Central warehousing - rollup usage

If there is a parent-child relationship, normal usage and average inventory usage can be established for a warehouse under these circumstances:

• Normal Usage: With normal usage, usage for each warehouse is calculated by combining sales usage and transfer usage. The underlying concept is that the parent warehouse should base its replenishment needs on what it sells to customers and what it needs to stock to replenish child warehouses. Child warehouses are replenished through transfers.
• Average Inventory Usage: With average inventory usage, which is also called rollup usage, transfer usage is not considered. Instead, the sales usage from the child warehouse is rolled up into the parent’s usage. If a parent warehouse sells 100 units of a product over a month to customers, and the child warehouse sells 50 units of the same product where the ARP is the parent, then the total usage at the parent warehouse is 150.

Normal usage and rollup usage are defined at the company level in Product Replenishment Setup-Usage. If usage is not correctly reported, neither method is effective. Either approach works equally well in companies that tightly control how usage is accumulated. If accuracy of transfer usage is a problem, then using rollup usage may produce better results.

Rolling up average monthly usage results in a more reliable usage value at the central warehouse level if your company experiences these situations:

• The ARP is changed on product records, rendering the usage history file invalid.
• Adjustment for unusual usage in a child warehouse is not made at the parent warehouse level.
• Usage at one branch varies significantly from other branches.
• You regularly drop ship orders to customers.

If you select rollup usage, the usage in child warehouses is considered when reviewing a product in a parent warehouse for low usage using the Product Administration Month End Processing Report. If there is sufficient usage for the product in the child warehouses, the parent warehouse product does not freeze for low usage.