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Inventory Management 225

A transfer posting is used in several other situations that do not necessar-
ily involve a physical movement of materials. Here we consider two scenarios:
material-to-material posting and consignment-to-warehouse stock posting. A
material-to-material posting is used to change the material number of a mate-
rial. This process is common in industries such as pharmaceuticals and chemi-
cals where the characteristics of a material change over time. For example,
one of the steps in the process of brewing beer is to boil and cool grains and
water. This material, called wort, is combined with yeast and placed into a
fermentation vessel. Once the wort is fermented, it becomes beer. Thus one
material (wort) changes over time into another (beer). In addition, a company
occassionally will change a material number for a material. In both cases, the
company uses a transfer posting to change the material number from the old
number to a new number, using an appropriate movement type.
The second scenario in which a transfer posting is not accompanied by
a physical movement of materials involves vendor-owned inventory—that is,
materials that are stored in the customer’s facilities although the vendor retains
ownership. This arrangement is common for large companies such as Walmart.
Let’s use GBI to illustrate this process. Consider a scenario in which GBI has
an agreement with one of its vendors to provide GBI with raw materials on a
consignment basis. In this case, when the goods receipt is posted, the quantity
of materials in inventory is increased, and the status of the materials is set to
consignment stock. However, GBI does not owe any money to the vendor,
and the materials are not valued in GBI’s balance sheet. Thus, the goods
receipt does not affect GBI’s fi nancial position. There is no impact on the ven-
dor’s account, the accounts receivable reconciliation account, or the inventory
account. At a later point in time, when GBI uses the raw materials in the pro-
duction process, it will change the status of the materials from consignment
to warehouse stock (either unrestricted use or in quality inspection). At this
point there is a fi nancial impact—GBI now owes the vendor for the quantity
of materials used—which is recorded in the general ledger using an appropri-
ate movement type. (You might want to review our discussion of the invoice
verifi cation step of the procurement process in Chapter 4.)

STOCK TRANSFERS

Whereas a transfer posting need not involve an actual movement of materi-
als, a stock transfer is used to physically move materials within the enterprise
from one organizational level or location (e.g., a storage location in a plant)
to another. A stock transfer can involve movements under three scenarios: (1)
between storage locations within one plant, (2) between plants in one company
code, and (3) between plants in different company codes. Figure 7-1 provides
two examples. The arrow marked “3” in the middle of the fi gure illustrates a
stock transfer between two plants (A and B). Although not indicated in the
fi gure, the plants may be in the same company code or in different company
codes. The arrow marked “3” near the bottom right part of the fi gure illustrates
a transfer between two storage locations in the same plant.
Regardless of the organizational levels involved, three options are avail-
able for moving materials: using a one-step procedure, a two-step procedure,
and a stock transport order. We discuss stock transport orders at the end of
this section. The one-step and two-step procedures are illustrated in Figure 7-2.

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