1 (edited by aleifuuwork 07/31/2019 02:53:12 am)

Topic: [separate, but related to current IR bug] zero inventory adjustment

Ok, firstly I'm not sure wether this should go to Bug Reporting or New Feature request
as what I'm bumped into is a bit of both. This would surely also still touch on the current
inventory valuation report bug that it's currently going on in 2.4.3 and maybe still an issue for
2.4.4+


In our manufacturing industry, it's normal to account for loss material when it comes
to inventory valuation, for example when we want to create a 100 kg of finished good,
there may be coming from a 110kg of raw material

The keyword is 'may be', as we won't know the actual loss material value until the process
finish or when period ends

Hence 
110 kg raw material = 100 kg finished good + (assumed) 10 kg loss material

My industry is unique, in the sense that most of those (assumed) 10 kg loss material can
be used again for next process.

After operators sorted it, it's found that 8kg of the (assumed) 10kg loss material can
actually be reused for next process leaving only 2kg of real loss


How do I facilitate these scenario into FA ?


Steps to produce
-------------------
0. Create raw item, simply called 'raw item'
1. Create manufacturable item 'finished item'
2. Having BOM as follow

   1.10 raw item for each 1 kg finished item

3. This way, it's assumed all 1.10 raw item are exhausted to make 1kg 
4. Apparently 8 of the 10 assumed lost material can be used again ! but these 8kg values have been reduced
   to ZERO since I have exhausted them ahead
5. How do I put these these-now-worth-ZERO 8kg back to raw item stock ?



Option 5a --> actually my first preference, but apparently will need some changes to algorithm behind it
---------
a. inventory adjustment to record additional raw item qith qty=8kg and unit_cost=0

this operation is not currently possible because the algorithm will treat unit_cost as not 0, but as null,
hence it will take value from purchase_cost instead

class line_item
{
    var $stock_id;
    var $item_description;
    var $units;
    var $mb_flag;

    var $quantity;
    var $price;
    var $standard_cost;

    function __construct($stock_id, $qty, $standard_cost=null, $description=null)
    {
        $item_row = get_item($stock_id);

        if ($item_row == null)
            display_error("invalid item added to order : $stock_id", "");

        $this->mb_flag = $item_row["mb_flag"];
        $this->units = $item_row["units"];

        if ($description == null)
            $this->item_description = $item_row["description"];
        else
            $this->item_description = $description;

        //[FIX/SUGGESTION] to separate a 0 $standard_cost vs other null $standard_cost
        /*
        if ($standard_cost == 0 )
            $this->standard_cost = 0;
        */
        
        if ($standard_cost == null)
            $this->standard_cost = $item_row["purchase_cost"];
        else
            $this->standard_cost = $standard_cost;

        $this->stock_id = $stock_id;
        $this->quantity = $qty;
        //$this->price = $price;
        $this->price = 0;
    }
}

I did try to hard-code and set $standard_cost=0 and posted

The result that follows are
1. raw item stock qty adjusted correctly
2. raw item value adjusted to figures that is just wrong ( it was inflated if i am not mistaken )
3. no GL is produced for this transaction --> i'm not so sure why ?, maybe the current logic is not to produce GL if any transaction is having no value. maybe someone senior can have more information further on this


Option 5b --> my current workaround until IA issue resolved
---------
a. Simply create a new supplier 'internal_supplier'
b. create purchase order / direct invoice with item raw_material qty=8kg and price=0
c. This, so far it adds the raw material stock correctly
d. The IR report also showing correct figures, so is CIMR

innovation-driven technology

Re: [separate, but related to current IR bug] zero inventory adjustment

Make the re-usable leftover 8 Kgs as another output product!

Re: [separate, but related to current IR bug] zero inventory adjustment

@apmuthu : how ?

Just so that we are in the same page


START BALANCES
--------------------
You start with these balances

raw material : 250 kg
finished product : 0 kg

your BOM is set so that 1 kg finished product use up 1.10 kg raw material assuming


PROCESS
-----------

You take 110 kg out from raw material stock ( 250 kg - 110 kg = 140 kg )

input   : raw material used = 110 kg
output : finished product = 100 kg + 10 kg of material X ( usually lost )

But 8 kg of these 10 kg X material actually can be used back or added back straight to raw material stock ( so 140 kg + 8 kg ) for next process

Leaving 8 kg reusable and 10 - 8 kg = 2 kg scrap

Remember, all these 8 kg having ZERO value as its value have been exhausted ahead

ENDING BALANCE
--------------------

raw material : 148 kg
finished product : 100 kg
lost material/scrap : 2 kg


I don't need FA to track lost material / scrap . I just need correct way to put these 8 kg back to raw material stock in FA for the sake of reporting . As my first try with positive inventory adjustment 8kg ZERO value leads to bug / incorrect behaviour, so here I am posting

Or maybe someone can help how in accounting these 8 kg reusable goods are treated in the book ?

innovation-driven technology

Re: [separate, but related to current IR bug] zero inventory adjustment

The accounts do not need to show that this 8kg was ever used in the 1st place

BOM is set so that 1 kg finished product use up 1.02 kg raw material

input   : raw material used = 102 kg
output : finished product = 100 kg + 2 kg of material X ( usually lost )

5 (edited by aleifuuwork 08/05/2019 05:11:41 am)

Re: [separate, but related to current IR bug] zero inventory adjustment

Thanks @poncho1234,

Let's say we produce 3 orders of finished product

Assuming each time we manufacture it we will take 110 kg from raw material no matter what => producing a 100 kg finished product

Now these 3 orders execution could go like the following

1)
start balance
raw material  : 500 kg

- You take 110 kg raw material from warehouse => 100 kg finished product + X material
- upon inspection 8 kg of X is usable and rest is material lost

ending balance
raw material : 500 - 110 + 8 kg back = 398 kg


2)
start balance
raw material  : 398 kg

- You take 110 kg raw material from warehouse => 100 kg finished product + X material
- upon inspection 5 kg of X is usable and rest is material lost

ending balance
raw material : 398 - 110 + 5 kg back = 293 kg


3)
start balance
raw material  : 293 kg

- You take 110 kg raw material from warehouse => 100 kg finished product + X material
- upon inspection 6 kg of X is usable and rest is material lost

ending balance
raw material : 293 - 110 + 6 kg back = 189 kg


What I meant is that in each of the orders, usable X could be 8 kg or 5kg or 6 kg. You will never know until end of execution

I'm pretty sure there should be way smart enough to NOT adjust BOM every time you want to create each finished product, in which there will be thousands transactions in real-life

There are usually only 2 ways to go about it

a. exhaust ahead and adjust back by the end of process if you over-exhaust value
b. exhaust minimally and adjust whenever required to closely match the physical stock
c. well, i was hoping someone experienced could advise how to go about this

I would opt to for a) because it's simpler operation out of the two. but apparently FA Inventory Adjustment Reporting are misbehaving if I put zero value ram material. the internal database material_cost seems to be correct, just the IR reporting and valuation wrong

innovation-driven technology

6 (edited by poncho1234 08/05/2019 03:45:29 pm)

Re: [separate, but related to current IR bug] zero inventory adjustment

Manufacture's and large organizations use 'Management accounting' along side their regular accounts to help manage and control operations.

Have a google for 'Management accounting in manufacturing'.

What may help you:-
Set up the BOM to reflect the average wastage over say 10 runs - lets say 5% - This is called the 'Standard wastage'. You can fine tune this later as you get more data.

In your management accounts you record the wastage from each production run as a 'variance':-
(each batch is say 100kg)
Week 1 production
Batch 1: 7Kg (+2)
Batch 2: 8kg (+3)
Batch 3: 4kg (-1)
Batch 4: 2kg (-3)

Total Weeks wastage 21kg against a standard wastage of 20kg(4 x 100 x 5%)

Now your accounts already show the 20kg of standard wastage, all you need to do is make an inventory adjustment +/-. (If negative this write off needs to be reflected in your selling price)

You can do this over what time period you want, weekly is normal for collecting the data, and the write off normally occurs on a monthly basis; but whatever works for your business is fine.

In a manufacturing environment have weekly/monthly stock counts of all components and you would hold weekly investigations for any variances outside norm. This helps keep wastage low. (You may initially think that the important batch's to investigate are 1 & 2 above where the actual wastage is above standard wastage; but by investigating batch 4 above you have an opportunity to reduce all batch's to -3kg by copying what happened during that production run)

Production employees can record actual wastage on a form or in a smaller manufacturing environment the actual works order which would then be returned.

I know of no way to use FA for management accounting, a simple spreadsheet should suffice.

Re: [separate, but related to current IR bug] zero inventory adjustment

Thanks @poncho1234,

That should suffice for my study and hopefully comes out with ways to better manage wastage etc /w or /wo FA

Was hoping with one integrated system, like FA though

innovation-driven technology

8 (edited by poncho1234 08/05/2019 02:40:35 pm)

Re: [separate, but related to current IR bug] zero inventory adjustment

I've worked in several large organizations where the system in post #6 was used very successfully for years. Now days they are using systems like SAP; if you can afford SAP then your company is doing very well! FA on the other hand is a lot cheaper

9 (edited by aleifuuwork 08/05/2019 03:26:26 pm)

Re: [separate, but related to current IR bug] zero inventory adjustment

I stay away from SAP and Oracle lol

IMHO too much learning curve and expensive / inflexible and require a lot more knowledge transfer and needed certain level of human capital to operate that is much lacking here

It's only when your company / organization / process mature enough then you may be getting some benefit from it

but yeah, this is just my 2 cents for it

innovation-driven technology

Re: [separate, but related to current IR bug] zero inventory adjustment

Abbreviations.com has some nice elaborations (just in jest only):
ORACLE: One Rich A** Called Larry Ellison
SAP: Slow and Painful
MICROSOFT: My Incredible Computer Runs Oddly So Oust Forged Trash

Using above may be like using a hammer to swat a fly/ant in most cases. That's where FA scores - with KISS technologies and gratis indeed. Some things are better than what money can buy and FA seeks to be the numero uno here.