Costing and Accounting for Vendor Managed Inventory
Supplier managed inventory is a supply chain management strategy in which a supplier manages goods that are located in a customer's warehouse. The goods can be consigned or non-consigned stock. The consigned stock is owned by the supplier until the customer consumes it, and the non-consigned stock is owned by the customer when it is received.
As the supplier, you will create a Supplier Managed Inventory (VMI) business unit, which represents your customers warehouse. This PeopleSoft Inventory business unit will have storage locations that contain items and item quantities. These items and item quantities will match the consigned items and item quantities at the customer site.
Non-Consigned Goods
Non-consigned stock is owned or consumed by the customer when it is received into their warehouse. When the sales order is shipped and depleted, the transaction is written to the TRANSACTION_INV record using the transaction group 037 (VMI Interunit shipment) to debit the cost of goods sold account and credit the inventory account. In addition, the auto-putaway process is initiated and updates the item quantities in the VMI business unit and the OM Billing Interface process (OM_BILL) selects demand lines for invoicing and sends them to PeopleSoft Billing in order to create an invoice for the customer.
Consigned Goods
Consigned stock (not VMI) is owned by the supplier until the customer consumes it from the customer's warehouse. When consigned items are consumed, the customer sends an EIP message to the VMI business unit. This creates a transaction in the TRANSACTION_INV record using the transaction group 038 (VMI Consumption) to debit the cost of goods sold account and credit the inventory account. The OM Billing Interface process reads the transaction table and creates a billing-only sales order for all 038 transactions.