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Thread: Commingled Product sourced from multiple branch plants and cost/revenue allocations

  1. #1

    Commingled Product sourced from multiple branch plants and cost/revenue allocations

    sorry for the poor thread title, but couldn't think of anything catchy. I am currently trying to setup something that I think should be basic. We have product that is being ST/OT'd from multiple source plants, each with varying product cost, and being commingled into a giant "pile". We want use FIFO inventory valuation, and want sales orders to consume the "first in" inventory. We also want to solve for allocating the revenue from this sale back to the source branch plant. Any general guidance that you good folks on the forum could give me would be greatly appreciated.

    The current approach is to produce a single item, with a different item number at each branch plant, then ST/OT it to the distribution point, and reclass it is a sellable item. I think that is where the current setup is falling short with revenue and cost recognition for inventory sold. Thanks in advance for the responses!

  2. #2
    The primary requirement is that the distribution branch needs to have lot control so that you can enable FIFO and lot level costing. In short, your sellable item will exist in the distribution branch and have the costing level set to lot. The manufacturing branches will produce a different item number that may or may not have lot control and can have costing set at branch level. The item will then be sold to the distribution branch like (ST/OT) but the difference is that the receipted item number will be different to the shipped item number. Now when you sell the item out of the distribution branch you can trace the source back to the manufacturing branch or branches. From an accounting perspective you can then set up the DMAAI's as required to handle the cost & revenue recognition.
    Russell Codlin
    www.rinami.com
    Capital Asset Management & Manufacturing Specialists
    REST Integration, IoT, Mobile Applications and Job Scheduling for all E1 releases from 9.2 back to 8.11SP1

  3. #3
    Quote Originally Posted by RussellCodlin View Post
    The primary requirement is that the distribution branch needs to have lot control so that you can enable FIFO and lot level costing. In short, your sellable item will exist in the distribution branch and have the costing level set to lot. The manufacturing branches will produce a different item number that may or may not have lot control and can have costing set at branch level. The item will then be sold to the distribution branch like (ST/OT) but the difference is that the receipted item number will be different to the shipped item number. Now when you sell the item out of the distribution branch you can trace the source back to the manufacturing branch or branches. From an accounting perspective you can then set up the DMAAI's as required to handle the cost & revenue recognition.
    Thanks so much for that succinct post! One other question, on the receiving end, how do I establish the link between the sales/receipt item and the production item from the source plants? I'm thinking this is not a reclass, right?

  4. #4
    Quote Originally Posted by RussellCodlin View Post
    The primary requirement is that the distribution branch needs to have lot control so that you can enable FIFO and lot level costing. In short, your sellable item will exist in the distribution branch and have the costing level set to lot. The manufacturing branches will produce a different item number that may or may not have lot control and can have costing set at branch level. The item will then be sold to the distribution branch like (ST/OT) but the difference is that the receipted item number will be different to the shipped item number. Now when you sell the item out of the distribution branch you can trace the source back to the manufacturing branch or branches. From an accounting perspective you can then set up the DMAAI's as required to handle the cost & revenue recognition.


    One other question. You mentioned having a different item at the production branch and the distribution branch. Are you saying a different item number for each of the source branches? Or would all of the source branches be producing the same item number, and as they feed to the distribution branch, they would all be receipted using the distribution branches item number?

  5. #5
    Quote Originally Posted by bigwebb83 View Post
    One other question. You mentioned having a different item at the production branch and the distribution branch. Are you saying a different item number for each of the source branches? Or would all of the source branches be producing the same item number, and as they feed to the distribution branch, they would all be receipted using the distribution branches item number?
    Correct. The manufacturing branches would all produce item A but with their own costs etc. The distribution branch will sell item B with lot level costing. When the distribution branch requires stock they will raise a purchase order for item B with the supplier being the manufacturing branch. The manufacturing branch would then raise a sales order for item A to ship it (assuming the system is demand pull). If you want to automate the process (kind of like ST/OT) you can use the EDI tables in the middle. If it is more of push system where the manufacturing branches are producing based on forecast then you then just have the manufacturing branch raise the PO in the distribution branch to effectively let them know that there is a shipment on the way. You would use specific document types for the SO and PO so that your DMAAI's can be set up for internal sales/transfers.

    If you prefer to use ST/OT to manage the process (maybe you have multi-branch MRP running) then another option is have a conversion work order at the manufacturing site. So they produce item A with branch level costing and then, as part of the shipping process they manufacture item B from item A on a work order.

    The reason for the two item numbers is that costing level is an item master configuration and I'm assuming that your manufacturing sites do not want to use lot level costing even if they're happy to use lot control on the manufactured item.
    Russell Codlin
    www.rinami.com
    Capital Asset Management & Manufacturing Specialists
    REST Integration, IoT, Mobile Applications and Job Scheduling for all E1 releases from 9.2 back to 8.11SP1

  6. #6
    Quote Originally Posted by RussellCodlin View Post
    Correct. The manufacturing branches would all produce item A but with their own costs etc. The distribution branch will sell item B with lot level costing. When the distribution branch requires stock they will raise a purchase order for item B with the supplier being the manufacturing branch. The manufacturing branch would then raise a sales order for item A to ship it (assuming the system is demand pull). If you want to automate the process (kind of like ST/OT) you can use the EDI tables in the middle. If it is more of push system where the manufacturing branches are producing based on forecast then you then just have the manufacturing branch raise the PO in the distribution branch to effectively let them know that there is a shipment on the way. You would use specific document types for the SO and PO so that your DMAAI's can be set up for internal sales/transfers.

    If you prefer to use ST/OT to manage the process (maybe you have multi-branch MRP running) then another option is have a conversion work order at the manufacturing site. So they produce item A with branch level costing and then, as part of the shipping process they manufacture item B from item A on a work order.

    The reason for the two item numbers is that costing level is an item master configuration and I'm

    assuming that your manufacturing sites do not want to use lot level costing even if they're happy to use lot control on the manufactured item.

    Thanks for the additional info. I think we want to keep the ST/OT process, since there is already some EDI/SOA integration built around automation of the process. I think the work order to convert item A to item B before sending to the distribution branch is the best approach for our current setup. Do you think I could setup a W line type item, so that the sales order (ST) for item B, from the source plant to the distribution plant. automatically generates a work order to consume A? Or is there a better way to approach this?


    Daniel

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