Purchase Order Receiving Overview
Purpose: Use purchase order receipts to record the receipt of inventory on open purchase orders.
You can record receipt:
• in the warehouse, to record stock receipts immediately as merchandise is being brought into the warehouse.
• as an office function, where receipts are entered after the merchandise is put away.
Purchase Order Receipt In API: You can use the Purchase Order Receipt In API to process PO receipts received from another system, such as a warehouse management system. See the Purchase Order Receipt In API for an overview and the required setup.
PO download triggers: The setting of the Create Generic PO Download Trigger for PO Receipt (K27) system control value determines whether the system creates a purchase order download (POH) trigger when a purchase order line is received. See Generic Outbound Purchase Order API for an overview.
In this chapter:
• Receiving Merchandise into Suspense
• Receiving Merchandise into a Pending Warehouse
• Additional Functions During Purchase Order Receiving
• Warning about Conflicting Jobs
- Standard Receipt Cost Calculation
• Suggest Warehouse/Location Placement
• Receiving Overages and Underages
For more information:
• Purchase Order Inquiry (MPOI)
You have the option of recording a purchase order as "docked" before you receive it. A docked status indicates that you have received inventory associated with the purchase order, but have not yet confirmed items or quantities. You can dock a purchase order just once or many times for different deliveries. Until you actually receive the purchase order, inventory inquires do not indicate that any of the associated inventory is on-hand in your warehouse.
A standard process might include:
• dock the purchase order
• count the merchandise and perform quality control
• receive the purchase order
Docking stock provides a record of when the inventory actually arrived at your warehouse, as opposed to when you completed quality control and recorded the receipt. This can be helpful if there is a question on whether the vendor delivered the merchandise on time.
If you dock stock, the system assigns a purchase order receipt control number at the time you dock it.
For more information: See Docking Purchase Orders.
Receiving Merchandise into Suspense
Receiving merchandise into suspense gives you the opportunity to inspect the merchandise before it becomes part of your inventory. Once the inventory has been inspected, you can transfer the inventory to its final destination. See Receiving into Suspense for more information.
Receiving Merchandise into a Pending Warehouse
Pending warehouses are warehouses where you can place inventory that is on its way to its final destination, for example, a staging area.
Use a pending putaway warehouse to temporarily store saleable inventory on its way to its final destination warehouse. Inventory received into a pending putaway warehouse retains its on order status so that the inventory is visible in PO Layering, yet the system recognizes the inventory as being in a warehouse location so that you can manipulate it.
You can define a warehouse as a pending warehouse using the Working with Default Warehouse Locations (WWDL) menu option.
When you place stock in a pending putaway warehouse, the system creates a record in the Pending Putaway Detail table. See Pending Putaway Overview for more information.
Use Suggest Location Placement to have the system recommend the locations where the inventory should be placed.
Values in the System Control table determine how this feature works. If you use a staging warehouse to receive inventory before you put it away, the system would suggest locations within your staging warehouse; the staging location indicates where the stock should ultimately be placed. See Working with Default Warehouse Locations (WWDL) for information on using a staging warehouse.
Additional Functions During Purchase Order Receiving
During Purchase Order Receiving, you can also add, change or view the messages associated with the purchase order, a line item on the purchase order, or with the vendor.
Warning about Conflicting Jobs
A warning pop-up window opens automatically when you select this option if Pick Slip Generation is active (in the Active Procedures table).
Reason: The warning pop-up window opens because each of these options affect inventory at the location level in the warehouse, as does the current option you are trying to use.
Responding to the Warning: Select OK to use the option anyway or select Exit to receive the items into inventory at a later time when the other jobs are finished running.
Note: The warning pop-up window(s) opens again if you selected OK at the first warning window to perform the receipt, then selected Accept to accept your entries. You can select OK to continue or Exit to wait to receive the inventory until the conflicting job has finished.
Available methods: The system supports the following three methods of determining the cost of inventory:
• Average costing
• Standard costing
• FIFO costing
The key differences between the methods are:
• Average costing: The system recalculates average cost when the items are received and updates the SKU table. The prorated amount of any overhead charges for the receipt and any additional item charges will be included in the average cost calculation. See Distributing Overhead Costs.
• Standard costing: The system does not recalculate standard cost at purchase order receipt.
• FIFO costing: The system creates a new FIFO cost layer for the receipt quantity, and decreases the on-hand quantity of this layer through sales or other transactions until the quantity is exhausted.
Note: The system will always perform the average costing calculation, even if you have selected another costing method. Because the system retains each item's computed average cost, you can change from standard to average costing at any time.
The Costing Method (A25) system control value controls the costing method for your company. See below for more information on each method.
When you use average costing, the system averages your costs over both the current on-hand inventory plus the incoming receipt. In addition, any overhead charges associated with the receipt, any additional charges for the item, and any discounts are included in the costing calculation. The system performs the costing calculation when you place the merchandise into inventory.
• The calculation is performed at receiving if you receive directly into your on-hand inventory
• The calculation is performed during Place Suspended Stock if you receive inventory into suspense. This function is used to transfer merchandise from suspense to inventory.
The system uses the following calculation to determine the average cost of an item:
(quantity on-hand x old average cost) + (quantity received x new purchase cost) / (quantity on-hand + quantity received) = new average cost
The new purchase cost represents the actual cost at which the item was purchased plus any additional charges.
When you use the standard costing method, you enter and maintain all cost information; the system does not update any cost information automatically.
The system retains the standard cost for each item, the cost at receiving for each receipt, and the cost at payables for each item invoiced. Overhead charges for a purchase order or a vendor/item are not included in the cost at receiving. The system always performs average costing calculation and retains each item's average cost, even when you use the standard costing method.
You can update the standard cost with the landed cost (primary vendor price + additional charges) through:
• Updating Standard Cost (MSCC)
• the Update Standard Cost periodic function (see Working with Periodic Functions (WPER))
• creating your own query reports to compare the standard cost of an item against its current cost, and making any necessary adjustments manually.
When you use FIFO Costing, the system tracks the cost and the quantity for each receipt in a warehouse separately. For example, you receive 10 units on 1/10 at $1.00, then receive 5 units on 1/20 at $2.00. The system uses a cost of $1.00 for the first 10 units of the item you sell (or if you decrease the on-hand quantity through any other transaction); it then uses a cost of $2.00 for the next 5 units.
To switch to FIFO costing, you must run a conversion program; you cannot change by simply changing the setting of the Costing Method (A25) system control value. The conversion is necessary because FIFO costing requires additional detail tables to track the unit costs for each transaction, which may be derive from different FIFO layers.
The system includes the following in the receipt cost calculation:
• cost of item
• discounts: You can include the following discounts in the receipt cost calculation:
- primary vendor discount: (from the Discount % (Primary discount percentage) field.
- additional vendor discounts: Discounts in Work with Vendors.
- vendor terms discount: from the Terms field. The Vendor Discount % to Costing at Receiving (D76) system control value must be selected in order for the system to include the vendor terms discount.
• additional charges. You can include the following additional charges in the receipt cost calculation:
- purchase order additional charges: You can define purchase order additional charges at the Work with PO Header Estimated Charges Screen and Work with PO Detail Estimated Charges Screen.
- vendor item additional charges: You can define vendor item additional charges at the Work with Vendor Item Add’l Charges Screen.
• costing calculation method: The system calculates the receipt cost using the item cost plus any additional charges and discounts.
Standard Receipt Cost Calculation
The system includes additional charges and discounts to the item cost to determine the receipt cost of the item.
Note: To use the standard receipt costing method, the Allow Additional Costs to P/O Receipts (A60) system control values must be unselected.
In order to include additional charges in the receipt cost of an item, you cannot use standard costing; instead you must define FIFO or AVERAGE in the Costing Method (A25) system control value.
1. |
Calculate the net cost. The system calculates any discounts defined in Working with Vendors (WVEN) when the purchase order is created to determine the net cost. • the primary vendor discount • additional vendor discounts • the vendor terms discount See Maintaining Purchase Orders (MPOE) for more information on how the system calculates the net cost during purchase order maintenance. |
2. |
Calculate the average cost. The net cost of the item is used to calculate the average cost, including any additional charges. For the standard receipt costing method, the system includes: • the purchase order additional charges if the Include PO Estimated Charges in Receipt Cost Calculation (G29) system control value selected. • the vendor item additional charges if the Default Vendor Item Additional Charges (I21) system control value is selected. This system control value defaults the vendor item additional charges to the purchase order; as long as the Include PO Estimated Charges in Receipt Cost Calculation (G29) system control value selected, the system includes the vendor item additional charges in the receipt cost calculation. If a primary vendor discount or any additional vendor discounts are defined, the system calculates the additional charges based on the non-discounted cost. |
3. |
Calculate the new purchase cost. The New purchase cost is calculated by adding the additional charges to the item cost: item cost + vendor item charges + purchase order charges) = new purchase cost |
4. |
Calculate the new average cost. The new purchase cost is used in the average cost calculation: quantity on-hand x old average cost) + (quantity received x new purchase cost) / (quantity on-hand + quantity received) = new average cost |
Overhead costs: When you receive a shipment, you might incur additional costs that you want to distribute across the cost of all items received. These costs might include freight charges, duty charges, import charges, brokerage fees, commissions, surcharges or any other user-defined costs.
You can include overhead costs in the cost of an item by applying them to items:
• received on a single purchase order
• purchased from specific vendors
When the Allow Additional Costs to P/O Receipts (A60) system control value is selected, the system allows you to advance to the Work with Additional Charges, where you can enter the overhead costs associated with the purchase order.
Additional PO estimated charges: You can also define overhead costs to apply to each detail line on a purchase order or to a specific detail line on a purchase order if the Include PO Estimated Charges in Receipt Cost Calculation (G29) system control value is selected.
Additional charge calculation guidelines: The table below presents the guidelines the system uses in determining the purchase order additional charges to factor into the cost of an item at purchase order receipt when using receipt controls.
Standard PO Receipt Cost Calculation Method |
Vendor Item Additional Charges (Charges in WVNI) |
PO Additional Estimated Charges (Est charges when creating the PO or Estimated charges when maintaining) |
All, whether unit or percentage, if Default Vendor Item Additional Charges (I21) is selected and Include PO Estimated Charges in Receipt Cost Calculation (G29) is selected |
All, whether unit or percentage, if Include PO Estimated Charges in Receipt Cost Calculation (G29) is selected |
Which costs are updated? The Average cost and the Last purchase cost in the SKU table are always updated when you receive a purchase order.
If you use FIFO Costing, the FIFO cost is always updated with the weighted average FIFO cost when you receive a purchase order.
The standard cost is not updated at purchase order receipt.
Note: Additional charges you enter by selecting Add’l Charges when receiving a specific purchase order do not update any of the costs in the SKU table.
Additional costing factors: The following system control values control the discounts you factor into the Last purchase cost and the Average cost in the SKU table based on purchase order receiving:
• Vendor Discount % to Costing at Receiving (D76): If this field is selected, the system applies the terms code assigned to the vendor through Working with Vendors (WVEN), and subtracts the related discount percentage from the cost at receiving.
• Apply Discount To Manual Cost (D96): If this field is selected, the system subtracts any discounts assigned to the vendor.
Receiving choices: You can receive merchandise:
• Directly into inventory: the system updates inventory immediately, and the merchandise is available to be reserved and picked. See Receiving into Inventory.
• Into suspense: inventory is not updated until the merchandise is transferred from suspense to inventory. Suspended merchandise is not available for reservation and picking. You control whether merchandise can be received into suspense by completing the Allow Receipt to Suspense (A59) system control value. You can receive an entire purchase order into suspense, or only specific items. You determine how the inventory will be received during purchase order receipts. See Receiving into Suspense.
• Into a pending putaway warehouse: the system creates a record in the Pending Putaway Detail table and creates a PO layering record for the “final destination” warehouse. The pending putaway detail record indicates the quantity to be placed in the “final destination” warehouse and the expected due date when the inventory will be moved. See Receiving into a Pending Warehouse.
• Into a staging warehouse: you would normally define the staging warehouse as non-allocatable, and the staging locations as non-pickable, to prevent the system from attempting to reserve or pick from the staging area. See Receiving into a Staging Warehouse.
When the entire quantity of the item is received, the purchase order detail line is closed. When the entire purchase order is received, the purchase order is closed. See Receiving Overages and Underages for information on special receipt quantities.
When merchandise is received directly into inventory, it is available for reservation and picking immediately.
If you receive merchandise directly into inventory, the following system updates occur at receiving:
• The on-order quantity for the item is decreased
• The on-hand quantity of the item is increased in the item warehouse and the item location.
• The average costing calculation is performed
• Vendor item analysis is performed
All or part of a purchase order can be received into inventory.
You can use the Suggest Location Placement function to recommend the locations where the items should be placed when the inventory is received. See Suggest Warehouse/Location Placement.
Placing merchandise into suspense can help you quickly move merchandise from the loading dock to a secured setting where it can be processed for quality control.
When merchandise is received into suspense:
• It is not available for order fulfillment.
• Inventory is not updated until the merchandise is transferred from suspense to inventory.
• Suspended merchandise is not available for reservation and picking.
To receive into suspense: You can receive merchandise into suspense only if the Allow Receipt to Suspense (A59) system control value is selected.
Inventory can be received into suspense using the Work with P/O Receipt Detail Screen:
• You can receive the entire balance of the purchase order into suspense using the Receive Suspense option. In this situation, the quantity due for each item on the purchase order is placed into suspense and the purchase order is closed. See Receiving an Entire Purchase Order Into Suspense for instructions.
• You can receive a purchase order line into suspense using the Suspense On/Off option: Select this option for an item on a purchase order to change the suspense receiving status of the line. The word Suspense displays next to the Location field and indicates the line item will be placed into suspense when the purchase order is accepted. If the word Suspense is not displayed, the quantity received for the line will be placed into inventory. A Location is not required if you are placing the item into suspense. See Using the Direct Entry Method or Using the Change Purchase Order Details Method for instructions on working with individual line items during PO Receipts.
Suspense updates: The system performs the following updates when merchandise is received into suspense:
• Creates a record in the PO Suspense table for each purchase order line indicating the quantity received into suspense.
• Creates a record in the PO Receipt table for each purchase order line, with the Suspense flag set to Y.
• Updates the Received quantity for each purchase order line on the Purchase Order History screen by the quantity received into suspense.
• Decreases the Quantity Due for each purchase order line on the First Display Purchase Order Detail Screen by the quantity received into suspense.
• Updates the Suspense quantity on the Display Item/Warehouse Information Screen by the quantity received into suspense.
The following updates do not occur when merchandise is received into suspense:
• The on-hand quantity for the item is not changed.
• The costing calculation is not performed.
• Vendor Item analysis is not performed.
These updates occur when the merchandise is transferred from suspense to inventory using the Placing Suspended Stock (SUSP) menu option.
Receiving into a Pending Warehouse
Pending warehouses are warehouses where you can place inventory that is on its way to its final destination, for example, a staging area. Inventory in a pending warehouse is not available for reservation and picking.
Use a pending putaway warehouse to temporarily store saleable inventory on its way to its final destination warehouse. Inventory received into a pending putaway warehouse retains its on order status so that the inventory is visible in PO Layering, yet the system recognizes the inventory as being in a warehouse location so that you can manipulate it.
You can define a warehouse as a pending warehouse using the Working with Default Warehouse Locations (WWDL) menu option.
When you receive merchandise into a pending warehouse, the system performs the following updates at receiving time:
• Creates a pending putaway detail record. If a pending putaway detail record already exists for the purchase order and item/SKU, the system adds the receipt quantity to the existing pending putaway detail record. The pending putaway detail record indicates:
- The quantity of the item in the pending warehouse for this receipt. The on hand quantity for the item at the item warehouse level indicates the total pending putaway quantity for the item.
- The “final destination” warehouse where the inventory will be placed.
- The expected due date of the inventory; this due date is displayed in order entry, order maintenance, standard or streamlined order inquiry, inventory inquiry, and item availability for the “final destination” warehouse.
• Creates a PO layering record for the “final destination” warehouse.
• Decreases the on-order quantity for the item in the “final destination” warehouse.
• Creates an inventory transaction history record for the pending warehouse.
The following updates do not occur when merchandise is received into a pending warehouse.
• The on-hand quantity for the item in the "final destination" warehouse is not changed.
• The costing calculation is not performed.
• Vendor Item analysis is not performed
These updates occur when the merchandise is transferred from the pending putaway warehouse to the "final destination" warehouse.
See Pending Putaway Overview for an overview of the updates the system performs when you place inventory into a pending warehouse.
Receiving into a Staging Warehouse
When you receive into a staging warehouse, the same updates take place at receiving as when you receive into inventory. However, you normally define the staging warehouse to be non-allocatable and non-viewable in Order Entry, and define each location to be non-pickable; the result is that the inventory is not generally available or visible on the system until you place it in your main warehouse.
See Working with Default Warehouse Locations (WWDL) for an overview of defining default locations within a staging warehouse.
Suggest Warehouse/Location Placement
Purpose: Use the Suggest Location Placement function to have the system determine where merchandise should be placed. The system searches through the available locations in your warehouse to determine where you should place the merchandise. You can accept, reject or change any of the system suggested placements for an item.
When suggest placement is used: Suggest Location Placement can be used during the following functions:
• Receiving Purchase Orders (PORC): when merchandise is being received into inventory
• Placing Suspended Stock (SUSP): when merchandise is being transferred from suspense to inventory
• Suggest Location Placement (MSLO): when you are placing items in locations independent of the Purchase Order Receipts and Place Suspended Stock functions.
Standard Warehouse/Location Placement
Purpose: The system will attempt to place the merchandise in a single location where the item is currently stored, if possible. If a single location cannot be found, the system will spread the merchandise across as many locations where the item is stored as is necessary. If the full quantity cannot be placed in existing item locations, the system will search for any suitable location (e.g., a location class compatible with the item type, a location that is not frozen, etc.) that can hold the placement quantity.
Note: The Suggest Location Placement function searches existing warehouse locations only; new warehouse locations will not be created using this function.
Your company decides the criteria for how locations are suggested and the order in which the system will search for available locations.
• Determining Location Capacity
- Determining Location Capacity by Units
- Determining Location Capacity by Volume
The following values in the System Control table allow you to define whether to use suggest placement, and how the system will search for available locations when recommending stock placements. The following values are used:
• Suggest Location Placement (A27), which controls whether the function is used.
• Type of Location to Search First during Suggest Location Placement (C40), which defines the location type that will be searched first.
• Type of Location to Search Second during Suggest Location Placement (C41), which defines the location type that will be searched second.
• Type of Location to Search Third during Suggest Location Placement (C42), which defines the location type that will be searched last.
• Suggest Multiple Items in a Location during Suggest Location Placement (C43), which determines whether the merchandise can be placed in a location the contains other merchandise when the system is searching for any available location.
• Location Capacity Method (A31), which determines how the system determines when a location is full.
Suggest Location Placement searches primary, secondary and bulk locations in the sequence you define. You do not have to include all three location types. For example, you can choose to suggest only primary locations, or only bulk and secondary locations for item placements. Temporary locations cannot be recommended for placements.
The Suggest Location Placement program searches for a location as follows:
1. First, search locations whose Location type code matches the Type of Location to Search First during Suggest Location Placement (C40) in location code sequence until it finds a single location for the placement; otherwise,
2. Search locations whose Location type code matches the Type of Location to Search Second during Suggest Location Placement (C41) until it finds a single location for the placement; otherwise,
3. Search locations whose Location type code matches the Type of Location to Search Third during Suggest Location Placement (C42) until it finds a single location for the placement; otherwise,
4. If the full quantity cannot be placed in one location, search through all applicable locations again, in the same sequence, and fill each eligible location to capacity until the full quantity has been placed; otherwise,
5. If the full quantity cannot be placed in the existing locations where the item is stored, search for any available location in the warehouse that can hold the full placement quantity. If the Suggest Multiple Items in a Location during Suggest Location Placement (C43) value is selected, the program places two different items in the same location if it can hold the full capacity; otherwise, if the value is unselected, the program evaluates only empty locations.
The system evaluates the location capacity when determining whether the placement quantity can fit in a location. The location capacity can be evaluated by units, by cubic volume, or by weight. The unit capacity, cubic capacity, and weight capacity for a location are defined in the Location table. See Creating and Maintaining Locations (WLOC).
Determining Location Capacity by Units
When determining capacity by units, the system evaluates the number of units currently on hand in the location against the placement quantity to determine if the quantity can fit in the location. The total quantity cannot exceed maximum number of units from the Item Location table or the Location table.
In addition, the system checks the combined item weight to ensure that the location can support the on-hand quantity and the proposed placement quantity.
Determining Location Capacity by Volume
When determining capacity by volume, the system evaluates the cubic volume of the units currently on hand in the location against the cubic volume of the placement quantity to determine if the quantity can fit in the location. The Fill factor defined for the location is used to determine the total cubic volume that can fit in the location. See Creating and Maintaining Locations (WLOC).
If item dimensions (height, length, and width) are defined in the Item/SKU table, the item dimensions will be used to calculate the cubic volume. If item dimensions are not defined, the Cube factor is used.
In addition, the system checks the combined item weight to ensure that the location can support the on-hand quantity and the proposed placement quantity.
Receiving Overages and Underages
Overages: At times, a vendor may overship an item. The Over Receipt % (A61) value in the System Control table allows you to receive more than the quantity ordered for an item if the quantity received is within the tolerance limit.
If a vendor ships you more merchandise than you ordered, the system allows you to record the receipt if the overage is within an acceptable tolerance limit. For example, if you set the Over Receipt % (A61) to 10%, you can receive a quantity up to ten percent above the amount that was ordered. If the overage exceeds the tolerance amount, the following message indicates:
Invalid over receipt quantity
The Override Tolerance (A18) value in the Security table lets you accept any overage amount the vendor may ship. When this option is allowed, the system accepts any receipt quantity you enter without displaying a message.
Underages: At times, a vendor may under-ship an item and may not be able to fulfill the entire purchase request. The Under Receipt % (A62) value in the System Control table allows the system to close a purchase order line if only a certain percentage of the order quantity is received.
If a vendor short-ships an item and the quantity received is within the defined tolerance, the purchase order line will be closed even if the full order quantity was not received. This allows you to close purchase order lines when vendors short-ship merchandise and are unable to complete the shipment.
For example, if you define the Under Receipt % (A62) at 10%, a purchase order line will be closed when at least 90% of the merchandise is received. If you order 100 units and receive 92 units, the line will be closed when the receipt for 92 units is accepted.
If the vendor ships you the balance of the merchandise at a later time, you can add a line to the purchase order during Purchase Order Receipts to record the additional receipt, if you have the proper authority. The Add PO Detail Line during PO Receipts (A21) value in the Security table determines whether you can add lines to a purchase order at receiving.
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