There is an unconfirmed rumor that the North Pole uses Visual ERP. I happen to be privy to some dissension amongst the holiday team regarding Product Codes. These are some of the things I have overheard:
- “Those darn elves changed the Product Codes again”. Mrs. Claus who is also CFO, is frustrated. “Inventory is out of balance. The ingredients are too high by 10K and toys are too low by 10K. I hate being out of balance”.
- The elves stated: “We have been given strict instructions from Santa, Mrs. Claus and consultants that we should NEVER change product codes in Visual ERP. We are afraid to do so. We don’t want to get on the naughty list”.
I get it. There are some complexities related to Product Codes.
What do Product Codes do?
The codes are associated with parts, customer orders or work orders. Think of them as product families. The codes will determine where to post manufacturing transactions. The postings and General Ledger (GL) accounts they control are:
- Sales, Cost of Sales
- Inventory
- Work in Process
- Inventory Adjustment
Since they control financial postings, these codes belong to accounting. However, assigning the codes to the parts typically belong to someone from operations. Enough of the technical jargon, let’s get back to Santa.
Why Change Product Codes?
In a perfect world, there should never be a need to change product codes on a part, however, the world or even the North Pole, isn’t perfect. Here’s a collection of reasons why Santa, Mrs. Claus and the elves would want to change Product Codes.
- A mistake was made when the part was set up. I understand. We are human. Are elves considered human?
- We have changed how we want to classify revenue or inventory.
• Santa has these major categories for inventory reporting:
• Ingredients/Raw Materials
• In process goods
• Goodies (i.e. cookies, candy canes or even fruitcake)
• Gifts
The North Pole decided that toys made in-house could be purchased from experienced craftsmen instead. A group of parts changed their identify from in process goods to Raw Materials.
Another time, the elves suggested to Santa, if he bought a mill, that they could make the wheels at the North Pole for less money. Not only would they save but they would be able to respond more quickly to the changing minds of the wee children. In this case, the opposite happened, Ingredients/Raw Material parts were changed to in process goods.
- When Santa started with Visual ERP, he wanted to have a really good idea of inventory split out for each product type. Their ingredient/raw material inventory would show accounts such as:
• Sugar, Flour etc.
• Plastic
• Wood
• And the list goes on.
Their gift (finished goods) inventory would be split as:
• Toy Cars
• Dolls
• Games
• Clothes
Santa could have used Product Codes to split their gifts into 5, 10 or even 20 classifications. Just imagine having inventory accounts for each of these. That’s 20 inventory accounts. If Mrs. Claus decided to split these between the 4 costs types (material, labour, burden and service) that means they would have 80 accounts to track the gift inventory. I realize this is a bit extreme, but it is possible.
Mrs. Claus started looking at this and scolded Santa – “What are you crazy? You are too detailed. We don’t need to have all this information in our books. We can reduce the accounts used to track our gift inventory”.
- Then something else happened. It was March. The team was on their annual vacation in the Caribbean. Everyone was recharging after the holidays. They were reflecting on the changing world. There were so many toys. Initially, they had a group of gifts called games. In the past that was board games. Now, there is an expanding number of computer games. Santa said: “I hate to tell you sweetheart but I think we need a new category. There are more requests for these new-fangled computer games. Since this is a larger part of the annual gift giving, we need to know more. We even need to know the inventory of computer games. Sorry dear, but I have to insist we need a new Product Code”.
Mrs. Claus responded to the request. “Not a problem. I will do it when we get back to the North Pole. And I will get the elves to change the product code on all the computer games”.
As you can see several reasons can prompt product code changes:
• Errors in setup
• Evolving business needs
• Enhanced reporting requirements
All of these seem pretty plausible so we need to know how to address them.
How to Handle Changing Product Codes?
Historically, changing product codes and getting Visual to reflect these changes was a time-consuming process. It involved reposting thousands of transactions which could be a daunting task. Since, changing of Product Codes can be expected with ever-changing business requirements we came up with an alternative.
Mrs. Claus and I put our heads together. The conversation went something like this:
Mrs. Claus: “Why do we have to look at all the transactions instead of just the problem ones? It takes hours or even days for costing to run. The end result is there is a small percentage of things to be changed”.
Kim: “You are correct. What if we only looked at the problems? We would need a way to find them. Once we find them, then we can change the flag on these transactions only. That would save a ton of computer time”.
Fast forward a bit of time.
Kim: “Santa and Mrs. Claus – We have a gift for you. We created the Deep Dive application which helps reconcile inventory- but there is more- in the tool, instead of forcing Visual to look at ALL the history for product code changes, we identify only the orders where the Product Codes and/or the GL accounts changed. Instead of looking at a huge amount of data, Visual will look at the limited number of changes”.
We worked together and Deep Dive found the items that needed to be changed to the new GL accounts. We ran costing on a Saturday just so we could isolate the activity. I have to admit, it took less than 1 hour to move the amounts to the new accounts.
Santa: “Well, that was easy. Kim, you are on the Nice List this year. More good news, the elves won’t be on the naughty list. And Mrs. Claus will be happy. “Happy Christmas to all, and to all a good night!”
