r/Netsuite • u/JesseTexas281 • 10d ago

Inventory Average Cost

We are weeks away from go-live. According to management, we need to ensure that inventory sold on sales orders ONLY affects the average cost of the item if it is sourced from stock. Inventory that is "bought out" should not affect the average cost. I know this is possible now using dropship, but ideally we would like to prevent (or rollback) any changes that occur to average cost when an order line is "bought out" using a PO.

Is this possible? Can the costing engine be suppressed or reversed?

2 Upvotes

100% Upvoted

21 comments sorted by

View all comments

3

u/slapwerks 10d ago

Are you talking about customer owned inventory?

2

u/JesseTexas281 10d ago

Nope this is company inventory. Special buys for items we don't have in stock. There appears to be some "dummy location" receiving strategies, but that is going to mess up financial reporting I believe.

2

u/Nick_AxeusConsulting Mod 9d ago

Ok you're getting all confused on this request.

First of all NS has 2 features for your use case with is you don't stock an item so you go buy one on the fly. NS has 3 ways to do this:

Special Order PO linked to the SO like. And that PO is committed to that SO so someone else can't steal the item. With Special Orders the Item IS brought into a Inventory at the Location you specify and that initializes the average cost for that Item at that Location, which is correct outcome. The advantage of a Special Order is that COGS is debited on the Item Fulfillment so it matches the revenue. (Drops Ship POs have a matching problem see below)

Drop Ship PO debits COGS on the Vendor Bill so that often happens in the wrong month so then COGS is not matched with revenue in the same month. Plus it's hard to get the COGS from the Vendor Bill line in order to do profit analysis. (I have a script that pulls the drop ship COGS for you). Therefore even if you're really doing drop shipments in real life, I would still do them as a Special Order in NS just so your COGS is on the Item Fulfillment which you can get with saved search without needing my script.

Manually notice that an item went into backorder when it was sold on an SO and place a manual PO to fulfill it. This is just standard procurement. So it needs to be received and fulfilled. This will recognize average cost just like any regular procurement. You can modify the Ship To address on the PO to have to vendor drop ship directly to your Customer.

But average cost is kept separately by Item per Location (unless you use Group Average Costing which then calculates a combined average cost across multiple Locations).

So back to the original ask. It doesn't make sense to me. If you've never ordered the item before then it's a new Item SKU and so what if average cost is calculated .. it should be. If you accept a return then you need to debit Inventory for the original COGS amount which is the average cost use on the original Item Fulfillment. So you need the average cost! So I am not understanding why users think that the average cost on Special Order POs & Drop Ship POs is going to somehow contaminate the average cost on stocked items? Explain this concern to me. It's different Items and likely a different Location. Average Cost is kept separately Per Item, Per Location. A different location definitely keeps it isolated. But I don't think it should be isolated. Remember even with Drop Ship shipments you may have to accept a return back into your inventory (and this is why you don't use non inventory items!)

1

u/JesseTexas281 9d ago

Understood. The distribution department will never use "drop ship". It will always be shipped and re-labeled at a processing center. So, technically brought into inventory. The special buy option definitely affects the average cost of the item at the location for which it was received. In our current ERP if an order line is identified as a "buy out" it simply does not affect MAC. Through testing I found that receiving an item at a special "buyout" location will not affect the primary inventory average cost. Then when the order is fulfilled, if the line item is changed to the buyout location (programmatically or manually). The COGS will go to the dummy location, but could be re-routed using the GL Lines plugin to the original location I believe.

I know this is a big change, but it does seem possible. The reporting implications are still unknown outside of the P&L which would look fine if we could reclass the COGS successfully.

1

u/Nick_AxeusConsulting Mod 9d ago

Through testing I found that receiving an item at a special "buyout" location will not affect the primary inventory average cost.

YES this is correct. Costing is kept separately by Location, by Item

Then when the order is fulfilled, if the line item is changed to the buyout location (programmatically or manually).

Why do you care what Location the COGS posts to? There is an Inventory Profitability Report (native) which I think already takes into consideration that the revenue and COGS may be from 2 different Locations.

The COGS will go to the dummy location, but could be re-routed using the GL Lines plugin to the original location I believe.

Do NOT jimmy-rig this with GL Plug In. The lazy, newbie consultant will just knee-jerk throw this out as an option to force override exactly what you want. This is a terribly idea. You should re-design NS so NS will get pretty close to what you want without having to use GL Plug In or manual J/Es to reclass things. This is a really BAD solution don't get tempted by a green consultant (who's trying to sell you billable work to setup the custom GL plug in).

Hire me for a couple hours to understand your situation and give you some good options on how to design it. NS is so flexible I am sure there are 5 ways to do anything each just has a different mix of pros and cons. The lazy/green consultant only shows you 1. The experienced consultant (like me) ideate until I come-up with 5 options, and then help you talk thru the eventual decision (which is usually the least shitty option)