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Consignment Stock handling

started a topic 7 months ago

Hello Dear,

We're enjoying the co-manufacturing functionality. Related-but-different problem: Consignment stock from a customer.


We sometimes have to incorporate components that have been paid for by our customer.

  • There is never a tax invoice generated
  • These components do not belong to us until we use them in an operation
  • They should not be on our balance sheet in Xero
  • We still need to consume the components and ask the customer to re-order when stock gets down to a certain level.
So far we've been using a separate warehouse and then our bookkeeper has been manually correcting our accounts. This is not ideal for the reasons above.


Are you able to implement a consignment stock workflow where the Dear subscriber is the consignee? SKUs (or a batch of product with a certain SKU) would need to be identified as 'Consignment' but stored in the same warehouse (or a special warehouse that does not need a movement order) to be consumed in a production process, and then have some way to prompt the customer to reorder at a certain stock level.


Not a straightforward workflow - trying to think of the best way to describe it to your dev team?

  •  Hello Matt,


    I hope you are doing great.


    Could you please specify the following:


    1. What is the preferrable method of adding consignment stock: stock adjustment or purchase order with 0 cost for component?

    2. Should the cost of added components be zero to avoid discrepancies on balance sheet?

    3. What document should be generated to order components from customer . Can we use purchase order and mark it as Complete on stock receiving?


    Looking forward to hearing from you soon.


    Best regards,

    Elena 


  • Hi Elena,

    Thanks for the rapid response.


    I think a PO with zero cost would be good, better than a stock adjustment as it reflects the fact that more stock has been requested (rather than an inaccuracy corrected).


    Components should be zero value on the balance sheet.


    PO template would be good, if we could use a custom format with 'stock request' or similar that would be better but if that needs a lot of work I'd say let's use the PO for now and if other users have ideas for improvement it can be tweaked later?



    Matt

  • Hello Matt,


    Hope you are doing great.


    Please let me ensure that we are on the same page regarding the workflow for consignment stock.


    1. The Product A - a consignment stock is received in some location:

    - stock movement (receiving) is done for Product A to define the fact of receiving

    - G/L transactions are not done because the owner of the stock is the vendor 


    2. Product A is allocated for the Production Order to be consumed in the production process. In the process of production the ownership for the Product A is changed from the vendor to the company which consumes this Product A. 

    Please specify if the fact of the ownership change should be recorded in some reports or notes?


    3. As soon as Product A is consumed, the Purchase Order Invoice for the Product A should be generated to the vendor of the Product A. This invoice is generated for the consumed quantity so that the vendor could provide the cost for Product A. 

    Please specify who is paying for the Product A consumed in the production? 

    We have 3 parties in this case:

    - manufacturer - the company which initiates the Production Order;

    - co-manufacturer - the company to which manufacturer transfers the stock;

    - final customer who buys finished product produced in the production process.


    Looking forward to hearing from you soon.


    Best regards,

    Elena  

  • Hi Elena,


    1. Correct


    2. For us it just needs to be a note, and then booking of assembly time and overheads (as if it had been a normal product). But yes the converted goods / output is then transferred to our balance sheet.


    3. This is the confusing bit. Our customer is 'the manufacturer' in this case - we are the co-manufacturer, but the company who issues the Production Order and who receives the customer stock. When we consume that stock in an assembly it gets absorbed into our goods (as it contains our work). We then sell it back to the customer (along with components that we have bought, our labour and margin). The PO needs to be more of a 'order request' to our customer as they need to raise a PO in their systems to order from their vendor.


    Does that make sense? The scenario in (3) is something that we try to avoid as it is complicated but is sometimes necessary for proprietary components or components that the customer has already purchased (where we're coming in to rescue a job). 

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