What happens if components go negative?

Mindie

I need to know the implications of removing an error message.

When components are automatically flushed an error message will prevent it from posting if there is not enough inventory on hand.

I'm assuming that error is there for a reason. If I remove the error message and allow the inventory to go negative what problem would it cause? Would it cause any problems with reservations or costing?

They are on Ver 4.0 SP2 if it matters.

kine

I assume problems with costing...

Mindie

Do you know what kinds of problems? If so, perhaps there is a way to avoid those problems.

ara3n

Once you allow negative components, I would test and make sure that when the PO is received with a different cost, that it roles up the cost to Finished good.

Alex_Chow

Yes, my guess is that it mainly deals with costing and be prepared to lose the client if you mess with anything related to costing.

Not many people knows what will happen because not many people are brave enough to mess with it at a production site.

Mindie

They've wanted the change for a long time now but I have always told them no. Now they really need the change because they have vendor managed inventory and those items will always be in the negative.

Since sales are allowed to bring items into the negative but manufacturing conusumption is not, there must be a reason.

I guess I'll keep testing.

kine

Try to solve it in different way to not have negative inventory... there must be some way how to do that (virtual invenory etc.)

AdamRoue

Hi

It is to do with costing, the negative entry would never be closed by the later creation of stock, meaning the finished goods cost is never updated. I will temper this by saying this is version dependent, I am not sure what happens in 5 for example, or later versions of 4, I have not tried it!

For VMA you could have a location to handle this, where you always have stock, you can exclude this from reports. You could also choose to backward flush these items, I assume you forward flush, unless you still do not have the items by the time you come to finish the order which is a neat trick

Mindie

Thank you! That answer makes a lot of sense.

I think I'll have them set the vendor managed inventory with a different posting group. That way they can reverse out the value of the inventory each month for financial statements or treat it as something other than an asset.

They do backwards flushing using routing link codes. I have had many talks with them about "How did you use that material if you didn't have it?". There are many scenarios that cause problems.

The BOM might list 1285.5 lbs of steel but they only have 1284 lbs on hand so they use 1.5 lbs of scrap. The amount isn't enough to worry about but it won't allow the output journal to post.

The Qty Per on the BOMs are only estimates. Sometimes they have enough material to finish the item but the back flushed amount is higher than the avialble inventory.

Then there are incorrect inventory counts and many other things that come up.

Each instance can be manually handled but it breaks the flow of everyday processing. They spend 2-4 hours a day chasing down these problems. #-o

AdamRoue

Hi Mindie

I am not aware of the lead-time, but if on the VMA you removed the routing link code it would mean the stock was backflushed at the finishing of production, enabling a little more time to find the stock Alternatively you could consider manual flushing on the "estimated" items, the production journal will prepopulate with the suggested amount which they can then alter to the actual amount used (although if you use scrap you would need to book it in!!) in this manner you do not hit backflushing issues. It might seem longer, and I cannot comment on the volume, but if you are spending 2-4 hours a day chasing these issues down it may be a lot quicker.