ED GUTKOWSKI, SENIOR DISTRIBUTION CONSULTANT
Many manufacturing companies will send materials out to suppliers in order to take advantage of specialized skills, temporarily increase capacity, and to lower cost. JD Edwards Manufacturing provides the ability to include these processing steps inherently in Bills of Material, with the ultimate goal of automatically creating the purchase order to get the supplier paid.
When a parts list is created, any routing steps defined as outside operations trigger an automatic purchase order having an item number with a format of "Parent Item" + *OP + "Routing Step". (If the parent item number is 12345 and routing step 10 is an outside op, the PO item is 12345*OP10). Please note that this 'item' is not a real item, even though it must be set up in the item master and branch. It is meant as a placeholder, and if all transactions work properly there should NEVER be on hand quantities for them. But alas we do not live in a perfect world and sometimes things don't always work as intended. So what do you do if you see any of these items in inventory?
To answer that question, let's first take a look at how to account for the process. When the *OP item is received on the purchase order, special processing kicks in and two transactions will appear in the Cardex:
1) An 'OV' receipt that triggers payment to the supplier. This transaction adds quantity on hand to inventory, credits RNV and debits inventory.
2) AN 'IM' issue that immediately removes the quantity from inventory, credits inventory and debits WIP.
The net result of the two transactions is a credit to RNV and a debit to WIP, with no inventory left on hand! This makes sense as we need to pay our supplier and roll the cost of the operation back to the parent.
When items are on hand, it is normally the result of the 'IM' transaction not taking place as intended. You can verify this by looking at the Cardex. This could happen because of improper set up, manual overrides or system glitches. The best way to rectify the imbalance is to perform the transaction that the system missed. I would recommend setting up a dedicated issue transaction that credits the inventory account and debits WIP, effectively mirroring the missing transaction. Creating a report that looks for these items and performing the recommended step results in fewer reconciling items during period end and a more accurate inventory balance!