Managing Component Exchange between Customer and Company

A Core is defined as a component or subassembly such as an engine, gearbox, or fuel pump that can be rebuilt or remanufactured and is often available as part of a dealer exchange program.

In this context, Core refers to failed material or used parts and is the raw material available for re-manufacture after the customer has no more use for it and has returned it. The core value is added to the part price at the outset of the sale to help ensure its return and is refunded when the part is returned. If the core material or used parts are not returned the value is lost.

The use of attribute cost on the core return is key to the process as it facilitates the management of inventory accounting and inventory valuation issues on the core return order. It simplifies the core process and reduces the risk associated with manual updates and intervention. The actual core charge can be retrieved from the supplier and used as an inventory accounting price.

This is valuable to the equipment dealer as it helps ensure that the returned core item is valued depending on the attribute combination at goods receipt in 'Customer Return. Open' (OIS390) with the person responsible for receiving the goods affecting the actual inventory value with the action in 'Attribute Values. Connect to' (ATS101). At this point if the default attribute combination is selected the item will be placed into inventory with the inventory accounting price of a new sellable item when the actual returned value of the used core item is much lower.

This document provides a high level summary of this component exchange process and includes a number of links to detailed documents that explain each step in the process.

Outcome

You have bought components and the components are put into a component exchange fleet.

The MITCEN table in M3 is updated with core entitlement.

A core entitlement is created between customer A and supplier X when A purchases a product from X and where the product sales price includes a core charge. A then undertakes to return the core to X in order to receive the core refund.

The components can be used in the component exchange process where malfunctioning components, such as cores, are exchanged for new or remanufactured components.

Before you start

Settings must be defined as specified in and Defining Settings for Component Exchange with Supplier in Core Management Process.

Process summary

The below illustration describes a core process for a large dealer. The division is comprised of several local warehouses and one central warehouse. Each local warehouse makes the acquisitions to the core fleet. Once the returned core has been inspected it is shipped to the central warehouse where it is repacked and returned to the supplier.

Follow these steps

Purchasing a component for component exchange fleet

You purchase components that you want to reserve for the component exchange fleet. When you receive the goods, the different components are reclassified as Remanufactured. The components are put into stock in the component exchange fleet and they are used in the component exchange program.

You purchase the component in 'Purchase Order. Open' (PPS200).

The goods receipt is performed based on the goods receiving method, either direct put-away or one-stage or two-stage inspection. This is performed in 'Purchase Order. Receive Goods' (PPS300) and in 'Purchase Order. Inspect Goods' (PPS310).
Selling a remanufactured component

A remanufactured component is sold to the customer in 'Customer Order. Open' (OIS100). When you sell a remanufactured component the attributes on the component will automatically trigger the addition of a core charge item to the order. A record will be created in 'Core Entitlement. Open Toolbox' (MWS090) indicating that a worn component is expected in return.
Customer returning the core

The customer receives a credit when returning the core. The value of this credit is based on the defined core terms and the condition (state of wear and tear) of the returned core. The returned core must be inspected to determine its condition.

You enter the core return in 'Customer Return. Open Line' (OIS391).

The inspection result is entered in 'Customer Return. Display Inspection Result' (OIS392).
Remanufacturing core

A returned core is repaired or remanufactured and then returned into the stock of remanufactured components.

If the remanufacturing is done by the company in-house, a work order is created for the remanufacturing. When the remanufacturing is completed, the work order is closed and the attribute on the component is changed from Worn to Remanufactured at that time. When the work order is closed, the component is put into the remanufactured stock.

If the remanufacturing is done by a third-party repair shop or a supplier, a work request is created for the remanufacturing. When the request is released to become a work order, a repair purchase proposal is created and is then released to become a repair purchase order. The component is sent away for repair to the supplier.

When the remanufacturing is completed, the component is sent back to the company. At goods receipt on the repair order the attributes for the component are entered and the work order is updated. When the work order is closed, the component is put into the remanufactured stock.

The component can also belong to the supplier exchange program. In that case, the core is sent back to the supplier on a return-to-supplier order connected to the purchase order for the remanufactured component.
Using the remanufactured component in maintenance

A remanufactured component is issued to a maintenance work order and a core is returned.

The component can be manually issued in 'Work Order. Open Line (MOS101) or in 'Req/Distr Order. Open' (MMS100) or can be a part of a predefined service bill of material in 'Service. Open' (MOS300).

When the issue is reported, either by confirming the picking list or making a direct issue, the invoice specification in 'Maintenance CO. Check Preliminary Invoice Spec' (COS170) is updated.

When the update is done, a line for the core charge is automatically triggered in the same way as you sold the component on a normal customer order.

Return of the core is performed in the same way as for return from sales order in (OIS390), (0IS391) and (OIS392).

When the return is entered, the line for the return automatically updates the core entitlement file (MITCEN).
Core tracking

Core tracking is used to keep track of open core transactions. For example, it is important to track which components must be returned to suppliers and which must be returned from customers. The concept supporting the MITCEN (Core entitlement) table is to create one master file to hold the entire entitlement.

You can track core components in the Core Tracking Portal, which is a separate application.
Supplier exchange process

The terms for the purchase of remanufactured components are directly retrieved from the item master definition, and no specific agreement or order type needs to be used. The purchase can be done in a normal purchase order. When the item is defined as exchangeable in (MMS001/K) and the attribute entered matches the purchase attribute defined for the core term, a record is automatically updated in the core entitlement file.