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6/26/2018 1
Worldwide Equipment
Inventory Control
Standard Operating Procedures
June 18, 2018
June 26, 2018
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6/26/2018 2
Introductions
Reid HeiserDirector of
Accounts
Paul ReynoldsParts Consultant –
Senior Product
Expert
Karmak Headquarters – Carlinville, IL
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6/26/2018 4
Objective
Implement standard and consistent inventory control operating procedures in all
WE parts departments
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6/26/2018 5
Summary of Standard Operation Procedures / Work Instructions
Daily cycle counts
Parts receiving to accounts payable process
Creating part numbers
MPO’s to purchase parts locally
Parts Purchases using Credit Cards
Returns to vendors
Quantity adjustment process
Purchases from Road Champion
Customer prepay process
Reconcile inventory daily
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6/26/2018 6
Daily Cycle Counts
Count a section of bin locations each day
Develop a count schedule
Pick a standard time each day to count
Early morning
Late afternoon
Second shift
Goal: count the entire inventory 2-4 times per year
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6/26/2018 7
Daily Cycle Counts Process
Enter bin locations to be counted
Print count sheets
Perform counts
Enter counts
Print preliminary variance report
Research variances
Perform final update
Accounting department will make monthly entry to adjust G/L inventory for variances
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6/26/2018 8
Daily Cycle Counts Variance Research
Check Part Transactions for part movement
Have any inventory adjustments been made?
Has the part been forced filled?
Has the part been physically received but not received into Fusion?
Is the part committed on an open order but has not been pulled?
Parts order
Repair Order
Inter-branch transfer
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6/26/2018 9
Parts Receiving to Accounts Payable Process
All parts invoices entered in A/P Invoice Entry with posting reference
Parts inventory has been split into three G/L numbers
1300 – Parts Inventory
13IC – Inherent core inventory
13DC – Dirty core inventory
Note posting reference or print Parts Inventory Receiving Report when receiving
Match posting reference to vendor invoice
Fix posting reference to match invoice in Parts Inventory Receiving
Cost
Quantity received
Merge/split posting references to match invoice
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6/26/2018 10
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6/26/2018 11
Special Situations
Manually referenced posting references – the accounting to match posting reference has been done outside the A/P system
Free or promotional parts
Create purchase order for parts
Receive parts off purchase order
Enter zero total A/P invoice, post credit to no charge parts G/L account
Road Champion – post A/P invoice like other vendors
PACCAR invoices for core charges – two A/P invoices reference the same posting reference
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6/26/2018 12
Special Situations
Mack Invoices that are for multiple purchase orders
Post each purchase order as a separate invoice
Use Mack’s invoice with a -1, -2, etc. suffix
Merge/split posting references as needed
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6/26/2018 13
Why use Posting References?
Identify and correct receiving and invoicing errors
Maintain accurate and up-to-date Posting Reference Reconciliation report (received not billed)
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6/26/2018 14
Posting Reference Reconciliation Report
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6/26/2018 15
Creating Part Numbers
Parts managers and counter personnel can create part numbers from price file
Manually creating part numbers in Parts Inventory will be restricted to inventory control personnel
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6/26/2018 16
Use MPO’s to Purchase Parts Locally
No part is purchased without a P/O
Definitions
Bill-only part – not a valid part number in the inventory system. Purchased and sold on an MPO. No history tracked for purchasing purposes.
Buy-out part – valid part number that is purchased from a local vendor. Purchased and sold on an MPO. History is tracked for purchasing purposes.
Local purchases are going to require some work
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6/26/2018 17
MPO Process
Create MPO
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6/26/2018 18
MPO Process
Bill part to customer
Bill-only part –reference MPO
Buy-out part –validate part number, the reference MPO
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6/26/2018 19
MPO Process
Enter A/P Invoice, reference MPO
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6/26/2018 20
Returning Parts Purchased on an MPO
Bill part to customer
Enter A/P Invoice, reference MPO
Use Copy/New to create Ext 01 MPO to return part
Credit part to customer, reference Ext 01 MPO
Use Ext 01 MPO to return part to vendor
Enter credit A/P invoice, reference Ext 01 MPO
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6/26/2018 21
Purchasing Parts using a Credit Card
SOP -- All Parts Purchases will begin with a valid Purchase Order
Follow the Buyout / Bill-out process for issuing a PO to a vendor
Use the A/P vendor, for the PO, that is associated with the Credit Card being used for the purchase
Issue the PO to the Vendor at the time of ordering, ask that the PO number be referenced on the invoice
Process the Invoice using the same A/P process used for any parts order
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6/26/2018 22
Returning Parts to Vendors
All vendor stock, overstock, and core returns to vendors will be entered as Return Purchase Orders
Finalizing the return P/O will assign a posting reference
Tracked in:
Posting Reference Reconciliation report
Parts Receiving Reconciliation
Relieved by posting credit invoice is A/P Invoice Entry, referencing the posting reference
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6/26/2018 23
Returning Parts to Vendors
Invoice parts returns to return customer in Parts Order
PACCAR Returns
Enter parts to be returned as a return purchase order in Parts Purchase order
Generate return tags
Delete the return purchase order (do not finalize it)
Invoice parts returns to return customer in Parts Order
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6/26/2018 24
Quantity Adjustments
When you identify a quantity variance, research why variance occurred
Invoice the variance quantity to customer INV ADJ on a parts order
Receiving adjustments – corrected in Parts Inventory Receiving
Cycle count adjustments
Quantity available adjusted when you finalize the cycle count
Accounting entry booked monthly by the accounting department
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6/26/2018 25
Customer Prepay
Force fill (drive quantity negative) will be turned off
Customer prepay processUse Prt Deposit miscellaneous charge to bill customer for the price of the part .
Create second parts order and backorder part to the customer. Add same Prt Deposit miscellaneous charge to credit customer for prepayment of the part
When backorder fills, invoice second parts order to customer.
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6/26/2018 26
Reconcile Inventory Daily
Physical +/- Parts Inherent Cores Dirty Cores Total
Inventory Valuation Report (INV60505) - Archive in KOLD + 1,492,302.61 105,953.27 25,887.81 1,624,143.69
Parts Allocation Report (INV61825) - Archive in KOLD + 173,930.26 42,654.18 60,692.50 277,276.94
Total Physical Inventory = 1,666,232.87 148,607.45 86,580.31 1,901,420.63
General Ledger +/- Parts Inherent Cores Dirty Cores Total
G/L Account Number 1300 13IC 13DC
Ending G/L Balance 1,626,664.67 (17,091.57) (51,962.19) 1,557,610.91
Posting Reference Reconciliation Report - thru reconciling month (APM66000) + 310,273.39 114,907.94 80.50 425,261.83
Posting Reference Reconciliation Report - current receipts posted prior month (APM66000) + 0.00
Miscellaneous Purchase Order Reconciliation Report (MPO60700) + 0.00
Parts Inventory Quantity Adjustments Listing (INV61010) + 0.00
Total G/L inventory = 1,936,938.06 97,816.37 (51,881.69) 1,982,872.74
Total Physical Inventory - 1,666,232.87 148,607.45 86,580.31 1,901,420.63
Difference = 270,705.19 (50,791.08) (138,462.00) 81,452.11
As of (Date): 06-13-2018 System Reports Branch:
Physical to General Ledger Inventory Reconciliation Worksheet
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6/26/2018 27
Reconcile Inventory Daily
Physical +/- Parts Inherent Cores Dirty Cores Total
Inventory Valuation Report (INV60505) - Archive in KOLD + 1,492,302.61 105,953.27 25,887.81 1,624,143.69
Parts Allocation Report (INV61825) - Archive in KOLD + 173,930.26 42,654.18 60,692.50 277,276.94
Total Physical Inventory = 1,666,232.87 148,607.45 86,580.31 1,901,420.63
General Ledger +/- Parts Inherent Cores Dirty Cores Total
G/L Account Number 1300 13IC 13DC
Ending G/L Balance 1,626,664.67 (17,091.57) (51,962.19) 1,557,610.91
Posting Reference Reconciliation Report - thru reconciling month (APM66000) + 310,273.39 114,907.94 80.50 425,261.83
Posting Reference Reconciliation Report - current receipts posted prior month (APM66000) + 0.00
Miscellaneous Purchase Order Reconciliation Report (MPO60700) + 0.00
Parts Inventory Quantity Adjustments Listing (INV61010) + 0.00
Total G/L inventory = 1,936,938.06 97,816.37 (51,881.69) 1,982,872.74
Total Physical Inventory - 1,666,232.87 148,607.45 86,580.31 1,901,420.63
Difference = 270,705.19 (50,791.08) (138,462.00) 81,452.11
As of (Date): 06-13-2018 System Reports Branch:
Physical to General Ledger Inventory Reconciliation Worksheet
Total quantity
available. Updated
by selling parts to
customers and
receiving parts on
purchase orders.
Included in the G/L
balance.
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6/26/2018 28
Reconcile Inventory Daily
Physical +/- Parts Inherent Cores Dirty Cores Total
Inventory Valuation Report (INV60505) - Archive in KOLD + 1,492,302.61 105,953.27 25,887.81 1,624,143.69
Parts Allocation Report (INV61825) - Archive in KOLD + 173,930.26 42,654.18 60,692.50 277,276.94
Total Physical Inventory = 1,666,232.87 148,607.45 86,580.31 1,901,420.63
General Ledger +/- Parts Inherent Cores Dirty Cores Total
G/L Account Number 1300 13IC 13DC
Ending G/L Balance 1,626,664.67 (17,091.57) (51,962.19) 1,557,610.91
Posting Reference Reconciliation Report - thru reconciling month (APM66000) + 310,273.39 114,907.94 80.50 425,261.83
Posting Reference Reconciliation Report - current receipts posted prior month (APM66000) + 0.00
Miscellaneous Purchase Order Reconciliation Report (MPO60700) + 0.00
Parts Inventory Quantity Adjustments Listing (INV61010) + 0.00
Total G/L inventory = 1,936,938.06 97,816.37 (51,881.69) 1,982,872.74
Total Physical Inventory - 1,666,232.87 148,607.45 86,580.31 1,901,420.63
Difference = 270,705.19 (50,791.08) (138,462.00) 81,452.11
As of (Date): 06-13-2018 System Reports Branch:
Physical to General Ledger Inventory Reconciliation Worksheet
Total parts
committed – on
open parts orders,
repair orders and
I/B transfers.
Included in the G/L
balance.
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6/26/2018 29
Reconcile Inventory Daily
Physical +/- Parts Inherent Cores Dirty Cores Total
Inventory Valuation Report (INV60505) - Archive in KOLD + 1,492,302.61 105,953.27 25,887.81 1,624,143.69
Parts Allocation Report (INV61825) - Archive in KOLD + 173,930.26 42,654.18 60,692.50 277,276.94
Total Physical Inventory = 1,666,232.87 148,607.45 86,580.31 1,901,420.63
General Ledger +/- Parts Inherent Cores Dirty Cores Total
G/L Account Number 1300 13IC 13DC
Ending G/L Balance 1,626,664.67 (17,091.57) (51,962.19) 1,557,610.91
Posting Reference Reconciliation Report - thru reconciling month (APM66000) + 310,273.39 114,907.94 80.50 425,261.83
Posting Reference Reconciliation Report - current receipts posted prior month (APM66000) + 0.00
Miscellaneous Purchase Order Reconciliation Report (MPO60700) + 0.00
Parts Inventory Quantity Adjustments Listing (INV61010) + 0.00
Total G/L inventory = 1,936,938.06 97,816.37 (51,881.69) 1,982,872.74
Total Physical Inventory - 1,666,232.87 148,607.45 86,580.31 1,901,420.63
Difference = 270,705.19 (50,791.08) (138,462.00) 81,452.11
As of (Date): 06-13-2018 System Reports Branch:
Physical to General Ledger Inventory Reconciliation Worksheet
Total physical
inventory.
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6/26/2018 30
Reconcile Inventory Daily
Physical +/- Parts Inherent Cores Dirty Cores Total
Inventory Valuation Report (INV60505) - Archive in KOLD + 1,492,302.61 105,953.27 25,887.81 1,624,143.69
Parts Allocation Report (INV61825) - Archive in KOLD + 173,930.26 42,654.18 60,692.50 277,276.94
Total Physical Inventory = 1,666,232.87 148,607.45 86,580.31 1,901,420.63
General Ledger +/- Parts Inherent Cores Dirty Cores Total
G/L Account Number 1300 13IC 13DC
Ending G/L Balance 1,626,664.67 (17,091.57) (51,962.19) 1,557,610.91
Posting Reference Reconciliation Report - thru reconciling month (APM66000) + 310,273.39 114,907.94 80.50 425,261.83
Posting Reference Reconciliation Report - current receipts posted prior month (APM66000) + 0.00
Miscellaneous Purchase Order Reconciliation Report (MPO60700) + 0.00
Parts Inventory Quantity Adjustments Listing (INV61010) + 0.00
Total G/L inventory = 1,936,938.06 97,816.37 (51,881.69) 1,982,872.74
Total Physical Inventory - 1,666,232.87 148,607.45 86,580.31 1,901,420.63
Difference = 270,705.19 (50,791.08) (138,462.00) 81,452.11
As of (Date): 06-13-2018 System Reports Branch:
Physical to General Ledger Inventory Reconciliation Worksheet
Total G/L inventory.
Updated by
invoicing parts to
customers and
posting A/P
invoices.
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6/26/2018 31
Reconcile Inventory Daily
Physical +/- Parts Inherent Cores Dirty Cores Total
Inventory Valuation Report (INV60505) - Archive in KOLD + 1,492,302.61 105,953.27 25,887.81 1,624,143.69
Parts Allocation Report (INV61825) - Archive in KOLD + 173,930.26 42,654.18 60,692.50 277,276.94
Total Physical Inventory = 1,666,232.87 148,607.45 86,580.31 1,901,420.63
General Ledger +/- Parts Inherent Cores Dirty Cores Total
G/L Account Number 1300 13IC 13DC
Ending G/L Balance 1,626,664.67 (17,091.57) (51,962.19) 1,557,610.91
Posting Reference Reconciliation Report - thru reconciling month (APM66000) + 310,273.39 114,907.94 80.50 425,261.83
Posting Reference Reconciliation Report - current receipts posted prior month (APM66000) + 0.00
Miscellaneous Purchase Order Reconciliation Report (MPO60700) + 0.00
Parts Inventory Quantity Adjustments Listing (INV61010) + 0.00
Total G/L inventory = 1,936,938.06 97,816.37 (51,881.69) 1,982,872.74
Total Physical Inventory - 1,666,232.87 148,607.45 86,580.31 1,901,420.63
Difference = 270,705.19 (50,791.08) (138,462.00) 81,452.11
As of (Date): 06-13-2018 System Reports Branch:
Physical to General Ledger Inventory Reconciliation Worksheet
Total received not
billed and
differences
between what was
received and what
was posted to A/P.
Total is in physical
inventory but not in
the G/L balance.
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6/26/2018 32
Reconcile Inventory Daily
Physical +/- Parts Inherent Cores Dirty Cores Total
Inventory Valuation Report (INV60505) - Archive in KOLD + 1,492,302.61 105,953.27 25,887.81 1,624,143.69
Parts Allocation Report (INV61825) - Archive in KOLD + 173,930.26 42,654.18 60,692.50 277,276.94
Total Physical Inventory = 1,666,232.87 148,607.45 86,580.31 1,901,420.63
General Ledger +/- Parts Inherent Cores Dirty Cores Total
G/L Account Number 1300 13IC 13DC
Ending G/L Balance 1,626,664.67 (17,091.57) (51,962.19) 1,557,610.91
Posting Reference Reconciliation Report - thru reconciling month (APM66000) + 310,273.39 114,907.94 80.50 425,261.83
Posting Reference Reconciliation Report - current receipts posted prior month (APM66000) + 0.00
Miscellaneous Purchase Order Reconciliation Report (MPO60700) + 0.00
Parts Inventory Quantity Adjustments Listing (INV61010) + 0.00
Total G/L inventory = 1,936,938.06 97,816.37 (51,881.69) 1,982,872.74
Total Physical Inventory - 1,666,232.87 148,607.45 86,580.31 1,901,420.63
Difference = 270,705.19 (50,791.08) (138,462.00) 81,452.11
As of (Date): 06-13-2018 System Reports Branch:
Physical to General Ledger Inventory Reconciliation Worksheet
Total billed not
received. Valid only
for a month-end
reconciliation.
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6/26/2018 33
Reconcile Inventory Daily
Physical +/- Parts Inherent Cores Dirty Cores Total
Inventory Valuation Report (INV60505) - Archive in KOLD + 1,492,302.61 105,953.27 25,887.81 1,624,143.69
Parts Allocation Report (INV61825) - Archive in KOLD + 173,930.26 42,654.18 60,692.50 277,276.94
Total Physical Inventory = 1,666,232.87 148,607.45 86,580.31 1,901,420.63
General Ledger +/- Parts Inherent Cores Dirty Cores Total
G/L Account Number 1300 13IC 13DC
Ending G/L Balance 1,626,664.67 (17,091.57) (51,962.19) 1,557,610.91
Posting Reference Reconciliation Report - thru reconciling month (APM66000) + 310,273.39 114,907.94 80.50 425,261.83
Posting Reference Reconciliation Report - current receipts posted prior month (APM66000) + 0.00
Miscellaneous Purchase Order Reconciliation Report (MPO60700) + 0.00
Parts Inventory Quantity Adjustments Listing (INV61010) + 0.00
Total G/L inventory = 1,936,938.06 97,816.37 (51,881.69) 1,982,872.74
Total Physical Inventory - 1,666,232.87 148,607.45 86,580.31 1,901,420.63
Difference = 270,705.19 (50,791.08) (138,462.00) 81,452.11
As of (Date): 06-13-2018 System Reports Branch:
Physical to General Ledger Inventory Reconciliation Worksheet
Parts on MPO’s that
have been invoiced
to the customer but
not posted in A/P.
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6/26/2018 34
Reconcile Inventory Daily
Physical +/- Parts Inherent Cores Dirty Cores Total
Inventory Valuation Report (INV60505) - Archive in KOLD + 1,492,302.61 105,953.27 25,887.81 1,624,143.69
Parts Allocation Report (INV61825) - Archive in KOLD + 173,930.26 42,654.18 60,692.50 277,276.94
Total Physical Inventory = 1,666,232.87 148,607.45 86,580.31 1,901,420.63
General Ledger +/- Parts Inherent Cores Dirty Cores Total
G/L Account Number 1300 13IC 13DC
Ending G/L Balance 1,626,664.67 (17,091.57) (51,962.19) 1,557,610.91
Posting Reference Reconciliation Report - thru reconciling month (APM66000) + 310,273.39 114,907.94 80.50 425,261.83
Posting Reference Reconciliation Report - current receipts posted prior month (APM66000) + 0.00
Miscellaneous Purchase Order Reconciliation Report (MPO60700) + 0.00
Parts Inventory Quantity Adjustments Listing (INV61010) + 0.00
Total G/L inventory = 1,936,938.06 97,816.37 (51,881.69) 1,982,872.74
Total Physical Inventory - 1,666,232.87 148,607.45 86,580.31 1,901,420.63
Difference = 270,705.19 (50,791.08) (138,462.00) 81,452.11
As of (Date): 06-13-2018 System Reports Branch:
Physical to General Ledger Inventory Reconciliation Worksheet
Adjustment from
current month cycle
count. Physical
inventory has been
adjusted but G/L
inventory has not.
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6/26/2018 35
Reconcile Inventory Daily
Physical +/- Parts Inherent Cores Dirty Cores Total
Inventory Valuation Report (INV60505) - Archive in KOLD + 1,492,302.61 105,953.27 25,887.81 1,624,143.69
Parts Allocation Report (INV61825) - Archive in KOLD + 173,930.26 42,654.18 60,692.50 277,276.94
Total Physical Inventory = 1,666,232.87 148,607.45 86,580.31 1,901,420.63
General Ledger +/- Parts Inherent Cores Dirty Cores Total
G/L Account Number 1300 13IC 13DC
Ending G/L Balance 1,626,664.67 (17,091.57) (51,962.19) 1,557,610.91
Posting Reference Reconciliation Report - thru reconciling month (APM66000) + 310,273.39 114,907.94 80.50 425,261.83
Posting Reference Reconciliation Report - current receipts posted prior month (APM66000) + 0.00
Miscellaneous Purchase Order Reconciliation Report (MPO60700) + 0.00
Parts Inventory Quantity Adjustments Listing (INV61010) + 0.00
Total G/L inventory = 1,936,938.06 97,816.37 (51,881.69) 1,982,872.74
Total Physical Inventory - 1,666,232.87 148,607.45 86,580.31 1,901,420.63
Difference = 270,705.19 (50,791.08) (138,462.00) 81,452.11
As of (Date): 06-13-2018 System Reports Branch:
Physical to General Ledger Inventory Reconciliation Worksheet
Total G/L inventory
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6/26/2018 36
Reconcile Inventory Daily
Physical +/- Parts Inherent Cores Dirty Cores Total
Inventory Valuation Report (INV60505) - Archive in KOLD + 1,492,302.61 105,953.27 25,887.81 1,624,143.69
Parts Allocation Report (INV61825) - Archive in KOLD + 173,930.26 42,654.18 60,692.50 277,276.94
Total Physical Inventory = 1,666,232.87 148,607.45 86,580.31 1,901,420.63
General Ledger +/- Parts Inherent Cores Dirty Cores Total
G/L Account Number 1300 13IC 13DC
Ending G/L Balance 1,626,664.67 (17,091.57) (51,962.19) 1,557,610.91
Posting Reference Reconciliation Report - thru reconciling month (APM66000) + 310,273.39 114,907.94 80.50 425,261.83
Posting Reference Reconciliation Report - current receipts posted prior month (APM66000) + 0.00
Miscellaneous Purchase Order Reconciliation Report (MPO60700) + 0.00
Parts Inventory Quantity Adjustments Listing (INV61010) + 0.00
Total G/L inventory = 1,936,938.06 97,816.37 (51,881.69) 1,982,872.74
Total Physical Inventory - 1,666,232.87 148,607.45 86,580.31 1,901,420.63
Difference = 270,705.19 (50,791.08) (138,462.00) 81,452.11
As of (Date): 06-13-2018 System Reports Branch:
Physical to General Ledger Inventory Reconciliation Worksheet
Difference between
G/L and physical
inventory. Looking
for a small, 1%
variance at year
end. Need to
investigate large
changes from day
to day.
The way to maintain a small inventory variance is to practice
good physical controls and follow procedures.
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6/26/2018 37
Questions???