we are in the middle of implementing ax 2012 for out production site (4 in Europe).
One of the issues is how to model transferring goods from RM warehouse to the production floor.
The production manager want to use a transfer like mechanism to accomplish this.
Whereas the financial manager says: when goods are sent from the RM warehouse, I consider this as WIP.
The problem is that the raw materials are going in bulk from RM warehouse to the floor for more than one production order.
As a consequence of having minimum stock levels for these raw materials, when the materials are release from RM warehouse to the floor, new raw materials are purchased to replenish the inventory.
But the raw materials are not consumed at that moment. So then we have too much raw materials in stock compared to the actual production.
Hope to get some advice from someone quickly.
Hi Marc, I would agree with the production manager to use transfer of materials, but anyway, they will not be part of WIP accounts untill the picking list is posted.
Now regarding the issue you mention as a problem, I would use locations instead of warehouse for the transfer. Suppose you have a warehouse called PRD (Production), with two locations STK (Stock) and FLR (Floor stock), so you move from PRD-STK to PRD-FLR, this will solve you the issue with the safety stock, as the items are still going to be in the same warehouse, so the safety level is still in the same level until it is consumed.
Regarding the financial manager thought, maybe it will be enough for him to call location FLR as WIP, we know that the products are not in wip accounts by that moment, but some times financial people are ok with having items “located” or “identified” in that way, you can allways provide him with the amount of items moved to that “WIP” location.
Best regards and good luck with your implementations
I would also suggest you get the AX financial consultant to sit with the financial manager and show how WIP is accounted for in AX, this may in turn solve many problems. His original start point is incorrect for accounting for WIP as the shop floor could legitimately have safety stock levels - he needs to understand what he is looking at in AX.
Hi Hector and Adam,
Thanks for your suggestions.
I will pick it up and let you know the outcome.
thanks for the solutions that you provided.
The solution the consultants came up with is to user transfer orders for the transfers between warehouses.
But then there is no possibility to post this on separate g/l accounts (like in an adjustment journal).
So now they are investigating if this can be added as a customization to this journal type.
No customisation is needed - if the finance director runs the inventory valuation report for the production warehouse he has a WIP value he can journal out for the monthly accounts - much simpler and end result is the same.
I discussed this solution with the consultant, but he was wondering what you meant with " journal out for the monthly accounts ".
Maybe you can explain.
The finance director will have an account pot for “WIP Production” as far as AX is concerned this will be in the “Inventory Asset” account. The FD wants to see the Inventory Asset account less than what he considers WIP. Lets say you have $1m in inventory asset and $300k is in the production WIP warehouse, at month end you run the inventory valuation report for the production warehouse telling you there $300k in stock and you raise a reversing journal to move it financially from the asset account to the WIP account solely for month end reporting purposes. Not what I would recommend, but it is an option to give the FD the view he wants.
Lets say you have $1000 Raw material as a inventory asset and you transfered the from RM warehouse to Proudction Warehouse . Still your inventroy value is $1000, but $300 is in the production warehouse. .
When the Picking list is posted automatically system will transfer the value from stock account to WIP account and at month end you run the inventory valuation report for the RM warehouse telling you there $700 in stock .
I did not understand why you are suggesting to raise a reversing journal .
Please correct me Steven if i am wrong.
want some more detail about this…
If you read the original post you will see the FD considers stock in the Production Warehouse as WIP, he does not consider it in stock even if it is in stock, he sees the warehouse split as a physical AND financial split so does not want it in his inventory asset account.
If you are talking about the link please start a new post, it is not relevant to this one.