Configure inventory policies
The Negative inventory field group determines whether physical or financial negative inventory is permitted. It contains the following two parameters:
Physical negative inventory - Select this checkbox to allow the system to issue an item from inventory, even though stock levels are insufficient. This parameter is sensitive for inventory value calculation. Ensure that you make the decision of whether to select or clear this parameter with utmost care to prevent incorrect use of the functionality.
Example: Usually, a time lag occurs between arrival of items in the warehouse and when the purchasing department updates the received item's product receipts. When you visit the warehouse, you notice that the items have arrived for your purchase order, even though it's not part of your warehouse in the system.
If the item's item model group has Physical negative inventory selected, you can deliver the item, even if it's not registered as being physically present in the inventory.
Financial negative inventory - When this checkbox is cleared, you're prohibited from issuing quantities from stock, though they're physically available, if insufficient quantities exist that are financially updated, on-hand inventory for the item.
When you select this field, negative financial inventory is turned on, and the user can issue quantities from stock and inventory without knowing the real cost price. The system might post the invoice of these items after the items are sold, and then an inventory closing must adjust the cost to actual cost.
If the checkbox is selected and you're using an actual costing approach, you should also enter a cost on the item to temporarily value the issue until you can make an adjustment to actual cost. Enter the cost price in the Cost price field on the Manage cost FastTab on the Released products page.
Quarantine management
Select the Quarantine management checkbox to indicate that products linked to this group are under quarantine management rules and requirements. Use this option for items that are set aside and waiting approval for reception into the physical inventory and for distribution.
If the checkbox is clear, items aren't under quarantine management unless you create a quarantine order manually. When you physically update the item, the system generates a quarantine order with the status of Started.
Physical update field group
Fields in the Physical update field group determine the workflow that you use when sending or receiving items. Additionally, you use these fields to set rules around how to handle an order for receiving and shipping. The Physical update field group contains the following parameters:
Registration requirements - By selecting this checkbox, you must register the receipt before updating inventory through the product receipt on a purchase order. Register a product to record the item's physical presence at the company. These products are part of the physical warehouse available inventory. However, the system doesn't update the cost until you physically update it with a product receipt update. Generally, you would use this option with the Warehouse management functionality.
Example: Select the Registration requirements parameter to monitor the vendor performance or the reception of goods into the company. In this case, you must monitor the goods when they arrive at the company.
Receiving requirements - When you select this checkbox, you must physically update item receipts before you can financially update them. You need to enter a product receipt and post it before you can post the corresponding vendor invoice. If a difference occurs between the received quantity on the product receipt and the invoiced quantity on the invoice, an icon shows in the Product receipt quantity match field on the Vendor invoice page.
Picking requirements - When you select this checkbox, item issues must have the status of Picked before you can physically update inventory. Select the Picking requirements parameter with the warehouse management functionality when you use location management on the item and when you collect shipments by using picking routes.
Deduction requirements - When you select this checkbox, you must physically update item deductions before you can financially update them for inbound and outbound.
Inbound - You must enter and post a product receipt before you can post the corresponding vendor invoice. If a difference occurs between the deducted quantity on the product receipt and the negative invoiced quantity on the invoice, an icon shows in the Product receipt quantity match field on the Vendor invoice page.
Outbound - You must enter and post a packing slip before you can post the corresponding customer invoice. If a difference occurs between the deducted quantity on the packing slip and the negative invoiced quantity on the invoice, an icon shows in the Product receipt quantity match field on the Customer invoice page.
Reservation field group
The Reservation field group contains the following parameters:
FIFO date-controlled - If you select the FIFO date-controlled option, a sorting date controls the inventory reservation according to the first-in, first-out (FIFO) principle. The system reserves batches based on the earliest date of receipt of items, according to the FIFO principle.
Backward from ship date - This option becomes available if you select the FIFO date-controlled option. If you select Backward from ship date, the system reserves inventory backward from the desired ship date according to the principle of last in, first out (LIFO). If no receipts are available before the ship date, the system uses a FIFO reservation.
Item sales reservation - Determines whether item reservation is manual or automatic. If a reservation is automatic, the system reserves inventory when you create order lines. You can make reservations at the item number level for BOMs (Automatic option) or for the individual elements of a BOM (Explosion option). The default value for Item sales reservation can be inherited from the Accounts receivable parameters page. On that page, you can set the value in the Reservation field in the Sales default values section on the General tab.
Same batch selection - With this option, you can reserve inventory for a sales order line against a single batch of inventory. If you want to use this option, you must also set the Consolidate requirement option to Yes. Other settings are required for the tracking dimension group and storage dimension group.
Consolidate requirement - This option is similar to the Same batch selection option, and it consolidates inventory that's reserved for sales order lines into a single requirement.
FEFO date-controlled - Known as first-expired, first-out (FEFO), this option allows you to reserve batches that are close to their expiration date or best before date. You also need to set the Pick criteria field to select Expiration date or Best before date.
Pick criteria - Select this option to determine the date for master planning calculations and reservation logic. This date is an internal setting that decides whether you can use an inventory batch.
When you select these parameters for the item model group, you determine how Supply Chain Management makes reservations of the type Automatic, where no available inventory or receipts with the Received or Invoiced status exist for the item; however, receipts exist with the Ordered status for the item.
Additionally, for these parameters to come into effect, you need to select the Reserve ordered items checkbox in Inventory and warehouse management > Setup > Parameters > General tab.
Inventory model
The inventory model determines the cost measurement method (standard costing or actual costing) and the cost flow assumption under actual costing for valuing inventory. When you use actual costing, the inventory closing function adjusts estimated cost according to the rules of the selected inventory model. The choices are as follows:
FIFO
LIFO
LIFO date
Weighted avg.
Weighted avg. date
Standard cost
Moving average