DBD: PO Vendor Owned Inventory

DBD: Purchase Orders - Vendor Owned Inventory

Step 1: Create a New General Ledger Account

Create a new General Ledger account. (Example: If your GL for inventory is 1200-00, then add a 2-digit ID for this account. You may choose to use 85, such as 1200-85. It does not matter what account you use, just make it a new account.)

Step 2: Set Up Automatic G/L Posting by Location

You can set your Inventory Control Parameters in such a way that the system will automatically post transactions in and out of this General Ledger account. Answer the question: Does this company post G/L Inventory Control accounts by location? then enter the appropriate starting digit that will correspond to your new Inventory Sub-account.

Inventory Control Parameters — post G/L accounts by location

Step 3: Set Up the New Warehouse Location

You will now setup a new warehouse location for these goods. This is done in Inventory Control > Setup > System > System Setup > Warehousing Location. I would start the warehouse code with an 8500 series of numbers. This will allow you to also enter the vendor code where this inventory is stored.

On this same screen, you will enter the new GL Sub-Account number in the following field:

Warehousing Location — Inventory Sub-Account to Post field

Step 4: Enter the Order to Have the Items Produced

When you wish to have these items produced, you would enter the order thru Stock Entry: Order processing > Purchase Orders > Processing > Purchase Order Entry. You would enter the warehouse to be this new location. If you choose to enter this order as a BAS-Bill as Ship order thru Standard Order Entry, then you will need to disable Inventory Job Costing for these orders.

Step 5: Receive the Goods When Produced

When the vendor indicates the goods have been produced, you will receive this thru Purchase Order Receiving. You will receive the goods only.

Step 6: Release the Goods to the Customer

When your customer places an order for these goods, you will enter a Billable-type release that is to release the goods out of this new location. You can then print the packing list and forward a copy of this to the vendor.

Step 7: Receive the Vendor's Invoice for Released Quantity

You will receive an invoice from the vendor for the quantity released. Your vendor will need to identify the original order number on their invoice to you. You will then receive this quantity thru Purchase Order Receiving; you will enter the quantity in the 'Vendor is Invoicing' fields. The invoiced previously numbers will slowly grow to equal the quantity that you have previously received.

Frequently Asked Questions

Q: What situation does Vendor Owned Inventory address?

A: When inventory is produced by the vendor and stored in their warehouse. As you receive customer orders, you send a packing list to the vendor, who ships the goods and bills you for what was released.

Q: What's the first setup step?

A: Create a new General Ledger account, typically by adding a 2-digit ID to your existing inventory GL account number (for example, 1200-85 alongside 1200-00).

Q: How do postings get automatically directed to the new GL account?

A: Enable 'Does this company post G/L Inventory Control accounts by location?' in Inventory Control Parameters and enter the starting digit matching your new Inventory Sub-account.

Q: How should I set up the warehouse for vendor owned inventory?

A: Create a new warehouse location in Inventory Control > Setup > System > System Setup > Warehousing Location, starting the code with an 8500 series, entering the vendor code and the GL Sub-Account number.

Q: What if I enter this as a Bill as Ship order?

A: You'll need to disable Inventory Job Costing for these orders.

Q: How do I get the goods to the customer once produced?

A: Enter a Billable-type release to release the goods out of the vendor owned warehouse location, print the packing list, and forward a copy to the vendor.

Q: How do I reconcile what the vendor bills you for?

A: When the vendor's invoice for the released quantity arrives (referencing the original order number), receive it through Purchase Order Receiving and enter the quantity in the 'Vendor is Invoicing' fields — the invoiced-previously totals grow toward what you've already received.

Tags: purchase-orders, vendor-owned-inventory, warehouse-setup, gl-account, po-receiving, DB-distributor