Managing Warehouses in SAP Business One

• Your company makes, buys and sells items that are stored in multiple warehouses.
• One of the warehouses is controlled by bin locations.
• Another of the warehouses is physically located at a vendor so it is represented as a drop ship warehouse.
• Your business is growing in a new region, so you create a new regional warehouse to expand your distribution.

Documents in the sales and purchasing processes reference a warehouse whenever they contain items.

Inventory documents such as the goods receipt, inventory transfer and goods issue always reference a warehouse.

Because warehouses are so key in any process involving items, we will look at how warehouses are defined and what they signify.

A warehouse represents a location where goods are stored.

The first step in defining a warehouse is to enter a Warehouse code and a Warehouse name.

Then you need to specify where the warehouse is by entering location information. This location information is important. because typically the address of the warehouse associated with the first document row is used as the ship-to address.

Most warehouses are created for physically storing items, but a warehouse can also be set up as a virtual warehouse to manage business processes where goods are shipped directly to your customers from one of your vendors. We call this a drop ship warehouse. If you choose to set a warehouse as a drop ship warehouse, you will have the additional option to manage serial numbers and batches in the drop ship warehouse.

Another option is whether you want this warehouse to be considered in material requirements planning.

A third option, is the option to use bin locations as sublevels within your warehouses. This option would not be available if this is a drop ship warehouse.

Other fields for tax information may be visible depending on the localization.

One option to improve logistics of warehouse processes is to implement bin location management.

Bin location management helps you keep track of the items in a warehouse down to the physical bins that store the items.

Using bin location management can help you optimize storage space, quickly locate items, and plan out efficient routes for picking.

In our business example, Warehouse 5 is managed with bin locations. The warehouse is broken out into 4 levels.

The top level is the warehouse.

Below the warehouse, the first sublevel is made of 4 aisles: A1 through A4.

Each aisle is made up of 6 shelves S1 through S6, and each shelf as 3 levels.

The bin location code is made up of the warehouse code plus each sublevel. Here we see the third level of shelf 1 on aisle 1 has a bin location code of 05-A1-S1-L3.

Here is a quick glance of the main business processes showing steps in the process that include bin locations. Bin locations are available on all documents that have inventory movements.

Sometimes, you have products you sell that you do not make or store. Instead, your company serves as a middleman between your customers and vendors. In those circumstances you can set up a drop ship warehouse.

When a customer orders a product from a drop ship warehouse, the system opens the procurement confirmation wizard when you save the sales order.

The wizard creates a purchase order for the preferred vendor of the item.

The ship-to address in the purchase order is the ship-to address of the customer in the sales order.

When the vendor receives the purchase order, they ship the product directly to the customer.

The vendor invoices you for the cost of the product, and you invoice the customer for the sales amount.

With the drop ship process, there is no effect on inventory quantities or values. No goods movements are posted. No journal entry is made to reflect inventory value changes. Therefore, the drop ship warehouse is not displayed on inventory reports.

To set up a warehouse, mark the Drop Ship checkbox. If you would like to include the ability to track serial numbers or batches in a drop shipment, then also mark the Manage Serial Numbers and Batches checkbox.

• Warehouses are specified in all inventory documents and in any sales or purchasing document containing items.
• Bin location management can help you optimize storage space, quickly locate items, and plan out efficient routes for picking.
• The bin location code consists of the warehouse code plus each sublevel.
• Bin locations can be specified on all documents that have inventory movements once bin location management is activated.
• You can set up a drop ship warehouse to represent a vendor's location. Then when you save a sales order with a product from the drop ship warehouse, the procurement confirmation automatically suggests creating a purchase order to the vendor. The items are sent directly to the customer from the vendor. The vendor invoices you for the cost of the product, and you invoice the customer for the sales amount.

• Imagine that your company makes, buys and sells items that are stored in multiple warehouses.
• You transfer items between warehouses to improve availability.
• Sometimes you receive items into stock that do not come through the regular purchasing or production processes.
• Sometimes stock is issued out of the warehouse as samples for trade fairs or other marketing purposes.
• Periodically damaged stock is removed from the warehouse.

This graphic shows an overview of the different possibilities of stock movements, including some of the stock movements initiated from purchasing, production, and sales documents.

We will focus on the business process in this topic - these are the basic inventory goods movement:

• Goods receipt documents are used for receiving inventory that is not purchased or produced. One example might be receiving a sample from a vendor for inspection. You choose to receive it into the warehouse on a goods receipt rather than on a goods receipt PO because the item is not relevant for pricing or purchasing analysis reports.
• Inventory Transfers are used to move stock between warehouses.
• Goods issues can be useful for cases where items are damaged, perhaps by a flood in a warehouse. If water damage renders them useless and unable to sell, they are removed from the warehouse.

The goods receipt and goods issue windows are very similar.

Both documents require you to enter the warehouse affected.

If you do not specify a warehouse, the system will use the default warehouse from the item master record.

Unlike marketing documents used in the sales and purchasing processes, you cannot enter a business partner.

One difference between the two documents:

• Goods receipts allow you to enter the price of item entering warehouse.
• Goods issues, on the other hand, use the item cost to calculate the value of the accounting transaction and the price field is for informational purposes only.

If a company is using perpetual inventory, saving an inventory transaction creates a journal entry automatically.

Here we see a graphic representation of the postings for a goods receipt (on top) and a goods issue (on the bottom).

A goods receipt creates a journal entry that posts the value of the received goods on the debit side of the stock account and the credit side of the inventory offset - increase account.

A goods issue creates a journal entry that posts the value of the issued goods on the debit side of the inventory offset - decrease account and the credit side of the stock account.

When you have multiple warehouses, you might need to transfer inventory from one warehouse to another.

Here's an example. A sales order has just come in for 5 cartons of an item.

Warehouse 01 has 2 cartons. More cartons are available in Warehouse 02.

We can transfer the 3 cartons from warehouse 02 to warehouse 01, so that all the items can be delivered from one warehouse.

When you add an inventory transfer from warehouse 02 to warehouse 01, the system posts a journal entry. The journal entry posts the value of the transferred goods on the debit side of the stock account of warehouse 01 and on the credit side of the inventory account of warehouse 02.

Inventory transfer documents can also be used to transfer items to a consignment warehouse at a customer's site. Unlike the goods receipt or goods issue documents, inventory transfers have fields for a business partner, a contact person and ship-to address.

When items are withdrawn from the consignment warehouse at the customer site, you create an A/R invoice for the items and quantities used. Each row references the consignment warehouse so that inventory is shown as removed from the warehouse when the invoice is saved.

Inventory transfer requests commit items to move from one warehouse to another with no effect on inventory movements or financials. Only once the request is closed is the stock transferred and the financial posting made.

When the inventory transfer request has the status Open:

For the issuing warehouse, the requested quantity is regarded as Committed.

For the receiving warehouse, the requested quantity is regarded as Ordered.

When the inventory transfer request has the status Closed:

For the issuing warehouse, the requested quantity is released from the Committed quantity. If you copy this request fully into an inventory transfer, the quantity is subtracted from the In Stock quantity.

For the receiving warehouse, the requested quantity is released from the Ordered quantity. If you copy this request fully into an inventory transfer, the quantity is added to the In Stock quantity.

If a warehouse is managed by bin locations, then a bin location will be required on inventory documents for any items stored in that warehouse.

Bin locations represent a physical shelf or bin where items are located. Bin location codes consist of the warehouse code plus the code for each sub-level.

You can define default bin locations for goods receipt and rules for automatically determining bin locations for goods issues.

To manually specify a bin location, right-click on the quantity field in a row to open the Bin Location Allocation window.

In this window you can specify quantities and bin location codes for the item on that row.

• Goods movements are recorded by both marketing documents and inventory transactions.
• The three main inventory transactions are: goods issue, inventory transfer and goods receipt. A goods receipt is used to receive items into a warehouse. A goods issue is used to transfer goods out of a warehouse. And the inventory transfer is used to transfer items between warehouses.
• A warehouse is required on all inventory documents. If one is not manually entered into the transaction, the default warehouse for the item will be assigned.
• You cannot enter a business partner on a goods receipt or goods issue, unlike marketing documents which always require business partners.
• An inventory transfer request can be used to commit the movement of stock from one warehouse to another. It is possible to specify a business partner on an inventory transfer.
• If you activate bin locations for a warehouse, then a bin location is required every time you use that warehouse on inventory documents.
• When using perpetual inventory, each goods movement automatically creates a journal entry.