Inventory Management in Cloud ERP
A modern-day business needs an efficient inventory management system to track raw materials and manufacturing costs in a cloud ERP.
Versa Cloud ERP Inventory Management is a versatile all-in-one solution built to help businesses manage their operations with ease.
How to Track raw material and manufacturing costs through suppliers?
In this case, businesses will purchase raw materials from supplier A. Supplier A sends the raw material to supplier B to perform additional work on the raw material and turn it into a semi-finished product. Supplier B sends the semi-finished product to supplier C who performs additional work and turns it into a finished product.
Users want to be able to track the total cost of their finished product and incorporate all costs into the finished product.
How to do this in Versa?
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Steps
Create a PO for each of the suppliers
Create a PO for the finished product to supplier A. The cost on the PO is the cost for the raw material only. We will capture the additional cost later. Create a PO for the additional service to be performed on raw materials to supplier B. Create a PO for the additional service to be performed on semi-finished products to supplier C.
Receive Finished Product
When you receive the finished product from supplier C, you would receive the first PO (to supplier A). This will only capture the cost of the raw material.
Then we need to recognize the additional cost to the finished product, you would create a bill for supplier B and supplier C (using the Link to PO item feature on the billing page to bring in the PO details). When entering the bill item, choose to Allocate Bill Item Costs to Shipment Receipts. Then choose the PO to supplier A to allocate the cost to (enter the PO number to search). By doing this, the system will take the bill amounts to suppliers B and C and added to the inventory cost of the finished products. The total cost of the finished product now includes the raw material cost and then additional service cost performed by suppliers B and C.
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In the Versa Cloud ERP inventory management module a user can allocate Bill Item Costs to Shipment Receipts is a setting you have to turn on from the Setup menu, feature settings, and Bill Item Form. It is only available when your inventory costing method is FIFO (First In First Out)
Alternative Steps
The previous step does not track your raw material as a separate product. You are only working with finished products. If you want to track both raw materials and finished products, you can do the steps below. Since we are treating raw materials as non-inventory items, we are not tracking excessive raw materials which might not be used.
Set up raw material as a non-inventoried product and finished product as an inventoried product.
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A comprehensive cloud ERP for inventory management gathers data from different warehouses across geographies, sales orders, web stores, retail outlets, and all business processes across business entities to give an accurate real-time window into business operations.
Create a PO for each of the suppliers
Create a PO for the raw material to supplier A. The cost on the PO is the cost for the raw material only. Also, create a PO for the additional service to be performed on raw material to supplier B. Create a PO for the additional service to be performed on semi-finished products to supplier C. Create a separate PO and put the finished product on the PO. These would be the finished product you received from supplier C. Put the price of the PO as zero as we are only using this PO to receive the finished products.
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Receive Finished Product
Receive the first PO (to supplier A). You can do this when supplier A has sent the raw material to supplier B or do it all at once when the finished product is shipped to you.
Receive the finished product from supplier C. After this, the inventory value for the finished product is zero since the PO value is zero.
Then businesses need to recognize the additional cost to the finished product, users would create a bill for suppliers A, B, and supplier C (using the Link to PO item feature on the billing page to bring in the PO details). When entering the bill item, choose to Allocate Bill Item Costs to Shipment Receipts. Then choose the PO to supplier C (with the zero PO total) to allocate the cost to (enter the PO number to search). By doing this, the system will take the raw material cost from supplier A, additional cost from suppliers B and C, and added to the inventory cost of the finished product. The total cost of the finished product now includes the raw material cost and additional services cost performed by suppliers B and C.
Let Versa Cloud ERP handle the Inventory Management process
To know more, please visit our website or contact us directly.
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