Warehouse Management

We will discuss here about how the cost group functionality works within WMS. It is a quite common discussion among warehouses when items are undergoing change in valuation or when non-WMS organizations upgrade to WMS.

What is Cost Group functionality?

A Cost Group is the set of accounts that hold on hand inventory. It segregates the accounting and the physical attributes of the inventory. Cost group feature in WMS provides you with a flexible way to track accounting attributes of stock in the warehouse without impacting its physical storage.

Cost Groups: Inventory vs WMS

Before the advent of Cost Groups, sub-inventories defined both the physical and accounting attributes of the material. In each warehouse zone, different accounts were maintained by creating separate sub-inventories, and pre-assigning locators to each sub-inventory. Any change in valuation (defective etc.) would result in a move of the item to a different sub-inventory. In non-WMS organization this would happen only by a physical move. Organizations running WMS has much more flexibility by using cost group feature:

• Efficient space utilization by eliminating the need for multiple sub-inventories and pre-assignment of each sub-inventory and locators to a unique account
• Change valuation separately from a physical movement, controlling access to both transactions separately. Hence, the warehouse operator just moves the items and another person with different access level manages the cost group transfer. In non-WMS organization, any operator can move stock and effect the financial transactions without checks.
• From a financial perspective, it eliminates the requirement to physically relocate the inventory with a different cost group just because of a different accounting treatment.

How are Cost Groups used in a WMS enabled organization?

WMS can automatically assign a cost group based on the cost group rules. Cost group rules can be configured to assign cost groups when a stock is received in the warehouse. Some of the item attributes that can be used to assign cost groups are:
• Supplier
• Lot Attributes such as Grade, Expiry Date
• Descriptive flexfield information
• Customer
• Item
• Location
• Item Category
• Item Status
• Item disposition (used, new, and refurbished)

Cost group rules are invoked when inbound such as receiving or WIP completions are carried out in the warehouse. It is worthwhile to note that Cost groups are just one distinguishing factor between 2 items in the sub inventory.

Example: Handling “Refurbished” items

Cost groups in WMS can be effectively used to segregate on-hand stock into different accounting buckets based on item attributes. For example when certain stock of an item is “refurbished” it can be segregated for accounting purposes with “normal” item. The “normal” and “refurbished” items can reside anywhere in the warehouse. WMS maintains full visibility to where the material for each cost group resides and when they are transacted, their cost groups are considered for valuation and accounting purposes.

Some Common Business Scenarios

1. Receiving from Multiple Suppliers into the Same Subinventory
2. Changing cost groups in a wholesale food distribution warehouse environment where item characteristics and category can change
3. Receiving item of different grade to same zone
4. Granting different access levels to different people to help regulate financial transactions

Cost Group Commingling

Since material belonging to different costs group is likely to be indistinguishable physically, WMS imposes the constraint that stock of the same item cannot be commingled in the same physical locator. In other words, “refurbished” items cannot reside in the same physical bin or locator as “normal” items unless the “refurbished” and “normal” items belong to two different license plate numbers (LPNs). WMS putaway rules automatically avoid commingling. In addition transactions such as miscellaneous receipts explicitly prohibit you from performing receipts that could potentially cause commingling.