www.ryze.com/go/Al9Mac Find BPCS Documentation Suppliers http://radio.weblogs.com/0107846/stories/2002/11/08/bpcsDocSources.html BPCS/400 Computer Janitor at http://www.globalwiretechnologies.com/