Process over/under transactions

When the orders in a voyage are processed, the system expects the item quantity that is received in the final destination warehouse for consumption to match the quantity that is specified on the purchase order lines that are associated with the voyage. However, because the exact quantity on the purchase order lines isn't always received in the warehouse, the Landed cost module defines a set of rules that are used to handle over-receiving and under-receiving of goods. These rules are especially important because the original purchase order has been invoiced and can no longer be modified.

By setting up the details of over/under transaction policies, you enable the system to determine how it should manage the over-processing and under-processing of goods at the time of receipt. In some cases, an over/under transaction triggers an automatic action. In other cases, resolution requires manual action. You can also manually manage over and under inventory by using the Over/under transactions page.

We recommend that you use a goods-in-transit order to handle over-deliveries and under-deliveries.

Over/under transaction process flow and examples

The following diagram shows a flowchart of the process that the system uses to determine whether over/under transactions should be created.

The diagram highlights the following steps of the process:

1. When goods are received, the system compares the total monetary amount of the received purchase with the original purchase order. If there is a difference, the system determines whether it's within or outside the configured amount tolerance.
2. If the difference is within the amount tolerance, the system checks the percentage tolerance against the individual purchase order line.
3. The system determines whether the received amount or quantity is more or less than the ordered amount or quantity.
4. Based on this analysis, the system determines whether an over-delivery or an under-delivery occurred. It then takes the relevant follow-up action as required.

Use the Over/under transactions page to track whether the system created an over/under transaction, movement journal, and/or purchase order.

In some cases, a movement journal is automatically created in response to an over-delivery or under-delivery. This movement journal writes off or absorbs the difference between ordered and actual quantities.

In other cases, a purchase order is automatically created. For an over-delivery, the new purchase order records the additional quantity that was received. For an under-delivery, the purchase order shows a negative quantity, so that the vendor can pay for the missing goods. This negative quantity works as a vendor return or as credit for a future order.

In case where the system doesn't take any automatic action, the user must decide whether to create a movement journal or a purchase order.

Example scenarios

Setup used in the scenarios

All four scenarios use the following setup.

The following over/under tolerances apply. (These tolerances are required so that all items can be used on the purchase order.)

• Amount tolerance: $100 (applied to the order)
• Percentage tolerance: 10% (applied to the order line)

The following purchase order exists:

• Line 1: 10 pcs at $100/ea
• Line 2: 20 pcs at $50/ea
• Total monetary amount of the original purchase order: $2,000

Because of this setup, any received purchase order where the total value is outside the $1,900–$2,100 threshold is processed as an over/under transaction. Any difference between the quantity of the original and received purchase order lines is considered to be within the percentage tolerance if it's within the following thresholds:

• Line 1: 9–11
• Line 2: 18–22

Scenario 1

The following items are received and, as a result, the following actions are taken (as shown in the flowchart earlier in this article):

• Total order: The total value of the purchase order is $2,050.

  • Step 1: The purchase order is within the amount tolerance.

• Line 1: 10 pcs ($1,000) are received.

  • Step 2: Because the exact quantity of the purchase order line was received, the order line is within the percentage tolerance threshold.
  • Step 3: The received quantity of the purchase order line equals the original purchase order line.
  • Step 4: The exact quantity of the purchase order line was received. Therefore, the system takes no action.

• Line 2: 21 pcs ($1,050) are received.

  • Step 2: The difference between the quantity of the original and received purchase order lines is within the percentage tolerance threshold.

  • Step 3: The received quantity of the purchase order line is more than the original purchase order line.

  • Step 4: An over-delivery occurred. Therefore, the system creates the following items:

    • An over transaction
    • A movement journal

Scenario 2

The following items are received and, as a result, the following actions are taken (as shown in the flowchart earlier in this article):

• Total order: The total value of the purchase order is $2,050.

  • Step 1: The purchase order is within the amount tolerance.

• Line 1: 9 pcs ($900) are received.

  • Step 2: The difference between the quantity of the original and received purchase order lines is within the percentage threshold.

  • Step 3: The received quantity of the purchase order line is less than the original purchase order line.

  • Step 4: An under-delivery occurred. Therefore, the system creates the following items:

    • An under transaction
    • A movement journal

• Line 2: 23 pcs ($1,150) are received.

  • Step 2: The difference between the quantity of the original and received purchase order lines is outside the percentage threshold.

  • Step 3: The received quantity of the purchase order line is more than the original purchase order line.

  • Step 4: An over-delivery occurred. Therefore, the system creates the following items:

    • An over transaction
    • A purchase order

Scenario 3

The following items are received and, as a result, the following actions are taken (as shown in the flowchart earlier in this article):

• Total order: The total value of the purchase order is $1,900.

  • Step 1: The purchase order is within the amount tolerance.

• Line 1: 7 pcs ($700) are received.

  • Step 2: The difference between the quantity of the original and received purchase order lines is outside the percentage threshold.
  • Step 3: The received quantity of the purchase order line is less than the original purchase order line.
  • Step 4: An under-delivery occurred. Therefore, the system creates an under transaction.

• Line 2: 24 pcs ($1,200) are received.

  • Step 2: The difference between the quantity of the original and received purchase order lines is outside the percentage threshold.

  • Step 3: The received quantity of the purchase order line is more than the original purchase order line.

  • Step 4: An over-delivery occurred. Therefore, the system creates the following items:

    • An over transaction
    • A purchase order

Scenario 4

The following items are received and, as a result, the following actions are taken (as shown in the flowchart earlier in this article):

• Total order: The total value of the purchase order is $2,950.

  • Step 1: The purchase order is outside the amount tolerance. Therefore, step 2 is skipped.

• Line 1: 20 pcs ($2,000) are received.

  • Step 3: The received quantity of the purchase order line is more than the original purchase order line.

  • Step 4: An over-delivery occurred. Therefore, the system creates the following items:

    • An over transaction
    • A purchase order

• Line 2: 19 pcs ($950) are received.

  • Step 3: The received quantity of the purchase order line is less than the original purchase order line.

  • Step 4: An under-delivery occurred. Therefore, the system creates the following items:

    • An under transaction
    • A movement journal

Set up over/under transactions

To enable over/under transactions for goods-in-transit orders, you must complete the following setup:

• Set up the good-in-transit feature as described in Goods-in-transit processing and receiving.
• Ensure that a movement journal was set up and specified for the over-delivery or under-delivery in the Over/Under Delivery field in the Defaults section on the General tab of the Landed cost parameters page (Landed cost > Setup > Landed cost parameters). As part of this setup, an offset account must be defined.
• Set up over/under tolerances, over/under reasons, and tolerance groups, if applicable, on the Over/under setup page (Landed Cost > Setup > Over/under setup).

Over/under tolerances

Over/under tolerances define when a difference between the actual and purchased quantities of goods creates an over/under delivery transaction. You set over-delivery and under-delivery tolerances to specify the over and under quantities or volumes that can be processed on a voyage without causing an error. If the voyage line receipt is outside these tolerances, it must be modified and resolved before the voyage line can be closed for further processing.

By setting tolerance levels, businesses can avoid unexpected expenses that might arise when they receive a smaller quantity of goods than they expected. At the same time, if businesses receive a larger quantity of goods than they expected, they can benefit from the savings and adjust the landed cost calculation accordingly.

To configure the tolerances, go to Landed cost > Over/under setup > Over/under tolerances. There, you can view, edit, add, and remove tolerance records. The following table describes the fields that are available for each record.

Over/under reasons

When an over or under quantity is associated with a voyage line that is received, you might have to identify the reason for the over or under quantity. In this case, you can select the over-delivery or under-delivery reason on the receiving line when the goods are received.

To set up over-delivery and under-delivery reasons, go to Landed cost > Over/under setup > Over/under reasons. There, you can view, edit, add, and remove the available over-delivery and under-delivery reasons. The following table describes the fields that are available for each reason.

Item over/under tolerance groups

Items that have similar tolerances can be grouped together. In this way, you can set the over/under tolerance for all items in that group at the same time.

To set up item over/under tolerance groups, go to Landed cost > Over/under setup > Item over/under tolerance groups. There, you can view, edit, add, and remove over/under tolerance group records. The following table describes the fields that are available for each record.

Vendor over/under tolerance groups

You can group together vendors that regularly over-deliver or under-deliver. You can then set the over/under tolerance per group.

To set up vendor over/under tolerance groups, go to Landed cost > Over/under setup > Vendor over/under tolerance groups. There, you can view, edit, add, and remove over/under tolerance group records. The following table describes the fields that are available for each record.

View and process over/under transactions on the Over/under transactions page

Over and under transactions are generated when the quantity of goods that is put away doesn't match the initialized quantity. The quantity in the arrival journal should be updated only with the quantity that is put away.

When the receipt of voyage lines is processed, over/under tolerances can be set for a vendor. The items will then be reviewed and validated.

If an item that is received is inside the tolerance, the system will generate a movement journal. This journal can be specified on the voyage parameters page. In addition, an over/under transaction will be created. For example, the order value is $100, the receipt value is $99, and these values satisfy the tolerance rules. In this case, a negative movement journal for the under-received quantity will be created.

If an item that is received is outside the tolerance, the system will generate an over/under transaction for the difference in quantity.

To view and process over/under transactions, go to Landed cost > Inquiries > Over/under transactions. There, an over/under transaction will be associated with all the items in a voyage that are over-received or under-received. We recommend that you use the Over/under transactions page to resolve all over/under transactions that are associated with voyages.

We also recommend against using movement or counting journals to manually resolve under-delivery warehouse transactions. Instead, you should use the Over/under transactions page to manage the under-delivery warehouse quantities.

Upper Overview tab

To view your over/under transactions, select the Overview tab in the upper part of the Over/under transactions page. The following table describes the fields that are available in the grid.

Upper General tab

To view more information about the line that is currently selected on the upper Overview tab, select the General tab in the upper part of the Over/under transactions page. The information on this tab includes the values for all available dimensions. This information is pulled from the originating purchase order.

Lower Overview tab

To view the document type for the row that is selected on the upper Overview tab, select the Overview tab in the lower part of the Over/under transactions page. The following table describes the fields that are available.

Lower General tab

To view the over/under transaction number, lot ID, and dimension number that are associated with the selected over/under transaction line, select the General tab in the lower part of the Over/under transactions page.

Action Pane buttons for processing over/under transactions

The Action Pane on the Over/under transactions page provides the following commands for processing the transactions that are selected on the page. Each command lets you choose how to process each transaction.

• Create > Movement – Create and post a movement journal for the selected transaction. For under transactions, a movement journal is automatically created and posted for the difference between the expected and actual received quantity. Select this command for over transactions if you want the vendor to realize the cost difference.
• Create > Purchase order – Create a purchase order for the difference between the expected and actual received quantity of the selected transaction. Select this command for over transactions if your organization will realize the cost difference.
• Create > Transfer to destination – This command applies only to transfer orders. Select it if you want to transfer the over or under quantity to the destination warehouse.
• Create > Transfer to origin – This command applies only to transfer orders. Select it if you want to transfer the over or under quantity to the origin warehouse.

Over-receive or under-receive goods-in-transit orders when quality orders are enabled

When a goods-in-transit order is under-received, if the Per Updated Quantity parameter is enabled on the Item sampling page (Inventory management > Setup > Quality control > Item sampling), a quality order is created for the actual quantity that was received. If the parameter is disabled, a quality order is created based on the order quantity of the goods-in-transit order.

When a goods-in-transit order is over-received, the system automatically creates either a purchase order or a movement journal for the quantity that was over-delivered. In this case, a quality order is created based on the original quantity of the goods-in-transit order.

• If the system creates a purchase order, and you want the over-delivered quantity also to go through the quality check process, you must add a quality association for the new purchase order.
• If the system creates a movement journal, you can manually create a quality order for the over-delivered amount on the goods-in-transit order page.

Learn more about how to set up quality orders for Landed cost in Quality orders.