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ERP Inventory Management - MM Module.  Material Management.

Contact Jyotindra Zaveri for ERP consultancy and training, any ERP.

Over 100 ERP implementation, especially manufacturing ERP.

  • Inventory Management module optimizes all purchasing processes with the workflow driven processing functions, enables automated procurement and storing with accurate inventory management, and integrates purchase accounting as well as quality check of material at the time of receiving the same in the stores.

  • ERP gives real-time inventory report quickly for JIT (Just-In-Time) inventory management.

  • In a manufacturing company that is in the early stages of their ERP project, obtaining a 95% or higher IRA (Inventory Record Accuracy) number is a tedious, but absolutely necessary task.

  • Inventory Management module optimizes all purchasing processes with the workflow driven processing functions, enables automated procurement and storing with accurate inventory management, and integrates purchase accounting as well as quality check of material at the time of receiving the same in the stores. ERP gives real-time inventory report quickly for JIT (Just-In-Time) inventory management.  In a manufacturing company that is in the early stages of their ERP project, obtaining a 95% or higher IRA (Inventory Record Accuracy) number is a tedious, but absolutely necessary task.

1.1. Inventory Master.  Item Master

  • Audit Trail: The name of the person who created the item in item master is captured along with date of creation. The same can be seen in the item list.

  • Master database-containing information about all kinds of material.

  • Enter items in the item master.

1. Bought out items, raw material, consumables, spares, etc. Items which are supplied by vendors
2. Sub-assemblies, semi-finished goods, factory made item, etc. This includes items that are received from third party.
3. Finished Goods, (product which usually appears in the sales invoice).

  • Everyone in the organization must call any material (item) by the same name (nomenclature). Proper classification or categorization of material is very important in the ERP. This discipline helps in getting useful MIS (Management Information System) reports. Access / secret password to prepare the item master should be restricted to two people only, to ensure correct grouping of items. 

  • In ERP it is not necessary to give numerical item code per se. However, if user wishes to give item code there is no restriction. Item code once given cannot be changed. Item code is nothing but a short name of the item. Item description is long name of an item. Item description can be edited later – but NOT the item code. Select the main category of the item carefully. It is advisable to restrict number of category of items. This is a one time setting and should be restricted to experience person only.

  • 1.1.2. Main Location Master.

  • 1.1.3. Location concept.

  • Any material movement is always with respect to an inventory location that is defined in the location and sub-location master database.
    1.1.4. Sub Location Master                                              
    Example:
    Sub-contractor is also an inventory location.
    1.1.5. Item Category Master                                                 
    User can create a new product category by clicking the New button and typing the New category in the Product category description text box. This is linked to GL account.
    1.1.6. Add Item Sub Category                                   
     User can create a new product sub category "sub category"  by clicking the new button, selecting the Product category under which the user wants to create a sub category, and typing the new sub category in the Sub category description text box.
     1.1.7. Item Sub Group                                                     
     User can further add a sub-group for a given sub-category.
    1.1.8. Just in Time Inventory control settings
     There are important flags [tick mark] provided on the Item sub-category master. 
    1.1.8.1. Excess received % (percentage)                                  
     "When material is received, the PO quantity is defaulted automatically. The stores person cannot receive quantity exceeding PO quantity. However, for some item it may not be practically possible for vendor to supply the exact quantity. When ticked, ERP will allow excess by percentage that is defined for a given sub-category.
    1.1.8.2. QC Required flag                                                              
     If tick (true) then item will be first received in Hold then will be transferred to stores after QC is done; else (if not tick) item can be directly received in stores.
     1.1.8.3. Depreciation applicable                                          
    Tick for capital goods to avail depreciation.
     1.1.8.4. Activate serial number                                                 
    When ticked, ERP will keep track of Serial number of the item. (Not applicable).
    1.1.9. U.O.M. (Unit of Measurement) Master                    
    It displays various units of measurement, which are regularly used. E.g. Kg, Each, Pair, Set, etc. This is ‘accounting unit’ required while creating item master.
     1.2. Inventory Transactions
    1.2.1. Goods Receipt Note (GRN)  
    Purpose: Goods Receipt Note "Purchase Voucher"  is used when material is received in the stores. PO is a parent document to make a GRN. User will select vendor name. All pending PO will default automatically. User will enter Quantity information and save the GRN. This document is active document. In ERP, user does not have to enter documents twice. Excisable purchase transaction will also record excise related information.
     In legacy parlance, this transaction is sometime called goods inward.
     In ERP the GIN is prepared for material received from the sub-contractor "Third Party" . ERP distinguishes the material received from Vendor "Vendor"  and sub-contractor, because sub-contractor material is actually our own item received in a new shape and / or size, after processing (or assembly).
     Goods Receipt Note "Purchase Voucher"  cum Goods Inward transactions does the following:
    1. GRN will add material into stock (Hold location or material under inspection location).
    2. Credit the vendor .
    3. QC inspector / Quality Assurance can reopen GRN and enter accepted quantity – this will automatically add item into main stores and if item is rejected, add into Rejection Location.
    4. Prepares short quantity debit note based on Challan quantity and received quantity.
    5. Excise update button is given, here the excise person opens the document and enters the CenVAT amount, Cess amount and S. H. Cess amount and clicks the Excise update button. This will automatically update the CenVAT Credit Input register.
    6. In Item level GRN there is facility to add Agents Name when user chooses the agent
    7. In item level GRN facility to add Agent Bill No in GRN
    8. Account passed procedure is for accountant control.
    9. Short quantity debit note "Short quantity debit note" :
    ERP will raise a debit note (automatically generated), in case received quantity "received quantity"  is less than challan quantity "challan quantity" . Debit supplier and credit the purchase account.
    10. When QC person opens the GRN (or GIN) and enters the accepted quantity:  ERP will change and print remark below QC Done "QC Done"  (changed from QC pending "QC pending" ).  When the material is rejected, the credit posting in the creditor ledger "creditor ledger"  (vendor ledger) shows full credit as per the total bill amount. Therefore, an additional Account remark should be printed:  ‘Raise debit for Rs. nnnnn, against rejection’.  This remark also will be printed in creditor ledger – particular column.
     11. Account person will open this GRN again and approve the same by clicking ‘Account approved’ button. Until then, the GRN will be with remark ‘Account Pending’.  Once the accountant saves the GRN, the remark will change to ‘account approved "account approved" ’.
     See a column in Creditor Ledger ‘ACCOUNTANT’ - ERP will pint ‘OK’ if GRN (or GIN) is approved else by default ‘PENDING’ under this column.

  • 1.2.2.       Stock Transfer Challan (STC)                          
     STC is used to transfer material from one location to another. This does not consume material. User will select from location and to location.  Material is transferred using the stock transfer challan (STC), from stores to shop floor as per the Bill of Materials. STC is linked to the work order.
     1.3.    Stock Transfer Challan with W/O (STC):             
    If user is issuing more material than the required material then it displays a passive message for the same.
    1.4.7.   Item Master List
     There are three kinds of items:
     i. Raw Material / bought out items, consumables, spares.
    ii. Semi-Finished Goods (SFG), sub assemblies, WIP.
    iii. Finished Goods (Final product).

  • List of all inventory items. User can prepare this category wise or sub-category wise. User can select required field (data) by ticking tick box. The report can be automatically saved, instantly, as an MS Excel Sheet.

  • From legacy data, prepare three item lists, print and endorse in the beginning. Thereafter, new item can be added by only authorized person (only two or three people is given the password).

 

Material Management video lecture by Prof Jyotindra Zaveri

 

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