In-Transit Accounting for Transfer Orders in Shipment Confirmation
When shipping an order between branch/plants, you must account for in-transit inventory that is related to transfer orders. Material Requirements Planning (MRP) and Distribution Requirements Planning (DRP) generate transfer orders to facilitate the transfer of inventory from one branch/plant to another. Companies that ship a lot of value between branch/plants cannot lose financial visibility to the value of inventory that is in-transit. The inventory general ledger value is relieved from the shipping branch/plant at the time of sales update. The inventory value is not updated in the general ledger again until purchase order receipts are performed at the receiving branch/plant. Be aware that month-end, quarter-end, and year-end financial statements may be incorrect if the in-transit value of inventory is not accurately reflected in the general ledger.
With the In-Transit Accounting processing option, purchasing receipt routing is automatically called at ship confirm to track the goods as in-transit with an associated update to the general ledger. This functionality ensures financial inventory visibility of goods in-transit. The In-Transit Accounting processing option on the Process tab and the PO Receipts (P4312) processing option on the Versions tab of the Shipment Confirmation program (P4205) should be activated to accurately track in-transit inventory.