Inventory Architecture Matters#
Inventory management architecture determines how well the ERP handles stock accuracy, multi-location operations, complex valuation, and integration with other modules.
Core Data Structures#
Item Master#
The foundation of inventory management.
Key attributes: - Item identifier - Description - Unit of measure - Item type - Product group - Valuation method
Inventory Locations#
Location hierarchy: - Site/warehouse - Zone - Aisle - Bin/location
Location types: - Storage - Staging - Receiving - Shipping
Unit of Measure#
UoM structure: - Base unit - Purchase unit - Sales unit - Inventory unit
Conversions: - Standard conversions - Item-specific conversions
Valuation Methods#
Standard Cost#
Predetermined cost assigned to items.
Advantages: Stable costs, variance analysis.
Disadvantages: Requires cost updates, variance handling.
Best for: Manufacturing with stable costs.
Moving Average#
Cost updated with each receipt.
Advantages: Reflects current costs.
Disadvantages: Cost fluctuations, harder analysis.
Best for: Trading/distribution with volatile costs.
FIFO#
First-in, first-out costing.
Advantages: Matches physical flow, current costs.
Disadvantages: Complex tracking, multiple cost layers.
Best for: Perishable goods, trend pricing.
LIFO#
Last-in, first-out costing.
Advantages: Tax benefits in inflation.
Disadvantages: Not allowed in many jurisdictions.
Best for: Rarely used in NZ/AU.
Transaction Processing#
Receipt Transactions#
Purchase receipt: Goods received from supplier.
Production receipt: Finished goods from production.
Transfer receipt: Goods received from another location.
Return receipt: Goods returned from customer.
Issue Transactions#
Sales issue: Goods shipped to customer.
Production issue: Materials consumed by production.
Transfer issue: Goods sent to another location.
Adjustment issue: Inventory write-off.
Transfer Transactions#
Location transfer: Between locations within organisation.
Status transfer: Between inventory statuses (e.g., quarantine to available).
Inventory Status#
Status Types#
Available: Ready for use/sale.
Reserved: Allocated to order.
Quarantine: Awaiting inspection.
On hold: Blocked for use.
In transit: Between locations.
Status Control#
Status rules: Which transactions allowed per status.
Status changes: Workflow for status changes.
Inventory Planning#
Reorder Point#
Calculation: (Lead time demand + Safety stock)
Triggers: Automatic reorder suggestion.
Safety Stock#
Purpose: Buffer against demand/supply variability.
Calculation: Based on service level target.
ABC Classification#
Class A: High value, tight control.
Class B: Medium value, moderate control.
Class C: Low value, simplified control.
Integration Points#
Procurement Integration#
Purchase requisitions: From inventory planning.
Purchase orders: To procurement module.
Receipts: From procurement module.
Sales Integration#
Availability check: Real-time stock check.
Reservation: Stock reservation for orders.
Picking/shipping: Fulfilment processing.
Production Integration#
Material planning: Production requirements.
Material issue: Production consumption.
Production receipt: Finished goods.
Warehouse Management#
WMS integration: Advanced warehouse operations.
RF/barcode: Data capture technology.
Automation: Automated material handling.
NZ/AU Considerations#
GST Treatment#
Tax codes: GST treatment by transaction type.
Import GST: GST on imported goods.
Export GST: GST-free exports.
Seasonality#
Seasonal planning: Seasonal demand patterns.
Promotional inventory: Promotional stock management.
Conclusion: Inventory Architecture Enables Accuracy#
Inventory management architecture determines data accuracy, operational efficiency, and integration effectiveness. Understanding the architecture helps in selecting and implementing the right solution.