Projects:Referenced Inventory/Functional Specification
My Project - Functional Specifications
Referenced Inventory is the preferred way to deal with variable inventory quantities, also known as Catch Weight Management because it typically happens for items that have both Weight and (some kind of) unit, like each, bag or pallet, as unit of measure.
The purpose of the Reference# is to uniquely identify “an object” in a Whse to facilitate identification and movements. This object can be a single product or it can be a multiple-product grouping (pallet). The Reference# as such is only relevant when these products are inside the company/warehouse and in no means have value for the end-customer, like lot- or serialnumbers have.
Referenced Inventory allows to see the average or typical weight of the item and the actual weight of the specific unit. This difference becomes relevant only when each unit of the inventory is of a (slightly) different quantity and the company values this difference to have it registered.
The scope is to implement Referenced Inventory basics, an gradually expand until all business processes use it. Specific functionality for multiple-product objects are not in the scope.
A good way to see the dynamics of referenced inventory is when we recognize this as a typical complexity in the process manufacturing industry. Where its counterpart, the discrete manufacturing industry deals with BOMs, assembly of components and discrete units, the process manufacturing industry deals with ingredients, bulk-materials and formulas.
As used in the Process Industry
Referenced Inventory is typical for the process manufacturing industry:
- For processed products, the BaseUM of any material should be a so-called fundamental unit. Let’s take mass (KG, in the metric system) for timber (or cheese).
- Then they also can have one or more alternate UM and each of these has a UoM-conversion to the BaseUM:
- Unit – for inventory and sales purposes -> 1 unit = 2,5 KG
- (note that each product has different sizes or base-material and as such different UoM-conversions).
- Pack (a packed multiple of unit) -> 1 pack = 10 kg (4 units)
- Pallet – for warehousing purposes -> 1 pallet = 500 KG (200 units or 50 packs)
Now we know for fact that each unit is not exactly 2,5 KG: If we would show enough decimals (and have proper measuring equipment), we would eventually see a digit different than 0. Consequently, a pack or pallet is also not exactly 10 or 500 KG... The business-question here is: "How relevant is this and do we want-or-need to record this in our system?"
- For products where the base material is a commodity* (both cheap and not regulated) it is advisable -unless other business parameters decide otherways- to treat these conversions as typical or standard conversion deviations and not register the individually procuded units in inventory. Obviously there will be deviations, but for a prpoer inventory accounting these could be controlled by a frequent inventory count in both raw materials and finished goods.
- When the base material is not cheap or it is regulated by law (f.i. we produce gold bars or medicine…) then there is a desire or requirement to register each individual processed unit in inventory, and with that the -slight but important- difference in BaseUM (weight in our example). This is not a UoM-conversion issue but an inventory issue! And so in this case we would mark the inventory record with a unique REFERENCE number that identifies that specific gold bar.
See below an example of REFERENCED inventory of three GOLD BARs from the same batch (XYZ) but each have a slightly different weight. When we scan the REFERENCE 12345678, we know that we are transacting that specific gold bar, that is stored in SAFE-1 and has Lotnumber XYZ and weighs 1,00391 KG.
And here an example of NOT-REFERENCED inventory of 4000 KG of timber of 20*80*4 cm.
From the perspective of the finance dept. there is 4000 KG of timber. From the perspective of the warehouse, there are 8 pallets. And from the perspective of the sales dept. there are either 1600 units or 400 packs. These are just different visualizations where all visualizations -obviously- accumulate to the same quantity, measured in BUM.
As used for Multiple-product grouping in Warehousing
As described earlier, Reference# are given upon creation of the inventory, and when relevant. The Reference# is an unique number and as result, all (relevant) single objects are uniquely identifiably when created.
An additional use of the Reference# is to identify an object that consists of multiple products, typically a pallet that has been created as result of a picking process and is to travel as complete object to the next stage, either customer shipping or production. The process for that is to constitute a new reference and add the single objects to it. In that process, the single object will adopt the Reference# of the newly constituted object (pallet). See below an example of a multi-product pallet that share the same reference number.
|CHEESE OLD AMSTERDAM||SHIPDOCK-X||ABC||66778899||51,99024|
Note that the total weight per lot is the sum of the individual single objects (cheeses).