Production Control

How to Implement Returns Processing in a Production Management System



Response pattern for shipping returns

There is an order of processing from shipping to sales, but since the Indonesian auto parts industry is based on simultaneous shipping sales, the sales processing is automatically completed by the shipping completion process.

  1. shipping instructions
  2. invoice registration
  3. Shipment complete
  4. Sales

In the case of Indonesia, when returning a product to us, we often ship a replacement product called Tukar guling, but the following are possible return processing patterns.

  1. Pattern 1.
    Just return and physically replace the replacement (Tukar guling).
  2. Pattern 2.
    Cancel everything and enter the actual number of deliveries after the return from the beginning.
  3. Pattern 3.
    After canceling a sales/invoice, issued an amended Invoice with an additional returns minus correction to the original shipment number due to the shipping returns process.
  4. Pattern 4.
    Negative invoices issued, negative shipments (returns arriving) and negative sales due to return orders after the end of the month.

The easiest way to do this is to send a replacement product without doing anything in the system, and this can be done within the month or after the end of the month.

  • Pattern 1.1.
    1. 10 units shipped and 100 sales recorded.
    2. 2 NGs are discovered, and returns are received but not processed by the system.
    3. 2 replacements are delivered, but the system does not process them.

In this case, you are only physically replacing the returned arrivals with replacements, which is fine without lot management, but if lot management requires tracing, the lot on the system will not match the current item.

In order to prevent this from happening, the following flow is used when inventory adjustments are used to bring in returns and send out replacements

  • Pattern 1.2.
    1. 10 units shipped and 100 sales recorded.
    2. In case of 2 pieces NG is found and a return is received, it will be processed by inventory adjustment.
    3. Substitute out-of-stock processing with 2 inventory adjustments.

The problem with this process is that there is no connection between 2 alternate issues and the actual shipment in the system, so it is necessary to issue an issue slip and record the shipment number in the remarks column of the alternate issue process so that it can be known which issue is the alternate issue for the actual shipment.

If you don't even need a history of returns, you can cancel everything from sales to shipping completion/shipping instructions and re-enter the corrective as 8 shipments from the beginning.

  • Pattern 2.
    1. 10 pieces were shipped and 100 sales were recorded.
    2. 2 pieces NG was discovered, and all the items were cancelled due to the return of goods.
    3. 8 shipping instructions, shipping completion, invoice registration, and sales processing.
    4. The 2 returned items were moved to the inspection warehouse.

However, I think that the system's main function is to process the return of the shipment, and if a substitute shipment is required, a new order is registered and shipped separately, and the history of the substitute shipment for the order is recorded in the remarks column.

  • Pattern 3.
    1. 10 pieces shipped and 100 sales.
    2. 2 NGs were found.
    3. Sales and invoice cancelled and shipping returns processed and 2 in the returns warehouse.
    4. Issued a revised invoice for "Shipment 100 - Return 20" and registered the sales again.
    5. New orders for two substitute products are registered and shipped, and the substitute shipment is indicated in the remarks column.

The accounting journal that is generated in this case is tied to the invoice number and minus indirectly as a sales adjustment.

  • Current month (accrual of A/R)
    Dr. AR 100      Cr. Sales 100
  • Current month (sales adjustment)
    Dr. Sales adjustment 10       Cr. AR 10

Whether this is a return after the end of the month, the return order process will record a negative invoice, negative shipment and negative sales.

  • Pattern 4.
    1. We shipped 10 pieces in the previous month and sold 100.
    2. Two orders were rejected in the same month, and two orders were rejected due to the order return process.
    3. Minus 2 Invoices issued.
    4. 2 units arrive in the returns warehouse by accounting for minus 2 units in the shipping returns process.
    5. Minus 20 sales registration.

By issuing a new invoice number for sales return processing and recording a negative sales result in shipping return processing, the cost of sales in calculation will be corrected.

  • Previous month (A/P incurred)
    Dr. AR 100      Cr. Sales 100
  • Current month (sales adjustment)
    Dr. AR -10       Cr. Sales adjustment -10

Lot trace

In reality, it is not always possible to identify the lot of returned parts because NGs are not always discovered immediately after delivery to the customer, and in some cases they are only discovered during the final check of the customer's manufacturing process. I think you need to be aware of the following three things when you do lot management in your system.

  1. The movement of the physical goods (lot number on the physical slips) and the movement of the system (lot number on the system) must coincide.
  2. To connect the physical item to the system by lot number on actual item label.
  3. The human awareness of selecting an input lot when issuing manufacturing instructions or inputting manufacturing results.