SC30 - Inventory for Supply Chain 201

1. SC30 - Inventory for Supply Chain 201 Thomas W. Blaisdell Microsoft Corporation

2. Agenda - Inventory for Supply Chain • Item Charges – Purpose and process • Landed Costs for Purchased inventory or Transferred Quantity • Landed Cost for paid freight on Sales to customers • Sales Price Adjustments • Purchase Price Adjustments

3. Financial Accounting Standards • Cost or Value of Inventory includes: • Direct cost of the purchased inventory • Additional Direct Cost – landed cost • Definition: The total cost of a landed shipment of inventory, which includes freight, insurance, custom duties, tariffs, crating costs, handling fees, and other costs to bring inventory to the port of destination. • Allocated Indirect Cost – full absorption costing • Administrative and other cost allocation • Allocated Lighting, rent, salaries, and other cost to manage inventory • Manage through Overhead Rate and Indirect Cost Percentage

4. The Dynamics NAV Solution:Landed cost = Item Charges The Purpose • Primary: • to facilitate landed cost assignment for Purchase, Sales, and Transfer receipt and shipment transactions • Secondary: • Account for allowances, service fees, and other changes to cost or price. • Price adjustments at the Sale or Purchase level • Correct erroneous value postings • Directly record value adjustment • Alternative to reversing and re-posting the transaction

5. The Dynamics NAV Solution:Item Charges The Process • Where can Item Charges be used? • Landed cost on the original Order • Landed cost from a separate freight Invoice • Purchase Invoice/Credit Memo and Sales Invoice/Credit Memo for cost and sales price adjustments • How is the process handled? • Line Type of ‘Charge (Item)’ on the Document Line • Item Charge Assignment Window • Access to current document lines • Access to all historical posted document lines • Includes Purchase Receipts, Sales Shipment, Transfer Receipts, Sales Return Receipts, Purchase Return Shipments

6. Item Charge Usage Example #1A – Purchase Item Charge for Landed cost Purchase Order for an Item with an Item Charge on same document Item Charge assigned to PO Line Item through the Item Charge Assignment window.

7. Item Charge Usage Example #1B – Purchase Item Charge on separate Purchase Invoice

8. Item Charge Usage Example #1B – Purchase Item Charge on separate PIItem Charge Assignment – Get Document Lines

9. Item Charge Usage Example #1B – Purchase Item Charge on separate PIItem Charge – Suggest Item Charge Assignment

10. Item Ledger and Value EntriesItem Charge for Purchase Freight After posting the Purchase Invoice with the Item Charge assignment, an additional Value Entry is created.

11. NAV 2009 and Item Charges Demo #1 – Purchase Item Charge for Landed cost

12. Item Charges for Sales Shipment Purpose: • To account for all direct costs that affect profit and cost calculations • The Cost is not included in inventory cost because it deals with items already posted out of inventory as a period cost allocation. • For example: • Freight-out costs for Sales Order or Purchase Return Shipping • Insurance costs on shipment of Sales Orders or Purchase Returns

13. Item Charge UsageExample #2 - Non-Inventoriable Costs Create a Purchase Invoice for Freight paid on a Sales Order. (Cronus pays the freight on the sale to its customer.)Item charge assigned to Sales Shipment under Line, Item Charge Assignment. Function – Get Sales Shipment Lines

14. Non-Inventoriable Cost on Sales Shipment The Purchase Invoice with the Item Charge assignment to the Shipment results in Non-Inventoriable cost posting

15. Item Card and Statistics - FIFO Test Item The Item Charge posting for non-inventoried cost has no effect on Inventory Average Cost or Unit Cost. The non-inventoried cost is reflected on the Item Statistics.

16. NAV 2009 and Item Charges Demo of Ex. #2 – Purchase Item Charge for Sales shipment cost

17. Item Charges - AllowanceAccounting for Sales and Purchase Adjustments without affecting Inventory Quantity Purpose: • To account for Credit against Sales or Purchase Invoice where Inventory is not returned • Examples • Sales Allowance posted against Sales Invoice due to damage during shipping or goods shipped didn’t fully meet requirement. Item is still usable, but customer wants compensation for damages. This reduces the Gross Proceeds on the original Sale and impacts profitability. • Purchase Allowance issued by Vendor for incorrect specifications on an Inventory Item or different size or color than requested. We request compensation and will retain the inventory, so reduction in Item cost is required.

18. Item Charge UsageExample #3 – Sales Allowance Record a Sales Credit(Example: Customer didn’t get the special feature they ordered. Decision is made to keep the Item and get a credit against the price.)Line - Item Charge AssignmentFunction – Get Shipment LinesAssign credit to the sale.

19. Item Ledger and Value Entries after Sales Allowance. The Sale Entry in the Item Ledger and Value Entries reflects the Sales Credit Memo posting effect. The Item Charge assignment to the Shipment for the Sales Allowance results in a reduction in Sales Amount (Actual).

20. NAV 2009 and Item Charges Demo #3 – Sales Allowances

21. Item Charge UsageExample #4 – Purchase Allowance Record a Purchase Credit Memo for a $25.00 per Unit for adjustment to the Purchase Invoice cost. Actions > Functions > Get Receipt Lines. Assign credit to the purchase receipts.

22. Item Ledger and Value Entries after Purchase Allowance.

23. NAV 2009 and Item Charges Demo #4 – Purchase Allowance

24. Item Charges – Additional topics • Expected Cost Posting • Not considered for Item Charges – only actual invoiced cost recorded • Item Charges must be applied to Receipt or Shipment ILE • Cannot post Order – Invoicing without ILE posted • Item Charges and Dimension Same Code • Private Hotfix Available.

25. What we’ve seen • The flexibility of Item Charges • The use of Item Charges for managing landed costs for purchased and sold inventory. • The management of price and cost adjustments using Item Charges

26. Thomas W. BlaisdellMicrosoft CorporationThomas.Blaisdell@Microsoft.com Thank You for Attending the NAVUG Forum 2010! Please remember to fill out your session evaluation form.