Compiere offers the current Java and web technology platform , which is based on open architecture and standards, throughout its offering.Due to its open source nature, Compiere offers a flexible and transparent technology platform.Compiere provides a competitive licensing model up to large-scale Enterprise levels.

We will therefore describe Materials Management.In this article by Andries L Pretorius, author of Compiere 3 Implementation Guide we shall learn:

• Give you an overview of materials management in Compiere, including warehousing, product quantities, and moving inventory
• Describe how to set up the replenishment of a product
• Give you an understanding of costing and accounting principles
• Give you an overview of the standard reports and business reporting views available

(Read more interesting articles on Compiere  here.)

Material Management

Material management within Compiere focuses on the physical side of storing and tracking items that are defined as being physically stocked. Central to this is the warehouse and its locators, into which and from where products are received, moved or shipped. In this article we will deal with Compiere standard functionality. An advanced Warehouse Management module with additional features is also available.

Warehouse Overview

Warehouses belong to Organizations, and it is recommended that you have a one-to-one relationship if user security role access is an issue, because roles are organization specific. Warehouses can have multiple locators and one default locator is selected.

Warehouses and locators are set up through the Warehouse & Locators window:

On the Locator tab, the warehouse locators are defined as follows:

Adjusting Product Quantities

Product quantities are adjusted through the Physical Inventory and Internal Use inventory windows. Physical Inventory adjustments are made during inventory counts or ad hoc manual inventory quantity adjustments, while Internal Use Inventory adjustments are made when items are expensed directly to a specific charge account:

Physical Inventory Entry

Updating material item quantities is done through a physical inventory transaction.The book (system) values are updated to the applicable quantities counted, and the adjustment is passed to the product. An example of this would be for a product with a book quantity of 10 and a physical quantity of 20, where an adjustment of a positive quantity of 10 will be made. We shall demonstrate the process of quantity counting to perform a physical adjustment.

1. Preparing a quantity count is done through the Physical Inventory window:

   

2. Create a count list of a Product Category:

   

Note that you can also set the Inventory Count to Zero, which would indicate a blind count. The correct count quantities need to be updated for each product and location, and the Physical Inventory transaction completed to correct the stock quantities:

Internal Use Inventory

Internal use inventory transactions are used for where products are written off or expensed, and not necessarily sold or shipped to customers.

The transaction window Internal Use Inventory is completed for this purpose:

In the example illustrated below, the Product Quantity is charged to Marketing Expenses, based on its default Unit of Measure on the Internal Use Inventory line, as follows:

Moving Inventory

There are two reasons for moving inventory:

• External: Material Shipments to Customers and Material Receipts from Vendors.
• Internal: Internal Warehouse movements within the warehouse.

Movements between warehouses are also regarded as external and explicit. Material shipment and receipt documents need to be created as such (also refer to the Compiere concept or Counter Documents where, in such cases, explicit inter-organization counter transactions can be automatically created, if this has been set up).

Material Shipments to Customers

Shipments are processed with reference to the Sales Order control document. We have previously explained that shipments occur based on the shipping rules defined in the Sales Order. Manual shipments are processed when the Standard Order sales order document type is used.

Processing a manual shipment (Generate Shipment from Order) is done through the Generate Shipments (manual) window:

A shipment with lines linked to the Sales Order lines will be created for this customer. This shipment can then be printed as a delivery note:

The default printed shipment document will look like the example shown in the following screenshot:

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Material Receipts from Vendors

Material Receipt transactions adjust product quantities by entering inventory into the system. Materials must be received into a warehouse, and during this process they may not need a price. Ultimately, product Material Receipts need to be matched against Purchase Orders and Accounts Payable(AP) Invoices. Costing entries are not adjusted until the Material Receipts are matched to accounts payable invoices.

Material Receipt transactions are processed through the Material Receipt window as follows:

The Create lines from button provides the ability to create receipt lines from another document and create an automatic link to the originating document:

Material Receipt Lines created are based on this information:

Once the Material Receipt line is completed, the product items are adjusted to the warehouse and locator as specified for each line.

Internal Inventory Move

Inventory move transactions facilitate the internal movement of products between locators in a warehouse. These are entered through the Inventory Move window:

The Inventory Move Lines tab indicates the product line information:

Here, a product is moved from a Default Store Locator to an FP-1-1-1-2 locator. On completion of this document, the material transaction is created to move the items from one locator to the other.

Product Replenishment

Product replenishment is done through pre-defined criteria, during the replenishment run. The pre-defined criteria in Compiere are the following:

• Reorder below minimum level: Product items will be re-ordered to their maximum level if their stock on hand goes below the minimum quantity level.
• Maintain Maximum level: Product items are re-ordered to their maximum level on each replenishment run.
• Manual: Manually set the quantity to order.

The product replenishment criteria are defined through the Product window >Replenishment tab

Once the product's replenishment criteria have been defined, a replenishment run creates a replenishment report, and purchase orders to subsequently be raised.

The Stock Replenishment report menu item is selected as follows, in order to run the report and create the inventory move, purchase order, or requisition transaction:

The stock replenishment report would look something like the example shown in the following screenshot:

The user is by no means bound to the proposed replenishment quantity, and should the user choose to create a Replenishment document (Inventory Move, Purchase Order, or Requisition) the quantities can be changed because the document would be initially created in a drafted state.

Product Costing and Accounting

Products can be valued through various costing methods, including Average Invoice,Last PO, Last Invoice, Standard Costing, FiFo, LiFO, and Average PO. A Product's costing is only updated based on the matching process between Purchase Orders and/or Material Receipt and/or Accounts Payable Invoices, and depending on which costing method is required it will be calculated accordingly. A Purchase Order is not required for the Average Invoice, Last Invoice, Fifo, and Lifo costing methods.

A typical example of the Average Invoice costing method to be applied would mean that an AP Invoice has been matched to a material receipt for that product item.The Cost of Goods Sold accounting post entry value (in the Shipment (Customer) transaction) is thus dependent upon this product's cost having been created before the product has been sold.

Different costing methods may be used for different product categories. This is set up through the Product Category Accounting| window:

It is important to note that the Compiere system will give Posting Errors where a product is being used on a document but no costs have been defined (as a result of proper matching not being achieved, for instance).

You can display a product's costs through the Product Costs window:

Typical Accounting of product warehouse transactions

The normal accounting of a product using its current cost per costing method applicable would be as follows:

Basic Product Reports Available

Compiere provides various reports as standard in the system. Some highlighted reports would include:

• Product list: A list of the products in the system.
• Inventory Valuation report: This is a report showing the valuation of product items per warehouse, based on a price list and valuation date.
• Product Storage Detail: By warehouse and locator, where products are stored, and their relevant quantities.
• Product movement detail: What products were moved, from where and to where, in a warehouse. You can select these movements based on a bspecific movement type.
• Material Receipt Details: Details of a material receipt.
• Receipts not matched to invoices: List of receipts not matched to invoices.
• Shipment Details: Details of a shipment to a customer.

Product Info Window

The Product Info window is a handy quick reference to get an overview of a product's pricing and quantity availability per warehouse.

The Product Info window is accessed through the View Product| Info menu item:

You can search based on search key, name, UPC/EAN, SKU and warehouse. A product must have a price list defined in order to be viewed in this window.

Summary

We covered the following in this article:

• Material management principles, including how to create a warehouse,locators, and how to facilitate:

  • Product Quantity management including physical inventory and internal use inventory
  • Material Receipts into the warehouse
  • Material Shipments out of the warehouse
  • Inventory moves within the warehouse
• Description of the basic principle of product replenishment.
• Overview of costing methods and accounting principles
• Overview of basic reports available and the info view

If you have read this article you may be interested to view:

• Compiere 3 Implementation Guide[book]

• Overview of the Compiere Application Dictionary and its Components [article]

• Adding a Custom Field in Compiere 3 [article]

• Setting Up a Basic Document Workflow in Compiere 3 [article]

• Product Management with Compiere 3[article]

Compiere 3

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Published: June 2010
eBook Price: $26.99
Book Price: $44.99
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