Sage Evolution

Stock Control: Four Important Concepts You Have to Understand

In most businesses, stock features prominently, and as such, stock control forms an important part of daily operations. Because knowing everything about stock control is not always achievable, we at Preferred Solutions have prepared four concepts of stock control, in the context of Sage Evolution and its Add-On Modules, that will help you understand the goings on in your business and {what} how the different facets of stock control might apply to you.

Costing Methods:

Let us start with Costing Methods. The Costing Method is generally determined by company policy. On Evolution’s, you have the choice between the following costing methods: Weighted Average, Latest Cost and Manual Cost. Please note that Latest Cost & Manual Cost are only available on the Premium package.  We’ll discuss each of these and demonstrate it with a simple example.

Weighted Average Cost is a method where the system calculates the cost of an item as the average cost of all inward movement of the specific item i.e. purchases (calculated each time a GRV is processed). For example, you purchase 10 units of Product A at R10 per unit. Your Cost Price is now R10 per unit. You then purchase 15 more of Product A but at R15 per unit. Your cost price is calculated on the average of the two purchases, based on the “weight” of each purchase, and is recalculated to R13 per unit.

Next is the Latest Cost method. The Latest Cost method uses the last inward movement of an item as the cost price for all items on hand. For example, if you buy Product A at R10 per unit and then buy Product A again but at R15 per unit, your cost price for all the items you have on hand will change to R15 per unit and the value of the stock on hand will be recalculated accordingly.

And finally, Manual Cost. With the Manual Cost method, you specify the cost and the system always uses that cost. Thus, if you set the Cost Price of Product A to R10 per unit, whenever stock of Product A comes in, it will always be stocked at R10 per unit and the difference in the purchase price is allocated to a selected account.

Groups and Warehouses:

You can link inventory items to Groups. This enables you to customise the integration of these groups into the General Ledger. As an example, a clothing store stocks lady’s shoes, men’s shoes, dresses and men’s shirts. The lady’s shoes and men’s shoes can be linked to a “Shoes” group and the dresses and men’s shirts can be linked to an “Apparel” group. You can now integrate the different groups to different General Ledger accounts and also refine your reporting in the sub-module based on the Groups.

Warehouses in the Sage Evolution Add-On Module, Multi-Warehousing, allows you to allocate to and move inventory items between different warehouses. Not all items need be warehouse items, and you do not have to have every warehouse item in each warehouse. Warehouses can be useful in many situations:

  • Physical warehouses in different geographic areas;
  • Keep raw materials and/or internal parts separate from items you sell;
  • Keep track of consignment stock / samples in a separate warehouse;
  • Separate obsolete items into a separate warehouse etc.

Multi-warehousing also allows you to define the following by warehouse (other than what is set as default on the inventory item):

  • Bin locations;
  • Groups;
  • Cost prices;
  • Selling prices;
  • Suppliers;

Bill of Materials and Manufacturing

The Bill of Materials module allows you to create, or manufacture, new inventory items from other inventory items, called components or raw material. Component items can themselves be items you create from other items, or they can be items you purchase from suppliers. The cost of the Item created through Bill of Materials are not limited to only the physical components used in the manufacturing process, it can also include services rendered, labour costs, machine hours, consumables ex. All these costs are tracked in Bill of Materials to give you the correct and accurate cost price of your product.

The Bills of Materials module is however most commonly used in the manufacturing of products that rely on repetitive production processes and because it uses “back-flush manufacturing”, it doesn’t keep track of Work in Progress. “Back-flush manufacturing” means that on Evolution, it is handled as an instantaneous process. Its here where the Manufacturing Add-On Module come to the rescue with a complete and comprehensive Work in Progress facility to help larger manufacturing companies to keep track of what happens on the factory floor with additional functionalities that enables you to issue stock, change raw material usage during the processes , etc.

Units of Measure and Pack Sizes

Keeping track of the number of units coming in and going out of your business can be a daunting task when quantities become large and different units of measure are used on one end than the other. Here the Units of Measure function is useful. You have the capability of purchasing, stocking and manufacturing a product in 3 different Units of Measure. For example, in the manufacture of soft drinks, a company purchases water in kilolitres, stock it in their warehouse in litres and uses it in manufacturing in millilitres. The system keeps track of the UoM and does the conversion of cost for you.

Pack Sizes are similar but apply more to the sale of your products. Products can be sold in fully customisable pack sizes i.e. cans, six-packs, cases, boxes, pallets ex.

This article is meant as an informative look and stock control and manufacturing processes. Sage Evolution and its Add-On modules are perfectly suited to this environment and can help you streamline your manufacturing processes to better serve your business.

Visit http://prefsol.co.za/sage-evolution-premium/ and http://prefsol.co.za/sage-evolution-add-on-modules/ for more information or feel free to contact us to speak to one of our consultants. Stay tuned for more information on procedures we recommend for your business.

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