Work in process handling
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 Order Management System Software 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 Order Management System Software adjusts the inventory value at the production location.
- For component items, on report of consumption, Sterling Order Management System Software publishes the negative change in inventory value for the financial application.
- For parent items, on report of production, Sterling Order Management System Software calculates the increase in inventory value as described in Inventory costing. Sterling Order Management System Software 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 Order Management System Software handles the receipt as described in Handling negative inventory balances.
- For parent items, on report of production, Sterling Order Management System Software publishes the change in inventory value for the financial application.
Work in process scenarios
The following illustrates how Sterling Order Management System Software 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 Order Management System Software,
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 Order Management System Software 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 Order Management System Software publishes
the information pertaining to the change in inventory value (used
for integration to financial applications).
Figure 1. Work in process scenario