IM0000 Inventory Management Package Overview 1
Overview
Package Overview
How To Use This Manual
When most people receive a new product, they want to use it right away. Unfortunately, this is not quite possible when dealing with computer hardware and software. This manual is intended to serve as a reference guide in describing the functionality and the application of the Inventory Management package.
The first few sections of this manual are intended to introduce the user to the Inventory Management (I/M) system and help get started. The latter sections are for reference when the user has specific questions about each of the Inventory Management applications. These applications are described later in this section under I/M Menu Bar Selections and Definitions.
It is suggested that the user first read the System Manager manual. The Package Overview section of this manual gives an overview of the Inventory Management package. The General Operator Instructions in the System Manager manual explains how to enter and edit data and the use of special keys on the keyboard. The Startup section gives step‑by‑step instructions on how to load the programs, create the data files, and enter the initial data. The Processing Procedures section gives direction in daily, period and year ending procedures.
The user should then scan each of the I/M sections to understand how each of the I/M applications work. A very basic description of each of these applications is also contained under the heading I/M Menu Bar Selections and Definitions which is part of this Package Overview.
Data Load Sheets are included in this manual under many of the applications. These sheets may be used to manually fill out the data that must be entered at the computer. They may be helpful in easing data entry.
Global Setup
There are many “Pick& Choose” features in the Util-Setup and Global Setup section of this manual that can improve functionality and productivity. The user should review these and choose accordingly.
A General Explanation Of Inventory Management
It can be very beneficial to you to have some understanding of the basic terms and concepts that will be used throughout the rest of this manual. Even if you have already had a great deal of experience with Inventory Management packages, it will be helpful to read through this general discussion of I/M to get an idea of how this package has put the basic principles to use.
Inventory Management
The Inventory Management package centers around one file, the Inventory Item File. This file contains a record for each different inventory item, which exists in inventory. A large amount of information is stored in this file for each item. Some examples of the type of information stored are listed below:
A description of the item
The quantity of the item currently on hand
The quantity of the item currently on order
The last price you paid for the item (last cost)
The average price you have been paying for the item (average cost)
The quantity used this year and this period
The quantity sold this year and this period
The weight of the item
The forecasted usage of the item for the next period
The warehouse location of the item
If a particular inventory item is stored at more than one warehouse, the package will store information on the quantity on hand and available at all of the different warehouses as well.
Receivings, Issues, Transfers, And Adjustments
Events which can affect the quantity on hand figures and their appropriate distributions in the package include transfers of items from one warehouse to another, issues of inventory items to the shipping department or to the shop for assembly and receivings into stock of inventory items. These events are recorded as inventory transactions, which update the Inventory Item File and other related files.
Physical Counts
In almost all Inventory Management packages, the actual quantities of each inventory item will drift away from the theoretical quantities, which are stored on file over a period of time. This can be the result of theft, breakage, miscounting, data entry errors, etc. Therefore, it is necessary to periodically count the inventory items and correct the data, which is on file. An application called Physical Count Processing in the Inventory Management package provides a few tools to make this an easier task.
Kitting
The I/M package allows the use of kits. Kits consist of a group of items (components), which are assembled to make an item that can be sold (a kit parent item). This type of structure is essentially a flat bill of material. The kitting feature provides the benefits of a simple bill of material system without the expense of purchasing an entire bill of material software package. Companies with multi-level bills of material will need to use the Elliott BOMP package. Customer Order Processing supports kits in its Order Entry application.
Inventory Value
Elliott Software allows you to choose one of five different methods to measure the value of your inventory.
Average Cost Method
Throughout the system, Average cost is referred to as FOB Cost and Landed Cost. With this method, the value of your inventory is calculated by multiplying the quantity of the item received by the item's average cost. The average cost is updated when the quantity is received into inventory (quantity added times item cost). The following is an example of the average cost method.
Date Units Cost Total
Beginning Inv. 8/31/89 100 $ 5.0000 $ 500.00
Purchase 9/10/89 100 $ 7.5000 $ 750.00
‑‑‑ ‑‑‑‑‑‑‑‑
200 $ 1,250.00
New Average Cost = 6.2500 (1,250 divided by 200)
NOTE: If you are using the LIFO or FIFO cost method, average cost will also be updated when an item
is sold or when an item is issued from inventory. Otherwise average cost will only be updated
when the item is received.
Last Cost Method
With this method, the value of your inventory is calculated by multiplying the quantity of the item relieved by the item's last cost. The last cost is updated when the quantity is received into inventory. This is the cost of the item when it was received last or its current cost. The following is an example of the last cost method.
Transaction Date Qty Cost Total
Beginning Inv. 8/31/89 100 $ 5.0000 $ 500.00
Purchase 9/10/89 100 $ 7.5000 $ 750.00
‑‑‑ ‑‑‑‑‑‑‑‑
200 $ 1,250.00
New Last Cost = 7.500
Standard Cost Method
With this method, the value of your inventory is calculated by multiplying the quantity of the item relieved by the item's standard cost. The standard cost is not updated when the quantity is received into inventory. To change the standard cost, you must manually change it through Item File Maintenance.
FIFO Cost Method (First‑In, First‑Out)
With this method, the value of your inventory is calculated by multiplying the quantity of the item relieved by the item's FIFO cost. The FIFO cost method assumes that the cost of the first items received should be assigned the first items sold. Each time an item is received a layer record is written to the LIFO/FIFO layer file and each time an item is sold a layer is removed. If the quantity needed is greater than the first layer then the cost of the next layer will be used for the balance of the quantity. The following is an example of the FIFO cost method.
Transaction Date Qty Cost Total
*Purchase 9/01/89 100 $ 5.0000 $ 500.00
Purchase 9/05/89 100 $ 7.5000 $ 750.00
Purchase 9/10/89 100 $ 6.0000 $ 600.00
Purchase 9/15/89 100 $ 6.5000 $ 650.00
‑‑‑ -‑‑‑‑‑‑‑‑
Total Inv. Value (Before) 400 $ 2,500.00
* This transaction could actually be a receipt transaction from the Inventory Transaction Processing application in I/M, a receipt transaction from the Receivings Processing application in P/O, or a posted credit memo from COP.
Let's assume by 9/25/89 we sold 250 of this item. The following FIFO costs would be used. The date of the sale or issue transaction has no impact on the FIFO costs used.
Transaction Date Qty Cost Total
*Sold 9/01/89 100 $ 5.0000 $ 500.00
Sold 9/05/89 100 $ 7.5000 $ 750.00
Sold 9/10/89 50 $ 6.0000 $ 300.00
‑‑‑ ‑‑‑‑‑‑‑‑
Total Cost of Goods Sold 250 $ 1,550.00
* This transaction could actually be an issue transaction from the Inventory Transaction Processing application in I/M or a posted invoice sale from COP.
After the item is sold the following would be the new value of inventory and the remaining FIFO layers.
Transaction Date Qty Cost Total
Purchase 9/10/89 50 $ 6.0000 $ 300.00
Purchase 9/15/89 100 $ 6.5000 $ 650.00
‑‑‑ ‑‑‑‑‑‑
Total Inv. Value (After) 150 $ 950.00
A further explanation on the implementation of FIFO is contained under Inventory Transaction Processing.
LIFO Cost Method (Last‑In, First‑Out)
With this method, the value of your inventory is calculated by multiplying the quantity of the item relieved
by the item's LIFO cost. The LIFO cost method assumes that the cost of the last items received should be
assigned the first items sold. Each time an item is received a layer record is written to the LIFO/FIFO layer
file and each time an item is sold a layer is removed. If the quantity needed is greater than the first layer
then the cost of the next layer will be used for the balance of the quantity. The following is an example of
the LIFO cost method.
Transaction Date Qty Cost Total
Purchase 9/01/89 100 $ 5.0000 $ 500.00
Purchase 9/05/89 100 $ 7.5000 $ 750.00
Purchase 9/10/89 100 $ 6.0000 $ 600.00
Purchase 9/15/89 100 $ 6.5000 $ 650.00
‑‑‑ ‑‑‑‑‑‑‑‑
Total Inv. Value (Before) 400 $ 2,500.00
The actual applications that can create this type of transaction are explained under FIFO Cost Method.
Let's again assume by 9/25/89 we sold 250 of this item. The following LIFO costs would be used. The date of the sale or issue transaction has no impact on the LIFO costs used.
Transaction Date Units Cost Total
Sold 9/05/89 50 $ 7.5000 $ 375.00
Sold 9/10/89 100 $ 6.0000 $ 600.00
Sold 9/15/89 100 $ 6.5000 $ 650.00
‑‑‑ ‑‑‑‑‑‑‑‑
Total Cost of Goods Sold 250 $ 1,625.00
The actual applications that can create this type of transaction are explained under FIFO Cost Method.
After the item is sold the following would be the new value of inventory.
Transaction Date Qty Cost Total
Purchase 9/01/97 100 $ 5.0000 $ 500.00
Purchase 9/05/97 50 $ 7.5000 $ 375.00
‑‑‑ ‑‑‑‑‑‑‑
Total Inv. Value (After) 150 $ 875.00
A further explanation on the implementation of LIFO is contained under Inventory Transaction Processing.