ACM capabilities in a nutshell – Inventory Management Part 3 of 3
Companies in the commodity and grain business are typically handling and reporting on huge amounts of inventory they own. However not all of the inventory they own is also in a physical storage location, but can be in-transit and in vehicles like trucks, train, barges or vessels. To have a holistic picture of the owned inventory the used solution needs therefore be capable of distinguishing between owned inventory which is still on storage and owned inventory which is in-transit. The in-transit inventory is separated into two very basic scenarios:
- Incoming: Goods the company took ownership off which have not yet arrived at the facility. Example: in a purchase scenario the company took ownership of the goods at time when they were loaded at the vendor location
- Outgoing: Goods are being sold to a customer, but the company keeps the title until the vehicle is unloaded at the customer location.
In SAP Agricultural Contract Management each of those scenarios can easily be modelled. Some by the solution provided features include:
- Reporting on owned inventory in physical storage and in-transit inventory
- Accounting integration, if inventory needs to be accounted for independently of the physical location
- Risk integration for position reporting and Mark-to-Market
- Sales revenue recognition when legal and federal requirements do not allow to realize revenue as long as the title is still with the company
With contract terms and supporting features that are specifically provided and managed by ACM also more complex scenarios can be flexibly modelled, like accounting impacts and MtM when the contract terms require special parity adjustments (i.e. when financial MtM adjustments are required to bring the contract terms to the compared market parity).
With Production Services the SAP ACM solution provides a very flexible framework to make inventory adjustments or corrections when required. Production Services are fully integrated into the other by ACM provided inventory management features like net/dry calculations, handling losses and also risk management (position and MtM) solution.
Contrary to other inventory solutions, the ACM Production Services are leveraging the full SAP standard Materials Management goods movement capabilities but enriching it with ACM and commodity specific inventory features and making the Production Services themselves a master data object to avoid the need of making frequent configuration changes.
- A company uses the same SAP goods movement type for various different performed inventory impacting services, like cleaning or drying
- The ACM solution allows the company to create separate Production Services for each of the performed activities. As Production Services are created as master data, the company is very flexible in creating as many services as needed on ad-hoc basis and retaining the ability on detailed reporting. Each performed activity is its own Production Services and can therefore also be reported separately; contrary to the usage of only goods movements alone where typically all of adjustment postings would be reported under the same goods movement type.
While the Production Service itself is created as master data, the ACM solution provides various different categories to which the Production Services need to be assigned. The categories drive features as well as validations:
- Conditioning Services: typically used for any conditioning service of the stored commodity, like drying, cleaning or aeration
- Condition in place: performing the conditioning service and keeping it in the same storage location
- Condition and transfer: performing the conditioning service and moving it into another storage location
- Condition and transfer with byproduct: performing a conditioning services that results in a byproduct; Example: screening
- Material to Material
- Material to material corrections based on quality inputs. Example: based on quality measurements the material reported in inventory needs to be adjusted to a different quality grade level
- Multiple materials into one material. Example: blending
- One material into multiple materials. Example: crushing
- Inventory correction posting. Example: corrections to the company’s gross and net inventory as per ACM net/dry capabilities have to be performed, resulting not only in a corrected physical inventory reporting but also impacting the risk position.
The Daily Grain Report is a for ACM tailormade flexible inventory reporting framework that allows reporting on a very granular level by integrating into and leveraging all the by SAP Agricultural Contract Management provided inventory and storage features. Some of the key elements and features of the reporting framework include:
Daily inventory snapshots
The Daily Grain Reporting offers a daily snapshotting functionality that provides the ability to define a custom end-of-day time snapshot based on organizational data. This enables capabilities like the ability to report on the inventory levels for any day in the past.
Gross/Net inventory levels
As the DGR is leveraging the by ACM provided net/dry inventory calculation capabilities, it enables all users to report their inventory on either gross or net quantities (or both).
Key reporting elements / key figures
The heart of the Daily Grain Report is the ability to report inventory and a very granular level. It is therefore providing over 40 different key figures out of the box; each key figure can be seen as a company’s key information about the characteristics of their inventory.
This article will not go into the detail of every key figure, but is meant to provide an overview of some of the most important:
- Daily book balance: As previously described each company can set a daily inventory snapshot time based on organizational needs. Under this category several separate key figures are provided:
- Beginning book balance as of start of the snapshot day
- Ending book balance as per end of the snapshot day
- Details about inventory changes between beginning and ending book balance. This includes:
- All via ACM posting incoming loads that increase the inventory level
- All via ACM posting outgoing loads that decrease the inventory level
- Through ACM production services posted inventory adjustments
- Manual quality characteristic adjustment in the net/dry work center that result in inventory changes. Example: after a sample from a silo is taken the moisture content for this storage location is updated which results in a loss of inventory
- Any other performed goods movement that may not have been executed through ACM. Example: consumption of inventory for the production of finished goods
- Reporting on storage: this includes over 15 key figures to provide details about stored quantities which are not owned by the company itself with separation into how much quantity is owned by producers and how much is owned by other legal entities to ensure compliance in legal reporting. It also provides details about stored quantities for which warehouse receipts were issued or how much of the licensed storage space is used.
- Settled and paid quantities that are currently in inventory. By leveraging the entire ACM solution, the daily grain report is able to backtrack starting from each incoming delivery, if a specific quantity in the inventory has already been settled and paid; distinguishing between both information. Some regions in this world allow to settle incoming loads, but defer the actual payment into a different period. This process is fully supported by ACM and the DGR can therefore leverage this information and report on it.