Adding this topic to see if there is anyone out there who has a similar scenario that may be able to give some advice:
Within our company we have a straight sales buy to order business. This is mainly for replacement equipment and spare parts associated with larger work we have done. We use the Epicor - quote, sales order and purchase order functionality for this (incl. buy to order and CTP).
As there are 1000’s of part numbers we would need to setup for this given the difference in material, spec, size etc and the fact that they may only be used once, we decided to set up generic part numbers which could be used for multiple different SO’s and PO’s. These were set at the AVG costing method, quantity bearing yes and non stock? false.
Unfortunately the gross margin reports are now showing minus percentages. The problem is that the generic part used could be for an purchase order with a value of €10k and a value of €5. If both these items are brought into stock at the same time, the system is averaged out the cost price and when the SO for say €15 is being invoiced, it is showing a % margin away in the hundreds.
As a solution from our consultants they recommended to change the cost method to FIFO. I have now tested this, and while is does work it will come down to timing. If I have SO 1 and SO 2, with corresponding PO 1 and PO 2 - I receipt in PO 2 first, then PO 1, but ship SO 1 first - the cost price for PO 2 will show against by SO and calculate the gross margin on this.
At the end of the month - it will iron itself out, because there is quick turnaround and everything that comes in in the month, goes out in the month. Therefore the overall margin report at an overall level.
What about Lot Tracking these parts, assign them a Lot based on the Order and then ship against that. If I am not mistaken when you use Lots it tracks that cost regardless of when it came in.
Just thinking this over further - all receipting of goods is done by central resources, this person would need to track lots for these parts only, but not for all the other goods. Currently they don’t have visibility as to whether this is a back to back order or a project related good. We would need to amend the process to include a check on that first before moving forward.
I’m not sure I follow, do you mean that these generic parts could also be received without the need to track this type of thing? Lot Tracking is set at the part level so assuming that these parts are only ever used in the original scenario you could just flag them as lot tracked, leaving others not and then when they make the receipt it will force the entry of a Lot Number, the person entering it does not need to know that is required separately, they just need to be trained to do it.
Alternatively you could probably come up with a way to do it automatically through BPMs to set the Lot in a way that shipping would know which one to use for the shipment.
Another alternative that I am more fuzzy about regarding how the costing would work would be to use the Buy To Order functionality, as soon as the parts are received they are allocated against the order. In my head at least this should create a distinct cost link between the PO-SO but we don’t really do any BTO like this so I don’t have any real experience with the Epicor Logic.
In terms of the Lot, no, we use Lot Tracking for certain parts with FIFO costing on pretty much everything. It is my belief though that if you had say 5 receipts for Part A with 5 different costs and they were all in as Lot Tracked when you ship Part A Lot 2 it will pull that specific cost as opposed to pulling Lot 1 which would be earlier (assuming FIFO).
The BTO thought was just that in my head, if you are doing the PO as a BTO Line Epicor should connect the two so when you ship it the actual cost for that receipt should translate to the COGS for that SO Line but if you are using BTO already and not seeing that I suppose Epicor logic does not meet up with what I would expect.