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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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Introductions

Reid HeiserDirector of

Accounts

Paul ReynoldsParts Consultant –

Senior Product

Expert

Karmak Headquarters – Carlinville, IL


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Objective

Implement standard and consistent inventory control operating procedures in all

WE parts departments


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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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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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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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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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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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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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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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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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Posting Reference Reconciliation Report


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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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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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MPO Process

Create MPO


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MPO Process

Bill part to customer

Bill-only part –reference MPO

Buy-out part –validate part number, the reference MPO


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MPO Process

Enter A/P Invoice, reference MPO


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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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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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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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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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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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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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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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Difference = 270,705.19 (50,791.08) (138,462.00) 81,452.11



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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Difference = 270,705.19 (50,791.08) (138,462.00) 81,452.11



Total parts

committed – on

open parts orders,

repair orders and

I/B transfers.

Included in the G/L

balance.


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Difference = 270,705.19 (50,791.08) (138,462.00) 81,452.11



Total physical

inventory.


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Difference = 270,705.19 (50,791.08) (138,462.00) 81,452.11



Total G/L inventory.

Updated by

invoicing parts to

customers and

posting A/P

invoices.


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Difference = 270,705.19 (50,791.08) (138,462.00) 81,452.11



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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Difference = 270,705.19 (50,791.08) (138,462.00) 81,452.11



Total billed not

received. Valid only

for a month-end

reconciliation.


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Difference = 270,705.19 (50,791.08) (138,462.00) 81,452.11



Parts on MPO’s that

have been invoiced

to the customer but

not posted in A/P.


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Difference = 270,705.19 (50,791.08) (138,462.00) 81,452.11



Adjustment from

current month cycle

count. Physical

inventory has been

adjusted but G/L

inventory has not.


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Difference = 270,705.19 (50,791.08) (138,462.00) 81,452.11



Total G/L inventory


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Difference = 270,705.19 (50,791.08) (138,462.00) 81,452.11



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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Questions???

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