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Tracking Customer Supplied Materials

  • 1.  Tracking Customer Supplied Materials

    Posted 3 days ago
    Currently on AX 2009.  Our Manufacturing Division has a long term project with a customer who wants to provide certain materials during the course of the build.  Seeking advice and guidance based on experience.  How have others worked with customer supplied materials in conjunction with BOMs?  What is being suggested have me with more questions than I have answers.

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    Keith Smyer
    Purchasing & Inventory Control Manager
    Tampa Armature Works Inc
    Riverview FL
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  • 2.  RE: Tracking Customer Supplied Materials

    Posted 2 days ago

    Have you considered setting up your customer as a vendor with the item's cost being zero?  You could then receive the inventory, consume it  in the manufacturing process.  You would also know if you could even start production by checking material availability.

     

     

     

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  • 3.  RE: Tracking Customer Supplied Materials

    Posted 2 days ago
    That is the current proposal.  Our Accounting & Finance team is a little uncomfortable with this.  We assume we would need to segregate this inventory physically since it is not our property.

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    Keith Smyer
    Purchasing & Inventory Control Manager
    Tampa Armature Works Inc
    Riverview FL
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  • 4.  RE: Tracking Customer Supplied Materials

    TOP CONTRIBUTOR
    Posted 2 days ago
    We're a toll chemical manufacturer, so we deal with customer-owned raw materials all the time, often times the same material we also buy for ourselves. Our solution when we switched to AX2012 was to use a different configuration for the customer-owned material, using the customer number as the configuration ID. One of the reasons for choosing to do this is that several of these items are stored in bulk storage tanks. While we need to track usage and cost based on who we're consuming material for, the reality is their material is co-mingled with ours and because the tanks only hold so much, it's not uncommon for us to have to dip into the percentage of customer-owned material, making it go negative until we resupply. It's not the most elegant solution, but it works and by using the same item number for our item and theirs, we're able to view on-hand inventory in aggregate as well as by configuration (ownership). I'm not sure if we had to have a customization in order to track different pricing by configuration or if that was out of the box functionality in 2012.

    One gotcha we did discover was that if we failed to create a cost price of $0 for the customer-owned configuration, when we consumed the material in production, it would grab our cost for the item instead - it didn't create the cost price when we made the first "purchase". This lead to numerous costing problems in our early days in AX. We've gotten more disciplined in ensuring the cost price is created when the configuration is added to an item, but the expectation was that since we are configured so that the cost price is updated by each purchase, that the first purchase would create the required combination. This was not the case.

    That's the basics of what we did on the raw materials side. It's something you should discuss with your partner, although our experience in trying to find a partner for the initial implementation was that not very many partners have experience dealing with customer-owned materials. I don't know if 2009 has the same capabilities 2012 had around configurations. We are now on D365F&O and are in the process of moving to turn on Advanced Warehousing. In preparation for that, we are switching to using unique item keys for every item/ownership combination, rather than doing it at the configuration level. I'm on the accounting side, so I'm not sure exactly why we're making that change. I'm pretty sure it had something to do with staying with out of the box functionality versus paying to modify a customization, so cost savings on the partner support for the project, rather than us being unhappy with how it had been working.

    As for reporting, you will definitely need to be able to see the customer owned materials separately from your own. The inventory reports can be run with configuration as a filter (again in 2012, 2009 my be different). If you have an external audit each year, count on being asked to provide a value for the customer owned material on your site. Also if it's going to add significantly to your overall inventory exposure, make sure your insurance is sufficient to cover all of it.

    On the vendor side, we designate all of our vendors for customer owned material with a "#" before their name, and we don't set up any address or payment method for them. We do have some customers who both supply material to us at no cost and who we also buy from. For those, we do use 2 different vendor keys - one for bringing in customer owned material and the other for buying material. We do the same purchase process regardless of who is providing the material. Create a PO, receive it and process an invoice against it. We just use the PO number as the invoice number when processing dummy $0 invoices for the customer owned material, but in AX2012 and later, it was the only way to financial settle the purchase. It's a bit of a pain, but fortunately it's not that high of a volume of dummy invoices we have to create.

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    Steve Latta
    Accountant
    Ortec, Inc.
    Easley SC
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  • 5.  RE: Tracking Customer Supplied Materials

    GOLD CONTRIBUTOR
    Posted 2 days ago
    Good Morning Keith,

    Our preferred method:
    We create separate items for customer supplied materials.  For example if we have item123 we will make item123-CN for items supplied by Customer Name.  This simplifies our tracking of the inventory and allows us to cost the item separately.  For the BOMs, if the BOM is specific to this customer only this build it with the -CN item.  If the BOM is for multiple customers than build with the generic item, and the production floor is responsible for substituting the -CN version when making something for this customer.

    Alternative method:
    If the item is bulk and we can't readily separate it, then we do a true up.  We buy the same item from both the customer and the market.  We make the customer's finished good consuming this item.  We know how much item we consumed to make the customer's finished goods.  Calculate the difference between the quantities of item consumed for customer's product and the quantity purchased from customer.  Multiply that quantity by the difference between the average market price and the customer contract price.  This amount is either invoiced to the customer or credited to the customer's account.  Repeat each month.

    Thanks,
    Barclay



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    Barclay Hershey
    Financial Analyst
    Sugar Creek Packing Co
    Cincinnati OH
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