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Consignment Stock from Suppliers Mixed Into Your Regularly Used Warehouses
Consignment Stock Supplied by Your Company to Your Customers
Consignment items are identified in the Product Line File. These are items that you don’t own, but are selling for a manufacturer or supplier.
Following are step-by-step instructions for managing consignment stock.
1. Set up a new warehouse(s) to isolate consignment stock. If you physically keep the consignment stock at one branch, you will only need one. If you stock it at multiple branches, set up one new warehouse for each consignment stocking location. For example, set up ZNY for New York consignment or ZOR for Orlando consignment. The Z will put all the consignment items at end of various reports that sort by warehouse. In the Warehouse File record, enter as company number 8, or any company number that is unused on your system. This method will keep the value of this stock out of the other (real) companies; thereby, keeping costs and value accurate. Consignment is not normally recorded anywhere on the General Ledger until sold, at which point the purchase is recorded. Therefore, the value should not be recorded on your books until sold.
2. Item master set up is the same as for any other items, except that in the Product Line File, enter Y in the Consignment field. This entry relates to the question “do you want to include consignment stock?”, which is an option on many reports.
3. Receive the consigned items into the new consignment warehouse(s). Receiving process is the same as for regular items.
4. Since, according to the system, the consignment stock is in a separate warehouse, you need to consider that for activities such as transfers, stock status reports, and reorder. For example, if consignment is physically in the NYC warehouse, but you have set up warehouse ZNY for consignment, then you will need to run transfers for both the regular NYC and consignment ZNY warehouses. Warehouse personnel should be aware that some pages will be for ZNY to NYC and, of course, they do not need to make a physical transfer.
5. Use the Stock Activity Report, option 5 on Inventory Reports menu, to track consignment stock and to report to the supplier. When running the report, always specify the manufacturer or supplier, the consignment warehouse number, and the date span for which you are reporting. There are summary and detail versions available. This report can keep your supplier informed about current on-hand quantities and activity for each item.
6. Use the various sales analysis and inventory reports to obtain your purchase price to pay the supplier. The X by Y Gross Profit Analysis Report gives you flexibility to alter the cost to reflect actual (average), standard, or house costs for the sales made. Be sure to consider the freight costs. If the freight was prepaid by your supplier, then you will probably need to pay the base portion of cost only. You would need to subtract the freight costs. You might simply want to pay the difference between last month’s consignment inventory value and this month’s consigned inventory value less new receipts. This method is the most complete, as it woudl include the effect of adjustments and transfers, as well as the sales. Your supplier will probably want to account for any usage of material, whether sold, used for samples, broken, or used otherwise. The Stock Activity Report shows you the beginning of month balances, activity for the month, and ending balances. The Inventory Reconciliation Reports can also be used for this purpose.
It is not necessary to create a separate warehouse for each manufacturer, if more than one manufacturer has placed consigned goods with your company. All of the reports can break the same consignment warehouse out by individual manufacturer.
Consignment Stock from Suppliers Mixed Into Your Regularly Used Warehouses
You can use all of the steps described above to manage the consignment stock. Because it’s received into your regularly used warehouse codes, the value of the consigned stock is added to the total value at that warehouse and for the company. This means that inventory value, turns and GMROI statistics include the consigned inventory within one consolidated analysis. For example, when looking at your Company File statistics, the inventory value, GMROI, and turns include actual and consigned inventories.
When mixing consigned inventory with regular inventory in a single warehouse, you should follow these guidelines in order to separate statistics when necessary.
— Do not mix consigned and non-consigned items into the same ABC codes, reorder categories, product lines, and item classes. This guideline enables you to easily obtain reports with or without consignment.
— Use the parameter “Include Consignment Product Lines?”, which is available on some inventory reports, or specify the product lines and item classes that represent the type of inventory you require.
Consignment Stock Supplied by Your Company to Your Customers
When you are supplying stock to your customers on a consignment basis, the inventory needs to remain part of your inventory value. Therefore, do not mark this material in your Product Line File as consignment stock unless it was also consigned to you by your supplier.
Set up an additional warehouse for each consignment location or customer. The warehouse should be coded to the respective company number.
When your customer records a sale, you must invoice that customer out of the related consignment warehouse. This could also be done on a monthly basis.
Consigned stock at a customer’s location is managed nearly identically to other regular sales from your inventory, aside from the unique warehouse code assigned to your customer.