Production often requires an item for which the quantity is not precisely defined. Usually these are relatively inexpensive items, and the quantity consumed is left to the operator’s discretion. To keep from running out, often a two bin inventory philosophy is used. Material is pulled from bin one, when bin one is empty, the material in bin two is moved to bin one, and a replenishment order is created to fill bin two. This blog explains how to use this concept in Microsoft Dynamics AX 2012.
Microsoft Dynamics AX 2012 has some obstacles to overcome when attempting to deal with floor stock in a traditional manner. Items on a bill of material (BOM) with a quantity of zero are omitted from the production order bill of material. Items on the Bill of material are costed against the production order, and not expensed.
Floor Stock Items
Optionally, you may want to have a separate account in the general ledger to track floor stock expense.
Next you need to set up a floor stock item group.
Navigate to Inventory Management > Setup > Inventory > Item Groups
For the Inventory Issue account, the account code would reference the expense account you created in the previous step.
Unit of Measure
A third possible setup step is to create the unit of measure and any equivalents. For example, you might purchase an item in 50 gallon containers… so container might be your inventory, purchase and sales unit of measure (UOM), but the item is called out in decimal ounces on the bill of material… so your Bill of Material UOM will be ounces and you need to make sure you have the decimal value set, and the equivalents from 50 gallons to ounces established.
Sometimes, the bill of materials will only identify the quantity with a value of As Required (AR). That must be set in the system as well usually by item since the requirements will be different for different items. As required can be translated into an approximate unit of measure. For example, AR = 3 g. What this means is that on average, the required amount will be three grams, give or take. Precision is not required, only approximation.
Navigate to Organization Administration > Setup > Units > Units
Setup for an As Required unit of measure
Floor Stock Item Setup
Navigate to Product Information Management > Common > Released Products > New
On Released Item > Create Product form
a) Make sure that your item group is set for Floor Stock
b) Leave your BOM unit of measure the same as the inventory unit of measure initially
Select the Edit icon on the action pane for your floor stock item.
Select the Unit Conversion Icon on the Action Pane for your floor stock item.
Create your ‘As Required’ conversion. Remember, this only has to be an approximate value.
a) Change the BOM UOM from the Inventory value to the value on the Bill (in the example ‘As Required.)
b) Change the Production Type to None since this is a purchased item
c) On the Plan fast tab, select a Min/Max replenishment coverage plan.
Bill of Material
Floor stock does not need to appear on the bill of material, but it can be placed there as a reference. To place floor stock on the BOM, you need to make sure that it is not part of the rolled up cost, and that the quantity required is zero.
Navigate to Inventory Management > Common > Bill of Material > select the BOM on the list page, and then the BOM version. Next proceed to the lines tab.
Bill of Material
a) Enter zero in the quantity field on the overview tab for the items.
b) Click on the General Tab
BOM Line General Tab:
a) Uncheck the Calculation check box. This ensures that the item will not be considered when the cost roll up is performed.
An item with zero in the quantity field will not appear on a pick list, so while you add it to the bill of materials, it will never show on the pick list. To have floor stock show, it must be added to the job instructions on the route card.
Issuing Floor Stock from Inventory
To issue floor stock from inventory, use the item movement journal.
The item group you created earlier sets the issue account to an expense account, and you set the offset to the inventory account, debiting expense, and crediting inventory. This moves the material from an inventory cost to an overhead cost.
If you looking for more information on managing floor stock or Microsoft Dynamics solutions for manufacturing, contact our professionals at firstname.lastname@example.org or by phone at 855.437.7202. RSM offers a full range of service for Dynamics AX with certified professionals across the United States and can assist with new and existing Dynamics AX solutions. If you found this information useful, consider a subscription to our Dynamics Community News publication.
By: Mac McHenry – Illinois Microsoft Dynamics AX partner