Inventory Methods

Inventory Methods Available for Order Entry

ActiveApplications inventory and order entry applications have built in interface options called Inventory Methods. The inventory selection methods vary from the simple to the complex. The method you use can have tremendous impact on the value of ActiveApplications to your company. The purpose of this presentation is to explain the methods of inventory order tracking available so you can choose which methods provides your company the greatest benefit.

Your company and the needs you have will determine which method works for you. Also, as inventory methods get more complex you must be willing to allocate time for your inventory personnel to record the required information in the system. The best method may not work for your company if you do not have adequate resources to manage the information.  

Your UDS Sales or Support representative can be a valuable resource in assisting you to determine your most cost effective alternative. One method will not work for all companies. A method successfully and fully implemented in one company could fail miserably at another company even though the method is the same in both companies. Understanding why it will work for you will determine your success. 

The following methods are arranged in order of complexity and therefore resource requirements. The easiest to administer methods are listed first. The methods listed later may not mean you need to spend more time than you are currently spending. They do mean that you will be required to spend additional time controlling the process. The labor savings you receive from easier order fulfillment and the savings generated from increased order fill accuracy will offset the added inventory control labor costs.

 Method 1: Item Master Only Method (Do not use locations)

ActiveApplications has available two related inventory tables that the order entry application uses to find inventory. The first table is the Item Master table or Inventory Master Table (actual name is invendsc). It contains pricing, inventory descriptions, other basic item data and quantity. The other table divides the item master into smaller parts and is called the Inventory Location Table (actual name invenbal). The inventory balance table has cost, date, priority and quantity information. The total quantity in the master table should equal the total in all of the locations.

If your inventory is simple and you do not need to divide an item into different parts you can use the Item Master Only Method. This means you only fill in the master table information. The location table is hidden and no records are ever created for that table. If records exist in the inventory balance table they will cause confusing results.

If you need to track different costs of the same item, need to be able to pull from different physical locations, want to know where items can be found or need to assign availability dates to sections of an items inventory, you must use item location information.

You should use multiple locations for an item only if you must. Usually once locations are used they are used for all items even though it is not necessary to do so. One type of item could have locations while another type might not.

This method eventually falls apart as a company gets larger or specialized ordering for customer sales is used. Many landscape companies do not need multiple locations for an item.

Method 2: Specific Location Ordering at time of order.

When a customer order is placed for an item that has more than one location, order entry reserves the inventory for that customer. Another way of saying that is to place the item on order. This means you will select the item information then select the location you wish to pull the item from.

This allows the order entry person to tell order pick personnel which bin, bench, or field to use in filling this order when it ships. This lets the order entry person control the order fulfillment process. This method locks the inventory location to the order line at the time ordered. This method works best when there is a short period of time between when an order is entered and when it is picked for shipment to the customer. This works only if you know that you are going to ship that particular inventory to that customer.

This method gives you a way to track the same item that exists in more than one physical spot. This method works for First In First Out inventory fulfillment scenarios, too.

This is simple to use within ActiveApplications. It requires only one additional mouse click when ordering or invoicing a customer. It simplifies order fulfillment because the location of the item selected is known and the pick list displays that location for the order picking personnel. The additional labor it takes to add locations is minimal and it virtually maintains itself during operation. It also provides a tremendous benefit when taking physical inventories. This method is far superior to Method 1 if your inventory is at all complex.

Many software packages are content to lead with this method of order allocation. Although it sounds simple to use it gets complex in real life. If inventory gets moved between the time it is ordered and the time the order ships it creates fulfillment headaches. If inventory dies or the order entry person is not familiar with the inventory or the company location selection rules, it can lead to miss filled orders. The substitute location process places a burden on the fulfillment personnel you may find difficult to manage. It makes training of new or temporary order entry personnel more difficult.

Within ActiveApplications when inventory is moved you must apply the move to orders through the Location Quantity Move program. The program is simple to use but the inventory personnel must inform the system when they move an item and it must be applied to the orders properly. If not properly maintained inventory quantities are driven negative in the original location and it looks like you have inventory available in another location even though it has been shipped. The master quantity information will remain unchanged and be accurate but orders could be placed against inventory that is not there.

This creates a management issue that must be controlled.   The time spent managing the inventory is well worth the added benefits of this method but ActiveApplications has a better solution.

In many cases there may be other methods that will work better for your company. These methods might more accurately reflect the complex nature of your order entry processes. Consider using the following method.

Method 3: Dated Inventory:

The logic of using dated inventory was developed to avoid the difficulty of maintaining the direct connection between the order line and specific inventory locations. This method is easier to administer and adds flexibility to the fulfillment process.

Each inventory location has a two field that become very important when using this method. The first is a one character sort sequence. The second field is a six character field called the inventory location date or the available date. Dates are in YYMMDD format. This means that multiple batches of inventory can be in the same physical location but be different by the date assigned to them.

The days before and after must be filled must have values in the control file. This sets a number of days before and after the order ship date to use in filling an order. The system automatically selects the “best” date from the inventory locations available when an item is selected. The location selected is the one that has the closest date to the order ship date within the date range. It will also pull automatically from multiple locations that meet the date limit criteria. This means that you will not select a specific inventory location when ordering material. ActiveApplications makes it easy because you simply select the item to ship from the item view, key a quantity then the system does the rest.

It also means when shipping material the “best” material available at the time can be specified and changed easily through the use of the sort sequence field. The system will automatically invoice the A material before the B, C, D…Z material. The shipping of the material and the ordering of material are separate processes. The ordered material is against the best date. The shipping material is against the best available at the time of shipment.

This method is great for several reasons. The order process is easier because the order entry personnel do not have to know which inventory to ship at the time of order. The person placing the order does not have to know as much about the inventory.

An added benefit is that when moving inventory the order line does not have to be moved when the material is moved. It makes the moving in inventory significantly less complicated and time consuming. You are moving the on hand and on order inventory quantity only. You do not move the location specified on the order line because there is none. It will say “X” or master as the location for the order line. 

If you use dated inventory and want to know how much is available you will not be able to look at individual inventory locations to determine the inventory truly available in each location. You must only look at the total available quantity in the item master table. It will hold the total available for all of the locations. This is particularly true when you begin shipping material.

This example of the Dated Inventory Method may help illustrate the complexity and power of this method.

Positive Aspects of the dated inventory method

Recording orders with dated locations makes the selection of inventory for orders much easier for the order taker. The ordering by availability date logic helps you to control your business but it can appear confusing when applied to the complex situations you may have to deal with.

The dated inventory with sort sequence shipping lets the inventory person make inventory available when it is ready. It helps the order entry person simplify the selection process. The inventory personnel can manage inventory by adjusting the sort sequences within the locations. Pick lists will automatically show the best locations available at the order pick time.

It also minimizes the amount of work that must be done when inventory is moved from place to place in the nursery. Since the order lines are not tied directly to the inventory locations the item locations can be moved easily within the system. The difficulty of moving locations is the biggest weakness in ordering against inventory locations.

It also automatically makes the best inventory available when an order is cancelled. The means a cancelled orders inventory will be made available closest to the desired ship date.

Negative Aspects of the dated inventory method

Several dangers are inherent in the use of this method. The first is that if you override the quantity confirmed for orders the system will not be able to determine availability by date. Therefore the availability information will not be correct and it will not be reconcilable because the system does not know which location an order line was placed against.

The second is that you must use a single method when ordering an item. It will not work to order an item by date one time then order by location the next. The date logic and sort sequence fulfillment logic will not keep the two types of orders separate. You can use the two methods simultaneously but NEVER use the two methods on a single item.

Third it also can make the location inventories seem to be more confusing if you look at availability by location. Your business must decide to look at on hand quantities rather than the available quantities to manage inventory locations.

Fourth, order fulfillment difficulties can occur due to the inexact relationship between the available date, ordered quantity, and inventory location on hand quantity. Some times due to the limits of the date range and the systems use of the best possible date logic, an order line will not be filled when using extreme date logic could fill it. This means that the system will fill each order with the best available inventory at the time the order is entered. It will not try to maximize the spread of all the inventory locations to all the orders.

Fifth, if you do not put in an order ship date before recording lines, the results will be unpredictable. The order lines must be deleted from the order and reentered after a ship date is entered. If a line is entered before a ship date is added then a ship date is added before the line is deleted the resulting reservation of inventory will be erroneous. The reason it is not correct is because it will be using different logic to add and delete the same line.

Mixing dated inventory and location selection methods on a single item is not possible. Both methods can be used in order entry but the order taker must know what method to use with each item. This places a tremendous burden on all of the people taking orders. If one of them uses different methods for the other order takers the results will be inaccurate and not traceable.

This method works best when the time span between when the pick list is printed and the order is invoiced is a minimum. The longer that time range is means the greater the possibility of printing an empty location on a pick list.

With these cautions in mind this method works in situations where specific inventory is not reserved for an order. Trees and some nursery stock orders may not fit well into this method. Frequently trees are ordered against particular inventory and this method does not support that process. Bedding plants and perennials work best with this method.

The time to administer this method is less than in Method 2 because the duties of order selection and fulfillment are separated. This method, where it fits, makes your processes greatly more productive. This method allows you to take the first step toward inventory planning and availability control.

As productive as this method is ActiveApplications has methods that may be better for your company.

Method 4: Inventory Grading – ActiveApplications SQL Version only

Inherent in Method 3 is the requirement that the quality is consistent at the time of shipment between the items shipped. Method 2 is a little more flexible because ActiveApplications has a quality code that can be used by order entry personnel to assign inventory qualities to the customer. Too much flexibility is available to the order taker and quality can become a customer satisfaction issue if the wrong quality is assigned to a customer. Graded inventory is a method designed to alleviate the limitations of the other methods.

Inventory grading is a way of classifying inventory that is not consistent in appearance. The difference could be size or fullness or shape or any other characteristic that makes one plant different from another.

The one character field can be a letter or number assigned to the plant material. The grading table can have multiple records for each record in the inventory location table. Only items that have locations can be graded. The total graded should logically be less than the quantity on hand in the location but it is not required. The code assigned to the inventory represents the quality. Also a customer is assigned inventory grade codes that are acceptable to them. The order of the codes in the customer grade field is important because the first character will be selected from the graded locations before the second character. If the Grade Codes are ABC then the A grade inventory will be selected before the B inventory. If there are no A or B or C inventory grades but there are D, 7, 8 and 9 grades available the order for that item will not be filled because the customer grades are specified at A, B or C.

This method allows you to subdivide an item location into multiple divisions for order fulfillment purposes but still maintain the fewest number of locations to manage. Inventory personnel find it easier to maintain a crop as group while order takers get an easy way to record orders. Grading allows for easy changing of a location grades while a product matures.

This method works best when the customer is ordering shortly before shipping. The order is assigned to a single location at the time it is ordered automatically through the grade system. This method produces a line similar to a Method 2 order because it is assigned to a particular location.

The item location grading method can be used in conjunction with the other inventory order assignment methods. This allows some items to be graded and others not. Inventory grading can be used with any of the other method to fill lines on the order.

Some additional effort is required to grade the inventory locations but the reward can be the right material available to the right customer. The justification for this extra effort is found in the ability to move some of a crop sooner to the customer that will take it at a lower grade (Landscape Companies). It also improves customer satisfaction because the best material goes to the customer (Retail Companies) that requires it.

Summary

When taking orders the most difficult thing to do is to determine what inventory (crop) to sell for each order. Order size, future availability, location of the field it is grown in, ship date, item availability date, specific customer requirements, shipping requirements, inventory quality and many other things can be factors in the order taking process. ActiveApplications lets you choose your method of filling orders. Which method you use is determined by your needs and customer requirements. These methods give you more tools to control the process.

These methods add extra dimensions to the ActiveApplications inventory control and planning process. To really control your production process an additional application is required. That application is called Production Planning. Refer to other ActiveApplications documentation on this application to further your knowledge of how UDS can provide control of your business.