Processing returns and inventory adjustments

You can process Return Orders and make inventory adjustments.

The processes and inventory adjustments are as follows:

General

  1. Returns processing does not assume the use of the Sterling Order Management System Software Reverse Logistics module. The inventory adjustment can just be flagged as a "Return" type.
  2. The processing of returns and inventory adjustments do not force a recalculation of average cost.
    Note: The updateInventoryCost API can be used to recalculate the inventory value. For information about the updateInventoryCost API, see the Javadoc.
  3. Both returns and inventory adjustments force a recalculation of inventory value, based on the quantity received or issued.
    • The return receipt impacts an on-hand supply type. Supply types are configurable by the organization. This includes the ability (at this level) to control whether quantities are considered in on-hand calculations.
  4. When adjusting inventory value based on the processing of a return (a receipt) or an inventory adjustment (positive or negative), Sterling Order Management System Software publishes the change to be used by a general ledger accounting application.

    Positive inventory adjustments

  5. If the average cost of the item is not known, it is taken into stock at $0.00 cost and manual cost adjustments are required.

    Negative inventory adjustments

  6. If on-hand quantity results in a negative number, the inventory value is also reflected as a negative number. No change is made to the average cost due to this transaction.
  7. If an adjustment was made from a zero stock position and the average cost of the item is not known, the inventory value remains at $0.00.

    Returns

  8. If the average cost of the item is not known, it is taken into stock at $0.00 cost and manual cost adjustments are required.

Returns and inventory adjustment scenarios

Return Scenario 1 and 2 illustrate how Sterling Order Management System Software processes returns and makes inventory adjustments.

Returns - scenario 1 - see Figure 1

A return is created in Sterling Order Management System Software from an existing sales order. The customer ships the product back to the designated return node. In this instance, the product is returned to the same facility from which it was shipped. The return is received and moved into stock (as on-hand). Inventory value is recalculated using the current average cost for the item at the return node. The change in inventory value is published to the general ledger accounting application.

Returns - scenario 2 - see Figure 1

A return is created in Sterling Order Management System Software from an existing sales order. The customer ships the product back to the designated return node. In this instance, the product is returned to a different facility than that from which it was shipped. The return is received and moved into stock at the return facility (as on-hand). Inventory value is recalculated using the current average cost for the item at the return node. The change in inventory value is published for the financial application.

For both Return scenarios 1 and 2 the general information flow is as follows:

  1. Sterling Order Management System Software recalculates the Inventory Value
    1. Current Average Cost = $4.75
    2. Current Inventory Value = $2500
    3. New Inventory Value = $2500 + (10 * $4.75) = $2547.50
  2. Sterling Order Management System Software publishes the information pertaining to the change in inventory value (used for integration to financial applications).
    Figure 1. Return scenario 1 & 2
    RT_scenario1_a

Inventory adjustment - scenario 1 - see Figure 2

After cycle counting, the inventory of item ABC at Node1 needs to be decreased by 4 units. On completing adjustInventory, Sterling Order Management System Software recalculates the inventory value to reflect the loss of 4 units of ABC at the average cost of ABC at Node1. The change in inventory value is published for the financial application.

  1. Sterling Order Management System Software recalculate the Inventory Value
    1. Current Average Cost = $11.20
    2. Current Inventory Value = $12,500
    3. New Inventory Value = $12,500 - (4 * $11.20) = $12,455.20
  2. Sterling Order Management System Software publishes the information pertaining to the change in inventory value (used for integration to financial applications).

Inventory adjustment - scenario 2 - see Figure 2

After cycle counting, the inventory of item DEF at Node1 needs to be increased by 13 units. On completing adjustInventory, Sterling Order Management System Software recalculates the inventory value to reflect the gain of 13 units of DEF at the average cost of DEF at Node1. The change in inventory value is published for the financial application.

  1. Sterling Order Management System Software recalculates the Inventory Value
    1. Current Average Cost = $20.00
    2. Current Inventory Value = $17,800
    3. New Inventory Value = $17,800 + (13*$20.00) = $18,060
  2. Sterling Order Management System Software publishes the information pertaining to the change in inventory value (used for integration to financial applications).
    Figure 2. Inventory adjustments - scenario 1 & 2
    RT_scenario2_a