Inventory Management Overview


Inventory management is the supervision of non-capitalized assets (inventory) and stock items. A component of supply chain management, inventory management supervises the flow of goods from manufacturers to warehouses and from these facilities to point of sale. 

Main concepts

Introduction to Inventory Management

A double-entry inventory has no stock input, output (disparition of products) or transformation. Instead, all operations are stock moves between locations (possibly virtual).

Operations - Stock moves represent the transit of goods and materials between locations.

Analysis - Inventory analysis can use products count or products value (= number of products * product cost).

For each inventory location, multiple data points can be analysed:

        inventory valuation

        value creation (difference between the value of manufactured products and the cost of raw materials used during manufacturing) (negative)

        value of lost/stolen products

        value of scrapped products

        value of products delivered to clients over a period

        value of products received from suppliers over a period (negative)

        value of products in transit between locations

Procurements & Procurement Rules

A procurement is a request for a specific quantity of products to a specific location. They can be created manually or automatically triggered by: New sale orders, Minimum Stock Rules, Procurement Rules

Procurement Rules describe how procurements on specific locations should be fulfilled e.g.: where the product should come from (source location); whether the procurement is MTO or MTS

Routes : Procurement rules are grouped in routes. Routes define paths the product must follow. Routes may be applicable or not, depending on the products, sales order lines, warehouse etc. To fulfill a procurement, the system will search for rules belonging to routes that are defined in (by order of priority): Warehouses, A Product, Product Category, Sale Order Line

Push Rule - Push rules trigger when products enter a specific location. They automatically move the product to a new location. Whether a push rule can be used depends on applicable routes.

      Quality Control -

Product lands in Input

        Push 1: Input → Quality Control

        Push 2: Quality Control → Stock

      Warehouse Transit -

Product lands in Transit

        Push: Transit → Warehouse 2

Procurement Groups - Routes and rules define inventory moves. For every rule, a document type is provided: Picking, Packing, Delivery Order, Purchase Order etc

Moves are grouped within the same document type if their procurement group and locations are the same.

A sale order creates a procurement group so that pickings and delivery orders of the same order are grouped. But you can define specific groups on reordering rules too. (e.g. to group purchases of specific products together)

Miscellaneous Operations



Lots and Serial numbers

Valuation methods