F Understand Container Management
This appendix contains the following topics:
F.1 About Container Management
The sale of products in containers involves a unique inventory process. Container Management extracts information about container transactions from other systems and stores this information in tables specific to Container Management. This allows you to closely track all transactions that involve containers.
You "loan" containers to your customers to store the product that they purchase until the product is depleted. Your customers then return the containers to you, usually in exchange for full containers. You maintain ownership of the containers while they are in the possession of your customer. These outgoing and incoming transactions, in which containers are not sold, present two main issues for your company:
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The containers are of high value. You retain responsibility for them while they are in your customer's possession. It is imperative that you are always able to track and account for these containers.
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Your customer pays a deposit fee or rental fee for each container. These fees must be tracked separately from the invoicing for the product.
Container Management allows you to address these issues and manage the regular exchange of containers and payment of deposit and rental fees and refunds.
This section contains the following:
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The Container Life Cycle
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System Flow
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Business Considerations
F.2 The Container Life Cycle
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Normally, the supplying company purchases the container and introduces it into the cycle at the filling plant. After you fill and test the container, you either deliver it to the customer or send it to storage for future delivery. You can also send the full container to a distributor who, in turn, delivers it to the customer. The customer and distributor return the empty container to you after the product it contains has been used up.
As the container repeats this cycle for a period of time, it eventually requires maintenance. Maintenance is critical for storing the product safely in the container. You need to inspect the container after every cycle through the filling plant. After a number of cycles, you can no longer use the container because it is damaged beyond repair, and you must scrap it.
You use Container Management to track the container through the cycles and manage the deposits and refunds that must be generated for these exchanges.
F.3 System Flow
You use Container Management only after you have processed the container through the Procurement and Sales Order Management systems. The following graphic demonstrates how Container Management fits into the overall system flow.
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You must perform a number of tasks before you can use Container Management, including:
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Recording the receipt of the container
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Filling the container
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Processing sales orders
F.3.1 Recording the Receipt of the Container
You only purchase empty containers in limited quantity as they are needed to replace scrapped containers or to meet increased demand. You enter purchase orders in the Procurement system to record the ordering of new containers.
When the containers arrive, you record the receipt of the new containers to write a record to the Item Ledger (F4111) table (the Cardex), and to update the general ledger accounts. The Item Ledger table is the central repository of all inventory and cost movements. Each program from all other JD Edwards World systems that handles inventory writes records to this table whenever inventory and cost are affected. You then compare the receipt for the containers to the purchase order. If the Procurement system detects a variance, it writes a new record to the Item Ledger table and updates the general ledger accounts.
Usually, you enter the empty container into the Procurement system with no cost so that when it is filled with the bulk product, the cost of the full container will equal the cost of the bulk product. You can process the empty container as either an expenditure or a fixed asset. If you choose the latter, you can use the Fixed Asset system to track the empty container.
F.3.2 Filling the Container
You record the filling of containers in the Inventory Management system and, optionally, the Bulk Stock Control system. When you fill an empty container with a bulk product, you create a new packaged item, which is the full container. The Inventory Management system does the following when you fill a container:
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Reduces the inventory of empty containers
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Reduces the inventory of bulk product
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Increases the inventory of full containers
F.3.3 Processing Sales Orders
You enter a sales order when you receive the request of a purchase by a customer. You enter the full container on the sales order as the item that is sold to the customer. If the customer is returning empty containers at the same time as taking delivery of full ones, you also enter a credit for the number of empty containers on the sales order.
You record the shipping of items to confirm the reduction in inventory or to confirm the return of empty or full, undelivered containers to inventory. You perform this additional task within the Sales Order Management system. If you use the ECS Sales Order Management system, you also need the Load and Delivery Management system to perform this task.
When you perform a load and delivery confirmation, the system writes a record to the Item Ledger table to reduce the inventory of full containers. If you have undelivered containers, the system writes a record to the Item Ledger table to increase the inventory of full containers.
You must enter a credit order and perform a confirmation on the order to record empty containers that your customers return. The Sales Order Management system processes these credit orders and increases the number of empty containers in the Item Ledger table.
At this point Container Management interfaces with the other systems to extract container transaction information and maintain it in tables specific to Container Management.
F.4 Business Considerations
The JD Edwards World integrated systems provide the flexibility to accommodate the full range of business considerations in distribution industries. Additional features support the unique considerations of the energy and chemical industry. In addition the inventory management of containers, Container Management addresses the following business considerations:
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Types of containers
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Deposit and rental fee accounts
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Deposit layers
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Billing methods
F.4.1 Types of Containers
Container Management can be used to track any type of container, such as pallets, metal cylinders, or railroad cars.
In the energy and chemical industry, the most common type of container is the metal cylinder. The following two types of products are usually sold in metal cylinders:
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Liquid Propane Gas (LPG)-In some countries, and some remote locations, where there is no "piped" natural gas to houses, LPG stored in metal cylinder containers is the main source for cooking and heating. LPG also has common industrial applications, such as for cutting torches or as a propellant for packaged spray products.
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Environmental Gases-The environmental gases supplied in metal cylinder containers can be oxygen, argon, helium, nitrogen, hydrogen, and carbon dioxide. Because the Environmental Protection Agency (EPA) requires specific storage and transportation procedures for these gases, there is an even greater need to track them carefully.
These metal cylinder containers do not have significant structural differences. They vary primarily in size and capacity but are typically of the same design. They are built to be portable for the specialized uses required by each customer.
Companies usually carry an extremely large inventory of containers, most of which are in constant circulation with customers.
F.4.2 Deposit and Rental Fee Accounts
Your company should set up a separate account to record customer deposit and rental fees. You draw against this account only for container refunds. Deposit, rental fee, and refund invoices should not impact a customer's normal revenue and cash accounts. In the case of a bad risk customer who returns containers but does not pay for the product, you can use the refunds issued for the returned containers to pay outstanding invoices.
F.4.3 Deposit Layers
The initial payment by the customer, the deposit, limits the customer in the number of containers that you will allow for exchange without charging additional deposits. Container Management stores each deposit received from a customer as a layer. Container Management creates additional deposit layers when the customer takes delivery of containers exceeding the number allowed by the initial deposit.
For example, if a customer initially deposits $100,000.00 for 10,000 containers at a rate of $10.00 each and then takes delivery of 11,000 containers, you charge the customer for the 1,000 extra containers at the current deposit rate. When you receive the additional payment for the 1,000 containers, Container Management creates a new layer for the deposit.
Container Management uses the First In/First Out (FIFO) method of accounting to calculate refunds. With this method, Container Management depletes the oldest deposit layer first when issuing refunds. If the deposit rate for a customer changes, the rate used to calculate the refund is the rate used in the oldest, undepleted layer.
The following example demonstrates how the system depletes deposit layers using the FIFO method. In this case, you refund the deposit for the 3,000 containers from the earliest layer, which is the layer created on 01/01/09. This reduces the balance for that layer's deposit to 2,000 containers at $20.00 each.
F.4.4 Billing Methods
To determine how a customer is billed for deposits and rentals, Container Management uses the following two methods:
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Summary method
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Transaction method
With the summary method, Container Management calculates the net quantity and amount for the transactions that occur in a period and issues an invoice or refund based on the total outcome. In the example below, the first return and delivery is an even exchange for the customer. The second exchange on 01/15/95 is not. The summary method allows the customer to make these exchanges without being charged. The only criteria for being charged an additional deposit is if the delivered quantity nets more than 5,000 containers.
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With the transaction method, Container Management processes each transaction recorded for the customer. You refund for each return and charge for each delivery. This method varies significantly from the summary method when the deposit rate changes. The example below demonstrates the results when the system uses the transaction method in conjunction with the FIFO accounting method. In this case, you charge the customer even though the customer does not surpass the initial number of containers on deposit.
