Accounting, cost, inventory question

Aaron,
We have customer supplied parts from CustomerABC. We label each of these parts as "C-..." in our system. This way we can tell immediately what is a "C-" (ie. Customer supplied part) in our system. CustomerABC is also VendorABC in our system. When we need parts from them, we issue a $0 PO to VendorABC. Then when we ship the final assembly back to them, we ship it to CustomerABC. I have no clue how ABC keeps track of what they need, but that's not our concern in this case.

Troy Funte
Liberty Electronics

----- Original Message -----
From: Aaron Hoyt
To: 'Vantage E-Group (E-mail) ' (E-mail)
Sent: Tuesday, March 26, 2002 8:39 AM
Subject: [Vantage] Accounting, cost, inventory question.


I will try to explain this to the best of my ability so that those of you
that know can offer sensible suggestions.
Basically we have this. Customer ABCompany needs us to keep more inventory
than we can afford. Solution has been to sell our current inventory to them
including raw material, parts, and assemblies. Then we use these now
"customer supplied parts" (no cost to us anymore) to assemble the final
product that we sell to them at a reduced price to reflect the parts that
they supplied to us (paid for in advance). This continues having them pay
the vendors directly for the raw material/subcontracts as the costs are
incurred providing us with more "customer supplied parts".
If I have explained this right, you can imagine the confusion this causes
because the POs are still entered through Vantage and then when the parts
arrive the Customer pays the Vendor.
Management seems to like this arrangement and has begun this with Customer
YZCompany as well.
My question is, are we the only company in the world with this complex
process and if not, how are others handling the inventory and cost
accounting portion of this. I am rather certain that I would get a huge
backlash from the accounting community if I were to explain the method that
is being used here now. Could anyone offer a suggestion on a method? For
instance, ship the parts to the customer upon receipt and receive them back
as customer supplied? I have my thoughts, but know that my opinion will not
carry much weight.
Anyone that can offer suggestions???

Aaron Hoyt
Information Systems Manager
Design Standards Corp.
PO Box 1620
Charlestown, NH 03603
Tel 603-826-7744
<mailto:aaron.hoyt@...>




Yahoo! Groups Sponsor
ADVERTISEMENT




Useful links for the Yahoo!Groups Vantage Board are: ( Note: You must have already linked your email address to a yahoo id to enable access. )
(1) To access the Files Section of our Yahoo!Group for Report Builder and Crystal Reports and other 'goodies', please goto: http://groups.yahoo.com/group/vantage/files/.
(2) To search through old msg's goto: http://groups.yahoo.com/group/vantage/messages
(3) To view links to Vendors that provide Vantage services goto: http://groups.yahoo.com/group/vantage/links

Your use of Yahoo! Groups is subject to the Yahoo! Terms of Service.


[Non-text portions of this message have been removed]
I will try to explain this to the best of my ability so that those of you
that know can offer sensible suggestions.
Basically we have this. Customer ABCompany needs us to keep more inventory
than we can afford. Solution has been to sell our current inventory to them
including raw material, parts, and assemblies. Then we use these now
"customer supplied parts" (no cost to us anymore) to assemble the final
product that we sell to them at a reduced price to reflect the parts that
they supplied to us (paid for in advance). This continues having them pay
the vendors directly for the raw material/subcontracts as the costs are
incurred providing us with more "customer supplied parts".
If I have explained this right, you can imagine the confusion this causes
because the POs are still entered through Vantage and then when the parts
arrive the Customer pays the Vendor.
Management seems to like this arrangement and has begun this with Customer
YZCompany as well.
My question is, are we the only company in the world with this complex
process and if not, how are others handling the inventory and cost
accounting portion of this. I am rather certain that I would get a huge
backlash from the accounting community if I were to explain the method that
is being used here now. Could anyone offer a suggestion on a method? For
instance, ship the parts to the customer upon receipt and receive them back
as customer supplied? I have my thoughts, but know that my opinion will not
carry much weight.
Anyone that can offer suggestions???

Aaron Hoyt
Information Systems Manager
Design Standards Corp.
PO Box 1620
Charlestown, NH 03603
Tel 603-826-7744
<mailto:aaron.hoyt@...>
We are doing something similar, however - our customer actually places the
po to the supplier (to keep their accounting dept happy) - the material
ships to us - we fax over a copy of the packing slip to the customer so they
can receive and process the invoice from the supplier. We cut a po to the
customer for the same material - as customer owned stock - so we can show a
receipt, - but the po is valued at zero - so our inventory is not inflated.
Material is issued to jobs as normal - and we are able to provide to our
customer on hand stock qty at any point in time. (we also run time phase on
this part - just to be able to let our customer know when to place a new
po.) - Not the best system in the world - but it does pass our outside
auditors test!

Wanda Patterson
KARLEE

-----Original Message-----
From: Aaron Hoyt [mailto:aaron@...]
Sent: Tuesday, March 26, 2002 10:40 AM
To: 'Vantage E-Group (E-mail) ' (E-mail)
Subject: [Vantage] Accounting, cost, inventory question.


I will try to explain this to the best of my ability so that those of you
that know can offer sensible suggestions.
Basically we have this. Customer ABCompany needs us to keep more inventory
than we can afford. Solution has been to sell our current inventory to them
including raw material, parts, and assemblies. Then we use these now
"customer supplied parts" (no cost to us anymore) to assemble the final
product that we sell to them at a reduced price to reflect the parts that
they supplied to us (paid for in advance). This continues having them pay
the vendors directly for the raw material/subcontracts as the costs are
incurred providing us with more "customer supplied parts".
If I have explained this right, you can imagine the confusion this causes
because the POs are still entered through Vantage and then when the parts
arrive the Customer pays the Vendor.
Management seems to like this arrangement and has begun this with Customer
YZCompany as well.
My question is, are we the only company in the world with this complex
process and if not, how are others handling the inventory and cost
accounting portion of this. I am rather certain that I would get a huge
backlash from the accounting community if I were to explain the method that
is being used here now. Could anyone offer a suggestion on a method? For
instance, ship the parts to the customer upon receipt and receive them back
as customer supplied? I have my thoughts, but know that my opinion will not
carry much weight.
Anyone that can offer suggestions???

Aaron Hoyt
Information Systems Manager
Design Standards Corp.
PO Box 1620
Charlestown, NH 03603
Tel 603-826-7744
<mailto:aaron.hoyt@...>





Useful links for the Yahoo!Groups Vantage Board are: ( Note: You must have
already linked your email address to a yahoo id to enable access. )
(1) To access the Files Section of our Yahoo!Group for Report Builder and
Crystal Reports and other 'goodies', please goto:
http://groups.yahoo.com/group/vantage/files/.
(2) To search through old msg's goto:
http://groups.yahoo.com/group/vantage/messages
(3) To view links to Vendors that provide Vantage services goto:
http://groups.yahoo.com/group/vantage/links

Your use of Yahoo! Groups is subject to http://docs.yahoo.com/info/terms/
First of all, why are you doing this, what's the benefit ?

-----Original Message-----
From: Aaron Hoyt [mailto:aaron@...]
Sent: Tuesday, March 26, 2002 10:40 AM
To: 'Vantage E-Group (E-mail) ' (E-mail)
Subject: [Vantage] Accounting, cost, inventory question.


I will try to explain this to the best of my ability so that those of you
that know can offer sensible suggestions.
Basically we have this. Customer ABCompany needs us to keep more inventory
than we can afford. Solution has been to sell our current inventory to them
including raw material, parts, and assemblies. Then we use these now
"customer supplied parts" (no cost to us anymore) to assemble the final
product that we sell to them at a reduced price to reflect the parts that
they supplied to us (paid for in advance). This continues having them pay
the vendors directly for the raw material/subcontracts as the costs are
incurred providing us with more "customer supplied parts".
If I have explained this right, you can imagine the confusion this causes
because the POs are still entered through Vantage and then when the parts
arrive the Customer pays the Vendor.
Management seems to like this arrangement and has begun this with Customer
YZCompany as well.
My question is, are we the only company in the world with this complex
process and if not, how are others handling the inventory and cost
accounting portion of this. I am rather certain that I would get a huge
backlash from the accounting community if I were to explain the method that
is being used here now. Could anyone offer a suggestion on a method? For
instance, ship the parts to the customer upon receipt and receive them back
as customer supplied? I have my thoughts, but know that my opinion will not
carry much weight.
Anyone that can offer suggestions???

Aaron Hoyt
Information Systems Manager
Design Standards Corp.
PO Box 1620
Charlestown, NH 03603
Tel 603-826-7744
<mailto:aaron.hoyt@...>





Useful links for the Yahoo!Groups Vantage Board are: ( Note: You must have
already linked your email address to a yahoo id to enable access. )
(1) To access the Files Section of our Yahoo!Group for Report Builder and
Crystal Reports and other 'goodies', please goto:
http://groups.yahoo.com/group/vantage/files/.
(2) To search through old msg's goto:
http://groups.yahoo.com/group/vantage/messages
(3) To view links to Vendors that provide Vantage services goto:
http://groups.yahoo.com/group/vantage/links

Your use of Yahoo! Groups is subject to http://docs.yahoo.com/info/terms/
Tony,.

Basically,
Puts cash in our hands instead of tied up in inventory.
Much of this inventory is large dollar and we have to order enough to keep
them happy for three months or more. Something we can't afford. The second
(and maybe more compelling reason) is this customer has been dictating
change after change, obsolescing parts that we have oodles of. Somehow they
get amnesias when we bill them for the obsolete inventory wondering why we
had so many to start with (trying to keep up with their growing demand even
through the changes).
Basically it is forcing them to take responsibility $$$ for the changes that
affect current inventory and allows them to more directly control the price
of the product, purchasing at what they feel are economic quantities based
on their internal expectations for sales.
At least this is how I understand the issue from the information that I get.
There may be some other motives that I am not aware of.

Aaron

-----Original Message-----
From: Tony Meschini [mailto:tmeschini@...]
Sent: Tuesday, March 26, 2002 12:01 PM
To: 'vantage@yahoogroups.com'
Subject: RE: [Vantage] Accounting, cost, inventory question.


First of all, why are you doing this, what's the benefit ?

-----Original Message-----
From: Aaron Hoyt [mailto:aaron@...]
Sent: Tuesday, March 26, 2002 10:40 AM
To: 'Vantage E-Group (E-mail) ' (E-mail)
Subject: [Vantage] Accounting, cost, inventory question.


I will try to explain this to the best of my ability so that those of you
that know can offer sensible suggestions.
Basically we have this. Customer ABCompany needs us to keep more inventory
than we can afford. Solution has been to sell our current inventory to them
including raw material, parts, and assemblies. Then we use these now
"customer supplied parts" (no cost to us anymore) to assemble the final
product that we sell to them at a reduced price to reflect the parts that
they supplied to us (paid for in advance). This continues having them pay
the vendors directly for the raw material/subcontracts as the costs are
incurred providing us with more "customer supplied parts".
If I have explained this right, you can imagine the confusion this causes
because the POs are still entered through Vantage and then when the parts
arrive the Customer pays the Vendor.
Management seems to like this arrangement and has begun this with Customer
YZCompany as well.
My question is, are we the only company in the world with this complex
process and if not, how are others handling the inventory and cost
accounting portion of this. I am rather certain that I would get a huge
backlash from the accounting community if I were to explain the method that
is being used here now. Could anyone offer a suggestion on a method? For
instance, ship the parts to the customer upon receipt and receive them back
as customer supplied? I have my thoughts, but know that my opinion will not
carry much weight.
Anyone that can offer suggestions???

Aaron Hoyt
Information Systems Manager
Design Standards Corp.
PO Box 1620
Charlestown, NH 03603
Tel 603-826-7744
<mailto:aaron.hoyt@...>





Useful links for the Yahoo!Groups Vantage Board are: ( Note: You must have
already linked your email address to a yahoo id to enable access. )
(1) To access the Files Section of our Yahoo!Group for Report Builder and
Crystal Reports and other 'goodies', please goto:
http://groups.yahoo.com/group/vantage/files/.
(2) To search through old msg's goto:
http://groups.yahoo.com/group/vantage/messages
(3) To view links to Vendors that provide Vantage services goto:
http://groups.yahoo.com/group/vantage/links

Your use of Yahoo! Groups is subject to http://docs.yahoo.com/info/terms/



Useful links for the Yahoo!Groups Vantage Board are: ( Note: You must have
already linked your email address to a yahoo id to enable access. )
(1) To access the Files Section of our Yahoo!Group for Report Builder and
Crystal Reports and other 'goodies', please goto:
http://groups.yahoo.com/group/vantage/files/.
(2) To search through old msg's goto:
http://groups.yahoo.com/group/vantage/messages
(3) To view links to Vendors that provide Vantage services goto:
http://groups.yahoo.com/group/vantage/links

Your use of Yahoo! Groups is subject to http://docs.yahoo.com/info/terms/
We basically do this, too. They order & expedite the forgings. We cut an
internal PO @ zero $ for the material, for tracking purposes. We don't do
anything like this on the subcontract costs. I'm not sure how you would do
that.
For us, the subcontract is integral to the whole process. Maybe use zero
dollar
orders again, and have the customer issue a PO for the actual Money. Sounds
like
a _lot_ of coordinating time to me. I tease our accounting department about
being
a black hole for paperwork, but that seems like a whole new level of black
hole-ness.
(think of it, 2 accounting departments involved in paying a bill.) Then
what happens
if/when you have to reject work? Vantage already doesn't handle that issue
well, and
involving the customer in it wouldn't sweeten the pot at all.

Have you looked at progress payments? You get paid a percentage at certain
intervals
instead of only when you make a shipment. That would keep the cash flow
going, while
the volume is high. You wouldn't have to change your process and standard
practices for
a small # of customers, either. It becomes a management/accountant thing,
and the
shop moves on normally. It would involve a lot fewer people, and in this
case, I think
would be a better option.

Just $.02 from a purchasing perspective.
Rhonda Sherer
Reeder & Kline Machine.


Message: 16
Date: Tue, 26 Mar 2002 10:48:28 -0600
From: Wanda Patterson <wpatterson@...>
Subject: RE: Accounting, cost, inventory question.

We are doing something similar, however - our customer actually places the
po to the supplier (to keep their accounting dept happy) - the material
ships to us - we fax over a copy of the packing slip to the customer so they
can receive and process the invoice from the supplier. We cut a po to the
customer for the same material - as customer owned stock - so we can show a
receipt, - but the po is valued at zero - so our inventory is not inflated.
Material is issued to jobs as normal - and we are able to provide to our
customer on hand stock qty at any point in time. (we also run time phase on
this part - just to be able to let our customer know when to place a new
po.) - Not the best system in the world - but it does pass our outside
auditors test!

Wanda Patterson
KARLEE


[Non-text portions of this message have been removed]
We have a similar situation where we receive "customer supplied Materials".
We treat the customer as both Supplier and Vendor. We also put close
scrutiny on the acountablility of the recived parts for whenever the
Customer/Vendor wants an accounting. This is a single element in QS9000
requirements. Since we are only using these Customer supplied parts for
specific products each component would have its own part number in our
system. The details of our process could be better but overall it works.

Shirley Graver
Systems Administrator
Rubber Associates Inc.
Cleveland/Akron, OH

-----Original Message-----
From: Aaron Hoyt [mailto:aaron@...]
Sent: Tuesday, March 26, 2002 11:40 AM
To: 'Vantage E-Group (E-mail) ' (E-mail)
Subject: [Vantage] Accounting, cost, inventory question.


I will try to explain this to the best of my ability so that those of you
that know can offer sensible suggestions.
Basically we have this. Customer ABCompany needs us to keep more
inventory
than we can afford. Solution has been to sell our current inventory to
them
including raw material, parts, and assemblies. Then we use these now
"customer supplied parts" (no cost to us anymore) to assemble the final
product that we sell to them at a reduced price to reflect the parts that
they supplied to us (paid for in advance). This continues having them pay
the vendors directly for the raw material/subcontracts as the costs are
incurred providing us with more "customer supplied parts".
If I have explained this right, you can imagine the confusion this causes
because the POs are still entered through Vantage and then when the parts
arrive the Customer pays the Vendor.
Management seems to like this arrangement and has begun this with Customer
YZCompany as well.
My question is, are we the only company in the world with this complex
process and if not, how are others handling the inventory and cost
accounting portion of this. I am rather certain that I would get a huge
backlash from the accounting community if I were to explain the method
that
is being used here now. Could anyone offer a suggestion on a method? For
instance, ship the parts to the customer upon receipt and receive them
back
as customer supplied? I have my thoughts, but know that my opinion will
not
carry much weight.
Anyone that can offer suggestions???

Aaron Hoyt
Information Systems Manager
Design Standards Corp.
PO Box 1620
Charlestown, NH 03603
Tel 603-826-7744
<mailto:aaron.hoyt@...>




Yahoo! Groups Sponsor
ADVERTISEMENT




Useful links for the Yahoo!Groups Vantage Board are: ( Note: You must
have already linked your email address to a yahoo id to enable access. )
(1) To access the Files Section of our Yahoo!Group for Report Builder and
Crystal Reports and other 'goodies', please goto:
http://groups.yahoo.com/group/vantage/files/.
(2) To search through old msg's goto:
http://groups.yahoo.com/group/vantage/messages
(3) To view links to Vendors that provide Vantage services goto:
http://groups.yahoo.com/group/vantage/links

Your use of Yahoo! Groups is subject to the Yahoo! Terms of Service.



[Non-text portions of this message have been removed]