Materials Management Functions

Materials Management Functions
The Materials Management applications must provide the NCAS with capabilities for managing and controlling the State's purchasing and accounts payable policies and accounting for the inventoried assets. These functions include Purchasing, Accounts Payable, Fixed Assets, and Inventory which are completely integrated within the Materials Management system, as well as with the General Ledger and Budget Control process.

The Materials Management modules are currently integrated components of the NCAS with the exception of the Fixed Assets Module (FA). Figure 5, along with the following paragraphs by business application, portray the fully integrated process.

Figure 5. Overview of Current Materials Management Process

Through shared vendor and policy information, Purchasing and Accounts Payable functions can freely communicate without the usual control issues associated with duplication of files and batch interfaces. Accounts Payable shares purchase order information from Purchasing and updates the invoiced-to-date amount on the purchase order real-time. Receipts are entered and referenced to a purchase order number, ensuring accurate posting of deliveries to each purchase order line. Receipts that cannot be identified or that do not fit matching criteria are identified, placed on hold, and reported for buyer action. Each receipt is checked for proper delivery points and verified that the quantities received and the receipt date are within tolerances already defined on the purchase order. Another receipt requirement, inspection of goods, is handled through dock-to-stock tracking. This feature tracks the inspection of materials according to a table of routing and inspection areas.

Accounts Payable performs the invoice audit and approval functions by checking invoice details such as amounts, unit price, terms, tax, freight, etc. against the purchase order. Data entry effort is minimal, because invoice details are built from the purchase order and displayed on-line. Accounts payable clerks have to deal only with the exceptions, resulting in maximum efficiency with full control. The NCAS system uses a PC-based, laser printing process to support the creation of vendor payments. The laser check printing process has strong internal controls, including password protection access to the check printing software, the use of security chips in the printers themselves, as well as the use of blank check stock (vs. pre-printed check forms). Agencies print checks locally, using a nightly check file that is downloaded from the NCAS mainframe system.

The Inventory integration with the Purchasing system is designed to address warehouse replenishment needs. Information about stock items and requisitions for replenishment are passed from Inventory to Purchasing, and purchase orders and receipts pass from Purchasing to Inventory. The following information is shared between the two systems: items, requisitions, purchase orders, and receipts.

Requisitions are created to replenish warehouse inventory. They can be generated either automatically in batch by the system, or created manually by the inventory replenishment planner. Once approved, these requisitions automatically pass to Purchasing to be converted into purchase orders. When goods are received in the Purchasing function, the quantity is passed to Inventory to reduce the on-order quantity and increase the on-hand quantity. If goods undergo inspection in the Purchasing function, the active on-hand quantity is not increased in the Inventory until the goods have passed inspection.

The Materials Management systems maintain accounting integrity through integration with the General Ledger. Distribution entries from purchase orders, Accounts Payable and Inventory issues and replenishments are validated directly against the General Ledger. Offsetting cash, assets accounts, and encumbrances are automated through the accounting rules or system policies to ensure accounting accuracy.

The integration of the Materials Management functions with the budgetary control function provides the funds-checking capability required for the NCAS. All Purchasing, Accounts Payable, and Inventory transactions (commitments, encumbrances, inventory consumption and replenishment, and expenditures) are checked real-time to the available funds amount calculated through budgetary control functions. Real-time funds checking ensures expenditures are kept within the authorized budget and provides advanced knowledge of the budgetary status for spending decisions.

Purchasing
The Purchasing function is a real-time, decision support application designed to help manage the entire procurement cycle. This cycle includes requesting, competitive bidding, buying, receiving, and inspecting. Purchasing agents' day-to-day decision-making is fully supported with tools and information on-line to manage the supplier base and service the purchasing function for the State in a timely and efficient manner. Figures 6 and 7 display the participants and tasks in the Purchasing or Competitive Sourcing and Vendor Selection processes, respectively.

Purchasing Financial Functions
The State's purchasing policies and strategies are the basis for the system and are incorporated into a policy hierarchy. The policy hierarchy consists of rules that define how to handle purchasing functions within the government environment. The most general purchasing policies represent the highest level of the hierarchy, and each successive level below the general policy defines further levels of detail to the general policy.

As requisitions and purchase orders are processed, the policy hierarchy ensures that the majority of the purchasing activity is handled automatically and within the required purchasing guidelines. If a particular situation does not fit the general rules, a purchaser may change the hierarchy default to fit the situation; however, the system tracks in detail the full procurement process from requisition to payment.

Figure 6. Overview of Current Purchasing Process The Purchasing function provides:

Full integration with Accounts Payable, Inventory, Budgetary Control, and General Ledger;
Real-time encumbering of funds and confirmation of funds availability;
A centrally-controlled item file that ensures a consistent statewide purchasing history database;
Common policy files for Purchasing and Accounts Payable;
A statewide central vendor file that is shared by both Purchasing and Accounts Payable;
Funds checking at each decision point (requisition, purchase order, and Accounts Payable);
Buyer tools (on-line buyer split requisition worksheet);

Figure 7. Overview of Current Vendor Selection Process

Document preparation for requisitions, purchase orders, and requests for quotes (RFQs) with standard phrases available to expedite the preparation process;
Flexible purchase order generation to support blanket order purchases, services, and purchases of goods;
An integrated receiving function;
Documentation and tracking of purchase order quotes;
On-line real-time requisition approval and rejection; and
Continuous building of financial data throughout the Purchasing and Accounts Payable functions.

Purchasing Reporting Functions
Reporting within the Purchasing function supports:

Daily purchasing decisions through buyer action reports and buyer exception reports, and
Central management requirements for the Division of Purchase and Contract (P&C) HUB reporting and recycled goods reporting.

Accounts Payable
The Accounts Payable function provides an effective and efficient cash management process by automatically calculating the discount due date, discount amount, and payment due date according to standard vendor terms or system policy, thus maximizing cash availability. For inventory transactions, the Accounts Payable function recognizes price variances, and automatically posts the adjustments to the General Ledger. Figure 9 shows the details of the Current Accounts Payable process. For clarity and completeness, a flow of the Current Receiving Process is also presented in Figure 8. The Receiving process contains multiple decision points necessary to bring a receipt to the point where the Accounts Payable staff are involved and pay for the items.

Figure 8. Overview of Current Receiving Process

Figure 9. Overview of Current Accounts Payable Process

Accounts Payable Financial Functions
The Accounts Payable function provides:

Full integration with Purchasing, Inventory, Budgetary Control, and General Ledger;
Flexible payment cycles;
Available funds checking;
Efficient document processing through:

Automatic document matching;
Automatic validation of Purchasing and Accounts Payable policy and accounting distribution;
Recurring payment options ;
Pre-defined policies that default on the invoice;
Information passing from the purchase order to the invoice;
Automatic proration of discount, sales tax, and freight ;
Agency cash management;
Common policy files;
Statewide centrally-controlled vendor files;
Bank reconciliation;
Agency-controlled checks;
1099 processing and control from the central vendor file;
Fixed Assets interface to facilitate establishing newly acquired fixed assets;
Cash, encumbrance, and accrual reporting automated to the General Ledger;
Employee advances/reimbursements tracked and balanced; and
Vendor payment history.

Accounts Payable Reporting Functions
The Accounts Payable function supports the following reporting requirements:

Daily input control reports;
Automated balancing reports;
Cash management reports;
Sales and Use Tax reports;
Ad hoc reports;
Bank reconciliation with the Treasurer; and
MICR-encoded checks from blank stock.

Fixed Assets
The Fixed Assets function provides timely and accurate information about the State's fixed assets. The Current process is described in Figure 10.

Figure 10. Overview of Current Fixed Asset Process

Fixed Assets Financial Functions
The Fixed Assets function meets the following NCAS objectives:

Maintains maximum property control for acquisitions, additions, transfers, retirements, adjustments, property listings, and retirement reversals; and
Provides depreciation calculations according to GASB specifications.

Some of the specific features included with the function are:

Maintenance of service and repair cost information, with supporting information such as vendor name, service contract number, and contract expiration date;
On-line data entry, validation, and inquiry;
Interface to establish fixed assets when payment is made for an item in Accounts Payable;
On-line report viewing; and
User-defined fields that can be used to identify location and other descriptive information.

Fixed Assets Reporting Functions
The Fixed Assets function provides reporting for:

Active and retired assets;
Assets transfers;
Asset adds and deletes; and
Asset depreciation.

Inventory
The Inventory function tracks and maintains inventory in a cost-efficient manner, ensuring the integrity of the inventory balances while providing the flexibility required at the agency level. The Inventory design allows for multiple warehousing, staging areas, and inventory item differences. The financial integration of Inventory to Purchasing, Accounts Payable, Budgetary Control, and the General Ledger, along with Inventory policy defaults ensure uniform and appropriate financial information required for cash basis, GAAP, and management reporting.

Figures 11 and 12 cover the current inventory replenishment and inventory issuing processes.

Inventory Financial Functions
The Inventory function supports:

Flexible policy definitions;
Multiple buying entities defined;;
User-defined network of warehouses and item controls at the warehouse level;
Historical demand information captured to assist in forecasting future demand for an item and management of inventory levels;
Automatic calculation of a moving weighted average cost, which provides up-to-date inventory valuation;
Precise inventory replenishment through multiple ways of controlling replenishment: order point, computed order point, and standard inventory level;

Figure 11. Overview of Current Inventory Replenishment Process

Reduction in number of backorders through usage order shortage checks that identify approved substitutes to resolve material shortages;
Allocation of inventory off-line or real-time, providing up-to-date information on available inventory;
Cycle counting procedures and on-line adjustment to prevent understating inventory and/or ordering unneeded material;
Integration with other business functions (Purchasing, Accounts Payable and General Ledger) to expedite the inventory management process and ensure the integrity of the financial data; and
Inventory security, permitting operators to be defined with varying degrees of access to warehouse and other system functions.

Figure 12. Overview of Current Issue Inventory Process

Signature approval process that provides management controls over work orders;
Automatic inventory picking, which programmatically posts the allocated quantity as the picked quantity for usage orders allocated during off-line processing (optionally, the picked quantity can be manually posted);
Minimum/maximum item quantity controls that prevent stockpiling of inventory;
Available funds checking through integration with Budgetary Control ensures that funds are available before inventory is issued or replenished; and
Consumption accounting, which provides effective planning information for future budgeting requirements for inventory purchases and cost of operations.

Inventory Reporting Functions
The Inventory reporting capabilities include:

Pick lists;
Value transaction register by warehouse;
Inventory valuation detail report;
Transfer and usage reports;
Usage history by item and assets;
Replenishment action report;
Cycle count reports by warehouse; and
Ad hoc reporting.