Inventory consumption handlingIn vendor managed inventory (VMI) and subcontracting environments, consumptions are recorded to view and maintain consumption data in the supplier's or manufacturer's administrative warehouse. This warehouse mirrors the customer's or subcontractor's warehouse from which the customer/subcontractor consumes materials supplied by the supplier/manufacturer. Handling inventory consumptions includes the creation and processing of these consumptions. Note In this topic, supplier refers to the supplier or the manufacturer, customer refers to the customer or the subcontractor, and VMI warehouse refers to the customer's or the subcontractor's warehouse from which the customer or the subcontractor consumes goods supplied by the supplier or manufacturer. Consumption master data To record inventory consumptions in the supplier's administrative warehouse, to update the inventory levels, and initiate invoicing:
For further information on how to set up the VMI functionality, see VMI customer forecast - setup and VMI supplier forecast - setup. For information on subcontracting, see Overview of subcontracting. Consumptions Consumption records are generated or manually created. They show the received quantities provided by the supplier and the subsequent consumptions by the customer. A consumption record includes a header and one or more lines.
After the consumption is specified, it must be processed to:
Note In the customer's LN system, consumptions are generated in the Consigned Consumptions (whwmd2551m000) and Inventory Consumptions (whina1514m000) sessions. For more information, refer to Consumption records. Processing consumptions To determine whether invoicing is applicable, to start up invoicing for the relevant customer, and to lower the inventory levels in the administrative warehouse, you must process the inventory consumptions. You can process:
After the consumptions are processed, the orders and schedules that are linked to the consumptions are displayed in the Orders by Inventory Consumption Line (tdsls4142m000) session. Note You can start all of these sessions from the Inventory Consumption (tdsls4640m000) session. How LN processes consumptions - outline Step 1. Link consumption record to replenishment
order/schedule To determine whether invoicing is applicable and to start up invoicing for the relevant customer, LN links the consumption to the order/schedule with which the item was received in the VMI warehouse as follows:
If the Invoicing Required check box is cleared on the consumption line, LN automatically lowers the inventory level. For more information, refer to Adjusting inventory level in the administrative warehouse. Step 2. Process returns If the Return check box is selected on the consumption line, no invoicing is required. If the sales order found is Pay on Use, an invoicing line is created that is not invoiced. On the invoicing line, the returned consumption quantity is displayed in the Returned Consumption Quantity field of the Sales Order Invoice Lines (tdsls4106m100) session. If the Subcontracting Reference is filled or the returned item is a packaging item, the consumption line's Processed check box is selected, and no further action is taken. To return quantities, you must manually create a sales return order and link it to the relevant order/schedule. For more information, refer to Sales return orders. Linking consumptions to the replenishment
order The following can apply to a consumption record:
Subcontracting order To link a consumption line to a subcontracting purchase order, LN first utilizes the subcontracting reference, and then the consumed item to locate the relevant material supply line matching the subcontracting purchase order. The material line with an item that matches the inventory consumption line's item is selected. For costing purposes, the used material must be booked on the correct subcontracting purchase order. Therefore, the Subcontracting Reference field in the Inventory Consumption Lines (tdsls4141m000) session is mandatory. Usually, the subcontractor is not invoiced for material that is supplied by the manufacturer and consumed by the subcontractor to produce the items for the manufacturer. For consumption lines that are linked to an operation subcontracting, item subcontracting, or service subcontracting material supply line, the Consumed Quantity field is updated in the Purchase Order Material Supply Lines (tdpur4116m000) session, after receipt of a consumption message from the subcontractor. Consequently, the inventory levels are updated. For more information, refer to Adjusting inventory level in the administrative warehouse For more information, refer to Subcontracting in Procurement. VMI order/schedule To link a consumption line to a vendor managed inventory (VMI) order or schedule, LN first uses the combination of reference and shipment reference to search for a matching sales schedule. Next, the packing slip is used to search for a matching sales schedule shipment. Finally, the customer order/schedule reference is included in the search. In VMI environments, the customer order/schedule reference is not mandatory. If an inventory consumption line contains a customer order/schedule reference, LN searches for a sales order or sales schedule with a matching Customer Order. If no match is found, LN searches for the first sales schedule line with a matching Customer Schedule Number. Consumption lines are linked to this specific sales schedule, although consecutive schedule lines can have a different customer schedule reference. If the payment found is Pay on Use, inventory levels are updated and invoicing is triggered. For the order/schedule lines linked to the consumption line, LN creates invoicing lines in the Sales Order Invoice Lines (tdsls4106m100) session or Sales Schedule Invoice Lines (tdsls3140m200) session. If the payment found is Pay on Receipt or No Payment, only the inventory levels are updated. For more information, refer to Adjusting inventory level in the administrative warehouse. If no packing slip or customer order/schedule reference is available and the Invoicing Required check box is selected:
If a Pay on Use sales order/schedule line is used and the total consumed quantity exceeds the ordered quantity, LN creates an invoicing line for the part that "fits". For the remainder, LN searches for other Pay on Use sales order/schedule lines to create invoicing lines. For the consumed quantities for which no sales order/schedule line is found, LN creates a consignment invoicing sales order. For each invoice line created, LN updates the inventory levels with the invoiced quantities. For more information, refer to Adjusting inventory level in the administrative warehouse. Note LN searches for Pay on Use sales order/schedule lines only if the Ownership External check box is selected in the Implemented Software Components (tccom0100s000) session. Sales consignment invoicing orders with origin Consumption If a consumption cannot be linked to a replenishment order, a sales consignment invoicing order is generated to settle the invoicing of the consumed quantity. For these orders, their origin is Consumption and their order type is retrieved from the Consignment Invoicing Order Type field in the Sales Order Parameters (tdsls0100s400) session. Updating inventory levels for these orders is handled by Warehousing, because warehouse activities are part of the order procedure of a sales consignment invoicing order. After a consignment invoicing order is released to Warehousing, inventory level adjustments are handled by the outbound process. You should set the activities of the warehousing order type that are linked to the consignment invoicing order type to automatic. For more information, refer to To define warehousing procedures. Note
Adjusting inventory level in the administrative
warehouse LN automatically updates the inventory levels of the administrative warehouse without performing the outbound and shipment procedures. To register the inventory reduction, a sales order of type Sales (Manual) and a shipment are created. You can view this sales order and shipment in the Item - Warehouse - Inventory Transactions (whinr1510m000) and Inventory Consumptions (whina1514m000) sessions. The ownership of the sales order is Customer Owned, because invoicing and payment is performed based on the originating Pay on Use sales order/schedule, the consignment invoicing order, or the subcontracting purchase order. Prices and discounts When LN creates an invoicing line:
Note
Pay on Use sales order/schedule lines Sales order/schedule lines for which the payment type is Pay on Use and the activity Release to Invoicing is part of the order procedure, can:
Note This is applicable in an extended consignment setup, in which you directly link the invoicing for a consumption of consignment inventory to the replenishment order or schedule. In a basic consignment setup, in which the order and schedule procedures are split into a replenishment and invoicing part, these rules apply:
For more information, refer to Consignment in Sales and Procurement.
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