Managing Consignment Inventory in Dynamics NAV
Many manufacturers, distributors, service companies, hospitals, etc will have significant quantities of consignment inventory on hand at any given point in time. However, consignment inventories are often left uncounted and unvalued and are excluded from the ERP system in terms of quantities and supply chain planning calculations. Continue reading to learn how you can manage consignment inventory in Dynamics NAV out-of-the-box.
To accomplish managing consignment inventory in Dynamics NAV you must setup inventory location(s) for consignment inventory but then configure the posting groups (accounting) so that inventory, while in consignment, does not impact the financial position of the company.
- Begin by creating inventory locations (Location Codes) to track all inventory movements in and out of consignment.
- Use the inventory posting setup to accommodate that no asset or liability will be recognized financially however the inventory sub ledger will show the qty on hand and cost. You should use a liability account (instead of an asset account) to offset the accrued liability that is created by the system (according the to General Posting Setup) so that there is no “net” impact to the trial balance when the goods are initially received into the company into consignment.
- This location codes for inventory consignment should be be excluded when running an inventory valuation for purposes of reconciling to the balance sheet or for audits, etc.
- The receipt for the consignment item will be posted into the Consignment Location.
- Material can be consumed / issued directly from the Consignment Location with appropriate costs. Once consumed, the accounting will correct itself and record the appropriate expense (or WIP) and the liability is then recognized. The posting of the vendor invoice will reclass the liability into accounts payable.
- Periodic usage reports can be generated for Vendor invoicing or depending on the process, to issue Purchase Orders to the Vendor.
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