Priority manages inventory on a number of levels, allowing you to obtain a complete picture of current inventory from various perspectives, in keeping with operating and inventory control needs.

Specifically, inventory is maintained per:

• Part Catalogue Number 

• Warehouse and Bin – Each warehouse may be composed of one or more bins. There is no limit to the number of warehouses and bins that may be defined. You can view balances per warehouse and bin, as well as perform inventory transactions (transfers) between warehouses and between bins in the same warehouse.

• Raw Material Lot or Work Order Number – You can maintain lot numbers for purchased materials, either adopting the vendor’s lot number or using a number assigned automatically by the system.

You can also maintain work order numbers for manufactured parts, which are assigned automatically when the work order is opened.

Work orders and lot numbers are included in inventory transactions and reports of production, allowing for tracing and data management per work order/lot (e.g., date opened, expiration date, BOM revision).

• Status – Maintenance of inventory is managed via statuses using a series of graphic BPM flow charts:

• BPM Flow Chart – Parts
• BPM Flow Chart – Inventory Conversions
• BPM Flow Chart – Inventory Disposals
• BPM Flow Chart – Assemblies
• BPM Flow Chart – Warehouse Transfers
• BPM Flow Chart – Supply Issues
• BPM Flow Chart – Subcontractor Shipments

After defining the necessary statuses (and the paths that connect them), you can view their attributes in the corresponding status forms.

• Operation – In cases of WIP, inventory balances are maintained by the last operation performed on the part. This provides firm control over work in progress and reports of production, and guarantees the flow of exact quantities through the stages of production.

Warehouses 

Priority provides three predefined warehouses:

• Flr – the plant floor

• Main – a regular factory warehouse

• Outl – a factory outlet

Each of these warehouses represents one of three basic types:

• Type F – any plant floor warehouse (divided into work cells)

• Type D – any regular warehouse, containing inventory that is taken into account during production planning, MRP and purchase planning

• Type W – any warehouse storing goods that are not taken into account during planning (e.g., a factory outlet).

In addition to these, you can define as many warehouses as you need. For most types of transactions, you can define a default warehouse that will be recorded automatically in each new transaction document. You can also subdivide any warehouse (except on the plant floor) into bins.

Priority provides the settings you need to define new warehouses for special purposes, such as:

• a sales warehouse – stores goods that are available for general sale to customers (used primarily for sales rate analysis)

• a holding warehouse – stores goods that are not immediately shipped to the customer, but remain on your premises even after the invoice is issued (also used for sales rate analysis)

• a kit warehouse – stores kit parts until the entire kit is ready for shipment to a subcontractor or until you are ready to use them on the plant floor

• an issuing warehouse – issues parts to kits on a specific plant floor. It is usually needed when you have multiple plant floors located some distance apart (e.g., in different cities)

• a consignment warehouse – “holds” goods shipped on consignment to a customer. Though the merchandise is physically stored at the customer, it is recorded as inventory in the warehouse, where it remains subject to inventory valuation and costing control, until sold to an end customer

• a vendor consignment warehouse – stores goods belonging to the vendor, without affecting company inventory

• a transit warehouse – “stores” ordered goods as they are being shipped to a consignment warehouse

• a repairs warehouse – stores defective parts returned by the customer for repair in the course of service calls (inventory belongs to the customer)

• a fashion outlet or franchise warehouse – the former belongs to your company, so shipments from the factory to the warehouse are not billed; the latter belongs to a customer, so shipments to the warehouse are billed

• a project warehouse – stores all inventory transferred to a project (to ensure accurate calculation of the project’s inventory charges)

• a subcontractor warehouse – “stores” any components shipped to the subcontractor for processing

• a bonded warehouse (for dual-currency users) – stores imported goods prior to payment of customs duties and release by a customs agent.

Warehouses that are not needed can be flagged as inactive.

Consignment Warehouses 

Priority provides special tools for maintaining remote warehouses that store company inventory on consignment, either for a single customer or for multiple end customers. When goods are sold from a consignment warehouse to an end customer, the owner is invoiced by your company for the sold goods.

The Replenish Consignment Warehouses program calculates current and projected inventory levels in consignment warehouses and determines the quantities of each part that are needed to replenish the supply, according to a set of inventory parameters defined by the user. Furthermore, the program can be set up to open the necessary orders automatically.

Maintenance of Past Balances 

Past balances are a means of freezing warehouse balances at any desired point in the past. They are often calculated in conjunction with cost analysis, enabling you to obtain inventory valuations for any past balance date.

Priority allows you to calculate past balances for any date in the past. These balances are determined by starting with the last calculation of past balances and adding any inventory transactions and production reports that have taken place since.

Any reports of production that fall before the date on which past balances were calculated, and any inventory transactions documented prior to that date are considered final. The calculation of past balances automatically updates inventory levels in all warehouses.

Quality Assurance and Expiration Dates 

Raw materials that are subject to quality control (i.e., those with a testable entry status) must undergo laboratory tests before they can be used in production. Test results are recorded and any changes in the status of the tested materials are made accordingly. System tables for test results and quality control data conform to the generally accepted norms of quality assurance, specifically those of ISO 9000.

The system allows you to:
• Record test results
• Trace parts following their release from the lab
• Reject parts and indicate the reason for their rejection • Maintain expiration dates (shelf life) for parts.

The Analysis (COA) Module 

The COA module provides the following features:

• Defining required tests on the level of family, base product, part or operation.

• Defining possible results for each test, as well as automatic calculation of acceptability and standard deviation.

• An Analysis Results form linked to all inventory documents in the system, as well as to work orders.

• Printouts of Certificates of Analysis (COA).

When an inventory document or production report is opened for a given part or parts, the system automatically lists the required tests for each part. Parts that are routinely tested can be assigned a default status, which they receive upon entry into a company warehouse. In order to receive a status that allows these goods to be used or sold, they must be recorded in a Laboratory Release document after receiving acceptable test results.

The results received from the various tests determine whether or not a part meets the required standards. The resulting COA document accompanies the inventory transaction or production report in which the goods were first recorded.

Material Review Boards (MRB) 

The MRB module documents and tracks malfunctions discovered during quality assurance. This module facilitates a process by which a quality inspector reports a problem in a Malfunction Document, and either decides on a solution or refers the problem to the appropriate review board (MRB).

The MRB agrees on a solution and recommends ways to prevent repetition of the malfunction. These decisions and recommendations are recorded in a separate form.

The quality inspector closes the malfunction document, thus completing the malfunction handling process. After filling out a malfunction document, you can link it to various inventory documents (e.g., Goods Receiving Voucher, Returns to Vendor).

Maintenance of Inventory in Progress (WIP) 

Priority‘s management of floor inventory allows the user to receive an up-to-date picture of raw materials on the plant floor, including components that have been issued to a kit even if they have not yet been used (the reference is to the manual issue of costly components to specific work orders, as opposed to regular issues from floor stock, automatically calculated by backflushing). In most computerized systems, the entire quantity of the material issued to the kit disappears from inventory the moment the issue is recorded. In fact, it is likely that a significant amount of time may pass until the material is actually used in the kit. During this period the material is in fact on the plant floor, yet there is no indication or record of this within the inventory system. In Priority, inventory levels are precisely maintained for these components from their receipt into the warehouses, through their issue to the floor, to their usage during production.

Another difficulty in managing floor inventory in regard to kits entails the quantity issued versus what is actually used. Frequently, the quantity of the component that is needed for the kit is considerably smaller than that included in a single package of this material. When dealing with a very expensive item, which should remain in its packaging as long as it is not being used, it is common practice to issue the entire package to the work order and subsequently record a return of the balance to the warehouse. But until the return transaction has been recorded, there will be a discrepancy between the inventory balance of the part as calculated by the system and what actually exists! Priority resolves this problem by offering the option of manual, controlled issues from floor stock. In other words, the entire package of materials is issued to the plant floor (rather than to the work order), and then the precise quantity of the needed component is manually issued to the work order.

Inventory transactions in Priority can be classified into five major groups:

• Sales inventory transactions
• Purchase inventory transactions
• Warehouse inventory transactions
• Plant-floor transactions
• Inventory counts.

Once an inventory transaction is recorded, inventory balances are immediately updated online. These updates are inherently tied to other transactions and processes in the system, so that, for instance, balances of an order item are updated when customer shipping documents are prepared; a warning is given when the defined order tolerance level is exceeded; and a warning message is received if a specific transaction will result in negative inventory balances.

Recorded inventory transactions can be printed out, but need not be printed the moment the transaction is recorded. Moreover, you can print a draft version of a pending document (which still needs to be finalized). For example, a draft shipping document can be printed as an aid in preparing the customer shipment.

A history of inventory transactions is maintained in the Audit Trail, which can be retrieved on the basis of a variety of criteria (e.g., date, part number, document type) and provides both control and traceability of inventory transactions.

An automatic mechanism produces electronic signatures (including username, date, hour) that also aid in traceability and accountability. This mechanism is offered for virtually all actions recorded in all modules.

Sales Inventory Transactions 

Inventory transactions related to sales include: customer shipments, customer returns, packing slips and bills of lading.

Customer Shipments 

Shipping documents can be itemized automatically on the basis of one or more sales orders, whereby quantities are filled in with the current order item balance (although they may be revised) and the order balance in question is updated.

You can define one or more shipping addresses for each customer. By default, the shipping document displays the address defined as the customer’s main site. This can then be replaced by one of the customer’s other sites or by a new address entered manually. The shipping address can also be inherited from earlier related documents (e.g., price quote, sales order). Each customer site can be assigned a default contact, whose name and info appear in the printout of the shipping document.

A shipping document can also be used as a bill of lading to document the inclusion of one or more packed crates, each with its own packing slip, such as for shipment via a container (see “Packing Slips and Bills of Lading” below).

In addition, Priority supports the loading of shipping data from an external source.

When a shipping document is itemized, either manually or automatically on the basis of an order, Priority “recommends” which inventory to use by displaying available quantities of parts by warehouse, bin, work order and status. If several inventory statuses share the same attributes, and one status is more desirable for supplying customer shipments, you can assign these statuses supply priorities to ensure that the system selects the best inventory for each shipment.

Once a shipping document has been recorded, you can create an invoice for the shipment without leaving the form. Or you can wait (e.g., until the end of the month) and prepare a multi-shipment invoice for a batch of shipments to this customer. The customer’s billing customer now appears in the shipping document, so that any invoice linked to the document is opened for the billing customer.

Alternatively, you can record a sales invoice, which simultaneously records an inventory transaction (shipment), updating inventory balances, and a financial transaction (invoice), billing the customer for the shipped goods.

Customer Returns 

You can record customer returns within the regular shipping document, by designating negative quantities, or use a customer return document, which can be itemized automatically on the basis of a shipping document or even a sales order.  

In Priority, quantities in customer return documents are automatically checked to ensure that the returned quantity is not larger than the original shipped quantity, which is particularly important when several returns have been opened for a single shipment.

Furthermore, customer returns opened for defective parts may now be based directly on service calls.

The customer’s billing customer appears in the return document, so that any credit memo linked to the document is opened for the billing customer.

Packing Slips and Bills of Lading 

Goods can be packed and set aside for a specific customer prior to their shipment (e.g., in preparation for export) by recording a packing slip. This document can be itemized automatically on the basis of specific sales orders, according to their shipping balances.

Once packed, items receive the status of the customer for which they are intended (e.g., their status changes from “Goods” to the customer’s number). You can also pack goods for inventory without designating a customer (for example, when selling packaged goods in regular fixed quantities).

Each packing slip records the packing of a single crate. This crate can then be shipped, together with other packed crates, in containers, accompanied by a bill of lading that calculates the volume and weight of the included crates.

Links to the Financials Module 

In addition to the linkage between shipping documents and sales orders, there is also a strong connection between these inventory transactions and related financial transactions. For instance, you can follow up each shipping document to ensure that the customer is billed for the goods received. This includes the ability to produce reports that list all unbilled shipments and their details.

Purchase Inventory Transactions 

Purchase transactions mainly entail receipts from vendors and subcontractors.

Goods Receiving Voucher 

Receipts from vendors can be linked to one or more purchase orders, in which case the goods receiving voucher (GRV) is itemized automatically. You can use a sub-level form to select individual purchase order items from a list of all open items ordered from the vendor in question. Quantities are based on order item balances, which, in turn, are updated by the GRV.

Goods receiving vouchers can later be used to record a multi-GRV invoice received from a vendor.

When recording a GRV, you can specify a separate warehouse and/or bin into which each item is received. The default entry status of each item (e.g., Hold, Goods) — a parameter assigned to the part — appears automatically, but may be revised. Items that need to undergo quality checks are later moved to the laboratory, where they are either converted to Goods or rejected.

Receipt of a component that is currently needed for an open kit triggers a message to that effect. In that way, the warehouse manager is quickly informed and can issue the needed component.

For parts that are managed by lots, the vendor-assigned lot number is recorded or the system provides an internal number (depending on user choice). Serial numbers may be assigned in a similar manner (i.e., either based on an existing vendor number or assigned by the system).

Priority supports the use of the manufacturer’s part number instead of the vendor part number, and also interfaces with bar code readers.

In place of a GRV, you can record the receipt of goods in a vendor invoice, which simultaneously records an inventory transaction (receipt of goods), updating inventory balances, and a financial transaction (i.e., a copy of the vendor’s invoice).

In GRVs, as in most other inventory transactions, a budget item and profit/cost center can be linked to the transaction item. You can also distribute the costs of the purchased items among other parts or specific work orders.

Returns to Vendors 

You can record returns to vendors within the GRV, by designating negative quantities. Or you can use a return to vendor document, which can be itemized automatically on the basis of either a GRV or a purchase order. You can record credit received for the return in a multi-GRV invoice, or (if no credit memo was received) you can send a debit memo to the vendor.

Bonded Warehouses (dual-currency package only) 

Bonded warehouses can be defined and connected to shipping vouchers for importing purposes. The inventory in a bonded warehouse is managed in accordance with shipping vouchers and is divided into blocks and platforms.

When receiving goods into inventory from a bonded warehouse, you can automatically itemize the GRV on the basis of balances in that warehouse by specifying the appropriate shipping voucher number. Bonded warehouse balances are updated in accordance with the quantities transferred to inventory.

The cost of receiving goods into inventory is calculated separately for each partial release of goods from the bonded warehouse.

Subcontractors 

In Priority, a subcontractor Is defined as a vendor with a warehouse. Inventory is controlled in this warehouse just as it is managed in any other plant-floor warehouse, i.e., inventory transactions that occur there are linked to production processes.

Parts can be shipped to a subcontractor in conjunction with a purchase order for the work to be done. You can automatically itemize a shipment to the subcontractor by basing it on the kit list required by the work order in question. You can also add items in accordance with the issues plan.

Often, kit components are not issued directly to the subcontractor (i.e., to the designated warehouse). Rather, they are collected in a kit warehouse as they are obtained and kept in a specific area (e.g., a section near the loading dock) until the kit is complete and/or the subcontractor is ready to receive them. Only then are the components for a given work order actually shipped to the subcontractor’s warehouse.

Receipts from subcontractors are recorded on the basis of a purchase order, which automatically fills in the work order number of the kit. Consequently, the incurred subcontracting costs are attached to that work order. Once the Backflush program is run, the received parts are deducted from the subcontractor’s warehouse balance and added to your company’s inventory.

Warehouse Inventory Transactions 

Warehouse inventory transactions include: warehouse transfers, warehouse assembly, inventory conversions and inventory disposal.

Warehouse Transfers 

Warehouse transfers refer to the movement of goods both from one warehouse to another and from one bin to another within the same warehouse. They are used to document the transfer of finished goods, raw materials or subassemblies from one warehouse (or bin) to another, including transfers between company branches or from company headquarters to a branch office. They are also used to issue finished goods from the plant floor to the main warehouse in preparation for shipment to customers.

If the transaction simply entails the transfer of goods from one warehouse or bin to another, it is itemized manually. However, if the transfer is of items intended to fill a sales order (e.g., from the central warehouse to a branch sales warehouse), the document may be itemized automatically on the basis of the order.

Warehouse Assembly 

Priority supports the assembly of parts in the warehouse. The recorded assembly increases inventory of the final assembled part and reduces the inventory of all child parts. Once you specify the quantity of parts to be assembled, the system automatically determines the maximum number of parent parts that can be assembled based on the bill of materials and current inventory for the required child parts. You also have the option of revising the needed component parts and their child-parent ratios manually. Moreover, instead of the bill of materials, you can designate the actual components and quantities being assembled. If the assembly involves serialized parts and/or components, you can specify their serial numbers in the assembly report.

This type of transaction is documented when your organization is not interested in reporting assemblies within the framework of production — namely, when the assembly does not require extensive production resources. Nonetheless, Priority allows you to report the work hours invested in a warehouse assembly, to allow the costing program to take labor costs into account when calculating the cost of the assembled part.

Inventory Conversions 

In certain circumstances, the need arises to correct problems detected in existing inventory (e.g., those stemming from a change in a part’s routing). To resolve these problems, the system allows you to convert inventory manually: you can change the work order number of a processed part; the lot number of a raw material; the part number; the last operation executed on a part; and/or the status of a given part. The new part “inherits” the cost of the old part, but this can be manually revised.

To identify problems with inventory, Priority provides a report entitled Problematic Inventory.

Inventory Disposal 

Priority allows you to document the disposal of unusable inventory. Only parts with a disposable status (e.g., Reject) can be treated in this manner. Once inventory disposal is recorded, the warehouse balance of the part in question is reduced.

Plant-Floor Transactions 

Plant-floor inventory transactions mainly refer to various types of issues to the floor. These are primarily distinguished from one another by the degree of tracing (i.e., which child parts are issued to which parents). Issues to the plant floor can be made in bulk according to an issues plan, as an issue to a kit, as a manual issue or as an issue of supplies. Items for which vendor lot numbers or work order numbers are maintained are issued in accordance with expiration dates and by the FIFO (first in, first out) method.

Issues Plan 

The issues plan determines what materials are needed on the plant floor, in what quantities and on what date. This plan is generated by the results of production planning or material requirements planning (MRP).

Issue to Floor Stock 

Issues to floor stock entail the periodic issue of materials to the plant floor in bulk for use in production. These materials are available for use in any work order, and their usage will be calculated automatically (by the Backflush) based on production reports for their parent parts, taking into account parent- child ratios in the bill of materials.

Issue to Kit 

Issues to kits are issues of materials and/or sub-assemblies that are targeted for a specific work order. They are generally recorded for relatively expensive components (like electronic parts) or when the job is sent out to a subcontractor.

A kit list is a list of all the child parts required by a processed part in a work order. The list includes the required quantity of components in the kit (based on parent-child ratios in the bill of materials), as well as the production step at which each component is issued to the parent part.

Issues to kits are created for each work order once it has been released. They may be revised manually, enabling you to create a specific bill of materials for an individual work order. The child parts and quantities appearing in the kit list are then taken into account by the Backflush utility in the calculation of floor inventory.

Manual Issues 

In some cases, a particular work order requires less than the quantity of items that comes in the standard package for this part, and the fragility of the part precludes removing it from the package until needed. In such a circumstance, you can issue the material to floor stock manually, and then report a manual issue to the work order (designating exact quantities, as well as the specific child lot). This prevents all the goods that are in the standard package from “disappearing” from the balance in the warehouse. This is important when dealing with items that are too expensive to issue to stock and which are supplied in packaging that should not be opened until actual use requires specific quantities per work order.

The Backflush facility does not perform automatic calculations for manual issues, but rather takes into account the details that are manually specified.

Issue of Supplies 

Supplies are raw materials that are not included in any bill of materials, but rather are consumed during the production process or other peripheral activities of the business (e.g., lubricating oil, rubber gloves, lavatory soap and the like). The warehouse balance of the consumed parts is reduced once the supplies are issued.

Backflush (Maintenance of WIP) 

The Backflush program adds or subtracts quantities on the basis of production reports for specific jobs. Taking into account the bill of materials and routing of the part undergoing processing, the Backflush adds to the inventory of the reported job and subtracts from the inventory of any child jobs. This allows, among other things, for the management of work in progress.

The Backflush facility is able to calculate inventory levels for all processing steps, even those for which there is no reported production, so long as production is reported for a later stage in the manufacturing process.

The Backflush maintains WIP at a subcontractor’s warehouse just as it does for your own plant floor, taking into account the documentation of shipments to and receipts from the subcontractor.

The Backflush creates automatic inventory transactions according to the progress of production and the demand for child parts at each step. For example, when production is reported for an interim processing stage, only those materials that are needed for that step are deducted from inventory. That is, child parts that are joined to the parent in later stages of production are not yet deducted and continue to appear as inventory on the plant floor. Moreover, the inventory of the parent part at that particular production step is increased (with the last operation appearing in the warehouse balance).

Following activation of the Backflush program, the system warns of any negative balances calculated for plant-floor inventory. This is generally an indication of inaccurate or missing reports of production.

Online Backflush 

You can set up the system to run the Backflush automatically, in a localized manner. This provides you with a highly accurate, while not comprehensive, picture of the current floor inventory without tying up the resources required to run the full program. The online program adjusts floor inventory balances on the basis of the following events:

• Raw materials entering or leaving the plant floor (e.g., via warehouse transfer)

• Automatic transfer of completed parts from the plant floor upon execution of their final operation

• Production reports.

When the full Backflush is subsequently run, it confirms or adjusts these online calculations.

Inventory Counts 

Priority enables inventory counts of single part units and/or assemblies at all levels. The procedure for performing an inventory count includes preparation for the count (freezing balances for the count date and ensuring that no transactions take place between the system’s calculation of quantities and the physical count), followed by the printout of a form in which to record the count (by warehouse and bin). Quantities are then copied from the filled-in form into inventory count documents, which display variance between the calculated quantity (according to balances in the system) and the counted quantity.

Once a counted quantity is approved, warehouse balances are automatically updated (where necessary) in keeping with any variance.

When performing the count, you can add lines manually to the count documents, manually open documents and prepare recount documents (which also take into account manually added lines and manually opened documents). Inventory counts can also be loaded from external sources.

Inventory Transaction Management
Priority provides an up-to-date picture of all inventory, including work in progress (WIP).

The reports and queries in the system enable you to track inventory balances and fluctuations over periods.

The Audit Trail can be used to retrieve all transactions recorded for a given part over a specified period. The system displays all inventory transactions in a single form, from which a particular transaction can be retrieved by a variety of criteria. For example, you can view inventory fluctuations over a specified period for a given part; all shipments sent out during this period regardless of transaction type; and so forth. In addition to the quantities involved in each transaction, the Audit Trail displays the relevant warehouse and bin, status of the processed part, vendor lot/work order, and cost of each transaction. The original document (e.g., a specific customer shipment) can be reached directly from the displayed transaction record.

The electronic signature in the Audit Trail (displaying date and user name) allows easy identification of the user who last updated or recorded any given transaction.

Unlike most other computerized costing facilities, which are generally subject to the constraints of the accounting system, Priority offers manufacturing enterprises a module specifically designed for product costing, transaction costing and inventory valuation.

The following costing options are available:

• Actual costs by the FIFO (first in, first out) method;

• Actual costs by the Moving Average method;

• Standard costing (with variances), for use with the COGS module.

In addition, Priority provides for:
• Distribution of expenses (e.g., shipping) over material costs;
• Work order costing;

• Assemblycosting;
• Maintenance of actual cost, standard cost and last price — for each part.

Priority offers a separate costing mechanism for retail businesses and a more sophisticated one suitable for manufacturing environments.

Cost Analysis for Businesses 

Cost analysis for businesses supports part costing, transaction costing and inventory valuations calculated solely on the basis of material costs. It also has the capability of distributing additional costs, such as shipping fees.

Costing by Last Price or Standard Cost 

You can choose to base part costs on last prices or standard costs, instead of calculating actual costs. This method is much faster and simpler than running cost analysis.

• The last price of a purchased part is updated automatically whenever vendor invoices are recorded and finalized. It can also be updated by the user on the basis of a price quote, purchase order or vendor price list, even before the next invoice is received. In addition, a part’s last price can be designated manually. You can calculate the last price of a manufactured part by means of a special program, which takes into account parent-child ratios in the bill of materials, as well as the last prices of required components.

• Standard costs of purchased parts are defined manually by the user. You can calculate the standard cost of a manufactured part by means of a special program, which takes into account parent-child ratios in the bill of materials, as well as the standard prices of required components.

Transactions are costed as they are recorded, according to the purchase price and the quantity in the transaction (see below). Results are used by the COGS module to record inventory transactions against inventory, COGS and variance accounts (for more on COGS, see Section 4.6). Inventory valuations are determined by the inventory balance and the cost of the part.

Online Costing 

Priority provides online costing automatically. This is in addition to the more exacting option of running cost analysis programs (see below).

Online costing calculations are based on the order in which transactions are recorded in the system, not on the chronological sequence of events.

Consequently, the more your record keeping reflects the order in which the transactions actually occurred, the more precise the calculations will be.

Online costing works as follows:

• Each receipt of goods is automatically assigned a transaction cost based on available data (e.g., invoice, order).

• Costing for any other type of transaction is calculated automatically, according to the Moving Average method.

• Whenever a receipt of goods is recorded, the current part cost of any received item is updated by calculating the weighted average of its existing cost (prior to the receipt) and the value of the new receipt.

• A warehouse assembly is assigned a transaction cost based on the actual costs of its component parts.

• Whenever a warehouse assembly is recorded, the current part cost of the assembled part is updated by calculating the weighted average of its existing cost (prior to the assembly) and the value of the new assembly.

Part Costing by Moving Average or FIFO 

Priority‘s part costing mechanism is a unique utility that allows for the precise calculation of costs, based on component parts and related transactions (e.g., shipping expenses). Unlike online costing, the chronological sequence of transactions is taken into full consideration.

The costing mechanism is highly flexible. By running it in conjunction with the past balance facility (which enables you to capture and freeze a picture of inventory balances for any particular date), inventory valuations based on part costs can be calculated for any date in the past.

Priority offers two methods of costing:

• The FIFO method (first in first out) views the warehouses like a pipe — inventory enters and exits in chronological order; what comes in first goes out first. That is, inventory is valued according to the cumulative cost of the most recent incoming transactions (going backward in time until the entire quantity of existing inventory is covered).

• The Moving Average method views the warehouses like a vat — all inventory that enters is mixed with existing inventory, and what comes out is composed of this mixture. Under conditions of inflation, Moving Average generates lower costs than FIFO.

The calculation of moving average is as follows:

new cost = (previous cost × qty in inv.)

+ cost of new transaction ———————————————————–

current quantity in inventory + new quantity

Material Costing 

Costing for purchased items is determined by the price of the item in the transaction, plus the cost of any additional expenses (e.g., shipping) recorded against the transaction.

Each purchased part receives an entry value determined by one of the following:

• The price of the part as it appears in the vendor invoice (after subtracting all discounts), plus any additional expenses (shipping, insurance, etc.)

• When no invoice is available, the price in the purchase order (after deducting discounts).

• When there is no order, the part price in the most recent price list received from the vendor in question.

• When no price list is available, the price in the most recent quote still in effect from the relevant vendor.

• If none of the above exists, the standard price of the part. Transaction Costing 

Transaction costing is managed through the Cost Analysis module, rather than through inventory accounts. This allows for the retroactive adjustment of a transaction cost based on updated data — for example, when an invoice for shipping charges is received after the goods have been transferred to another warehouse.

Priority calculates costs online each time an inventory transaction is recorded (that is, every inventory transaction recorded in the Audit Trail receives an updateable online value). This initial cost is updated when the actual invoice or shipping charge is received (generally after the GRV is recorded).

When one of the costing programs is activated, any inventory transaction involving purchased materials is costed as follows (multiplied by the number of units involved in the transaction):

• In the case of a receipt of goods from a vendor,or a return based on that receipt, the (updated) entry value is taken. For instance, if the receipt was initially costed based on prices in a quote from the vendor and an invoice has been received, the cost is now based on the prices in the invoice.

• The same holds for any other transaction in which a purchased part is involved, so long as its lot number can be traced to the original GRV.

• Any other transaction is costed according to a moving average.

Cost Analysis for Manufacturers 

In addition to all of the costing options offered in the Cost Analysis for Business module, Cost Analysis for Manufacturers provides for the costing of processed parts, taking into account the bill of materials, the routing, labor and machinery costs, overhead on the plant floor, other attached costs (set-ups, subcontracting, rework), and production reporting. Like Cost Analysis for Businesses, it also calculates the costs of purchased parts, both those used as raw materials in the production of processed goods as well as finished items sold to customers. Here, too, transaction costs derive from part costs and serve as the basis for the Cost of Goods Sold (COGS) program. Inventory valuations may be based on actual or standard costs.

The costing programs for manufacturers enable calculations of standard and actual costing, where the latter may be determined by either the Moving Average or FIFO method.

Standard Costing of Parts 

The standard cost of a processed part derives from the sum of the standard costs of its raw materials and the standard production costs of all sub- assemblies in its bill of materials (BOM), based on parent-child ratios recorded during factory modeling.

The following is a detailed list of the relevant costs:

•Standard part costs of all raw materials in the BOM (standard purchase price × standard parent-child ratio)

•Machinery costs of all operations executed on all parts in the BOM:

• Direct machine costs
• Direct set-up costs
• Indirect machine costs
• Labor costs of all operations executed upon all raw materials in the BOM (skilled and unskilled labor):

• Direct labor costs
• Direct set-up costs
• Indirect labor costs
  • • Additional costs

• Subcontracting costs for each part in the BOM
• Charges for related services or non-inventory parts (e.g., consulting fees, storage)
• Charges for supplies required for production that are not part of the BOM (e.g., machine oil)
• The following is a detailed description of the standard processing cost components:
• Standard Machinery Costs 
  There are three types of recorded standard machinery costs: direct costs for job processing, direct set-up costs and indirect costs.
• • Direct Processing Costs = Hourly machine cost × machine time
  • Set-up Costs = Hourly machine cost × (set-up % × machine time)
  • Indirect Costs = Indirect machine cost × [machine time + (set-up % × machine time)]
• Standard Labor Costs 
  There are three types of labor costs: direct costs for job processing, direct set-up costs and indirect costs. There are two methods of calculating labor costs, depending on whether the worker is skilled or unskilled.
• Costs of unskilled labor at any given work cell are as follows:
  • Direct Costs = Hourly labor cost × unskilled labor time
  • Set-up Costs = Hourly labor cost × (set-up % × unskilled labor time)
  • Indirect Costs = Indirect labor cost × [unskilled labor time + (set-up % × unskilled labor time)]
  Costs of skilled labor at any given work cell are as follows:
  • Direct Costs = Hourly skill cost × number of skilled workers × skilled labor
  time
  • Set-up Costs = Hourly skill cost × number of skilled workers × (set-up % × skilled labor time)
  • Indirect Costs = Indirect skill cost × [(number of skilled workers x skilled labor time) + (number of skilled workers × set-up % × skilled labor time)]
• The direct and indirect costs of skilled labor are defined per skill.

Standard Costs of Indirect and Additional Costs 

There are three types of costs that are added to standard part costs: the standard cost of using a subcontractor, standard charges for related services or non-inventory parts, and standard charges for supplies.

• Standard subcontracting costs refer to the average cost of subcontracting for the part in question.

• Charges for related services (non-standard costs) refer to the average burden added to the part cost from orders of non-inventory parts (e.g., consultations, storage). These are charged to the part when they are purchased.

• Charges for supplies (supply costs) refer to the average expense added to the part cost from materials required for production that are not part of the BOM, but which are necessary for production (e.g., machine oil, pencils, lavatory soap). These expenses are charged to the part when the supplies are issued.

Actual Product Costs and Work Order Costing 

Priority is capable of managing product costing and inventory valuation for each individual work order. The cost of the part in question is calculated, either by the Moving Average or the FIFO method, in accordance with costs of any work orders closed during the designated costing period.

Costing of an open work order (required for inventory valuation) is determined by its accumulated production outlays less the cost of the quantity (for the same work order) that has already been transferred to a warehouse. The cost of the transfer is calculated by multiplying the quantity of items involved in the transaction by the part’s standard cost.

When work orders are not maintained for a particular part, the part cost equals its standard cost. The one exception to this rule is assembled parts (warehouse assemblies); these are calculated by reported quantities of assembled components multiplied by their actual costs.

Product Outlay Based on Reports of Production 

Whereas the costing of purchased parts simply entails linking their purchase price to any given inventory transaction, the costing of manufactured items also requires the calculation of production costs. Moreover, for many processed parts, costs are calculated per individual work order. Costing for a work order needs to take into account the costs of any component work orders (i.e., the work orders of child parts). As at least some of these parts are likely to be issued to the parent before their costing has been calculated (because final costing is not determined until the work order is closed), the cost recorded for them does not necessarily reflect their actual cost. Consequently, in the absence of a retroactive update of the value of issues to work orders (both for purchased and manufactured parts), the calculated cost of the work order is considerably removed from the actual cost.

In most costing systems, work order costing is carried out by opening an account or cost center and attaching the costs of transactions to it. This approach is problematic when it comes to recording costs other than those of materials, such as labor, machine time, set-ups, rework and indirect production costs.

Priority‘s product costing system, in contrast, applies an innovative approach to the costing of work orders, based on reported production. A special program records all the outlays that have accumulated and/or been updated for a specific work order since the last costing run. It also takes into account the standard costs of completed but unreported production steps (based on the part routing). In this way, the user receives an up-to-date picture of all the actual costs for the work order in question.

Work Order Costing 

The actual cost of a manufactured part is determined by the costs of all work orders for that part that have been closed since the last costing run. This calculation is made on the basis of either the Moving Average or the FIFO costing method. If no work order has been closed, the part’s actual cost is copied from the previous costing run. If this is the first run, it is determined by its standard cost.

The cost of a given work order is determined by its own processing costs (machinery and labor), material costs and additional costs, as well as those of any child parts in the part’s bill of materials.

Processing costs are calculated on the basis of production reports for the work order in question (e.g., quantities reported, machine time, labor time, employee number in the case of skilled labor). For any unreported operations in the routing (i.e., floor inventory that is estimated by backflushing), standard production costs are be taken into account.

Finally, additional costs are determined by the costs of any subcontracting, supplies, purchased services and the like that have been charged to the work order in question.

Distributing Costs of Issued Items to the Work Order 

Another difficulty in managing floor inventory and assigning costs to processed parts stems from the issue of items to kits (i.e., the manual issue of costly components to specific work orders, as opposed to regular issues from floor stock automatically calculated by backflushing). Frequently, the quantity of the component that is needed for the kit is considerably smaller than the quantity included in a single package of this material. When dealing with a very expensive item, which should remain in its packaging as long as it is not being used, it is common practice to issue the entire package to the work order and subsequently record a return of the balance to the warehouse. If the work order has been closed (or costing has been calculated) before the warehouse return has been recorded, its actual cost will inaccurately include the cost of all the material in the package, and not just the amount actually used for the work order.

Priority resolves this problem by offering the option of manual, controlled issues from floor stock. The entire package of materials is issued to the plant floor (rather than to the work order), and then the precise quantity needed is issued manually to the work order.

Last Prices 

As with costing for businesses, you can maintain last prices for all purchased parts. In addition, a special program allows you to calculate the last prices of processed parts, based on all parent-child ratios in the BOM, as well as the last prices of any required raw materials. The program updates the last price not only for the designated final product, but also for any intermediary parts in its BOM of materials (i.e., sub-assemblies). You can also designate a last price for any manufactured part manually.

Cost Analysis Reports 

The following costing reports are available (reports with asterisks are offered only in the dual-currency package):

Cost Analysis for Businesses 

• • Actual Cost Analysis
• • Analysis of Standard Cost
• • Analysis of Last Price
• • Analysis of Standard Cost (2nd Curr)*
• Costing for Manufacturers – Parts 

• Material Costing
• Product Cost Components
• Time-phased Part Costing
• Part Costing Comparison – 2nd
  Curr*
• Standard Cost Analysis

• Product Costing
• Product Cost Components – 2nd Curr*
• Part Costing Comparison
• Cost of Incoming Transactions

•Actual Cost Analysis

Costing for Manufacturers – Lots and Work Orders 

• Lot Costing
• Work Order Cost Components

•Work Order Costing

•Work Order Cost Components – 2nd Curr*

• Issues to Work Orders
• Work Order Outlays per Period
• Work Ord Outlays per Per. – 2nd
• Actual vs Std Production Costs
  Curr*
• Actual vs Std Production – 2nd Curr*
• Inventory Valuation 
  One of the most important tools Priority provides for determining inventory values for any given date is the ability to calculate past balances. This mechanism allows you to obtain a picture of inventory at any set moment in time, and specifically for a date in the past.
• Inventory valuations are carried out on a past date whenever the Costing for Past Balance Date program is run. This enables the dynamic calculation of inventory values, as past balances can be calculated for virtually any date. Valuations take into account the quantity of inventory on the past balance date (past balance quantity).
• In addition, inventory valuations can be calculated for today’s date by running the Costing for Current Date program.
• There are three types of valuations: standard, actual and materials: Standard Value = Part’s past balance quantity × part’s standard cost Actual Value = Part’s past balance quantity × part’s actual cost
  Materials Value = Part’s past balance quantity × part’s actual material costs
• The value of inventory in an open work order that is still on the plant floor is determined by the total value of production outlays for the work order in question and for all children at all levels of the part’s BOM, less the (standard) value of any quantity of that work order that is no longer in the factory (e.g., because it was issued to a parent part, sent to the customer, disposed of).
• Only inventory in warehouses (including the plant floor) that are flagged for costing are taken into account.
• Transaction Costing and Inventory Valuation Reports 
  The following transaction costing and inventory valuation reports are available in the Cost Analysis for Businesses and/or Cost Analysis for Manufacturers modules (asterisked reports appear only in the dual-currency package):

Transaction Costing Reports 

• Transaction Costs per Part
• Summary of Trans. Costs & Qtys
• Summary of Trans Costs by
  Warehouse  
• Summary-Warehouse Trans. Values

Total Inventory Valuation Reports 

• Inventory Valuation Summary
• Inventory Valuation by Warehouse
• Inventory Valuation by Part
• Inventory Valuation per Family

• Inventory Valuat’n by Lot/Wk Ord
• Std Valuation by Cost Component
• Inventory Aging
• Materials Inventory Valuation Reports 

• Materials Inv Valuation Summary
• Mater Inv Valuation by Warehouse
• Materials Inv Valuation by Part
• Materials Inv Valuation by Lot
• ABC for Material Inv. Valuation
• ABC for Mat. Inv Valuation – 2nd Curr*
• Part Inventory Valuation Reports 

• Part Inv. Valuation – Summary
• Part Inv Valuation by Warehouse
• Part Inv. Valuation per Part No.
• Part Inv. Valuation per Family
• Part Inv Valuation by Work Order
• Inv Val – Open Work Orders (WIP)
• Time-Phased Inventory Valuations 

• Inventory Valuation per Part
• Inventory Valuation by Warehouse
• Inv Val per Part and Warehouse
• ABC Reports 
  Priority offers two ABC reports:
  • The ABC for Material Inv. Valuation report displays the value of material inventory according to ABC class, for a specified costing date, calculated by last price, standard cost or actual part cost.
  • The ABC for Raw Materials report displays the total value of all issues of raw materials over the designated period, according to ABC classes. The types of issues covered include issues to floor stock, issues to kits, manual issues, issues of supplies, warehouse assemblies and automatic transactions (i.e., backflushed issues).

The designation of percentile values for each class is flexible and determined by the user. The predefined defaults are 10%, 20% and 70%. In the ABC for Raw Materials report, the value of issues for a particular part determines the ABC class to which the part is allocated. The report compares the part’s “standard” class with the class assigned to it over the period for which the report is run. The former remains constant over time, whereas the latter may change every time a new report is generated. Both are displayed in the report.

Priority allows you to use Bartender to produce labels containing information from the system’s database (e.g., catalog numbers, product descriptions and bar codes). The information is loaded into a work area from which it is printed in the form of labels, using designs created in the label software.

Current Inventory 

• Current Inventory by Warehouse
• Current Inventory by Part
• Current Inventory by Family
• Safety Stock Exceptions
• Warehouse Inventory Levels
• Part Availability
• Total Part Inventory

Inventory Reports 

• Inv. per Warehouse as of Date
• Inventory per Part as of Date
• Inventory per Family as of Date
• Total Part Inventory as of Date
• Disposable WIP in Closed Work Orders
• Clean Surplus Floor Inventory
• Problematic Inventory
• Inventory Report Generator

Inventory Transactions Reports

Customer Shipment Reports 

• Print Shipping Document
• Print Shipping Doc-Foreign Lang.*
• Print Customer Return Doc
• Print Packing Slip
• Print Packing Slip – Foreign Lang*

Unbilled Shipment/Service Call Reports 

• Unbilled Docs. by Customer No.
• Unbilled Docs. by Customer Name
• Unbilled Docs.-Details per Cust.
• Unbilled Docs. by Document No.
• Unbilled Docs.-Details per Doc.
• Unbilled Docs. by Sales Rep
• Partially Billed Documents

Print Purchase Documents 

• Print GRV
• Print Return to Vendor
• Print Return to Vend- ForeignLang*
• Print Receipt from Bonded Warehs

Warehouse Inventory Transaction Reports 

• Print Warehouse Transfer Doc.
• Print Warehs Transf-ForeignLang*
• Print Shipmt to Subcont/KitIssue
• Print Floor issues
• Print Issue of Supplies
• Print Inventory Disposal Doc.
• Print Inventory Conversion Doc.

Warehouse Assembly Reports

• Assembly Schedule (Table)
• Assembly Plan by Assigned Worker
• Reported Assembly Hours
• Warehouse Assm Report Gen.

Detailed Inventory Transactions 

• Customer Shipments
• Customer Returns
• Goods Received from Vendors
• Return of Goods to Vendors
• Warehouse Transfers
• Parts Supplied to Customers
• Value of Warehouse Transfers
• Monthly Part Shipments (Table)
• Monthly Shipments by Part & Cust

Transaction Summaries 

• Inventory Journal
• Inventory Journal for Warehouse
• Summary of Transaction Qtys
• Inv Journal – Materials on Floor
• Inv. Journal for Warehouse by WO
• Inventory Movement in Period
• Summary of Customer Shipments
• Unused Inventory

Inventory Transactions (Fashion) 

• Sales Rate by Part Report Gen.
• Sales Rate by Store Report Gen.
• Sales by Style
• Sales by Warehouse/Style
• Transactions w/Sales Warehouses
• Warehouse Transfers per Style

Inventory Count Reports 

• Details of Inventory Counts
• Print Inventory Count Form
• Count Discrepancies
• Count Discrepancies per Style
• Uncounted Parts in Period
• Count Analysis by Warehouse (C2)
• Count Analysis by Part (Curr2)
• Count Analysis Summary (Curr2)