PROCUREMENT DEPARTMENT POLICIES/ GUIDELINES
MAKCO INVENTORY MANAGEMENT SYSTEM
Created by GM 30 April 2007
Adding a category to the Inventory Management System
Adding an item ID to the Inventory Management System
Receiving a stock in the Inventory Management System
Preparing a Material Receipt Note for New Purchases
Transfer Issuing a stock from a site to another site from the Inventory Management System
Preparing a Material Transfer Issue Note
Adding a new category to the existing Inventory Management system has to be carefully studied and approved by the Procurement Engineer. There are three main types of categories:
a. Assets (AST)
An Asset can be a material/ tool/ machinery/ equipment/ appliance having an economic value that MAKCO owns or controls with the expectation that it will provide future benefit for its projects, employees and business goals.
b. Consumables (CON)
A consumable is a resource (materials/ tools/ machinery/ equipments/ appliances etc) that may deplete or gets worn out by use. A consumable normally looses its shape, significance or identity after its use.
c. Transit Items (TRA)
A Transit item can be a material/ tool/ machinery/ equipment/ appliance that has to be handed over in its actual shape (or after assembling) to the client for execution of a project.
The above three basic categories are coded in five levels. The first level is always either AST, CON or TRA. Every next level explains an item more in detail and narrows down to the specifications/ genre of the item. The first four levels are known in the inventory as "description only". A code with all five levels is the actual "stock item". While creating a code for a new item, it is important to see, if the item might fall in an existing level of categorization. To find if a similar category exists, a text search shall be done on the item list.
An example for an asset is given below:
Level 1 / AST / Asset
Level 2 / ASTAPP / Asset Appliances
Level 3 / ASTAPPACR / Asset Appliance Airconditioner
Level 4 / ASTAPPACR-CAR / Airconditioner Carrier
Level 5 / ASTAPPACR-CAR-012 / AC Carrier Split 42QNL025SX
An example for a Consumable is given below:
Level / Item ID/ Code / Item DescriptionLevel 1 / CON / Consumable
Level 2 / CONVEH / Consumables for Vehicles
Level 3 / CONVEHSPA / Consumables Vehicles Spares
Level 4 / CONVEHSPA-WIN / Window related spares
Level 5 / CONVEHSPA-WIN-001 / Wiper blade VW Golf 2003 Front
An example for a Transit item is given below:
Level / Item ID/ Code / Item DescriptionLevel 1 / TRA / Transit
Level 2 / TRAELE / Transit Electrical
Level 3 / TRAELEFIT / Transit Electrical Fittings
Level 4 / TRAELEFIT-IND / Transit Electrical Fittings Industrial
Level 5 / TRAELEFIT-IND-031 / Industrial Outlet Schyller
Some more examples of coding are given below:
Item ID/ Code / Item DescriptionASTCOMROU-DLI-001 / Router D-Link DSL G624T
ASTFURCHA-IKE-043 / Chair Ikea Naminel
ASTBESTEL-GAR-001 / Telephone Garyunis 410
ASTVEHCAR-TOY-041 / Car Toyota Camry 2006
CONVEHSPA-MIR-001 / Side Mirror VW Golf R
NEW STOCK ITEM - The following steps shall be followed while adding a new category or a stock item.
1. Determine if the item is an AST, CON or a TRA using the criteria mentioned above.
2. Check if a similar item exists by performing a text search on the "item list".
3. Check if a similar category at a higher level exists by performing a text search on the "item list". e.g. You want to add a plastic lamination machine company ID cards (made by Suntech, model number 602) to the inventory system. It is an "Asset (AST)". It is a part of the "Business Electronics (BES)" just like "fax machines (FAX)", "telephones (TEL)", "photocopy machines (PHO)" etc. The unique Genre of the item can be "Lamination Machine". It is important to use industry standard genre names so that no confusion or duplication arises. A code at level 3 can be "LAM". To check if a similar item was entered in the system before, you can perform a text search in the "item list" for the words like, brand name, lamination, LAM etc. A list of all business electronic can be printed and checked also for more scrutiny. When no matching genre/ item is found, only then a new code can be allotted to the item with the approval of the Procurement Engineer.
4. In the case of example given above, a "description only" shall be added first.
A new "description only" item is added by writing "ASTBESLAM" in the "item ID" field.
The "item description" field shall be "Asset BusEle Lamination Machine".
"Item class" shall be "Description only".
And "item type" shall be "Asset".
It is important that coding and descriptive conventions used already in the Inventory Management Systems are followed.
5. Looking at the similar items, particularly, in the Business electronics category, we see that the fourth level of coding shows the abbreviation for the manufacturer. Our item to be added is made by "Suntech". A "description only" entry will be made to the Inventory Management System.
Therefore the code will look like "ASTBESLAM-SUN".
The "item description" field shall be "Asset BusEle Laminator Suntech".
"Item class" shall be "Description only".
And "item type" shall be "Asset".
6. To enter the actual "stock item", we add a number to the code. The model name of the Suntech lamination machine is 602. Open the window from (MAINTAIN/ Inventory Items). The following Information shall be entered.
In this case we allot "ASTBESLAM-SUN-001" in the item "ID field".
The "item description" field shall be "Laminator Sunteck 602".
Price Level is calculated as required. (Normally it is the last purchase price Level 1)
"Item class" shall be "Stock item".
And "item type" shall be "Asset".
"Location" shall be "Tripoli".
"Preferred vendor" shall be the name of the supplier. e.g. CHL.
And "Buyer ID" shall be the name of the purchaser. e.g. Ghazanfar.
In General tab, additional description shall be provided as "For Sales".
And a descriptive information, "Suntech Lalminator 602, 220v-240VAC, 50Hz, 0,45A" shall be added.
An example is given here.
After confirming that all the required fields have been filled, click on the save icon at the top menu bar.
7. The level 5 code is a number and can be allotted to show the difference between two brand names etc. The two existing laminators in stock are shown below with their codes.
ASTBESLAM-SUN-001 / Laminator Suntech 602
ASTBESLAM-TIK-010 / Laminator Tiko 6201
Note that the "Laminator" is written before anything else in the "Item description". This helps in searching the items when an alphabetical list is used to search items. In this way, all Monitors, Fax machines, Printers, Desktops, Laptops, Fans, Calculators, Cameras, Telephones, Weld Generators, Compressor, Pumps, Trucks and Cars etc shall show systematically in the list.
8. It is important to note that the hierarchy followed in coding different levels of a stock item may vary for different types of items and genres. It depends on how a level can be divided into more possible levels based on industry conventions and also based on the limitations of the software.
Some more examples can be seen by clicking here:
NEW PURCHASES - When a new item is received from a vendor or a supplier, the items are entered in the Inventory Management System by opening the window from (TASKS/ Purchases or Receive entry). The following Information shall be entered.
Vendor ID
Ship to (This shall be filled automatically by the software. It defaults from the inventory 's physical location)
Date of purchase or Receipt
Vendors Invoice Number
Customer SO No. (This is the name of the Purchaser)
Customer Invoice No (This is the number of the internal Demand Note e.g DN-3456-GH)
Quantity
Item (This comes from the drop down menu of already created items)
Description (This comes from the drop down menu of already created items)
The GL Account (Inventory 1200)
Unit Price
(Please note that the job is not inserted in this window)
A sample is given here.
MRN-NP - A "Material Receipt Note - New Purchases" (MRN-NP) is prepared to be submitted to the Finance Deptt. (The MRN-NP is custom designed using the Reports/Inventory/Accounts Payable/Purchase Journal.)
The "MRN-NP" shall show the following fields in the given sequence;
For the Period, From -To
Date of inventory entry
GL Account ID and Description
Customer Invoice No (This is the number of the internal Demand Note e.g DN-3456-GH)
Ship to Name (This is the name of the site receiving the item)
Customer SO No (The name of the purchaser),
Vendor ID
Invoice/CM#
Item ID,
Item Description
Quantity
Unit Price
Transaction Amount
A sample is given here.
TRANSFER ISSUE - When an item is to be transfer issued from one site to another site, the items are shown as a sale, by opening the the window from (TASKS/ Sales or Invoicing). The following Information shall be entered.
Customer ID (This is the name of the site asking for the material)
Date (This is the date of transfer issue being done in the system)
Invoice No (This is the serial number of the MTIN-TP-0001-07, created by the Material Controller at Tripoli)
Costumer PO (This is the number of the internal Demand Note e.g DN-3456-GH)
Ship Via (Best Way or courier etc)
Ship Date
Sales Rep (This is the name of the Sender/ Material Controller)
Quantity
Item ID
Item Description
Unit Price
Job (This is the name of the Camp or the Project for which the material is sent)
A sample is given here.
MTIN-SS - A "Material Transfer Issue Note - Site to Site" (MTIN-SS) is prepared to be submitted to the Finance Deptt. (The MTIN-SS is custom designed using the Reports/Inventory/Accounts Receivable/Sales Journal.)
The "MTIN-SS" shall show the following fields in the given sequence;
For the Period, From - To
Date of inventory entry for transfer issue
Invoice/CM# (This is MTIN number created by the Material Controller)
Purchase Order (This is the number of the internal Demand Note e.g DN-3456-GH)
Item ID
Item Description
Quantity
Sales Rep ID (The Name of the Sender/ Material Controller)
Job (The project name or the site name requiring materials)
NOTE: The MTIN created by the Peachtree is not used, as it shows various GL account transactions. The MTIN-SS created by Peachtree is converted to Excel to make necessary adjustments and to remove GL account references.
A sample is given here.
Made with Peachtree (wrong)
Made with Excel (right)
It does not matter how the MRN-NP or the MTIN-SS is created. The most important issue is that the stocks are upto date and all receipts are issues are processed through the Inventory Management System.
When a material is received by a Site (after it has been transfer issued from another site) the receiving site creates a MRN-SS and enters it in the Receiving Site Inventory System. In this case the Sender Site becomes the Vendor and the Receiving site becomes the customer.
To issue a material to a project, the MPIN-PR (Material Permanent Issue Note - Projects) is created and the item is taken out of the Inventory System. A copy of the MPIN-PR is sent to Tripoli so that records in the Main Database are made uptodate. MPIN-PR is created using the same method as given for MTIN-SS (with necessary changes).
The Sites are maintaining their Inventory Management Systems in Excel format, whereas the Material Controller in Tripoli maintains separate Inventory Systems for all Sites (created as separate companies using Peachtree).
The Material Controller maintaining the Inventory systems of all Sites shall be able to provide existing stock status for all sites. The existing stock status of all sites shall be uploaded on the Makconet every week and emailed to all sites every week for their knowledge and reconciliation.
Note: All material inspections while receiving items are conducted and reported as per existing policies.
END