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Stock Transport Orders without Delivery Discussion Paper
This scenario involves steps from purchasing and inventory management, as illustrated in Figure 7-5. The receiving plant creates a stock transport order, either directly or with reference to other documents such as a purchase requi- sition. At the supplying plant, a goods issue is posted against the STO. At this point the quantity in unrestricted use is reduced at the sending plant, and stock in transit is increased at the receiving plant. A material document with two line items is created to record this movement. When the materials arrive at the receiving plant, a goods receipt is recorded, just as in the procurement process. Recall that in the procurement process the goods receipt was recorded against a purchase order. In this case, the STO is used instead of a purchase order. At this time, the quantity in transit is moved to unrestricted use at the receiving plant, and a corresponding material document with one line item is created. The FI impact (and therefore material valuation) occurs at the time of the goods issue
Figure 7-5: Stock transport order without delivery
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Inventory Management 231
using the valuation price of the supplying plant. As in the case of stock transfers, one FI document is created if the two plants are in the same company code, and two FI documents are created if the plants are in different company codes. The general ledger accounts affected are the material accounts and a clearing account. Note that the procedure described above is a two-step procedure. In fact, only a two-step procedure is possible for STO without delivery.
Demo 7.2: Stock transport order without delivery
Stock Transport Orders with Delivery
In the previous scenario, the only shipping-related task that is included is the goods issue. Recall from Chapter 5 that the shipping step can include addi- tional tasks, such as creating a delivery document, picking, and packing. When a company uses the stock transport with delivery scenario, the sending plant will fi rst create a delivery document prior to goods issue. Recall that in the fulfi llment process, this document is used to pick, pack, and ship the materials to the customer. Thus, when a business uses an STO with delivery, it treats the order like a sales order with the receiving plant taking on the role of a customer, and the sending plant acting as a vendor. After the delivery document is created, the rest of the shipping tasks (pick, pack) are completed, and a goods issue is posted. These steps are illustrated in Figure 7-6. An STO with delivery can uti- lize both the one-step and two-step procedures for the goods movement. When the company uses a two-step movement, the material movement and fi nancial
Figure 7-6: Stock transport order with delivery
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232 CHAPTER 7 Inventory and Warehouse Management Processes
impact are identical to those associated with an STO without delivery. When it uses a one step movement, only one material document is created, and the materials are placed in unrestricted use at the receiving plant.
Demo 7.3: Stock transport order with delivery
Stock Transport Orders with Delivery and Billing
The third scenario involving STO includes both the delivery document (ship- ping step) and the billing step from the fulfi llment process at the sending plant. In addition, it includes the invoice verifi cation step from the procurement pro- cess (see Chapter 4) at the receiving plant. This scenario is most appropriate for inter-company transfers. Figure 7-7 illustrates this scenario with a two-step procedure, although a one-step procedure could also be used. A stock transport order is created at the receiving plant in response to a need to acquire materi- als. In contrast to the previous two scenarios, a purchase price is included in the STO based on pricing conditions and info records, as we discussed in the Chapter 4. In response, the supplying plant then creates a delivery document authorizing the shipment. As in the fulfi llment process, when the goods issue is posted, the quantity designated as unrestricted use is reduced at the sup- plying plant. In addition, material accounts are credited by the value of the shipment, and the cost of goods sold account is debited. Corresponding material
Figure 7-7: Stock transport order with delivery and billing
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Inventory Management 233
and FI documents are created. However, the materials shipped technically do not belong to the receiving plant in the other company code. Therefore, the value of inventory is unchanged at the receiving plant. The materials are classifi ed as “in-transit CC,” which is different from the “in-transit” category previously discussed. Materials in the in-transit category are included in valu- ation, whereas those in the in-transit CC category are not.
When the company receives the materials at the receiving plant, it records a goods receipt against the STO. As in the procurement process, the quantity held in unrestricted use increases, material accounts are debited by the value of the materials received, and the GR/IR account is credited. Corresponding material and FI documents are created. Note that, in contrast to the other two scenarios involving STOs, the valuation in this scenario is based on the purchase price in the STO. The supplying plant then creates an invoice based on this price, which is the selling price from the perspective of the fulfi llment process. Thus, the valua- tion of materials does not refl ect the valuation price of the delivery plant. Rather, it is based on an agreed-upon transfer price between the companies within an enterprise. When the billing document is created, the system updates the appro- priate revenue and receivables accounts in the sending plant’s general ledger.
The receiving plant then verifi es the invoice, as in the procurement pro- cess. The system updates appropriate accounts payable and GR/IR accounts in the receiving plant’s general ledger. Corresponding FI documents are created as well. In contrast to the purchasing process, the receiving plant does not make any explicit payments to the supplying plant. Rather, when the invoice verifi – cation step is completed, it makes payment via a transfer of funds between appropriate accounts in the two company codes. At this time, the accounts receivable account and accounts payable account are also updated. As usual, corresponding FI documents are created.
Using an STO to move materials between plants, as compared to using stock transfers, has numerous advantages.
To review, inventory management is concerned with managing and mov- ing materials between storage locations within a plant or between two plants. The plants can belong to the same company code or to different company codes. Several options for moving materials are available depending on the type of movement. However, in all the options we have considered, the movement is at the storage location level. Recall that storage locations are places where
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234 CHAPTER 7 Inventory and Warehouse Management Processes
materials are kept until they are needed. Storage locations can be very large spaces, such as a room in a plant or even a specifi c area in a large room. It is important to note that although IM keeps track of the quantity of materials in a storage location, it cannot determine their exact location. For example, GBI’s Dallas plant has a storage location for raw materials (RM00), where it stores numerous materials such as tires, tubes, frames, and wheels until it needs them for production. Although IM can track the quantities of these materials in the storage location, it cannot determine exactly where each of these materials is stored. Thus, when production needs the raw materials, the plant employee must manually locate them.
In earlier chapters we alluded to a more granular management of materi- als using warehouse management processes. We also referred to links between previously discussed processes—procurement, fulfi llment, and production—and warehouse management. We now shift our focus to a detailed examination of warehouse management. We begin with organizational data relevant to warehouse management followed by master data and process steps.
ORGANIZATIONAL DATA IN WAREHOUSE MANAGEMENT The key organizational data in warehouse management is the warehouse. A warehouse is associated with one or more combinations of plant and stor- age location. For example, in Figure 7-8 the warehouse (100) is associated with three storage locations (FG00, TG00, and MI00) in the San Diego plant (SD00). The association between storage locations and a warehouse provides the linkage between IM processes and WM processes. When linking ware- houses to storage locations, the following rules apply.
Figure 7-8: Organizational data in warehouse management
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Organizational Data in Warehouse Management 235
GBI has enabled warehouse management only in the San Diego plant, and all three storage locations in that plant are assigned to warehouse number 100. If GBI wished to enable WM in other plants, then the storage locations in the other plants could also be assigned to the same warehouse number. Alternatively, GBI could create additional warehouses for other storage locations. Although all three storage locations in the San Diego plant are assigned to warehouse num- ber 100, GBI could choose to assign the fi nished goods and trading goods stor- age locations, but not the miscellaneous storage location, to the warehouse. This setup would be appropriate if the miscellaneous storage location were a small area that did not contain many materials.
A warehouse is divided into smaller areas, in a hierarchical manner, as depicted in Figure 7-9. More specifi cally, a warehouse is comprised of storage types, which are further divided into storage sections. In turn, storage sections contain storage bins where the materials are ultimately stored. Note that stor- age bins are actually master data. We introduce them in this section, however, to clarify the relationships among the various elements in a warehouse. Finally, storage types are sometimes divided into picking areas rather than storage sec- tions. We examine all of these concepts in the following sections.
Figure 7-9: Structure of a warehouse
STORAGE TYPE
A warehouse must include at least one storage type. A storage type is a divi- sion of a warehouse based on the characteristics of the space, materials, or activity. For example, the space in the warehouse can be divided into storage types based on how the materials are stored. In such cases the storage types could include shelf storage, pallet storage, and rack storage. Some materials may need to be handled carefully (e.g., hazardous material) or to be kept in environmentally controlled areas (e.g., specifi ed temperature). In these sce- narios the storage types would refl ect these specifi cations. Thus, storage types could be designated as hazardous storage and cold storage. In Figure 7-9 there is one area for shelf storage and one for pallet storage.
Recall that the assignment of storage locations to a warehouse links IM activities to WM activities. To illustrate this point, consider a simple procure- ment scenario in which a company receives a shipment from a vendor. When
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236 CHAPTER 7 Inventory and Warehouse Management Processes
materials are managed only at the storage location level, the company uses a goods receipt to record the receipt of the materials, which are then placed in the specifi ed storage location. When WM is enabled, however, additional steps must be completed. We will discuss these steps later in the chapter. For now, the key point is that until these WM steps are completed, the materials are placed in specially designated storage types that serve as interim storage areas in the warehouse (e.g., a receiving area). Interim storage areas are also utilized in the fulfi llment process when the materials are to be shipped from a warehouse managed storage location. These areas represent the physical links between IM and WM. Figure 7-9 includes one storage type for shipping and one for receiving.
STORAGE SECTION
Storage types can be further divided into storage sections, which group bins with similar characteristics. Examples of storage sections are fast-moving, slow-moving, heavy, light, large, and small. An organization may have some materials that are shipped out very soon after they are received in the ware- house. These materials are designated as fast-moving materials, and, logically, they should be placed close to the receiving and shipping areas. In contrast, slow-moving materials, which remain in the warehouse for long periods before being shipped out, should be stored further away. In Figure 7-9, the pallet area is divided into slow-moving and fast-moving storage sections.
Storage sections can also be based on the material’s weight or size. For instance, in a shelf area, heavy and bulky materials are placed in lower shelves, and lighter and smaller materials are stored in higher shelves. Thus, a shelf storage area can be divided into heavy and light storage sections, as depicted in Figure 7-9. The receiving and shipping storage areas have one storage sec- tion each, the total section. Each storage type must include at least one storage section.
Finally, Figure 7-9 shows three storage bins within the light storage section. Storage bins are areas in which the materials are actually stored. We discuss storage bins in the section on master data.
PICKING AREA
Storage areas can be divided into picking areas rather than storage sections. A storage section is a division of a storage area based on storing or putting away materials. In contrast, a picking area is a division of a storage area based on removing or picking materials. A picking area groups storage bins based on similar picking strategies. For example, picking areas can be assigned to spe- cifi c employees who are responsible for picking from the specifi ed bins. As another example, a delivery to a customer can be allocated to multiple picking areas to facilitate parallel picking. This arrangement makes the picking step more effi cient, and it enables the company to deliver the materials to the cus- tomer more quickly.
Figure 7-10 displays the layout of GBI’s San Diego distribution center, and Figure 7-11 displays its structure. GBI has two storage types—shelf storage (001) and pallet storage (002)—and two interim storage types—receiving (003)
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Organizational Data in Warehouse Management 237
Figure 7-10: GBI’s San Diego plant layout
Figure 7-11: Structure of GBI’s warehouse in San Diego
and shipping (004). Note that whereas Figure 7-9 displays multiple storage sections for the shelf and pallet storage areas, GBI has elected to not divide the storage types in the San Diego warehouse into multiple sections. Rather, each storage type has one storage section—the total section, as illustrated in Figure 7-11. Going further, GBI does not have picking areas defi ned in its warehouse. Finally, both the shelf storage and pallet storage have multiple bins. Note that interim storage types do not require bins to be created in advance.
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