WO2004084111A1

WO2004084111A1 - Consignment inventory management and reconciliation system

Info

Publication number: WO2004084111A1
Application number: PCT/SG2004/000032
Authority: WO
Inventors: James Barwick; Joel Haspel
Original assignee: Sentient Health Pte Ltd
Priority date: 2003-03-21
Filing date: 2004-02-03
Publication date: 2004-09-30
Also published as: EP1609096A4; US20090144178A1; JP2006520968A; NZ542567A; AU2004222605A1; CN1761970A; AU2004222605A2; US20040186796A1; AU2004222605B2; EP1609096A1; KR20050112107A; US20060190359A1

Abstract

A consignment inventory management and reconciliation method and system that tracks and reconciles on-hand quality which represents consignment items that were placed at the consignment location and are physically located at the consignment location at a given time; unbilled quantity which represents consignment items which were placed at the consignment location and are not physically present at the consignment location and have not been purchased at a given time, excess quantity which represents items found at the consignment location but are not considered consignment items at a given time; and perpetual quantity which represents the consignment items which have been delivered to the consignment location at a given time.

Description

Consignment Inventory Management and Reconciliation System

Field of Invention

The present invention relates to a consignment inventory management and reconciliation system and preferably, though not exclusively, than can track and age all relevant items in a consignment inventory.

Background to the Invention and Definitions

In July 1998 the Electronics Industry Data Exchange (EIDX) published a paper entitled "Inventory Management Business Models for Consignment Processes". In that paper was a definition of consigned inventory:

Consigned inventory is inventory that is in the possession of one party (for example, customer, dealer, agent, and so forth), but remains the property of another party (for example, manufacturer, prime contractor, and so forth) by mutual agreement.

The possessor of the inventory does not hold title to the inventory. Liability for the inventory is per contractual agreement. Title may or may not pass to the possessor depending on the contractual agreement.

Title may pass from a seller to a buyer when the buyer consumes the inventory.

Inventory may be consigned by a buyer to a third-party warehouse, to whom liability may pass but not title.

Inventory maybe consigned by a buyer to a contract manufacturer; title may or may not transfer depending on the contractual agreement;

It has the synonyms:

• Supplier-owned inventory (from the buyer's perspective)

• Customer-owned inventory (from the contract manufacturer's perspective)

• In-house stores (from consignee's perspective)

• Line-side stocking

• Remote warehouse (from seller's perspective)

That definition applies throughout this specification.

Inventory item tracking systems are widely used for the tracking and management of items in a warehouse or retail location. Current consignment inventory methods and systems only track the amount of consignment inventory that has been shipped to the buyer's consignment location by the seller. This is traditionally referred to as the on-hand quantity. Current consignment inventory systems will increment the on-hand quantity when items are shipped to the buyer and decrement the on- hand quantity when ownership is transferred from the seller to the buyer; the buyer returns the item to the seller; the item is determined to be missing and seller writes-off the item.

Currently there are no methods or systems to track and age items that:

• were shipped from the seller to the buyer;

• have not been billed by the seller; and

• cannot be found at the buyer's consignment location.

This is identified as the Unbilled quantity in this specification.

Currently there are no methods and systems to track and age items that:

• were not shipped to the buyer from the seller

° can be found at the buyer's consignment location and are the same as items provided by the seller to the buyer on consignment

This is identified as the EHCSSS quantity in this specification.

Consignment inventory management methods and processes today rely on the transfer of ownership for an item between the buyer and seller in order for consigned inventory to be reduced. The current methods and systems do not allow for the tracking of items that have been shipped from the seller to the buyer and used by the buyer or removed from the buyer's consignment location with out notification to the seller.

Summary of the Invention

In one preferred aspect the present invention provides a consignment inventory management and reconciliation system wherein there is tracking and reconciliation of: a. first items shipped to a buyer from a seller and that are located at the buyer's consignment inventory location; b. second items shipped to the buyer by the seller, that have not been billed by the seller and cannot be found at the buyer's consignment inventory location; and c. third items not shipped to the buyer by the seller, can be found at the buyer's consignment inventory location, and are of the same identity as items provided on consignment by the seller to the buyer Preferably, the system, also ages the first items and the second items;

There may be tracking of one or more selected from the groups consisting of: item number, item lot number, and item expiry date. Tracking may take place whenever a transaction is processed. A transaction may be represented by a transaction description and a transaction amount. The transaction amount may be zero, a positive number, and a negative number, with a number of decimal places. The transaction may be one or more of: bill, use, dispose, return, transfer-out, receive, transfer-in, order, set, and count.

Bill may be used when the item is no longer at the buyer's consignment location but ownership has to been transferred from the seller to the buyer.

Use may be used when the buyer has used the item and the process of transferring ownership from the seller to the buyer should be initiated or has been competed.

Dispose may be used when the item is no longer at the buyer's consignment location and seller is writing off the item. Ownership will not be transferred from the seller to the buyer.

Receive may be used when the item is physically being moved from the seller to the buyer's consignment location. Ownership will not be transferred from the seller to the buyer.

Transfer-in is used when the item is physically being moved to the buyer's consignment location from a third party location. Ownership will not be transferred from the seller to the buyer.

Return may be used when item is physically being moved from the buyer's consignment location back to the seller. Ownership will not be transferred from the seller to the buyer.

Transfer-out is used when the item is physically being moved from the buyer's consignment location to a third party location. Ownership will not be transferred from the seller to the buyer.

Order may be used when a request has been made to increase the buyer's consignment item(s) quantity.

Set may be used when, the quantity of items that the seller and the buyer agree is at the consignment location. Can be used as a starting point for consignment inventory On-hand quantity.

Count may be used when the quantity can be physically found and verified by the seller and buyer at the buyer's consignment location at a time. Preferably, reconciliation takes place after a stock count process. Reconciliation may note the first items as Unbilled and the third items as Excess to enable the seller to track quantities of first items and third items over time to provide a more accurate history of consignment inventory.

The seller may use the tracking of the item lot number and item expiry date to determine which of the first, second and third items are approaching an expiry date and thus need to be adjusted. Adjustment may be based on a reconciliation between what is counted (i.e. what is actually there) and what was thought to be there because it was shipped there.

One or more of the first, second and third items may be grouped together in a plurality of categories. Adjustment may be according to one or more of the plurality of categories.

An inventory total may be determined as being the sum of the first items and the second items, less the third items.

In a further form, there is provided a consignment inventory management and reconciliation system wherein there is tracking and reconciliation of first items shipped to a buyer from a seller and that are located at the buyer's consignment inventory location; and second items shipped to the buyer by the seller, that have not been billed by the seller and cannot be found at the buyer's consignment inventory location.

There may also be tracking of third items not shipped to the buyer by the seller, that can be found at the buyer's consignment inventory location, and are of the same identity as items provided on consignment by the seller to the buyer.

In yet another form there is provided a consignment inventory management and reconciliation system wherein there is tracking and reconciliation of first items shipped to a buyer from a seller and that are located at the buyer's consignment inventory location; and third items not shipped to the buyer by the seller, that can be found at the buyer's consignment inventory location, and are of the same identity as items provided on consignment by the seller to the buyer.

There may also be tracking and reconciliation of second items shipped to the buyer by the seller, that have not been billed by the seller and cannot be found at the buyer's consignment inventory location.

Finally, there may be provided a consignment inventory management and reconciliation system wherein there is tracking and reconciliation of second items shipped to the buyer by the seller, that have not been billed by the seller and cannot be found at the buyer's consignment inventory location; and third items not shipped to the buyer by the seller, can be found at the buyer's consignment inventory location, and are of the same identity as items provided on consignment by the seller to the buyer.

The present invention also extends to a computer useable medium having a computer program code that is configured to cause a processor to execute one or more functions to perform the process steps described above.

Description of the Drawings

In order for the present invention to be readily understood and put into practical effect there shall now be described by way of non-limitative example only preferred embodiments of the present invention, the description being with reference to the accompanying illustrative drawings, in which:

Figure 1 is a flow chart of an overview of a consignment inventory management process according to a preferred form of the present invention;

Figure 2 is a flow chart of the update consignment inventory process of Figure 1 ; Figuie 3 i a flow chart of purchase order process of Figuie 1 ; Figure 4 is a flow chart of restock process of Figure 1 ; Figure 5 s a flow chart of billing process of Figuie 1 ; Figure 6 s a flow chart of stock count process of Figure 1 ; Figure 7 s a flow chart of the return process of Figure 1 ; Figure 8 s a flow chart of reconciliation process of Figure 1 ; Figure 9 s a flow chart of adjust excess & unbilled process of Figure 1 ; and

Figure 10 is a flow chart of order picking process of Figure 1.

Description of Preferred Embodiments

To first refer to Figure 1 , there is shown an overview of the overall process. Reference numbers starting with 2, 3, 4, 5, 6, 7, 8, 9 and 10 are for processes illustrated in Figures 2, 3, 4, 5, 6, 7, 8, 9 and 10 respectively.

The consignment inventory management process may be initiated by many different events including but not limited to item usage, order, and count. There are several ways the seller can be made aware of these events. Figure 1 identifies these events. It also identifies all the other processes that impact on the several processes. In the first table is described the various elements and the process of Figure 1.

To now refer to Figure 2 items that were shipped to the buyer from the seller and are physically located at the buyer's consignment inventory located at a time are identified as the On-hand quantity.

Accounting methods and systems required the seller to keep track of the total consignment items shipped to the buyer and that should be at any time. This is called the Total quantity.

Total = On-hand + Unbilled - Excess

Like current consignment inventory methods and systems, On-Order represents consignment items that have been requested for the buyer's consignment location but have not been shipped at a time from the seller to the buyer.

A transaction is represented by a transaction description and a transaction amount. A transaction description is a code used to identify the transaction. If may be alpha, numeric or alphanumeric. The code may be of any suitable or desired length. The transaction amount can be a: zero, positive, or negative number with any number of decimal places.

Transactions (Trxn) used by this method and system include:

° Bill: the item is no longer at the buyer's consignment location but ownership has to been transferred from the seller to the buyer. ^e Use: the buyer has used the item and the process of transferring ownership from the seller to the buyer should be initiated or has been competed.

• Dispose: the item is no longer at the buyer's consignment location and seller is writing off the item. Ownership will not be transferred from the seller to the buyer.

• Return: item is physically being moved from the buyers consignment location back to the seller, ownership will not be transferred from the seller to the buyer.

• Transfer-Out: item is physically being moved from the buyers consignment location to the a third party location, ownership will not be transferred from the seller to the buyer.

• Receive: Item is physically being moved from the seller to the buyer's consignment location. Ownership will not be transferred from the seller to the buyer.

• Transfer-In: item is physically being moved to the buyer's consignment location from a third party location. Ownership will not be transferred from the seller to the buyer.

• Order: a result has been made to increase the buyer's consignment item(s) quantity. • Set: the quantity of items that the seller and the buyer agree is at the consignment location. Can be used as a starting point for consignment inventory On-hand quantity.

• Count: the quantity that can be physically found and verified by the seller and buyer at the buyer's consignment location at a time.

The method and system tracks item number, item lot number and item expirations date. The transactions are processed for the item or item/lot numbers based on the transaction being passed into the Update Consignment Inventory Process. In most cases there is more than one possible transaction that can be processed. Which transaction is process is determined by:

• the agreement between the buyer and seller; and

• other systems and methods used by the buyer and seller.

While the transactions processed may vary depending on the buyer and seller the desired result is the same. A consignment inventory management and reconciliation method and system that tracks and reconciles Total, on-hand, unbilled and excess quantities at a given time.

In Figure 3, there is illustrated the Purchase Order Process. There are many different purchase order methods and systems. Purchase Order Process only focuses on the processes that are required for this consignment inventory management and reconciliation system. It does not attempt to go into details relating to other purchase order systems.

The Restock Process is illustrated in Figure 4. This is a standard method in the management of consignment inventory. The restock process focuses on the movement of consignment inventory from the seller to the buyer's consignment location. No transfer of ownership takes place. Various approvals and signatures may be required in the process.

The Billing Process is illustrated in Figure 5. This is a standard method in the management of consignment inventory. The billing process initiates the transfer of consignment inventory ownership from the seller to the buyer.

Figure 6 illustrates the Stock Count Process. This is a standard method in the management of consignment inventory. The stocking counting process can take place on a daily, weekly, monthly, and quarterly or on a yearly cycle as well as at any time that the buyer and seller agree to a stock count.

The stock count process (or cycle count as it is sometimes called) consists of taking a physical count of all or a specific group of items at the buyer's consignment location at a time. This may also include counting the lot/batch associated with each item. The lot/batch usually contains the item expiration date and thus the stock count usually includes the identification and removal of expired items.

The Returns Process is illustrated in Figure 7. This is a standard method in the management of consignment inventory. The return process focuses on the movement of consignment inventory from the buyer's consignment location back to the seller. No transfer of ownership takes place. Various approvals and signatures may be required in the process.

An item can be returned for many reasons including but not limited to an item has expired, is being phased out and the buyer does not want if in the consignment location.

Figure 8 illustrates the Reconciliation Process. Current consignment inventory methods and systems refer to the need for a reconciliation process as a method for the buyer and seller to identify what items are missing from the consignment location. Current methods also refer to a need for a contract between the buyer and seller to determine who should bear the costs for the missing items and the need for reports to identify the missing items

The reconciliation process usually follows the Stock Count Process. In current consignment inventory methods and systems, the supplier will then either bill the buyer for the missing items or write off the missing items based on the contract between the buyer and seller. This results in decrementing the On-hand quantity by the missing amount. The missing amount is the different between the count and the On-hand amount. Currently the seller has no way to track the missing items over a period of time.

In addition the count process may find items that are at the buyer's consignment location but the seller has no record of shipping these items. This can happen for a number of reasons including:

• an unrecorded transfer from one buyer's consignment location to another. In this case the seller actually owns the item

• a non-consignment item is placed and counted with the consignment items. In this case the buyer actually owns the items.

The buyer and the seller have no way of knowing who owns the item and the current systems and methods have no way of tracking these items.

As discussed in relations to Figure 2, update consignment inventory process, the method and system of the present invention tracks the missing items as Unt-iflic? and the ejdra items as Bscess. This allows the seller to age (track the amounts over time) and research the unbilled and excess to better determine what action to take. Thus providing a more accurate visibility into the consignment inventory.

The reconciliation process adjusts the On-Hand, Unbilled and Excess amounts to accurately reflect what items are actually at the buyer's consignment inventory location at any time.

The Adjust Excess & Unbilled Process is illustrated in Figure 9. A seller may track items at the lot level. Lots are used to group items together based on when they were manufacture. The Lot also identifies the items expiration date. A seller will track the lots in order to determine exactly where a group of products are located. A seller will also track lots to better manage item expiration date so that consignment items can be moved to a location where they are more likely to sell before they expire. Lots are used in the manufacturing of most items. Lots are especially important in the healthcare and food industries where products have a short life span, and people's lives may be at risk.

The seller usually knows what lot has been shipped to the buyer's consignment location, but the buyer may not track which lots are used. Thus seller does not know which lots have been used and which lots are still on the shelf.

The current methods and systems require the seller to bill a specific lot if they shipped a specific lot. Since the seller does not know what lot has been used they often bill the wrong lot. This is usually of no concern to the buyer but it can be a problem for the seller since it gives them an inaccurate view of what item/lots are on consignment at the buyer's location

The adjust excess & unbilled process of Figure 9 uses the information from the reconciliation to net out the excess and unbilled lots for an item. The result is an accurate view of what lots are On-hand, Unbilled and Excess.

In Figure 10 is illustrated the Order Selection Process. Order picking (sometimes called order fulfilment) is the process for matching the buyer's consignment restock order with the seller's stock in a warehouse. The seller then selects the stock from the warehouse to fill the buyers restock order. There are many standard methods, electronic and hardcopy, for order selecting.

The consignment inventory management and reconciliation method and system described above tracks and reconciles on-hand quantity which represents consignment items that were placed at the consignment location and are physically located at the consignment location at a given time; unbilled quantity which represents consignment items which were placed at the consignment location and are not physically present at the consignment location and have not been purchased at a given time, excess quantity which represents items found at the consignment location but are not considered consignment items at a given time; and total or perpetual quantity which represents the consignment items which have been delivered to the consignment location at a given time.

The tracking of unbilled and excess consignment quantity provides visibility to the supplier that has not been available before in previous inventory tracking systems and methods. This visibility allows the supplier to accurately manage the consignment inventory items and identify the potential financial exposure (write off) as well as guard against lost sales.

The consignment inventory management and reconciliation method and system work as an enhancement to traditional consignment inventory methods and systems by provided a method and system for processing specific transactions that increase and decrease the on-hand, unbilled and excess quantities. This is accomplished with the update consignment inventory process, reconciliation process and adjust excess & unbilled process.

Whilst there has been described in the foregoing description preferred embodiments of the present invention, it will be understood by those skilled in the technology and business systems that many variations or modifications in details of operation maybe made without departing from the present invention.

Claims

The claims:

1. A consignment inventory management and reconciliation system wherein there is tracking and reconciliation of: a. first items shipped to a buyer from a seller and that are located at the buyer's consignment inventory location; b. second items shipped to the buyer by the seller, that have not been billed by the seller and cannot be found at the buyer's consignment inventory location; and d. third items not shipped to the buyer by the seller, can be found at the buyer's consignment inventory location, and are of the same identity as items provided on consignment by the seller to the buyer.

2. A system as claimed in claim 1, wherein the system also ages the first items, the second items, and the third items;

3. A system as claimed in claim 1 , wherein there is tracking of one or more selected from the groups consisting of: item number, item lot number, and item expiry date.

4. A system as claimed in claim 3, wherein tracking takes place whenever a transaction is processed.

5. A system as claimed in claim 3, wherein the transaction is represented by a transaction description and a transaction amount.

6. A system as claimed in claim 5, wherein the transaction amount can be one: zero, a positive number, and a negative number, with a number of decimal places.

7. A system as claimed in claim 4, wherein the transaction is one or more selected from the group consisting of: bill, use, dispose, return, transfer-out, receive, transfer-in, order, set, and current.

8. A system as claimed in claim 7, wherein bill is used when the item is no longer at the buyer's consignment location but ownership has not been transferred from the seller to the buyer.

9. A system as claimed in claim 7, wherein use is used when the buyer has used the item and the process of transferring ownership from the seller to the buyer should be initiated or has been competed.

10. A system as claimed in claim 7, wherein dispose in used when the item is no longer at the buyer's consignment location and seller is writing off the item; ownership will not be transferred from the seller to the buyer.

11. A system as claimed in claim 7, wherein receive is used when the item is physically being moved from the seller to the buyer's consignment location; ownership will not be transferred from the seller to the buyer.

12. A system as claimed in claim 7, wherein transfer-in is used when the item is physically being moved to the buyers consignment location from a third party location; ownership will not be transferred from the seller to the buyer.

13. A system as claimed in claim 7, wherein return in used when the item is physically being moved from the buyer's consignment location back to the seller; ownership will not be transferred from the seller to the buyer.

14. A system as claimed in claim 7, wherein transfer-out is used when the item is physically being moved from the buyer's consignment location to a third party location; ownership will not be transferred from the seller to the buyer.

15. A system as claimed in claim 7, wherein order is used when a result has been made to increase the buyer's consignment item(s) quantity.

16. A system as claimed in claim 7, wherein set is used when the quantity of items that the seller and the buyer agree is at the consignment location and is used as a starting point for consignment inventory On-hand quantity.

17. A system as claimed in claim 7, wherein count is used when the quantity can be physically found and verified by the seller and buyer at the buyer's consignment location at a time.

18. A system as claimed in claim 1 , wherein reconciliation takes place after a stock count process.

19. A system as claimed in claim 18, wherein the reconciliation notes the second items as Unbilled and the third items as Excess to enable the seller to track quantities of second items and third items over time to provide a more accurate history of consignment inventory.

20. A system as claimed in claim 3, wherein the seller uses the tracking of the item lot number and item expiry date to determine which of the first and second items are approaching an expiry date and thus need to be adjusted.

21. A system as claimed in claim 1, wherein the first items are grouped together in a plurality of categories.

22. A system as claimed in claim 1 , wherein the second items are grouped together in a plurality of categories.

23. A system as claimed in claim 1, wherein the third items are grouped together in a plurality of categories.

24. A system as claimed in claim 21 , wherein adjustment is according to one or more of the plurality of categories.

25. A system as claimed in claim 1 , wherein an inventory total is the sum of the first items and the second items, less the third items.

26. A consignment inventory management and reconciliation system wherein there is tracking and reconciliation of:

(a) first items shipped to a buyer from a seller and that are located at the buyer's consignment inventory location; and

(b) second items shipped to the buyer by the seller that have not been billed by the seller and cannot be found at the buyer's consignment inventory location.

27. A system as claimed in claim 26, wherein there is also tracking and reconciliation of third items not shipped to the buyer by the seller, that can be found at the buyer's consignment inventory location, and are of the same identity as items provided on consignment by the seller to the buyer.

28. A consignment inventory management and reconciliation system wherein there is tracking and reconciliation of:

(a) first items shipped to a buyer from a seller and that are located at the buyers consignment inventory location; and (b) third items not shipped to the buyer by the seller, that can be found at the buyer's consignment inventory location, and are of the same identity as items provided on consignment by the seller to the buyer.

29. A system as claimed in claim 28, wherein there is also tracking and reconciliation of second items shipped to the buyer by the seller, that have not been billed by the seller and cannot be found at the buyer's consignment inventory location.

30. A consignment inventory management and reconciliation system wherein there is tracking and reconciliation of:

(a) second items shipped to the buyer by the seller, that have not been billed by the seller and cannot be found at the buyer's consignment inventory location; and

(b) third items not shipped to the buyer by the seller, can be found at the buyer's consignment inventory location, and are of the same identity as items provided on consignment by the seller to the buyer.

31. A computer useable medium having a computer program code that is configured to cause a processor to execute one or more functions to perform the piocess steps as defined in claim 1.