If your company is using NetSuite to manage items in multiple locations, chances are you’ve been required to transfer stock from one location to another as part of your standard inventory management procedures.
The existing transfer functionality has been improved in NetSuite with the release of version 2016.2. NetSuite now allows users to enter partial fulfillments and receipts for transfer orders, resulting in more accurate item costing throughout the process.
Inventory Transfers – the Basics
NetSuite offers two methods for transferring inventory between locations, transfer orders and inventory transfers.
If the inventory is not immediately available in the destination location, a Transfer Order should be used in order to reflect the value of the goods as ‘in transit’ instead of available or ‘on hand.’ When the goods are received by the destination location, the value will be moved back from a ‘Goods in Transit’ type account to ‘Inventory on Hand.’
If an organization uses ‘theoretical’ inventory locations, meaning that there may not actually be a physical distance between sites, showing the goods in transit would provide no value and would simply add an unnecessary step to the process. An Inventory Transfer will reduce quantity in the ‘To’ location and increase quantity in the ‘From’ location in a single transaction. As such, the net impact to the Inventory Asset account is zero and no additional cost information is specified or required in the transaction.
Costing for Goods in Transit
Most companies will want the cost of the items to flow through to the destination location, with the option to add any additional costs required to move the goods. To facilitate this process, NetSuite allows you to default the Item Cost as the Transfer Cost.
This option can be enabled by navigating to Setup > Accounting > Accounting Preferences > Order Management > Transfer Orders. The setting can also be activated on a per-transfer basis. Alternatively, a transfer cost may be specified on the master item record or within the Transfer Order record itself on each detail line.
In the previous release, transfer orders that were using the item cost as the transfer cost required the same quantity of items at each step of the process. For example, if an order was processed for 10 items, the fulfillment (pick/pack/ship at ‘From’ location) and receipt (item receipt at ‘To’ location) both were required to also contain 10 items. Certain use cases may require partial fulfillments or receipts which were not permitted by the previous functionality.
Location B has an order for 5 widgets but none in stock. The warehouse manager at Location A agrees to transfer some widgets to fill the order and replenish the stock on hand at Location B.
A transfer order is entered for 10 widgets and fulfilled for 10 widgets once they have shipped from Location A. The following day, FedEx delivers only 1 out of 2 boxes to Location B – one of the packages was lost in transit.
With the new functionality in NetSuite 2016.2, Location B can enter a partial receipt to represent the widgets that were delivered and fulfil the sales order. The remaining widgets can be received when they arrive, completing the transfer order with a second item receipt.
This new functionality allows for a more accurate representation of inventory on the balance sheet as the lost widgets will not reflect in ‘Inventory on Hand’ until they truly are received or eventually written off as a loss.
Inventory Transfers – Intercompany and Standard Costing
In addition to transferring stock between locations, OneWorld users may require inventory transfers to move stock between subsidiary companies. However, the previous functionalities of 2016.1 did not permit the creation of intercompany transfer orders if the ‘Use Item Cost as Transfer Cost’ setting is enabled at the global level.
In many situations, some kind of mark-up or additional cost will be added when transferring stock between divisions or subsidiaries and the original item cost would not be appropriate for such transactions. Release 2016.2 allows entry of a transfer cost for intercompany transfers, effectively overriding the default cost setting, instead of preventing the transfer altogether.
Enterprises that are using standard costing will not be able to process a transfer for these items while the ‘Use Item Cost as Transfer Cost’ setting is enabled. If the setting is enabled globally, a pop-up will be generated when saving the transfer order. This popup will ask users to disable the setting on the individual order before they are able to continue. Otherwise, users should simply leave the setting unselected for any transfer orders using standard costed items.
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