In my last post, I discussed how I.B.I.S.’s Advanced Supply Chain Software™ can process, track, and manage your consignment inventory process. In this post, I want to explore the opposite scenario of vendor managed inventory (VMI). Your vendor has material in your warehouse, but the vendor retains ownership until you sell the material. We want to maintain visibility of that material. We also want to exclude it from a costing point of view since we don’t technically own it. Just like with consignment, VMI requires a little setup, and you’ll be off and running.
The first setup is to create a VMI inventory journal. The setup for this journal is a mirror image of what you use for movements and adjustments. Once you’ve created that journal, go to the Inventory and warehouse management parameters, Journal tab and set that journal as the VMI adjustment journal. This is a special replenishment journal to register, but not receive inventory; by using this journal, there is no impact to inventory cost. Just like we did with consignment, a new warehouse also needs to be created, and a few data points defined. On the General fast tab, there is a new Reference section. In this section, set the VMI checkbox to true/on. From the Vendor account dropdown, select the vendor that will be “using” this warehouse. This virtual VMI warehouse segregates the inventory, and sets the vendor account so the system will automatically create a purchase order when we need to buy the material from the vendor.
The second setup is at the vendor and item level. Open the vendor details to the Purchase order defaults fast tab. From the Site and Warehouse dropdowns, select the VMI site and warehouse you previously created. Open the item details to the Purchase fast tab. From the Vendor dropdown, select the VMI vendor and set the VMI checkbox to true/on. What we’ve done is declare the item as a VMI item. When the system automatically creates the purchase order for us, it knows which vendor, site, and warehouse to use.
Now, we’re ready to bring the material into the VMI warehouse, then turn around and sell it. Since we have to use, the VMI journal and warehouse, you will not use the standard receive and put-away functions for the warehouse. To bring the material in, go to the item details, VMI tab, VMI replenishment button. On the VMI replenishment form, enter the quantity that is coming into your warehouse in the Replenish quantity field and click the Update button. This adds the inventory to the VMI warehouse in a registered, but not received status. This will show as available physical but not physically received and therefore no impact to inventory cost.
Moving over to the sale of the VMI material, follow whatever standard business process is in place at sales order entry. The key will be to sell out of the VMI warehouse we previously setup. Physically, the inventory is in the warehouse, but we can’t use that warehouse on the sales order line. That’s because in AX the material is in the VMI warehouse. Once the picking list registration is generated against the sales order, an Infolog will pop-up saying a purchase order was created for the item, quantity, and vendor (this is where the item and vendor setup we did earlier comes into play). From that point, the purchase order is used as the tracking mechanism. You can send it to the vendor as the signal that you consumed the inventory, wait for them to send over the invoice, and process in AX as usual.
With a handful of setup clicks and the use of native AX functionality, you’ll be well on your way to better processing, tracking, and managing your VMI inventory process with Advanced Supply Chain Software™.
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