Work-In-Process handling describes the process of assembling kits within a warehouse.
The process involves consuming component products (that can be sold individually)
according to a parent bill of material, to produce a quantity of the parent item. Production of the
parent item and reporting its "receipt" into inventory complete the task.
Sterling Selling and
Fulfillment Foundation handles
work-in-process as follows:
- For kit processing within a warehouse management
system, all "production" activity of the parent item is reported as
positive inventory adjustments. All "consumption" activity of component
items is reported as negative inventory adjustments.
- For component items, on report of consumption, Sterling Selling and
Fulfillment Foundation adjusts
the inventory value at the production location.
- For component items, on report of consumption, Sterling Selling and
Fulfillment Foundation publishes
the negative change in inventory value for the financial application.
- For parent items, on report of production, Sterling Selling and
Fulfillment Foundation calculates
the increase in inventory value as described in Inventory costing. Sterling Selling and
Fulfillment Foundation also
recalculates the average cost for the item at the production location.
- When a receipt is made against an existing on-hand
balance that is less than zero, Sterling Selling and
Fulfillment Foundation handles
the receipt as described in Handling negative inventory balances.
- For parent items, on report of production, Sterling Selling and
Fulfillment Foundation publishes
the change in inventory value for the financial application.
Work in process scenarios
The following illustrates how Sterling Selling and
Fulfillment Foundation processes
the Work In Process orders.
Work in process scenario
The warehouse management system reports the production
of 20 units of kitted item A12 at Node1. It also reports the consumption
of the component inventory that went into the 20 units of A12 – 20
units of C1, 40 units of C2 and 60 units of C3.
The
standard makeup of A12 (one unit) is 1 unit of C1, 2 units of C2,
and 3 units of C3. Assume that the following Cost Factor Group is
associated with the production of work orders for this Enterprise:
Cost factor name |
Calculation method |
Application method |
Percentage |
Value |
Comment |
Labor |
Percentage |
- |
20% |
|
20% of the base cost is added to arrive at the labor cost |
Supplies |
Amount |
Quantity |
- |
3.00 |
$3.00 is added to every finished kitted unit as supplies cost |
- On decrease of component inventory within Sterling Selling and
Fulfillment Foundation,
the solution recalculates the inventory value for each component as
follows:
- For C1, 20 *Average Cost of C1 ($1.50) = $30
- For C2, 40 * Average Cost of C2 ($0.50) = $20
- For C3, 60 * Average Cost of C3 ($1.75) = $105
- Sterling Selling and
Fulfillment Foundation publishes
each inventory value change in a separate event for the financial
application.
- The value of production of 20 Units of A12 is as
follows:
- Component Cost = $30 + $20 + $105 = $155
- Labor Cost (20%) = $31
- Supplies = $3/Unit = $60
- TOTAL COST OF A12 = 155+31+60 = $246
- Existing Inventory Value = $850, Quantity = 100
- New Inventory Value = $1096, Quantity = 120
- New Average Cost A12 = 1096/120 = $9.133333
- Sterling Selling and
Fulfillment Foundation publishes
the information pertaining to the change in inventory value (used
for integration to financial applications).
Figure 1. Work in process scenario