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256 CHAPTER 7 Inventory and Warehouse Management Processes

As the fi gure indicates, the order in which IM and WM activities are com-
pleted can vary from one scenario to another. Consider, for example, the sce-
narios diagrammed in the bottom two rows of Figure 7-33. The third row is a
case in which the goods issue (for a sales order or production order) is posted
before WM activities are recorded in the ERP system. This scenario can occur
when either a customer or the production process needs materials urgently
and the materials are removed from storage and shipped out to the customer
or the production fl oor. In such cases, the materials are withdrawn from the
warehouse and a goods issue is posted, but the WM activities of picking
the materials and placing them in the interim storage area have not been
recorded. Rather, they are recorded later as time permits.
Let’s consider the impact of this type of movement on storage location
and warehouse inventory. Figure 7-34 illustrates a scenario in which a company
has 100 units in inventory prior to the process execution. It then ships 25 units
to a customer. At the time of shipment, a goods issue is posted, and storage
location inventory decreases by 25 units to 75. To keep storage location and
warehouse inventory equal, the ERP system will post a negative quantity to
the interim storage area (–25). As a result, warehouse inventory now becomes
75 (100 – 25). To reduce the warehouse bin inventory, a transfer order must be
confi rmed. When this occurs, a decrease of 25 units is recorded for warehouse
bins, and an increase of 25 units is recorded for the interim storage area. As a
result, the interim storage area shows a quantity of zero and warehouse bins
indicate a quantity of 75, which matches the storage location inventory.

Figure 7-34: Inventory impact when IM precedes WM

The last row in Figure 7-33 represents a case in which putaway in WM
is completed before a goods receipt is recorded in IM. This situation can occur
when fi nished goods from the production process are moved directly to bins in a
warehouse. It is common in the case of repetitive manufacturing, where fi nished
goods are continuously being produced (see Chapter 6 for an explanation). When
the materials are brought to the warehouse for putaway, a transfer requirement
or transfer order is created and confi rmed. Goods issues are then periodically
posted in IM to refl ect the increase in inventory in the storage location.
Figure 7-35 illustrates the inventory impact of this scenario. It assumes
that 100 bikes are in inventory initially and that 25 bikes are received into
the warehouse. When the transfer order is confi rmed, there will be 125 bikes
in the warehouse bins, but only 100 in storage location inventory, because the goods
receipt has not been recorded. To ensure that storage location inventory and ware-
house inventory are equal, a negative quantity is recorded in the interim storage
area. When the goods issue is posted, 25 bikes are added to both the storage loca-
tion and interim storage areas, leaving a total of zero in the interim storage area.

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