Chapter 6 - SC - Inventory - Warehousing-V2-Part 1 PDF

Department of Industrial Engineering and Engineering Management University of Sharjah 1 0405452: Enterprise Resource Planning Systems Course Overview...

Department of Industrial Engineering and Engineering Management University of Sharjah 1 0405452: Enterprise Resource Planning Systems Course Overview Fall 2024-2025 Dr. Ali Cheaitou Course developed in Collaboration with  Chapter 6 Supply Chain, Inventory , & Warehousing Management 2  Learning Outcomes Comprehend Warehouse Networks: Gain an insightful understanding of diverse warehouse network structures and common organizational arrangements Explore Inbound and Outbound Logistics: Examine inbound and outbound processes within supply chains, understanding their significance in managing inventory flows Differentiate Dropshipping and Cross Docking: Distinguish between dropshipping and cross-docking strategies, recognizing their roles in optimizing distribution and reducing handling times Analyze Picking Methods: Analyze various picking methods used in warehouse operations, understanding their applications and benefits Master Stock Management: Develop expertise in stock management practices, replenishment, and ensuring optimal inventory levels Achieve Inventory App Proficiency: Become skilled in inventory management functionalities within the Odoo ERP system by understanding how it aids in various inventory processes Step-by-Step Training on Odoo Inventory: Engage in comprehensive training on Odoo's inventory module, covering configuration, usage, reporting, and advanced features Experience Practical Scenarios: Apply acquired knowledge by simulating a business use case centered around purchasing and selling 3 Supply Chain Management is traditionally defined as the management of the flows of goods (and services), funds, and information, encompassing processes, systems, and people from the raw materials, to the manufacturing/production, to the delivery and consumption by the end-customer. It typically includes stages such as procurement, manufacturing, distribution, retail, and possibly return of products. Source: https://www.lokad.com/supply-chain-management-definition 4 Diverse Warehouse Networks. Warehouse networks = Backbone of Supply Chain Different types or functions: raw materials, WIP, finished goods, Distribution Center (DC), Regional WH, Local WH. Multiple combinations: Manufacturing+local WH Manufacturing+DC+local WH … Varying numbers and locations Strategic decision from the Warehouse Executive(s) 5 Typical Warehouse Organizations. A physical space where the goods are stored temporarily and within which the incoming and outgoing moves are tracked Warehouse divided in zones: ○ Inbound Area ○ Storage ○ Outbound Area 6 Warehouse organization QC & 7  Warehouse organization Zones and storage locations are organized and designed to optimize space and increase the work flows efficiency 8  Diverse Warehouse Networks It could be as simple as: Supplier Warehouse Customer 9  Or very complex... As complexity increases, it becomes more difficult to keep track of and process information. This is why a good portion of jobs in the Supply Chain relate to managing urgent issues! 10 Inbound & Outbound Flows 11  What is Inbound flow? How goods are managed from when they are received to when they are placed in stock 12  One-Step Inbound The product goes directly from the vendor to the stock 1 1 Reception from the vendor WHEN: This method is typically used by SME's (Small to Medium Size Enterprises). 13 Two-Step Inbound The vendor delivers the goods in an input zone, the products will be put away later due to time constraints. 1 Received to an input zone 1 2 2 Transfer to the storage location WHEN: When the volumes begin to be high, more medium and big company. 14 Three-Step Inbound The vendor delivers the goods in an input zone and then the products will pass a quality control before being sent to the storage location. 1 Receive in an input zone 1 2 3 2 Transfer to quality inspection 3 Transfer to the storage location WHEN: When the quality of the product needs to be guaranteed. The size of the company doesn’t matter in this case. 15 Inbound 1 2 Reception Transfer 1 One, two, three steps or even more... 3 Transfer 2 1 Vendor Stock 1 2 Vendor Input zone Stock 1 2 3 Vendor Input zone QC Stock 1 2 3 16  What is Outbound? How goods are managed from the stock to the customer 17  One-Step Outbound The customer order is prepared and directly sent to the customer 1 1 OR 1 Delivery to the customer WHEN : This method is typically used by SME's. Because their operations are more simplified, they don't require multiple steps. 18 Two-Step Outbound Orders are prepared and sent to an output for the truck loading. 1 Order preparation and transfer to the output zone 1 2 2 The truck is loaded for the delivery WHEN: Usually when the volume of orders is high, there is a specific location for the truck loading. 19 Three-Step Outbound Some companies process large amounts of deliveries every day, many of which include multiple products or require special packaging. To make this efficient, a packing step is needed before shipping out products 1 2 3 1 Order picking and transfer to the packing zone 2 Packing and transfer to the output zone 3 The package is taken in charge to be delivered 20 Outbound 1 2 Pick Pack One, two, three steps or even more... 3 Deliver 1 Stock Customer 1 2 Stock Output zone Customer 1 2 3 Stock Packing zone Output zone Customer 1 2 3 21 Other alternatives Dropshipping Dropshipping is a retail fulfillment method where a store doesn't keep the products it sells in stock. Business purchases an item from a third party and has it shipped directly to the customer. 1 1 Sales Order 2 Dropship 2 22 Other alternatives Cross Docking Products are unloaded from a truck, sorted, and directly reloaded onto outbound trucks to continue their journey. 1 2 3 IN OUT WHEN: The company acts as platform to efficiently transit goods from producer to customer 23 Picking 24 Picking order methods Picking: refers to every manipulation of products from a source location to a destination location (done by the warehouse team). Different ways to process the orders picking: Single order picking Batch picking Cluster picking Wave picking Order picking requires both speed and accuracy. The time it takes to get an order together greatly influences delivery time. 25 Batch Picking In batch picking, a picker collects items for multiple orders simultaneously, but the items are not separated by order during the picking process. The picker focuses on picking the required quantity of each SKU (Stock Keeping Unit) for all the orders in the batch. Once the items are collected, they are sent to a consolidation (sorting) area where they are divided and organized into individual orders. Advantages: Reduces the travel time by picking for multiple orders in one trip. Particularly useful when orders contain the same or similar SKUs. Disadvantages: Requires an additional sorting process after picking to organize items into individual orders. Sorting can be complex and time-consuming, especially for large batches. Use Case: Suitable when multiple orders contain common items, and you want to maximize efficiency in picking by reducing travel time. Batch 2 Batch 1 Batch of orders→ Batch picking 26 Cluster Picking In cluster picking, the picker collects items for multiple orders at the same time, but the items are separated by order during the picking process. The picker uses containers (such as totes or bins) that correspond to individual orders, so that items are immediately grouped into their respective orders as they are picked. Advantages: Items are already grouped by order, so no further sorting is needed after picking. Reduces the likelihood of errors in sorting, as the orders are assembled during the picking process. Disadvantages: May require more complex equipment or setup (e.g., special picking carts or containers). May involve more walking compared to batch picking if items are scattered. Use Case: Effective when order sizes are small or vary widely and when minimizing post-pick sorting time is important. Batch 1 Batch 2 Cluster the orders based on their list of products → cluster picking 27 Wave Picking Pickers collect items for multiple orders in scheduled "waves" or time slots, based on specific criteria such as shipping deadlines, carrier schedules, or workload balancing. Wave picking organizes the entire picking operation into distinct waves to optimize order fulfillment. During each wave, orders are released for picking, and pickers typically gather items for multiple orders. These items may later be sorted or grouped into individual orders (similar to batch picking), or they may be grouped into clusters depending on how the warehouse is structured. 28 Wave Picking Advantages: Coordination with other operations: synchronizes the picking process with shipping activities, ensuring orders are ready at the right time. Flexible scheduling: Warehouse managers can release waves based on priority, deadlines→ more control over labor allocation and workload management. Disadvantages: Complexity in planning: Requires careful planning to determine which orders should be included in each wave. I Increased idle time: If wave releases are not frequent enough, there may be downtime between waves. Post-picking sorting: Like batch picking, wave picking may require sorting of items after they are picked, depending on how orders are grouped during the wave. Use Case: High-volume warehouses that need to align picking operations with outbound shipments (e.g., aligning with shipping truck schedules or overnight deliveries). Warehouses with varied order priorities where orders with specific shipping deadlines need to be fulfilled before others. 29 Production Approaches 30 Make to Stock (MTS) To always maintain a certain level of stock in a warehouse based on forecasted consumer demands. Example: Grocery products,... 31 Make to Order(MTO) A product is not built or ordered from a supplier until a confirmed order for the product is received. Example: customized new cars, custom kitchen cabinets, photography printing,... 32 Inventory Valuation The Stock is a very important aspect in a company as much for the Supply Chain as for Accounting. WHY? The stock is a company’s asset. A company will calculate how much stock they have on hand as a way of understanding their companies' value. 3 legal ways to do it : - Standard cost - Average cost - FIFO 33 Inventory Valuation - Standard cost Definition: A predetermined cost set by the company for each item in inventory. How it works: The cost doesn’t change with actual purchase price fluctuations. The standard cost is updated periodically (e.g., annually or semi-annually). Example: If you set the standard cost of a widget at $5, this is the cost recorded in your inventory, even if the actual purchase price fluctuates. Use Case: Useful for budgeting and controlling costs but may not always reflect actual costs. - Average cost Definition: The inventory cost is calculated based on the average price of all units of an item purchased over time. How it works: Every time new inventory is purchased, the new cost is averaged with the existing inventory cost to determine a new average cost. Example: If you have in the stock 20 units and 10 units were bought at $5 and another 10 units at $7, the average cost would be ($5 + $7) ÷ 2 = $6 per unit. Use Case: Smoothes out price fluctuations over time, giving a consistent view of inventory cost. 34 Inventory Valuation - FIFO Definition: The cost is based on the assumption that the first (oldest) items purchased are the first ones sold. How it works: When items are sold, the cost of the oldest inventory (first-in) is used to calculate the cost of goods sold, while the remaining inventory reflects the cost of more recent purchases. Example: Day 1: Purchase 5 units at $10 each; Day 2: Purchase 8 units at $12 each; Day 3: Purchase 7 units at $15 each. Total value of inventory on Hand: 5 units at $10 = $50; 8 units at $12 = $96; 7 units at $15 = $105; Total inventory value = $251 Now, let’s assume the company sells 10 units on Day 4. Sell from the first batch (Day 1 purchase): You have 5 units at $10 each, these are sold first: 5 units x $10 = $50. We still need to sell 5 more units (since 10 units are sold in total): Use the units of Day 2: 5 units --> 5 units x $12 = $60. Total Cost of Goods Sold (COGS): $50 (from the first batch) + $60 (from the second batch) = $110. Use Case: Reflects a realistic flow of inventory in many businesses, especially when older stock is sold first. 35 Inventory Valuation How do you report stock value in Accounting? Continental (civil law countries: Germany, France,…): Annual Inventory →Tax regulations and statutory accounting. The financial statements must comply with legal and tax regulations, → Financial statements are typically prepared on an annual basis. → Tends to follow conservative valuation principles, where inventory may be valued at a lower cost than the market. This means inventory is often valued at its historical cost (once a year) unless the market value falls below cost, in which case the lower value is used. Anglo-saxon (USA, UK): Cost of Goods sold (COGS) → Cost of goods sold (COGS) refers to the direct costs of producing or procuring the goods sold by a company. COGS is deducted from revenues (sales) in order to calculate gross profit and gross margin. Higher COGS results in lower margins. → In accounting, it means that each time there is a stock reception or delivery, an accounting entry is made. → More flexibility is allowed in choosing inventory valuation methods. Common methods include: 36 First-in, First-out (FIFO). Understand Supply Chain Organization ○ Understand the products: What does the company buy? What does the company sell? What does the company create? Does the company track the stock and how? Are there groupings among the products? ○ How many warehouses does the company have? ○ How is it organized inside a warehouse? ○ What is the main path for the products’ inbound flows? Is there any exception? ○ What is the main path for the products’ outbound flows? Is there any exception? 37 Inventory App Features Storage Productivity Reporting Create and manage Notify procurement Full stock moves report to specific storage locations, managers about low stock map and trace product like shelves, aisles, cold and vendor lead times to moves from supplier to storage rooms, and pallet assist with reordering customer. racks. schedules. Monitor how long items Create dedicated locations Odoo automatic scheduler have been in the to receive products, sort, triggers operations warehouse. Quantities are pack, and other warehouse automatically for you sorted by receipt date, operations. based on product allowing you to stay Choose product removal availability and forecasts of informed about products strategies and streamline orders. nearing expiration. picker paths with the right picking method. You can find more using the following link: https://www.odoo.com/app/inventory-features 38 Integrated with 39 Model Structure One physical place is equal to one warehouse in Odoo. A Main (View) Location is created as a parent location by default, along with a Warehouse (stock) as a main storage location. Another set of intermediary entities including Input, Output, Stock, Packing, … entities. The intermediary locations are associated with the Main (View) Location (parent). A hierarchy of sub-locations can be built to further refine the warehouse organization (Rack 1, Rack 2,…) 40 Location Types View Internal Virtual Transit Partner Purpose Hierarchy Goods Counterpart for Goods External construction storage internal transiting counterpart consumption between for in & out or scrap different WHs Used for Qty Yes Yes No Yes No on Hand computation? e.g. View Internal Production Transit Vendor Physical (Manufacturing) Location Location & Locations & Inventory Customer within a Loss Location WH 41  Types of Operations Flexible source and destination locations when Internal Transfers creating a transfer Flexible destination location Receipts Source location is typically assigned as Partner Location/Vendor Flexible source location Delivery Destination location is typically assigned as Partner Location/Customer Limits the configuration setup (e.g. no return Manufacturing operation) as a manufacturing operation type can only be used for manufacturing processes 42 How to create and organize Locations in Odoo Step 1 Step 2 Step 3 Step 4 43 How to create and organize Locations in Odoo Step 1 Step 2 Step 3 Step 4 Existing internal locations are marked in red Press “New” to create a new location 44 How to create and organize Locations in Odoo Step 1 Step 2 Step 3 Step 4 Keep the type as “Internal location” 45 How to create and organize Locations in Odoo Step 1 Step 2 Step 3 Step 4 Remove the “Internal” filter in order to see the other types of locations. 46  How to create and organize Locations in Odoo Step 1 Step 2 Step 3 Step 4 View: hierarchical Customer organization of location: where the locations. sold products can Does not contain be viewed and products. they are no longer available in stock. Internal locations: where Press on WH Transit location: the products are. (View) to view the used for details intercompany or Virtual locations inter-warehouse (Production, operations to Loss): used to track products record stock between these product addresses. production and 47 consumption.  How to create and organize Locations in Odoo Step 1 Step 2 Step 3 Step 4 Go to Configuration → Warehouses Press new to create a new Warehouse (for a new shop in a new market for example). 48  How to create and organize Locations in Odoo Step 1 Step 2 Step 3 Step 4 Name: Name of the new WH New address (can Short Name be created in “Contact”) since every WH has a Buy to resupply different address. 49 How to create a product 1 2 5 3 6 4 7 50  Units of Measure Units of measure specify the unit used to handle a product. Product UOM versus Purchase UOM. The only condition is that all the units have to be in the same category (Unit, Weight, Volume, Length,...). The conversion between the different units of measure is done automatically. 51 Step 1 Step 2 Step 3 Step 4 Activate the units of measure in the settings 52 Step 1 Step 2 Step 3 Step 4 Create a UOM category 53 Step 1 Step 2 Step 3 Step 4 Create the reference unit of measure 54 Step 1 Step 2 Step 3 Step 4 Create the unit of measure and its ratio 55  Step 1 Step 2 Step 3 Step 4 Create the unit of measure and its ratio Created a new UoM of Box of 250 kg with the reference UoM being kg, in the category weight. 56  Step 1 Step 2 Step 3 Step 4 Create the unit of measure and its ratio The new UoM (Box of 250 kg), is used as the purchase UoM of a specific product that is purchased in boxes of 250 kg. The conversion when we buy that product will be done automatically from Box of 250 kg to 250 kg. 57  Step 1 Step 2 Step 3 Step 4 Create a planned transfer from the operations menu Please note that the internal transfer operation type will only be available if you define storage locations in the inventory configurations/settings 58  Step 1 Step 2 Step 3 Step 4 Fill in the product initial demand Click on new to reach this page 1- Specify from where and to where are you 2 moving the product 2- Put a scheduled date for that transfer 3- Add products that you want to transfer with 1 their demand 3 Press: Mark as Todo. 59  Step 1 Step 2 Step 3 Step 4 Mark the picking as to-do Stock Move in “waiting” state Reservation: Either through a manual action (e.g. button Check Availability) on the picking Or through the scheduled action Run Scheduler Or automated at operation initiation 60  Step 1 Step 2 Step 3 Step 4 Check the availability Based on the stock move initial demand, the function action_assign looks for available quantity in the specified source location and its children locations Stock Move in “ready” state Reserved quantity set on the quantity and the stock move Finally you can validate once you are done with the order 61 More Inventory Management 62  Removal Strategy Deciding in which order (HOW) products are going to be reserved and hence which preferred locations to be shown to the operator. Can be configured at product category level and/or at location level. Three options: FIFO LIFO FEFO Default Yes No No Based on Incoming Incoming Expiry Date Date Date Selection First IN Last IN First to Order EXPIRE 1- Please note that removal strategies like FEFO (First Expiry First Out) need to be enabled from the settings. Enabling expiration 63 dates from the Configuration (settings) will make it visible 2- You can access the screenshot by going into product categories Traceability: lot versus serial numbers Lot Number Serial Number Identification number given Identification number to one product in particular, assigned to a particular Definition to allow to track the history quantity or lot of material of the item from reception from a single manufacturer. to delivery and after-sales. Applicable on Multiple items Single item Products received in large Products for which a quantity and for which a lot unique tracking should be What for? can help in reporting, enforced on every unitary quality control issues, or transaction. any other info. Purpose Identify a production fault Help for after-sales service 64  Traceability: lot versus serial numbers 1- Make sure to enable lots and serial numbers with expiration dates in the inventory settings under traceability 65 65  Configure at product level Product by product, choose between one tracking type or another. Go to Purchase and create a RFQ for the product for which the Lot Traceability has been activated. 66 66  Create Lots or Serial Numbers Decide on the fastest way to receive products & assign tracking numbers. Manual Creation Copy/Paste from a spreadsheet Quick creation tool (for Serial Numbers only) Add as many lines as necessary with different Serial numbers Upon receiving the ordered quantity, press on the detail button (manually set) or Lot numbers and the corresponding quantities 67 67  Create Lots or Serial Numbers Decide on the fastest way to receive products & assign tracking numbers. Manual Creation Copy/Paste from a spreadsheet Quick creation tool (for Serial Numbers only) Press on Traceability Report 68 68  Trace and Locate Lots and SN Keep an eye on the movements of your lots or serial numbers. ○ Traceability report (in “Products→Lots/Serial Numbers→ Choose the Lots or Serial Number” → Press the button “Traceability” ○ Locate function→ Press “Location” button. ○ Quick link to Purchase Order and Sales Order 69  Add Expiry Dates Auto-compute the lifecycle of your products. Expiration Date: the number of days after receiving products (either from a vendor or in stock after production) in which goods may become dangerous and should not be used or consumed. Best Before Date: the number of days before the expiration date in which the goods start deteriorating, without necessarily being dangerous yet. Removal Date: the number of days before the expiration date in which the goods should be removed from stock. Alert Date: the number of days before the expiration date in which an alert should be raised on goods in a particular lot or containing a particular serial number. 70  Operation Type: Configuration Configuration → Operations Types 1 5 2 6 3 4 7 71  Operation Type: Configuration 1- Type of operation: There are 4 main types of operation (Receipt, delivery, internal transfer, and manufacturing). 2- Reference Sequence and Sequence Prefix: To add a sequence for the operation orders. For example, for the delivery orders operation, OUT is the sequence prefix so the result will be “WH/OUT/00001” 1 3- Reservation method: The reservation of the products in the operation from the warehouse. For example, if you don’t want the system to reserve the requested 5 quantity in the operation automatically, we will put the reservation method manually. 2 6 4- Lots/ Serial numbers: If there is tracking of serial numbers or lots, we can specify if 3 we can create new serial numbers or lots in the operation or only use the existing ones. For example, in the delivery operation, we shouldn’t create new lots and serial numbers because we have to select from the existing ones. 4 7 5- Returns type: if the operation allows returns, we can specify the operation that handles the return orders. 6- Create backorder: if the quantity in the operation is less than the demand, we can create backorders. 7- Locations: We can specify a default value for the source location and destination location in the operation. Tip: Please note that more/less options might appear depending on the type of 72 operation.  Putaway strategies: configuration. ○ Activate Storage Locations in Inventory > Configuration > Settings ○ Create sub-locations under the main storage location ○ Create product categories and associate products to it ○ Create putaway rules in Inventory > Configuration > Putaway Rules 73 Configurations to Look at Multi-locations in your warehouse: You will be able to create more than 1 location in 1 warehouse. Dropshipping: Ability to use dropshipping for sales with purchase. Inventory valuation and removal strategy: Able to find the inventory value and to select which removal strategy is preferred in the business. Barcodes: Ability to deal with barcode operations in your supply chain management. Landed cost: You will be able to add landed costs on your receipt. Lots/Serial Numbers: Ability to use lots and serial numbers to track products in inventory. 74 Configurations to Look at