| # Inventory consumption handling In vendor managed inventory (VMI) and subcontracting environments, consumptions are recorded to view and maintain consumption data in the supplier's or manufacturer's administrative warehouse. This warehouse mirrors the customer's or subcontractor's warehouse from which the customer/subcontractor consumes materials supplied by the supplier/manufacturer. Handling inventory consumptions includes the creation and processing of these consumptions. Note In this topic, supplier refers to the supplier or the manufacturer; customer refers to the customer or the subcontractor, and VMI warehouse refers to the customer's or the subcontractor's warehouse from which the customer or the subcontractor consumes goods supplied by the supplier or manufacturer. Consumption master data To record inventory consumptions in the supplier's administrative warehouse and to update the inventory levels and start up invoicing: In the Implemented Software Components (tccom0100s000) session, select: The VMI (supplier side) check box to maintain consumptions in VMI environments. The Subcontracting with Material Flow (manufacturer) check box to maintain consumptions in subcontracting environments. In the Terms and Conditions (tctrm1100m000) session, define terms and conditions for the relevant business partners, warehouses, and items. In the Schedule Terms and Conditions (tctrm1131m000) session, select the External Packing Slip is Mandatory check box if the consumption line must include an external packing slip for a schedule. Specify the Duplicate External Packing Slip Allowed check box to allow or prevent, for a combination of sold-to business partner, ship-to business partner, and item, using an external packing slip that was already used before. In the Method of Inventory Update field of the Logistics Terms and Conditions (tctrm1140m000) session, to enable the creation of consumptions in the Inventory Consumption (tdsls4140m000) session for subcontracting scenarios, select one of the following: Receipts and Consumption Receipts, Consumption and Inventory Balance Inventory Balance as Consumption For VMI scenarios, selecting these options is not required, but if you do not select any of these options, received quantities are not shown in the Inventory Consumption (tdsls4140m000) session. For further information on how to set up the VMI functionality, see: VMI customer forecast - setup and VMI supplier forecast - setup. For information on subcontracting, see Overview of subcontracting. Consumptions Consumption records are generated or manually created. They show the received quantities provided by the supplier and the subsequent consumptions by the customer. A consumption record consists of a header and one or more lines. Consumption header When the VMI warehouse is replenished, LN generates a consumption header. Headers of consumption records contain the name of the customer, the VMI warehouse, and the aggregated received and consumed item quantities. They are viewed and maintained in the Inventory Consumptions (tdsls4140m000) session. Consumption line(s) When the customer consumes material, a consumption line is created. Details of individual consumptions are viewed and maintained in the Inventory Consumption Lines (tdsls4141m000) session. Consumption lines are automatically entered after receiving the LoadInventoryConsumption Business Object Document (BOD), or manually, resulting from an e-mail or a phone call from the customer. After the consumption is entered, it must be processed to: Invoice the customer for the consumed quantities, if invoicing is applicable. Decrease the inventory levels of the administrative warehouse. Note In the customer's LN system, consumptions are generated in the Consigned Consumptions (whwmd2551m000) and the Inventory Receipt Transaction Consumptions (whina1514m000) sessions. For more information, refer to Consumption records. Processing consumptions To determine whether invoicing is applicable and to start up invoicing for the relevant customer, and to lower the inventory levels in the administrative warehouse, you must process the inventory consumptions as follows: In the Inventory Consumption Lines (tdsls4141m000) session, from the appropriate menu, select Process Consumption Line to process selected consumption lines. In the Inventory Consumption (tdsls4140m000) session, from the appropriate menu, select Process Inventory Consumption to process the consumption lines of the selected item. Use the Process Inventory Consumption (tdsls4290m000) session to process a range of consumptions. After the consumptions are processed, the orders and schedules linked to the consumptions are shown in the Orders by Inventory Consumption Line (tdsls4142m000) session. Note You can access all of these sessions from the Inventory Consumption - Lines (tdsls4640m000) session. How LN processes consumptions - outline Step 1. Link consumption record to replenishment order/schedule To determine whether invoicing is applicable and to start up invoicing for the relevant customer, LN links the consumption to the order/schedule with which the item was received in the VMI warehouse as follows: Subcontracting reference present on consumption line? If yes, the consumption is linked to the corresponding purchase material supply line. For more information, refer to Subcontracting order and Process returns. If no: Packing slip present? If yes, search for a matching sales schedule shipment and link the consumption to the schedule. If no: Customer order reference present? If yes, the consumption is linked to that order. For more information, refer to VMI order/schedule and Process returns. If no: Customer schedule reference present? If yes, the consumption is linked to that schedule. If no: Search for a Pay on Use sales order line to link the consumption to. If found, refer to VMI order/schedule. If not found: Search for a Pay on Use sales schedule line to link the consumption to. If found, refer to VMI order/schedule. If not found: Create a consignment invoicing sales order to settle the invoicing of the consumed quantity. For more information, refer to Sales consignment invoicing orders with origin Consumption. If the Invoicing Required check box is cleared on the consumption line, LN automatically lowers the inventory level. For more information, refer to Adjust inventory level in administrative warehouse. Step 2. Process returns If the Return check box is selected on the consumption line, no invoicing is required. If the sales order found is Pay on Use, an invoicing line is created, but on this invoicing line the returned consumption quantity is shown in the Returned Consumption Quantity field of the Sales Order Invoice Lines (tdsls4106m100) session, and no invoicing takes place. If the subcontracting reference is filled or the returned item is a packaging item, the consumption line's Processed check box is selected, and no further action is taken. To return quantities, you must manually create a sales return order and link it to the relevant order/schedule. For more information, refer to Sales return orders. Note The search order listed above is leading. If, for example, a consumption line contains a subcontracting reference and a customer order number, the customer order number will be ignored, even if a search on subcontracting reference fails. To link consumptions to the replenishment order The following can be applicable for a consumption record: It is linked to the replenishment subcontracting order It is linked to the replenishment VMI order/schedule It cannot be linked to a replenishment order/schedule Subcontracting order To link a consumption line to a subcontracting purchase order, LN first uses the subcontracting reference and then the consumed item to find the relevant material supply line matching the subcontracting purchase order. The material line whose item matches the inventory consumption line's item is selected. For costing purposes, the used materials must be booked on the correct subcontracting purchase order. Therefore, the Subcontracting Reference field in the Inventory Consumption Lines (tdsls4141m000) session is mandatory. Usually, the subcontractor is not invoiced for materials supplied by the manufacturer and consumed by the subcontractor to produce the items for the manufacturer. For consumption lines linked to an Operation Subcontracting material supply line or an Item Subcontracting material supply line, the Consumed Quantity field in the Purchase Order Material Supply Lines (tdpur4116m000) session is updated after receipt of a consumption message from the subcontractor, which in turn triggers the update of the inventory levels. For more information, refer to Adjust inventory level in administrative warehouse For further information about the order flow between manufacturer and subcontractor, and operation and item subcontracting, see To subcontract operations (manufacturer's side) and Item subcontracting - procedure. Note LN only searches for a subcontracting order if, in the Implemented Software Components (tccom0100s000) session, Subcontracting with Material Flow (subcontractor) is selected. VMI order/schedule To link a consumption line to a vendor managed inventory (VMI) order or schedule, LN first uses the packing slip to search for a matching sales schedule shipment and link the consumption to the schedule. If no packing slip is available, the customer order/schedule reference is used. In VMI environments, the customer order/schedule reference is not mandatory. If an inventory consumption line contains a customer order/schedule reference, LN searches for a sales order/schedule line with a customer order/schedule, position, and sequence identical to the customer order/schedule reference, to determine the payment. For sales schedules, LN searches for the first sales schedule line with a matching customer schedule reference. Consumption lines are linked to this specific sales schedule, irrespective of whether or not consecutive schedule lines have a different customer schedule reference. If the payment found is Pay on Use, inventory levels are updated and invoicing is triggered. For the order/schedule lines linked to the consumption line, LN creates invoicing lines in the Sales Order Invoice Lines (tdsls4106m100) session or Sales Schedule Invoice Lines (tdsls3140m200) session. If the payment found is Pay on Receipt or No Payment, only the inventory levels are updated. For more information, refer to Adjust inventory level in administrative warehouse. If no packing slip or customer order/schedule reference is available and the Invoicing Required check box is selected, the following applies: LN searches for the oldest sales order/schedule with payment type Pay on Use that is not yet fully consumed. If a matching sales order/schedule line is found, LN creates an invoice line linked to that sales order line or sales schedule. If no matching line is found, LN creates a consignment Invoicing sales order based on the Consignment Invoicing Order Type field in the Sales Order Parameters (tdsls0100s400) session. If a Pay on Use sales order/schedule line is used and the total consumed quantity exceeds the ordered quantity, LN creates an invoicing line for the part that "fits". For the remainder, LN searches for other Pay on Use sales order/schedule lines to create invoicing lines. For the consumed quantities for which no sales order/schedule line is found, LN creates a consignment invoicing sales order. For each invoice line created, LN updates the inventory levels with the invoiced quantities. For more information, refer to Adjust inventory level in administrative warehouse. Note LN only searches for Pay on Use sales order/schedule lines if, in the Implemented Software Components (tccom0100s000) session, Ownership External is selected. Sales consignment invoicing orders with origin Consumption If a consumption cannot be linked to a replenishment order, a sales consignment invoicing order is generated to settle the invoicing of the consumed quantity. These orders receive the Consumption origin and their order type is retrieved from the Consignment Invoicing Order Type field in the Sales Order Parameters (tdsls0100s400) session. Updating inventory levels for these orders is handled by Warehousing, because warehouse activities are part of the order procedure of a sales consignment invoicing order. If a consignment invoicing order is released to Warehousing, processing the resulting outbound order lines handles inventory level adjustments. It is recommended to set the activities of the warehousing order type linked to the consignment invoicing order type to automatic. For more information, refer to To define warehousing procedures. Note The price for sales consignment invoicing orders is always based on the consumption date. You cannot cancel or delete sales orders with the Consumption origin, nor cancel, delete, or add corresponding lines or change item and quantity. Adjust inventory level in administrative warehouse LN automatically updates the inventory levels of the administrative warehouse without performing the outbound and shipment procedures. To register the inventory reduction, LN creates a sales order of type Sales (Manual) and a shipment. You can view this sales order and shipment in the Item - Warehouse - Inventory Transactions (whinr1510m000) and the Inventory Receipt Transaction Consumptions (whina1514m000) session. The ownership of this sales order is Customer Owned, because invoicing and payment is performed based on the originating Pay on Use sales order/schedule, the consignment invoicing order, or the subcontracting purchase order. Prices and discounts When LN creates an invoicing line, the following are applicable: Sales order LN determines prices and discounts based on the values of the originating sales order line, using either the consumption or replenishment date, depending on the Price Determination Based on parameter setting in the Order Terms and Conditions (tctrm1130m000) session. Sales schedule LN determines prices and discounts based on the values of the first schedule line linked to the originating sales schedule. Note In the Sales Order Invoice Lines (tdsls4106m100) session, consumption invoice lines are linked to a sales order line. In the Sales Schedule Invoice Lines (tdsls3140m200) session, consumption invoice lines are linked to a sales schedule header. If you release such consumption invoice lines to Invoicing, required information on prices, tax, and so on is retrieved from the first schedule line linked to the sales schedule. Information from successive schedule lines is not taken into account. The price for sales consignment invoicing orders is always based on the consumption date. Pay on Use sales order/schedule lines For sales order/schedule lines with payment type Pay on Use, the activity Release to Invoicing is part of the order procedure. Those lines can: Register consumptions Be invoiced, that is, invoicing lines are created for the consumption lines they are linked to Have the Self Billing check box selected Note This is applicable in an extended consignment setup, in which you directly link the invoicing for a consumption of consignment inventory to the replenishment order or schedule. In a basic consignment setup, in which the order and schedule procedures are split into a replenishment part and an invoicing part, the following are applicable: Invoicing is not available for consignment replenishment orders, which are sales orders for which the Consignment Replenishment check box is selected in the Sales Order Types (tdsls0594m000) session. Because for consignment replenishment orders Release to Invoicing is not part of the order procedure, consumptions can be invoiced using a Consignment Invoicing sales order. These are sales orders for which the Consignment Invoicing check box is selected in the Sales Order Types (tdsls0594m000) session. For more information, refer to Consignment in Sales and Procurement. Related topics Vendor managed inventory Overview of VMI business scenarios To update the administrative warehouse Consignment in Sales and Procurement Overview of subcontracting Configuring LN for BOD publishing |