Warehouse Transfers
The movement of inventory between locations is accomplished with the Warehouse Transfers System. There are a number of control features associated with warehouse transfers. These controls ensure that transfers conform to your business practices.
Allocate Inventory to Transfers
Freedom Series/ec21 allows you to indicate if you want inventory allocated to a warehouse transfer when it is entered in the system. If you do not allocate transfers, there is no chance that a transfer will take inventory that could go to a sales order until the items are actually picked and shipped. However, to insure that you can fill a transfer request, it is necessary to allocate transfers as they are entered in Freedom Series/ec21.
Automatic Receipt When Shipped
When moving goods between warehouses, including logical warehouses, Freedom Series/ec21 expects both a shipment and receipt transaction. This option instructs Freedom Series/ec21 to automatically generate the receipt transaction as it posts the ship transaction. This is considered a single pass transfer. Transferring inventory between physical warehouses usually requires receiving the merchandise, checking what was shipped, and handling any items damaged. However, transferring inventory out of a logical location into the warehouse it is associated with is more efficient when Freedom Series/ec21 generates the receipt transactions through a single pass.
Accounting for Transfers in Transit
If you use warehouse transfers, the value of the in transit inventory is maintained in a general ledger account(s) you set up for that purpose. Unlike many systems available, with Freedom Series/ec21 you never lose track of your inventory investment. This account can be set up by warehouse, so separate accounts for each warehouse can be used or a common account for all warehouses can be specified.
Serial Number Processing
For some types of serial numbered items it is necessary to only record the serial numbers of the items you have in your possession as the items are sold. For other items, guns for example, it is necessary to record the serial number of each item as it is received and track each product by serial number thereafter.
Freedom Series/ec21 can be set to prompt the receiver to enter serial numbers at time of receipt if the item is set for serial number processing (see Item Processing Options below). You would normally set Freedom Series/ec21 to prompt for serial numbers during receipt if you must know the serial numbers of many of the items you stock. Otherwise you would turn this option off. Either way, you can record and maintain serial numbers after the item has been received.
Item Costing
Freedom Series/ec21 gives you a choice of different methods to value inventory and cost of goods sold. These methods strictly adhere to Generally Accepted Accounting Principles (GAAP).
Freedom Series/ec21 actually allows you to make two choices about item costing. You may select one costing method for sales analysis and gross margin-based salesman commissions, and a different cost for general ledger booking. Of course you can still select the same costing method for both.
Cost Layers
The cost layer method of inventory valuation is the Freedom Series/ec21 standard and is a true FIFO costing method. For each transaction (receipt, customer return, warehouse transfer, or inventory adjustment) that causes an increase in an item's inventory, Freedom Series/ec21 creates a database record called a cost layer used to value inventory.
Freedom Series/ec21 stores cost layers by warehouse and for each cost layer keeps: the date of the receipt, your item number, your purchase order number, the line number of this item on the purchase order, your promotion number this item was purchased to support, the landed cost, and the quantities received, relieved and remaining.
When Freedom Series/ec21 costs a transaction the landed cost of the oldest cost layer (with a quantity remaining) is used. If the quantity of the transaction is larger than the quantity remaining in the cost layer, the next oldest cost layer is used, and so forth.
One exception to this true FIFO costing is if the sales transaction includes a promotion number, Freedom Series/ec21 will attempt to cost from a layer with the same promotion number regardless of the cost layer order. In this way, Freedom Series/ec21 gives you truer costing of your promotional efforts.
Landed Cost
You have the option to have Freedom Series/ec21, at receipt time, to set landed cost equal to the cost on the purchase order for the item or the PO cost plus a burden amount. This burden amount is set for each item as a percent of the PO cost.
After the receipt causes the creation of the new cost layer, you can also add other costs to the cost layer to be included in landed cost. These other costs may be import duties, freight, insurance, or other handling costs you wish to land. Freedom Series/ec21 provides a number of automatic methods for the addition of these other costs to the cost layer and therefore landed cost. You may also adjust these costs manually.
If adjustments are made to a cost layer from which sales have been costed, Freedom Series/ec21 has a procedure that you can run that will identify and correct affected sales lines in the sales history database. This procedure also produces general ledger journal transactions for the variances.
Freedom Series/ec21 maintains the cost layers regardless of the costing method you choose.
Average Cost
Freedom Series/ec21 uses the cost layers to calculate an average cost for each item. You can have Freedom Series/ec21 recalculate average cost as often as you like; daily, weekly, monthly, or even after every receipt.
If you choose the average cost method of inventory valuation and costing goods sold, the average cost stored for each item by warehouse is used to cost transactions.
Standard or LIFO
Freedom Series/ec21 provides a cost for each item that you maintain. It only changes if you change it. If you are accustomed to a standard costing system where the variances between true acquisition cost and standard are only reflected in general ledger, not operationally in inventory value or cost of sales, then you would choose Standard costing.
If you are like many distributors who operate on a FIFO basis, but restate your inventory using a dollar value LIFO method for ledger and taxes, this field can be used to store your base year or prior year cost used in calculating the inflation index.
Accrue Inventory Dollars at Receipt
Freedom Series/ec21 gives you the option to book general ledger inventory at the time of receipt. If you book inventory into general ledger when the invoice from the supplier is entered in Accounts Payable, you can continue to do so with Freedom Series/ec21. However, there are advantages to having Freedom Series/ec21 book inventory when it is received.
If you elect to have Freedom Series/ec21 book general ledger inventory at time of receipt, you also specify the offset account to use for the journal entry. You would also use this same offset account when booking the invoice in payables. Any variances between your PO cost and the vendor's invoice can be determined on-line during payables entry. Additionally, if you use this method, there is no lag between the time you take ownership (normally upon receipt) and when the value is reflected in your books.
Book Inventory Adjustments
Inventory adjustments are a necessary part of any distributor's operation. Computer on hand values for an item can become incorrect because of mispicks, key errors, damage not reported, or any other number of reasons. This option asks if you want Freedom Series/ec21 to create journal entries for each adjustment transaction. Freedom Series/ec21 allows you to create any number of reason codes for adjustments and each code can have a different general ledger effect. Whether you elect to have Freedom Series/ec21 make these entries or decide to do so manually, a comprehensive report of all adjustment transactions is available for your review.
Computer Assigned Receiver Numbers
Most distributors have developed their own method for assigning receiver numbers. Some prefix the PO number with the receiving date, others use a 'KeyRec' system, and others use a sequential log. If you currently use such a system, you can continue to do so, but Freedom Series/ec21 can be set to assign a sequential number to each receipt for you. It also gives you control of the starting number. You could, for example, reset the starting number each month in the format, YYMM00001 (Y=year & M=month), to give the number meaning. Freedom Series/ec21 can even be instructed to roll the month and year on the appropriate day. This or some other scheme could be maintained by Freedom Series/ec21.
Allocate backordres During Receiving
When the Allocate Backorders During Receiving option is elected, Freedom Series/ec21 will notify the receiver of any backorders pending for the item received. You are given the opportunity to allocate all backorders for the item, select orders for allocation and release, or cancel the pre-release for the item. By electing this option, you are insuring that no new orders will be allocated before backorders. If you choose not to activate this option, pre-release (allocation) is done by a separate Freedom Series/ec21 function.
Inventory Control
Inventory Management is made up of Purchasing Management and Inventory Control. Inventory Control, as used here, refers to the actions necessary to insure that the perpetual inventory records maintained by Freedom Series/ec21, for both units and cost, are accurate.
The Item File
All inventory control in Freedom Series/ec21 revolves around the Item File. The information recorded in the Item File about an item falls in five general categories: Identification, Unit of Measure, Inventory Categories, Processing Options, and Pricing. Pricing is discussed in detail in the section on Sales and Customer Service. The other four are discussed below.
Item Identification
Item Number
The item number in Freedom Series/ec21 can be up to 20 characters in length. You may use letters, numbers or special characters when assigning a number to an item. Other fields used to further identify an item can also be used for analysis purposes beyond the item number.
You should consider EDI and other electronic means of transmitting item information when assigning item numbers. While the use of letters and special characters presents no problem to Freedom Series/ec21, this may not be true of the systems used by trading partners and customers.
Item Description
Freedom Series/ec21 provides three description lines of 30 characters each. Additionally, there is an extended description line of 80 characters. The first description line and the extended description are used when Freedom Series/ec21 performs an item search by description.
Sequence Code
You may assign a 15 character sequence code to an item. Freedom Series/ec21 sorts all displays and reports involving items by the sequence code. The system will default either the item number or its description to the sequence code, based on an Inventory Default that you control. You can elect to override this default. You could, for example, set an item's sequence code equal to the vendor's number for a product, and then the item would sort in vendor product number sequence.
Inventory Categories
Freedom Series/ec21 allows you to create up to three different groups of inventory categories. An inventory category is identified with a three character code that is associated with a category description. Most distributors use the three category groups in a hierarchical fashion, but this is not a requirement. Inventory categories are used in sales analysis, and can be used for accounting, licenses checking, and other Freedom Series/ec21 features.
UPC Codes
Since UPC codes can vary based on unit of measure and vendor the Freedom Series/ec21 UPC file accommodates multiple UPC codes per item. During Sales Order Entry, an item's UPC may be entered instead of your Item Number, and Freedom Series/ec21 will automatically make the translation. UPC codes are also available to print routines for use in picking documents, delivery tickets and price stickers.
Item Aliases
You may associate any number of aliases with an item. An alias may be a common name or number for the item, or a competitor's number for the item. An alias can be used in Sales Order Entry instead of your Item Number, since Freedom Series/ec21 will accept either.
Item Notepad
Freedom Series/ec21 allows you to enter and maintain an unlimited amount of text about an item. Each line of text is associated with a code that tells Freedom Series/ec21 how to handle the text line. You can cause the same or different text to appear during Sales Order Entry, on a picking document, on the invoice, or on your Purchase Order.
Units of Measure
Inventory/Stockkeeping Unit of Measure
The primary unit of measure in Freedom Series/ec21 is the inventory or stockkeeping unit. This is the smallest unit of measure of the item that you will sell. It is also the unit of measure used for inventory control.
Don't Break Case Logic
Freedom Series/ec21 allows you to indicate a Shelf Pack quantity for each item. If you sell an item by the each, but it normally comes to you packed 12 to a carton, you could enter a shelf pack quantity of 12. You can instruct Freedom Series/ec21 that you only wish to sell this item in full cases/cartons. If the item in the previous example were so coded, the sales order quantity would be rounded to a multiple of 12.
Pricing Unit of Measure
You may designate a unit of measure other than the inventory unit as a pricing unit of measure. For example if you sell and stock an item by the case, you may set a pricing unit of measure of each. You set all prices by the each and Freedom Series/ec21 does the necessary math to price the case.
Don't Break Case Logic and the use of a Pricing Unit of Measure are similar but give you different ways of handling unique situations. If you want to price and accept orders by the each, but only ship by the case, Don't Break Case is the correct option. If however, you want to accept orders and ship by the case, but price by the each, then a separate Pricing Unit of Measure is appropriate. The correct choice is usually dictated by industry practice.
Purchasing
It is not uncommon to purchase an item in a different, usually larger, unit of measure than you stock the item. Freedom Series/ec21 fully supports a separate purchasing unit of measure for each item. For those items that are available from more than one vendor, the purchase unit of measure can be different for each vendor.
Item/Catalog Cross Reference
It is very common for distributors to produce a catalog of the items that they sell. Additionally, many distributors produce promotional catalogs or fliers. Freedom Series/ec21 provides you with a Item/Catalog Cross Reference that can be used in a number of different ways. You could, for example, produce price lists sorted in the order items appear in your catalog or promotional literature. Or you might wish to create special sales analysis reports that report sales activity by catalog or promotional piece.
When used in conjunction with the Freedom Series/ec21 promotional pricing capabilities, the Item/Catalog Cross Reference can become the vehicle for ensuring that sales orders are priced correctly depending on the catalog or promotion piece used by the customer when placing the order.
Freedom Series/ec21 gives you the ability to associate an item with an unlimited number of catalogs or promotional pieces. For each such association you can indicate the section, page and column that the item appears on in the catalog. You can optionally record a catalog description of the item if it is different that the item master file description and the size of the catalog space devoted to the item in square inches.
Item Processing Options
There are a number of processing options that can be set for each item. These options affect how Freedom Series/ec21 handles the item in different situations.
Serial Numbers & Lot Control
There are indicators you can set for an item that inform Freedom Series/ec21 to process the item for Serial Numbers or that the item is controlled by lots.
Mandatory Dropship
An item can be identified to Freedom Series/ec21 as a dropship only item. Each time this item is entered on a sales order, Freedom Series/ec21 dropship processing will always be invoked.
Mandatory Shipping Warehouse
If the item is only stocked in one warehouse of a multi-warehouse operation, this indicator tells Freedom Series/ec21 that the item, when entered on a sales order, should always be directed to the stocking warehouse for shipment.
Price Stickers
If you produce price stickers for your retail customers to use, this indicator can tell Freedom Series/ec21 not to produce a price sticker for this particular item. This prevents the production of price stickers for items that, because of their nature, are not stickered.
Authorization Required
This item control, when activated, requires that a customer be specifically authorized to purchase the item. It can be used to protect private label merchandise or items in very short supply.
MSDS Processing
This item option will cause MSDS processing for the item if it is invoked. When the item is sold, Freedom Series/ec21 checks a table it maintains of customers who have previously purchased the item. If there is no entry for the customer on the order being checked, Freedom Series/ec21 adds an entry to the table for the item/customer combination and appends a message to the order instructing a MSDS sheet be sent to the customer.
You are also given the ability to reset the table for a particular item and begin sending MSDS sheets for the item to each customer the next time they purchase the item. This facility in Freedom Series/ec21 allows you to send new MSDS sheets out when there is a change in the information on MSDS sheet.
Substitutions
Freedom Series/ec21 allows you to create and maintain a table of items that may be substituted for each other. During Sales Order Entry, you may request a display of substitutes for an entered item or, using system controls, you can cause the list of substitutes to be displayed whenever the item can not be filled from stock.
There is the facility to tell Freedom Series/ec21 that Item 'A' is a substitute for Item 'B', but Item 'B' is not a substitute for Item 'A'. This feature is most often used when 'A' is a replacement for 'B'.
DOT Hazardous Materials
The Freedom Series/ec21 approach to DOT Hazardous Materials is simple and effective. Although there are literally thousands of DOT Hazardous Material classifications, in Freedom Series/ec21 you only deal with the ones that apply to products you carry. Freedom Series/ec21 makes the DOT Hazardous Material information available to all documents involved in the shipping of merchandise.
License Types
For each item, you can record the type of license(s) the customer is required to have before you may sell the item to the customer. If Freedom Series/ec21 is unable to verify that a customer has the required license(s), the sales order is placed on license hold until you have the chance to review the situation.
Kits
In Freedom Series/ec21, a Master Item represents the kit as a whole and is recorded in the item file. Then, in an external table, you can record the contents of the kit. Each component in the kit must be an item in the item file. You record the item number and quantity of each item that makes up the kit. The cost of the kit is always the sum of the components, but you are given the option to price the kit as the sum of the components or the kit may have a price of its own.
Freedom Series/ec21 distinguishes in item history between the sale of an item directly and as a component of a kit. Additionally, when you inquire on availability of the master item, Freedom Series/ec21 will determine the number of kits that can be made based on the on hand value of each component.
The Vendor File
The Freedom Series/ec21 Vendor File is shared by the Inventory Management System and Accounts Payable. It contains the information to support both functions so the amount of maintenance you must perform is reduced and your control increases.
Vendor Identification
The Vendor Number
The Vendor Number may be up to 10 characters and may include numbers, letters and special characters. Freedom Series/ec21 can accommodate any numbering scheme you may currently have.
Order From/Pay To Addresses
The Vendor File contains separate fields for an Order From and a Pay To name and address. The Order From address is used for purchase orders and the Pay To address is used on checks.
Pay to Vendor Number
If you buy from two or more vendors with common ownership you can maintain separate Accounts Payable balances for each, but pay a common entity.
Vendor Contact Information
Freedom Series/ec21 allows you to maintain separate contact names and phone numbers for purchasing and accounts payable use.
Processing Options
Product Authorization
This option instructs Freedom Series/ec21 that all items purchased from this vendor require that a customer be authorized to buy the item.
Payment Terms
Freedom Series/ec21 provides a very flexible method of establishing vendor payment terms. All terms common to the distribution industry including cash discounts, prox dating, and split terms are supported.
Ship Via & Delivery Zone
These fields are used in preparing Purchase Orders. They describe the shipping method that you wish the vendor to use in shipping merchandise to you.
Insurance Required
Over the last decade, we have witnessed an explosion in product liability awards. Although these suits have been primarily aimed at the manufacturer of products, it is not uncommon for a retailer or distributor to be named a party to the suit. Given these facts of business life, Freedom Series/ec21 includes features to help to make sure that you are protected.
You can indicate in the Vendor File that product liability insurance, that includes you as a indemnified party, is required. Additionally, you can maintain a database of information about each vendor's insurance policy. This database includes the producer, carrier, types of liability coverage with dollar limits, and the expiration date.
Freedom Series/ec21 maintains an insurance status for each vendor that you are tracking. This status is based on the expiration date and the completeness of the information recorded in the data base. Freedom Series/ec21 reporting alerts you to problems and expired or about to be expired policies.
Vendor Targets
Many vendors offer volume or quantity discounts. To improve Purchase Order costing, Freedom Series/ec21 gives you the ability to record the vendor's discount structure. This structure is used to cost your purchase orders.
The information you can record includes the quantity qualifier (target), the type of qualifier (weight, units, dollars, or cube), the unit of measure for unit qualifiers, and the discount percent. Knowing that some vendors have different discount structures for different parts of their product line, Freedom Series/ec21 allows you to record targets for each product line (family).
Besides using this information to cost each PO line, Freedom Series/ec21 displays the targets during PO creation and informs the buyer of the amount needed to make each target, based on the current PO values. This display gives the buyer the information he needs to make appropriate buying decisions.
Vendor Information
You can record an unlimited amount of text information about the vendor. Each line of text carries a code you set that has meaning to you. Additionally, you can cause all or some of the text (by code) to appear on your purchase order.
Vendor Warranty and Returns Information
You may record in Freedom Series/ec21 a vendor's warranty and returns policy information. Additionally, you can enter the address to use for vendor returns and the vendor's lead times for repair and replacement. This information is used by Freedom Series/ec21 in handling warranty repairs and the return of merchandise from stock.
Vendor/Item Cross Reference
Freedom Series/ec21 is designed to handle items that are available from more than one vendor. Thus, items are associated with a vendor by utilizing a Vendor/Item Cross Reference database. An item can be associated with as many vendors as you desire. The following information is recorded for each Vendor/Item combination.
Vendor's Item Number & Description
You can record the vendor's number for a product and the vendor's description. This information is presented on many Freedom Series/ec21 on-line displays and reports and is used in search routines to allow you to quickly cross reference the vendor's item number to your internal item number. It is also available to the purchase order, whether hard copy or EDI.
Vendor's Unit of Measure
You can record the vendor's unit of measure, any minimum purchase quantity, and any quantity multiple required by the vendor. Replenishment quantities recommended by Freedom Series/ec21 will always conform to the values you record here.
Vendor's Prices
Freedom Series/ec21 allows you to record the vendor's price for an item along with any item level quantity discounts available. The price record also carries an effective date. This date is checked when preparing purchase orders and the appropriate price is chosen. This enables you to record and audit new vendor prices in advance of the date they become effective. Additionally, you may use the new cost to update your sell prices immediately in anticipation of the increase from the vendor.
Inventory Transactions
At the heart of the Inventory Control system are the methods used to process and record inventory transactions. Freedom Series/ec21 maintains the perpetual records for each item by warehouse, each transaction is associated with its source document by number, and inventory transactions are posted to the perpetual record immediately when they are entered in Freedom Series/ec21.
The Transaction Log
Freedom Series/ec21 posts each inventory transaction to a transaction log. This log can be viewed on-line for any item. You can view all transactions or limit the display by a date range or specific type of transaction. For each transaction, the following are included in each log entry: the quantity, type, document number (i.e., a receiver number for receipts), the source number (i.e., the PO number for receipts), the terminal used to enter the transaction, the date and time the transaction was posted, and quantity on hand prior to posting the transaction.
The transaction log is indispensable when researching problem items. You can quickly determine how Freedom Series/ec21 arrived at the on hand value that it is reported to you. You can spot unusual transaction quantities and quickly find the transactions involved for further research.
The transaction log is also valuable to your buyers. In the days when inventory transactions were manually posted to an inventory card, the card provided a buyer with insightful information about how an item was moving. The transaction log display gives the buyer that view of inventory movement again.
Vendor Returns
Freedom Series/ec21 provides a special set of transactions to handle the return of merchandise to the vendor, Vendor Returns. Vendor Return processing will handle all returns to the vendor, but it is particularly helpful if you return items for warranty repair that you expect will be eventually shipped back to the customer through you.
Vendor Returns are accomplished in three steps. The first step is the entry of the information about the vendor and the items being returned. This entry is very much like sales order entry. For those vendors that want repaired or returned items to be shipped to a location other than the location to which you address purchase orders, a special ship-to address file can be maintained. Serial numbered items are also supported. Vendor Returns can be associated with a particular customer in the case of an item that will be repaired by the vendor and eventually returned to your customer.
The second step is to release the Vendor Return and print a picking document for the warehouse. The third step is recording the shipment of the Vendor Return. All the freight handling methods available to sales orders are also used for Vendor Returns and are integrated with sales orders for manifesting purposes.
If the item returned to the vendor is shipped back to you after it has been repaired, the third step is to handle the return of the item to the customer. You can receive the item and easily identify the customer to whom you need to ship the item. There is a special reshipment transaction for this purpose that will allow the production of shipping documents and will use the standard freight handling methods with integration to the manifesting system. Through this entire process, Freedom Series/ec21 keeps accurate records about the location and status of serial numbered items.
Item Status and History
Freedom Series/ec21 provides you with several ways to view the current inventory status of an item. There are both on-line views of inventory status and reports which display inventory status. Since Freedom Series/ec21 processes each inventory transaction in real time, the inventory status displays and reports are accurate through the last transaction processed.
Item Status
The current inventory status of an item can be viewed at any time. The primary inventory status display for an item provides search capabilities and the search can be limited to a particular warehouse. The status information is presented in several panels. The primary panel displays the quantity on hand, allocated and available for the item. Additional panels provide information about the item including purchase orders and sales orders the item appears on. You can quickly determine, for example, which orders have inventory allocated to them.
Buyer's Display
One of the most useful displays of inventory status provided by Freedom Series/ec21 is called the Buyer's Super Screen. The primary panel of this display includes the Buying Controls for an item, the item's inventory status, and a display of the last 18 month usage history. Additional panels provide information about purchase orders, sales orders, and detailed stock status. Your buyers and other people concerned with inventory control will use this display often.
Item Status Reports
Freedom Series/ec21 provides you with several inventory status and valuation report options. These reports, coupled with the Sales Analysis reports available, give you great flexibility in reporting inventory status and the sales history of an item.
Serial Number and Lot Control Logs
Freedom Series/ec21 posts each transaction for a serial numbered or lot controlled item to special logs kept for each. These logs can be viewed on-line with search capabilities by item number, serial number, or lot number. You are able to view immediately the history of each serial numbered or lot controlled item. This display provides you with the information you need to answer questions associated with warranty or governmental regulations.
Purchasing Management
The Purchasing Management System is one of the most dynamic and beneficial functions within the comprehensive, integrated suite of Freedom Series/ec21 applications. This system is a thorough, well designed set of purchasing and replenishment functions. Based on time proven techniques, Freedom Series/ec21 Purchasing management is powerful, yet easy to use.
Unlike many replenishment systems, Freedom Series/ec21 Purchasing Management will be quickly accepted by your buyers. Your buyers will become comfortable with the set of purchasing tools provided by Freedom Series/ec21 and will be using them to produce positive improvements in margin and investment soon after they begin to use them.
The Freedom Series/ec21 replenishment system coupled with its full-featured purchase order system gives you control of your inventory and the flexibility to handle special buying situations like drop shipments, promotional buys, seasonal booking programs, and special one time purchases.
Replenishment
Most purchases are made to replenish your inventory of stock items. The goals of inventory management and replenishment purchasing are to achieve high returns on dollars invested in inventory while maintaining an acceptable level of service to the customer.
To help you accomplish these goals, Freedom Series/ec21 provides you with a sophisticated set of tools that recommend purchase quantities, highlight problem items, maximize vendor discounts, manage buyer workload, and give you greater control of your inventory.
Each of these tools is discussed in this section along with how they come together to produce recommended purchase quantities. The emphasis here is on purchasing to replenish stock inventory.
Buying Controls
The Freedom Series/ec21 recommended replenishment action for each item is based on a set of buying controls for each item. These controls are the heart of the replenishment system. They are system calculated, but the system calculations can be controlled and influenced by you. These controls are normally recalculated for each item at the end of each month.
Usage Rate
Replenishment action begins with a projection of the sales of each item for the coming month. This projection is quite useful as a ballpark starting point for determining replenishment action. Other Freedom Series/ec21 tools use the projection to refine the recommended replenishment action.
Freedom Series/ec21 uses a straightforward method to project sales, Usage Rate. Usage Rate is simply the average sales for the last six months. This quantity as a sales projection has the advantage of giving the most recent sales activity the greatest importance. It is a good a predictor of sales and is easily understood by everyone.
Exception Conditions
There are a number of reasons why recent sales may not be a good predictor of future sales. These reasons include unusual sales because of promotional activity, unusual weather conditions, expected new sales due to a new contract with a customer and item shortages from the vendor. Whatever the reason, Freedom Series/ec21 gives you a great tool for handling these conditions. For any item, Freedom Series/ec21 allows you to enter for a particular month a quantity to be used in the Usage Rate calculation instead of actual sales. This override amount doesn't change historical actual sales and is only used for determining Usage Rate.
Seasonal Items
The other major reason recent sales may not be a good predictor of future sales is when the item is seasonal. To help you manage seasonal items Freedom Series/ec21 provides first a tool to identify seasonal items and a different method to calculate Usage Rate.
You define seasonality to the system. For example you may define any item with 80% of its annual sales confined to any 4 month period as seasonal. Once these rules are defined Freedom Series/ec21 provides you with a list of items that meet your specifications.
Once an item is designated seasonal, Freedom Series/ec21 calculates Usage Rate by finding the average sales for a user-defined time period following the current month using the sales from one year prior. For example, if you are recalculating Usage Rate at the end of May in 1996 and have defined the time frame to be used to be four months the system uses the sales for June through September 1995 in the Usage Rate calculation for seasonal items. Next Freedom Series/ec21 adjusts the average sales figure by the year-to-year trend in sales (up or down) you have experienced. This adjusted average sale becomes the Usage Rate used in replenishment calculations.
Dependent Warehouses
If you have a warehouse that is supplied by a central company warehouse exclusively or for selected vendor lines, Freedom Series/ec21 can be instructed to calculate Usage Rate based on the sales by both warehouses to replenish the central warehouse. This insures that sufficient inventory is on hand at the central warehouse to support both direct sales and to supply the dependent warehouse.
Economic Order Quantity
Freedom Series/ec21 uses the traditional economic order quantity (EOQ) formula to determine the amount of an item it recommends for replenishment. This formula uses the cost of the item, its Usage Rate, your cost of carrying inventory and your cost to process a purchase order to calculate the EOQ. First developed in the late 1940's and refined through the years, this formula has stood the test of time as the best method to determine the purchase quantity of an item. It is a simple but powerful tool in helping you achieve the twin goals of high return on inventory investment and acceptable service levels.
Order Point
While EOQ addresses how much to buy, Order Point addresses when to buy. As implemented by Freedom Series/ec21, the Order Point is that level of inventory that will keep you in stock through the vendor's lead time while maintaining sufficient safety stock to cover exceptional demand for the item. As the inventory level of an item declines due to sales, it will eventually reach the Order Point level at which time Freedom Series/ec21 alerts the buyer that the item is eligible for purchase.
Available Inventory
Purchasing is recommended when the inventory level for an item reaches Order Point. Freedom Series/ec21 does not use the on hand quantity when making this comparison. It uses instead a quantity called Available Inventory. Available inventory is the quantity on hand, less the quantity already allocated to customer orders, less the quantity backordered to customers, plus the quantity due on any previously issued purchase orders. This restated inventory level is the amount of an item 'Available' to the inventory management system to cover expected usage during the coming review cycle.
Review Cycle
For the vast majority of distributors, it is not practical to purchase items individually from the vendor as they reach Order Point. Therefore, Freedom Series/ec21 allows you to assign a review cycle for each vendor. At the end of a vendor's review cycle, Freedom Series/ec21 produces a Recommended Order Action Report (ROAR) that includes each of the vendor's items that have reached Order Point.
Review Cycles can be of any length, but are typically set so that some vendor's are reviewed weekly, others bi-weekly, and still others monthly. A vendor's review cycle should be set so that you can routinely place a purchase order that achieves the desired volume discount level. If an item drops below Reorder Point prior to the normal review cycle it is reported on the Daily Items Requiring Attention report so that you may take action and prevent a stock out. You always have the option of manually running a Recommended Order Action Report (ROAR) prior to its scheduled run.
Line Point
It is common for distributors to try to add to a purchase order to achieve the next discount level offered by a vendor. The Freedom Series/ec21 recommended replenishment amounts are what you need for the period up to the next review. Any additions to these quantities actually put you in an over stock position. Therefore, Freedom Series/ec21 presents to the buyers an alternate recommended purchase that includes more items (not increased quantities) to achieve additional discounts.
The items Freedom Series/ec21 adds to the normal recommended purchase, based on Order Point, are the items that have reached Line Point. Items that have reached the Line Point inventory level at the end of review cycle are not needed now, but will be by the end of the next review cycle. Logically, these are the items you would add to a purchase order to achieve higher discounts from the vendor.
Manual Control of Items
Freedom Series/ec21 gives you the ability to manually control items that cannot be handled by the system control methods. Items you might put on manual control include new items with insufficient history, items that are obsolete, items that you plan to stock only temporarily, or items with very low sales but that are critical to customer service.
For items you place on manual control, you set a minimum and maximum value for the item and establish a Start and End Date for the manual override. The system will alert you to purchase the difference between the maximum and the current Available Inventory, when the Available Inventory is at or below the minimum. When the End Date arrives the system will switch back to automated calculations.
Buying Targets
Freedom Series/ec21 provides you with the ability to record each vendor's volume discount structure. This structure can apply to all items purchased from the vendor or can accommodate those vendors that have different discount structures for different product lines within their total offering. You may record the discount percent, whether discounts are added or chained, and the amount you must purchase to qualify for each discount level. The qualifying amount can be stated as a purchase quantity, a dollar amount, the weight required to be purchased or the cube you must purchase.
Recommended Order Action Report (ROAR)
Automatically produced each night for vendors that have reached the end of their review cycle, the Recommended Order Action Report presents the buyer with two versions of a suggested purchase order. One version based on purchasing only those items at or below Order Point. The second version includes items at or below Line Point.
This report displays for the buyer the recommended purchase quantity for each item, the item's buying control values, an 18 month sales history, and the item's current stock status. Although this report can be printed for each buyer, it is more common to print a summary version that displays the recommended totals and buying targets for each vendor reviewed. The buyer then reviews the detail on-line and is given the opportunity to make any necessary changes.
Buyers
The Freedom Series/ec21 Inventory Management system is designed with the buyer in mind. A number of reports and on-line functions are provided to give the buyer the information needed and to make the buyer more productive.
Daily Items Requiring Attention Report (Daily Diary)
The Daily Diary is the buyer's first source of information each day. The Daily Diary notifies the buyer of ROAR's that are ready for review, items (by vendor) at or below Order Point for vendors not scheduled for review last night, and items requiring special purchasing action (dropships, non-stocks, specials, etc.).
ROAR Review
As mentioned earlier, the ROAR's can be printed for manual review or they can be reviewed on-line. When reviewed on-line, you can also access other information, like detailed sales orders and open purchase order, available to back up the ROAR display. The buyer can easily make any changes desired to purchase quantities. These changes are immediately reflected in PO totals that are compared to vendor buying targets as part of the display. The buyer always knows the discount level achieved.
Items Requiring Purchase
These items (dropships, non-stock, and special) are identified on the Daily Diary. Creating purchase orders for these items is easy and the link to the sales order that created the need for purchase is maintained throughout the purchasing cycle.
Items Below Order Point
The Daily Diary reports items at or below order point that were not scheduled for review last night. The buyer has a range of actions he can take in response to this information. He can do nothing and wait for the review. He could buy some or all the items manually. Or if enough of the vendor's items are appearing on the report, he might choose to call for an early system review of the vendor. This is easily accomplished and can be done immediately, so you don't have to wait overnight.
Action Items
Freedom Series/ec21 gives the buyer the ability to record action notes for any item with a follow-up date. These items appear on the Daily Diary when the follow-up date is reached. The notes can be for any action the buyer chooses to enter and could include a reminder to take an item off manual control, for example.
Purchase Orders
Freedom Series/ec21 is designed to make purchase order creation quick and easy. Purchase orders can be created from reviewed ROAR's, based on special items appearing on sales orders, or can be manually entered.
Using the ROAR to Create a PO
One of the simplest ways to create a purchase order is to instruct Freedom Series/ec21 to create the PO from a reviewed ROAR. This is accomplished in a few key strokes and produces a PO based on the quantities recommended on the ROAR, with any changes made by the buyer, and the item costs reflect volume discounts achieved.
Buying Non-Stock and Special Items
Non-stock items that appear on sales orders that have not yet been purchased are automatically appended to the ROAR and therefore to the PO created from the ROAR. If the Buyer does not want to wait for the next review of a vendor to purchase non-stock items he can create a PO for these items quickly and easily using the information on the Daily Diary. Regardless of the method used to purchase non-stock items, the relationship to the sales order that the items appear on is always maintained.
Dropship Purchase Orders
Dropship PO's are quick and easy. Using the Daily Diary information, the buyer can create the dropship PO with ease and the relationship to the sales order is always maintained.
Special Purchase Order Situations
Freedom Series/ec21 handles two special purchase order types, Combined PO's and Blanket PO's. The special purchase order types are provided to give you the flexibility you may need in your buying.
Combined PO's
A Combined PO is created from two or more reviewed ROAR's for the same vendor but for different warehouses. The buyer is able to designate to which warehouse the Combined PO is to be shipped. This Combined PO gives you the ability to achieve the highest possible volume discount from the vendor because the quantities ordered are the total of all your needs across various company locations.
Freedom Series/ec21 maintains records associated with each PO line that indicate the part of the total quantity order that was purchased for each warehouse. When the PO is received, Freedom Series/ec21 automatically sets up the necessary transfer orders to move the merchandise to the intended warehouses.
Blanket PO's
The term Blanket PO does not have a precise definition common to the distribution industry. Blanket PO, as implemented in Freedom Series/ec21, means that the buyer can request the vendor to ship the total quantity ordered for each item over a number of different dates. Any number of different shipments can be specified, as well as the quantity to be shipped on each date.
Free Goods and Rebates
Freedom Series/ec21 supports the tracking of vendor offers to pay rebates based on purchases or to provide free goods. In the case of free goods, the purchase order system alerts the buyer that the purchase order qualifies for free goods via a pop-up window. The buyer can then decide to add the free goods to the PO or not.
Rebates based on purchases are easily entered and tracked in Freedom Series/ec21. You can indicate the qualifying time period, the qualifying items and whether the rebate is a flat amount per unit purchased or is a percent of total purchases. Reporting of current rebate status is available on demand and this reporting includes the detail necessary to make a claim for the rebate with the vendor.
Electronic Data Interchange (EDI)
Electronic Data Interchange is rapidly becoming the preferred method of communication for Purchase Orders, Acknowledgments, Advance Shipment Notices and Invoices. Freedom Series/ec21 fully supports the transmission of Purchase Orders and supporting documents using EDI technology.
Container Tracking
If you are purchasing product from overseas and having the product shipped in containers you can use the Freedom Series/ec21 Container Tracking module to monitor the shipment. Multiple purchase orders can be assigned to a container and splitting a purchase order across containers is supported. Key data elements that you may capture include Shipment Number, Container Number, Vessel ID, ship date, expected arrival date, etc. Freight, duty, insurance and other costs can be recorded and pro-rated against the item cost for items in the shipment. Since containers often originate in foreign countries, Container Tracking invokes the Freedom Series/ec21 currency conversion routines to assure inventory is properly costed.
In addition to tracking the shipment, receiving functions can be done at the Container Level, allowing you to post receipt of all product in a container in one step. Put-away documents, including bin labels can be created in advance, expediting the receipt function.
Work Orders
Items may be defined as Assemblies in Freedom Series/ec21. Such items are not purchased but are manufactured. These items are sourced through the Work Order System. Assemblies may be produced on-site or outsourced through vendors. The Freedom Series/ec21 Work Order System supports a single level bill of material, the inclusion of labor charges and the estimation of time required for assembly. These elements are used to produce a production schedule that details when the jobs should be launched in order to meet the requested delivery dates of backorders or normal replenishment requirements.
Demand Forecasting
Freedom Series/ec21 includes a powerful, stand-alone demand forecasting tool that provides an alternative to the standard inventory replenishment methods for your special buying situations. Demand Forecasting also models inventory and purchasing for the next 12 months. These demand forecasts, and the resulting inventory and purchasing models, are presented in the standard Distribution Requirements Planning (DRP) format.
Building Forecasts
The Demand Forecasting tool gives you the ability to build forecasts for any number of items in a reporting group. You can select individual items for inclusion in a reporting group or instruct the system to build forecasts for items associated with a vendor or category of merchandise.
Controlling the Forecasts
The basic sales forecast used for modeling inventory and purchasing requirements is set for each of the next 12 months by summing the sales and lost sales for an item in each of the last 12 months and reducing the result by the quantity returned from customers.
When building forecasts, you can control and manipulate the results based on your knowledge of the behavior of the items and your inventory management goals. The Demand Forecasting module allows you to adjust the forecast by an expected demand change percentage, set a minimum days of supply to keep on hand, and set a safety stock level. Requesting multiple forecast runs with different control parameter assumptions for the same group of items provides you with a powerful 'what if' tool.
Adjusting the Forecasts
The Demand Forecasting module includes the ability to manually adjust the forecast for an item. This fine tuning facility can ensure that your unique knowledge about expected item behavior is used in modeling the inventory and purchasing requirements.
Distribution Requirements Planning (DRP)
The final result of running demand forecasting for a group of items is a DRP model of the demand, inventory and purchasing requirements for the coming 12 months. The DRP model can be used to make preseason buys, build Blanket Purchase Orders, or set sales and inventory budgets.
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