Chapter 5

Inventory
Management

2024
Learning
Outcomes
●

●
Comprehend Warehouse Networks: Gain an insightful understanding of diverse warehouse network structures
and common organizational arrangements.
Explore Inbound and Outbound: Examine inbound and outbound processes within supply chains, understanding
their significance in managing inventory flows.
● Differentiate Drop Shipping and Cross Docking: Distinguish between drop shipping and cross docking
strategies, recognizing their roles in optimizing distribution and reducing handling times.
● Analyze Picking Methods: Analyze various picking methods used in warehouse operations, understanding their
applications and benefits.
● Master Stock Management: Develop expertise in stock management practices, replenishment, and ensuring
optimal inventory levels.
● Achieve Inventory App Proficiency: Become skilled in inventory management functionalities within the Odoo ERP
system by understanding how it aids in various inventory processes.
● Step-by-Step Training on Odoo Inventory: Engage in comprehensive training on Odoo's inventory module,
covering configuration, usage, reporting, and advanced features.
● Experience Practical Scenarios: Apply acquired knowledge by simulating a business use case centered around
purchasing and selling.
[Link]
Diverse
Warehouse
Networks.
● Different types or functions
● Multiple combinations
● Varying numbers and
locations
● Strategic decision from the
Warehouse Executive(s)
Typical Warehouse
Organizations.
● A physical space where the
goods are stored temporarily
and within which the
incoming and outgoing
moves are tracked

● Warehouse divided in zones:

○ Inbound Area
○ Storage
○ Outbound Area
 Warehouse
organization
 Warehouse
organization

Zones and storage locations are organized and designed to optimize

space and increase the work flows efficiency
Diverse Warehouse
Networks
It could be as simple as:

Supplier Warehouse Customer

 Or very complex...

As complexity increases, it becomes more difficult to keep track of and

process information.
It’s why a large portion of jobs in Supply Chain is managing urgent
issues!
 Inbound &
Outbound Flows
What is Inbound?
How goods are managed from
when they are received to
when they are placed in stock
 One-Step Inbound
The product goes directly from the vendor to the stock

1 Reception from the vendor

WHEN: This method is typically used by SME's (Small to Medium Size

Enterprises).
Two-Step Inbound
The vendor delivers the goods in an input zone, the products will be put
away later due to time constraints.

1 Received to an input zone 1 2

2 Transfer to the storage location

WHEN: When the volumes begin to be high, more medium and big
company.
Three-Step Inbound
The vendor delivers the goods in an input zone and then the products
will pass a quality control before being sent to the storage location.

1 Receive in an input zone

1 2 3
2 Transfer to quality inspection
3 Transfer to the storage location

WHEN: When the quality of the product needs to be guaranteed. The size
of the company doesn’t matter in this case.
Inbound 1

2
Reception
Transfer 1
One, two, three steps or even more... 3 Transfer 2

Vendor Stock

1 2

Vendor Input zone Stock

1 2 3

Vendor Input zone QC Stock

1 2 3
What is Outbound?
How goods are managed from
the stock to the customer
 One-Step Outbound
The customer order is prepared and directly sent to the customer

1
1 OR

1 Delivery to the customer

WHEN : This method is typically used by SME's. Because their

operations are more simplified, so they don't require multiple steps.
Two-Step Outbound
Orders are prepared and sent to an output for the truck loading.

1 Order Preparation and transfer

to the output zone 1 2
2 The truck is loaded for the delivery

WHEN: Usually when the volume of orders is high that there a

specific location for the truck loading.
Three-Step
Outbound
● Some companies process large amounts of deliveries every day, many
of which include multiple products or require special packaging.
● To make this efficient, a packing step is needed before shipping out
products
1 2 3

1 Order picking and transfer to the packing zone

2 Packing and transfer to the output zone
3 The package is taken in charge to be delivered
Outbound 1

2
Pick
Pack
One, two, three steps or even more... 3 Deliver

Stock Customer

1 2

Stock Output zone Customer

1 2 3
Packing
Stock Output zone Customer
zone
1 2 3
Other alternatives
Dropshipping
Dropshipping is a retail fulfillment method where a store doesn't keep
the products it sells in stock.

Business purchases an item from a third party and has it shipped

directly to the customer.

1 Sales Order
2 Dropship
2
Other alternatives
Cross Docking

Products are unloaded from a truck, sorted, and directly reloaded onto
outbound trucks to continue their journey.

1 2 3

IN OUT

WHEN: The company acts as platform to efficiently transit goods from

producer to customer
Picking
Picking order
methods
Picking: Each time that the warehouse will manipulate products from
a source location to destination location, it is referred to as “picking.

Different ways to process the orders picking:

● Single order picking

● Batch picking
● Cluster picking
● Wave picking

Order picking requires both speed and accuracy. The

amount of time it takes to get an order together greatly
influences delivery time.
Batch Picking
Batch picking optimizes picking activities by retrieving SKUs
in bulk to fulfill multiple orders at a time.

This minimizes travel time and speeds up fulfillment

operations, especially for warehouses that receive multiple
orders containing the same SKUs. Workers use a
consolidated pick list to pick SKUs for multiple orders in one
pass.
Cluster Picking
This picking methodology is used to fulfil multiple orders at the
same time. Workers travel through the warehouse retrieving
SKUs on multiple picklists and placing them into separate
bins/containers. Each container is associated with a separate
order/pick list.

This eliminates repeated trips to the same pick location and

removes the need for sorting since this is done by pickers at
each pick location. However, it requires the use of sophisticated
WMS solutions for proper scheduling and assignment of
clusters.
Wave Picking
Orders are grouped into sets or waves according to factors like
customer location, order frequency, order type, picking zones,
delivery date, etc.

Workers simultaneously pick SKUs from multiple zones and

forward them for sorting and consolidation into individual
shipments. Waves are assigned to pickers and schedules to
maximize
Production Approaches
Make to Stock (MTS)
To always maintain a certain level of stock in a warehouse based on
forecasted consumer demands.
Example: New launch, long lead time,...
Make to Order(MTO)
A product is not built or ordered from a supplier until a confirmed order
for the product is received.
Example: cars, custom kitchen cabinets, photography printing,...
Inventory Valuation
The Stock is a very important aspect in a company as
much for Supply Chain as for Accounting.

WHY? The stock is an company’s asset. A company will

calculate how much stock they have on hand as a way
of understanding their companies' value.

3 legal ways to do it :
- Standard cost
- Average cost
- FIFO
 Inventory Valuation
How do you report stock value in Accounting?

● Continental: Annual Inventory

→ Financial statements are typically prepared on an annual basis one
miscellaneous entry.

● Anglo-saxon: Cost of Goods sold (COGS)

→ Cost of goods sold (COGS) refers to the direct costs of producing or procuring the
goods sold by a company. COGS is deducted from revenues (sales) in order to
calculate gross profit and gross margin. Higher COGS results in lower margins.

What means in Accounting that each time that there stock reception or a stock
delivery, there is a accounting entry.
Understand Supply
Chain Organization
○ Understand the products:
■ What does the company buy?
■ What does the company sell?
■ What does the company create?
■ Does the company track the stock and how?
■ Are there groupments among the products?

○ How many warehouses does the company have?

○ How is it organize inside a warehouse?

○ What is the main path for the products inbound flow? Is there any exception?

○ What is the main path for the products outbound flows ? Is there any exception?
Inventory App
Features
Storage Productivity Reporting
● Create and manage ● Notify procurement ● Full stock moves report to
specific storage locations, managers about low stock map and trace product
like shelves, aisles, cold and vendor lead times to moves from supplier to
storage rooms, and pallet assist with reordering customer.
racks. schedules. ● Monitor how long items
● Create dedicated ● Odoo automatic scheduler have been in the
locations to receive triggers operations warehouse. Quantities are
products, sort, pack, and automatically for you sorted by receipt date,
other warehouse based on product allowing you to stay
operations. availability and forecasts informed about products
● Choose product removal of orders. nearing expiration.
strategies and streamline
picker paths with the right
picking method.
Integrated with
Model
Structure
● One physical place is equal to one
warehouse in Odoo

● A main parent location (view) is

created by-default as well as a main
storage location (stock)

● Another set of intermediary

● locations is associated to the main

parent location (view)

● A hierarchy of sub-locations can be

built to further refine the warehouse
organization
Location
Types
Purpose
View

Hierarchy
construction
Internal

Goods
storage
Virtual

Counterpart
for internal
Transit

Goods
transiting
Partner

External
counterpart
consumption between for in & out
WH

Used for Qty Yes Yes No Yes No

on Hand
computation
?

e.g. View Internal Inventory Transit Vendor

Location Loss & Location Location &
Production Customer
Location
 Types of
Operations
● Flexible source and destination
Internal Transfers
locations when creating a transfer

● Flexible destination location

Receipts ● Source location is typically assigned
as Partner Location/Vendor

● Flexible source location

● Destination location is typically
Delivery
assigned as Partner
Location/Customer
● Limits the configuration setup (e.g.
no return operation) as a
Manufacturing manufacturing operation type can
only be used for manufacturing
processes
How to create a
product
1

2
5

3
6

4
7
Step 1 Step 2 Step 3 Step 4

Create a planned transfer from the operations dashboard

Step 1 Step 2 Step 3 Step 4

Fill in the product initial demand

3
 Step 1 Step 2 Step 3 Step 4

Mark the picking as to-do

● Stock Move in “waiting”

state

● Reservation:

● Either through a
manual action (e.g.
button Check
Availability) on the
picking

● Or through the
scheduled action Run
Scheduler

● Or automated at
 Step 1 Step 2 Step 3 Step 4

Check the availability

○ Based on the stock move

initial demand, the function
action_assign looks for
available quantity in the
specified source location and
its children locations

○ Stock Move in “ready” state

○ Reserved quantity set on the

quantity and the stock move

○ Finally you can validate once

you are done with the order
Configurations
to Look at
● Multi-locations in your warehouse: You will be able to create more than 1
location in 1 warehouse.
● Dropshipping: Ability to use drop shipping for sales with purchase.
● Inventory valuation and removal strategy: Able to find the inventory value and
to select which removal strategy is preferred in the business.
● Barcodes: Ability to deal with barcode operations in your supply chain management.
● Landed cost: You will be able to add landed costs on your receipt.
● Lots/Serial Numbers: Ability to use lots and serial numbers to track products in
inventory.
 More
Inventory
Managemen
t
 Units of
Measure
● Units of measure specify the unit
used to handle a product.

● Product UOM versus Purchase UOM.

● The only condition is that all the units

have to be in the same category
(Unit, Weight, Volume, Length,...).

● The conversion between the different

units of measure is done
automatically.
Step 1 Step 2 Step 3 Step 4

Activate the units of measure in the settings

Step 1 Step 2 Step 3 Step 4

Create a UOM category

Step 1 Step 2 Step 3 Step 4

Create the reference unit of measure

Step 1 Step 2 Step 3 Step 4

Create the unit of measure and its ratio

Removal
Strategy
● Deciding in which order (HOW) products are
going to be reserved and hence which
preferred locations to be shown to the
operator.

● Can be configured at product category level

and/or at location level.

● Three options:

FIFO LIFO FEFO

Default Yes No No

Based Incoming Incoming Expiry

on Date Date Date

Selectio First IN Last IN First to

n Order EXPIRE
Traceability: lot versus
serial numbers Lot Number Serial Number

Identification number
Identification number
given to one product in
assigned to a particular
particular, to allow to
Definition quantity or lot of material
track the history of the
from a single
item from reception to
manufacturer.
delivery and after-sales.

Applicable on Multiple items Single item

Products received in great

Products for which a
quantity and for which a
unique tracking should be
What for? lot can help in reportings,
enforced on every unitary
quality controls or any
transaction.
other info.
Help for after-sales
Purpose Identify a production fault
service
 Configure at
product level
Product by product, choose between one tracking type or another.

53
 Create Lots or Serial
Decide on the fastest wayNumbers
to receive products & assign tracking numbers.
• Manual Creation • Copy/Paste from a spreadsheet • Quick creation tool (for
Serial Numbers only)

54
 Trace and Locate Lots
and ofSN
Keep an eye on the movements your lots or serial numbers.

○ Traceability report

○ Locate function

○ Quick link to Purchase

Order and Sales Order
Add Expiry Dates
Auto-compute the lifecycle of your products.
● Expiration Date: the number of
days after receiving products (either
from a vendor or in stock after
production) in which goods may
become dangerous and should not
be used or consumed.

● Best Before Date: the number of

days before the expiration date in
which the goods start
deteriorating, without necessarily
being dangerous yet.

● Removal Date: the number of days

before the expiration date in which
the goods should be removed from
stock.

● Alert Date: the number of days

before the expiration date in which
an alert should be raised on goods in
a particular lot or containing a
particular serial number.
 Operation Type:
Configuration

7
 Putaway
strategies:
○
configuratio
Activate Storage Locations in Inventory

n.
> Configuration > Settings

○ Create sub-locations under the main

storage location

○ Create product categories and

associate products to it

○ Create putaway rules in Inventory >

Configuration > Putaway Rules
 Advance
Inventory
Managemen
t
Routes
Push and Pull
Strategies
Trigger
Push

Stock Move
Pull

Procurement

Forward (from the

Direction Backward (from the need)
decision)

Based on Demand Forecast Actual Demand

No excess inventory and

High likelihood to deliver
Advantage(s) hence decreased storage
the customer on time
cost

High stock levels and

Downside(s) Ordering dilemmas
difficult forecast
Routes: one king to
rule them all
Two strategies embodied within a single object. Routes define paths the
product must follow.

Pull Rules
● Translate the Pull mechanism going backward.
Routes
● Describe how procurements on specific
locations should be fulfilled, which move to
make and whether the procurement is MTO or
MTS.
Push Rules
● Translate the Push mechanism going forward.

● Push rules trigger when products enter a

specific location. They automatically move the
product to a new location.
Routes: Order
of Priority
To fulfill a procurement, the system will search for rules belonging to
routes that are defined in:

Sales
Product Warehous
Order Product
Category e
Lines
1 2 3 4

Used to handle case by case exceptions

that require a human check
Used for typical paths within the
warehouse premises (Inbound flow,
Outbound flow, etc.)
Conflicting
The sequence of the routes is used to choose between two or several conflicting

routes
routes.
Conflicting
routes: avoid
Use 2D representation of routes to track conflicting rules.

them
Inbound and Outbound flows:
from 1 to 3 steps
○ To be configured and
applied at warehouse
level.

○ 3 options for incoming and

outgoing
Buy to
resupply ○ To be configured at
warehouse level.

○ To be applied at product or
product category level.

○ Specifies whether
purchases to external
suppliers can be placed
from this warehouse.

○ Don’t forget to set a

supplier as well as
purchase price on each
product.
Manufacture to
resupply ○ To be configured at
warehouse level.

○ To be applied at product or
product category level.

○ Specifies whether
manufacturing orders can be
triggered in this warehouse.

○ Don’t forget to configure a

Bill of Materials on the
finished or semi-finished
products to be
manufactured.
Manufacture … in
multiple steps
○ To be configured at
warehouse level.

○ To be applied at product or
product category level.

○ 3 options:

■ Manufacture (1 step)
■ Pick components and
then manufacture (2
steps)
■ Pick components,
manufacture and then
store products (3 steps)
Resupply from
other warehouses
○ To be configured at
warehouse level.

○ To be applied at product or
product category level.

○ Creates a two-steps route

from the source warehouse
(W2) to the destination
one (W1)
○ Another warehouse must
be created to have the
option
Dropshi
pping ○ To be configured in the
settings (Purchase >
Configuration > Settings).

○ To be applied at the sales

order line level.

○ Creates a specific
operation type to move the
product from the supplier
to the customer without
transiting through the
company’s stock.
Scrap
Products
○ To be configured in the
settings (Inventory >
Operations > Scrap).

○ Specify the product and

scraped quantity and then
validate
Creating a
new Route
Routes: At which level do you

applicable allow the route to be

applied?

on ○ Warehouse

○ Product Categories

○ Products

○ Sales Order Lines

Routes: Which action(s) are you
going to take to answer
the procurement or a

Actions forward move?

○ Pull from

○ Push to

○ Push & Pull

○ Buy

○ Manufacture
Routes:
Operation In which operation type

Type
are you going to
package the move
generated by the route?
Routes: Source and
Destination The destination location
is the procurement
location (pull); the
source location is the
destination location of
the previous move
(push).
Routes: Do you build a chain of
moves (trigger another
rule) or do you constitute

Supply a buffer stock in the

source location? Or a bit
of both?

Method ○ Take from Stock

○ Trigger Another Rule

○ Take from Stock, if

Unavailable, Trigger
Another Rule
Inventory
Valuation
Focus on the
Inventory
Costing Method
Valuation
Inventory
Valuation
Standard Price Standard
AVCO Automated
FIFO
Use case For
Costing Methods
● Receive 8 Products at $10
● Receive 4 Products at $16
● Deliver 10 Products
● Receive 2 Products at $6
 Standar
Operation
d
Unit Cost QTY on hand Delta Value Inventory Value

0 0 0

Receive 8 Products at $10

Receive 4 Products at $16

Deliver 10 Products

Receive 2 Products at $9
 Standar
Operation
d
Unit Cost QTY on hand Delta Value Inventory Value

$10 0 0

Receive 8 Products at $10 $10 8 +8*$10 $80

Receive 4 Products at $16

Deliver 10 Products

Receive 2 Products at $9
 Standar
Operation
d
Unit Cost QTY on hand Delta Value Inventory Value

$10 0 0

Receive 8 Products at $10 $10 8 +8*$10 $80

Receive 4 Products at $16 $10 12 +4*$10 $120

Deliver 10 Products

Receive 2 Products at $9
 Standar
Operation
d
Unit Cost QTY on hand Delta Value Inventory Value

$10 0 0

Receive 8 Products at $10 $10 8 +8*$10 $80

Receive 4 Products at $16 $10 12 +4*$10 $120

Deliver 10 Products $10 2 -10*$10 $20

Receive 2 Products at $9
 Standar
Operation
d
Unit Cost QTY on hand Delta Value Inventory Value

$10 0 0

Receive 8 Products at $10 $10 8 +8*$10 $80

Receive 4 Products at $16 $10 12 +4*$10 $120

Deliver 10 Products $10 2 -10*$10 $20

Receive 2 Products at $9 $10 4 +2*$10 $40

 Average
Operation Unit Cost QTY on hand Delta Value Inventory Value

0$ 0 0$

Receive 8 Products at $10

Receive 4 Products at $16

Deliver 10 Products

Receive 2 Products at $6
 Average
Operation Unit Cost QTY on hand Delta Value Inventory Value

0$ 0 0$

Receive 8 Products at $10 $10 8 +8*$10 $80

Receive 4 Products at $16

Deliver 10 Products

Receive 2 Products at $6
 Average
Operation Unit Cost QTY on hand Delta Value Inventory Value

0$ 0 0$

Receive 8 Products at $10 $10 8 +8*$10 $80

Receive 4 Products at $16 $12 12 +4*$16 $144

Deliver 10 Products

Receive 2 Products at $6
 Average
Operation Unit Cost QTY on hand Delta Value Inventory Value

0$ 0 0$

Receive 8 Products at $10 $10 8 +8*$10 $80

Receive 4 Products at $16 $12 12 +4*$16 $144

Deliver 10 Products $12 2 -10*$12 $24

Receive 2 Products at $6
 Average
Operation Unit Cost QTY on hand Delta Value Inventory Value

0$ 0 0$

Receive 8 Products at $10 $10 8 +8*$10 $80

Receive 4 Products at $16 $12 12 +4*$16 $144

Deliver 10 Products $12 2 -10*$12 $24

Receive 2 Products at $6 $9 4 +2*$6 $36

 FIFO
Operation Unit Cost QTY on hand Delta Value Inventory Value

0$ 0 0$

Receive 8 Products at $10

Receive 4 Products at $16

Deliver 10 Products

Receive 2 Products at $6
 FIFO
Operation Unit Cost QTY on hand Delta Value Inventory Value

0$ 0 0$

Receive 8 Products at $10 $10 8 +8*$10 $80

Receive 4 Products at $16

Deliver 10 Products

Receive 2 Products at $6
 FIFO
Operation Unit Cost QTY on hand Delta Value Inventory Value

0$ 0 0$

Receive 8 Products at $10 $10 8 +8*$10 $80

Receive 4 Products at $16 $12 12 +4*$16 $144

Deliver 10 Products

Receive 2 Products at $6
 FIFO
Operation Unit Cost QTY on hand Delta Value Inventory Value

0$ 0 0$

Receive 8 Products at $10 $10 8 +8*$10 $80

Receive 4 Products at $16 $12 12 +4*$16 $144

Deliver 10 Products $16 2 -8*$10 $32

-2*$16
Receive 2 Products at $6
 FIFO
Operation Unit Cost QTY on hand Delta Value Inventory Value

0$ 0 0$

Receive 8 Products at $10 $10 8 +8*$10 $80

Receive 4 Products at $16 $12 12 +4*$16 $144

Deliver 10 Products $16 2 -8*$10 $32

-2*$16
Receive 2 Products at $6 $16 4 +2*$6 $44
Let’s do it in
Odoo
Continental Vs
Anglo-Saxon
Note: DEBUG/Developer mode required!
Define your product
Category

99
Use case For
Costing Methods
● Receive 8 Products at $10
● Receive 4 Products at $16
● Deliver 10 Products
● Receive 2 Products at $6
 Let’s Check the
Inventory Valuation
Landed Cost
Enable Create Receipt Valuation
Enable Create Receipt Valuation
Enable Create Receipt Valuation
Enable Create Receipt Valuation
Inventory
Reports
 Stock Report
Check the quantity on hand, free to use, unit cost, total value, outgoing and incoming.

108
Move History
Report
Check movements history of the product

109
Locations Report
Check where is the product in your warehouse/inventory

110
 Forecasted
Report
Check the forecasted quantity for your product (On hand + Incoming - Outgoing)

111
Best
Practice
● Important for Warehouse Manager to create a to do list and track
s operations through the dashboard

● Used default operations first

● Add extra operation type for each type of operation in your warehouse
not reflected in the standard configuration
● Decide when to start tracking your products

● Set up alert mechanisms using the dashboard

Best
Practice
● Order of importance: Product Category > Stock Location > FIFO (default)
s
● Generic strategy at product category level or main location

● Case by case strategy at sub location level or for a specific product

category

● Use planned transfers as much as possible

● Negative quants are not a bad thing! BUT you should track them in the
inventory report and correct them through inventory adjustments
Best
Practice
● Endless possibilities, endless combinations BUT a single path should be
s applied for each product.

● Beyond this single path, foresee exceptions (manual procurement or

sales order line procurement).

● Keep routes simple

○ Don’t over complexify a flow: truly balance the additional time and
cost to handle an extra operation and the added tracking value you
get from the operation
○ Go step by step: manual operations first, routes second, reordering
rules third
Inventory Manag
ement
Thank You!
#Odoo /odoo

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