Introduction to Inventory Management

A double-entry inventory has no stock input, output (disparition of products) or transformation. Instead, all operations are stock moves between locations (possibly virtual).


Stock moves represent the transit of goods and materials between locations.

Production Order
2 Wheels: Stock → Production
1 Bike Frame: Stock → Production

1 Bicycle: Production → Stock

Stock: the location the Manufacturing Order is initiated from
Production: on the product form, field “Production Location”

1 Bicycle: Supplier → Customer

Supplier: on the product form
Customer: on the sale order itself
Client Delivery

1 Bicycle: Stock → Packing Zone


1 Bicycle: Packing Zone → Output


1 Bicycle: Output → Customer

on the pick+pack+ship route for the warehouse
Inter-Warehouse transfer
1 Bicycle: Warehouse 1 → Transit
1 Bicycle: Transit → Warehouse 2
Warehouse 2: the location the transfer is initiated from
Warehouse 1: on the transit route
Broken Product (scrapped)

1 Bicycle: Warehouse → Scrap


Scrap: Scrap Location when creating the scrapping

Missing products in inventory

1 Bicycle: Warehouse → Inventory Loss

Extra products in inventory

1 Bicycle: Inventory Loss → Warehouse


Inventory Loss: “Inventory Location” field on the product

1 Bicycle: Supplier → Input
1 Bicycle: Input → Stock
Supplier: purchase order supplier
Input: “destination” field on the purchase order


Inventory analysis can use products count or products value (= number of products * product cost).

For each inventory location, multiple data points can be analysed:

  • inventory valuation
  • value creation (difference between the value of manufactured products and the cost of raw materials used during manufacturing) (negative)
  • value of lost/stolen products
  • value of scrapped products
  • value of products delivered to clients over a period
  • value of products received from suppliers over a period (negative)
  • value of products in transit between locations
Location Value
Physical Locations $1,000
 Warehouse 1 $600
 Warehouse 2 $400
Partner Locations - $1,500
 Customers $2,000
 Suppliers - $3,500
Virtual Locations $500
 Transit Location $600
 Initial Inventory $0
 Inventory Loss $350
 Scrapped $550
 Manufacturing - $1,000

Procurements & Procurement Rules

A procurement is a request for a specific quantity of products to a specific location. They can be created manually or automatically triggered by:

New sale orders

A procurement is created at the customer location for every product ordered by the customer (you have to deliver the customer)


Procurement Location: on the customer, field “Customer Location” (property)

Minimum Stock Rules

A procurement is created at the rule’s location.


Procurement location: on the rule, field “Location”

Procurement rules

A new procurement is created on the rule’s source location

Procurement rules describe how procurements on specific locations should be fulfilled e.g.:

  • where the product should come from (source location)

  • whether the procurement is MTO or MTS


Procurement rules are grouped in routes. Routes define paths the product must follow. Routes may be applicable or not, depending on the products, sales order lines, warehouse,…

To fulfill a procurement, the system will search for rules belonging to routes that are defined in (by order of priority):


Warehouse Route Example: Pick → Pack → Ship

Picking List:

Pick Zone → Pack Zone

Pack List:

Pack Zone → Gate A

Delivery Order:

Gate A → Customer

Routes that describe how you organize your warehouse should be defined on the warehouse.

A Product

Product Route Example: Quality Control


Supplier → Input


Input → Quality Control


Quality Control → Stock

Product Category

Product Category Route Example: cross-dock


Supplier → Input


Input → Output


Output → Customer

Sale Order Line

Sale Order Line Example: Drop-shipping


Supplier → Customer

Push Rules

Push rules trigger when products enter a specific location. They automatically move the product to a new location. Whether a push rule can be used depends on applicable routes.

Quality Control
  • Product lands in Input

  • Push 1: Input → Quality Control

  • Push 2: Quality Control → Stock

Warehouse Transit
  • Product lands in Transit

  • Push: Transit → Warehouse 2

Procurement Groups

Routes and rules define inventory moves. For every rule, a document type is provided:

  • Picking

  • Packing

  • Delivery Order

  • Purchase Order

Moves are grouped within the same document type if their procurement group and locations are the same.

A sale order creates a procurement group so that pickings and delivery orders of the same order are grouped. But you can define specific groups on reordering rules too. (e.g. to group purchases of specific products together)