I’ve just got a call for help from a partner, about their customer who has decided to move from basic inventory management to full-scale warehouse management system. The question was how to post the opening balances for existing inventory quantities in flat locations to warehouse-managed ones.
I thought this might deserve a quick blog post, you can never know when someone else would want to do the same thing.
There are basically two ways how you can achieve this:
- Transfer Orders: you go and create a transfer order which transfers all inventory from old (non warehouse managed) locations to new (warehouse managed) ones. You post the shipment from old location, then create and post the warehouse receipt for the new location.
- Journals: you post the negative adjustment of closing inventory balance in old locations using Item Journal, then post the positive adjustment of opening inventory balance in new locations using Whse. Item Journal.
There are advantages and drawbacks of both approaches.
With Transfer Orders you’ll have more Item Ledger Entries and Value Entries (and G/L Entries, of course) than you would want to, because there is an In-Transit location involved. However, you keep the value link, which means that any cost adjustments on original entries will propagate all the way through (to receipt entries to start with, and any consecutive entries for any outbound transactions in the future).
With Journals, you get less entries, which means easier tracking. However you lose the value link, which means that any cost adjustments on original entries won’t propagate further, and you will have to revaluate all the opening balances manually to reflect the change in value.
In any case, I am not a Warehouse Management expert, and I believe there may be other ways, or better ways, or other pro’s and con’s of these two approaches. I would personally always opt for the first choice – Transfer Orders.
If you have a better idea, or a cleaner solution, please share it with all of us here.