Understanding Time-Based Inventory Valuation (LIFO/FIFO)

Datastream 7i enables you to set up and initialize stock using the Last in first out (LIFO) and/or First in first out (FIFO) inventory valuation methods. LIFO and FIFO are both time-based price types. FIFO inventory pricing mandates that you will consume the materials purchased first before using the most recently purchased materials. LIFO pricing mandates that you will consume the most recently purchased materials before using the materials that were purchased first.

LIFO and FIFO are both storeroom price types that require you to set your pricing level on the store level. Pricing level is defined by the PRICELEV installation parameter, which must be set to S for store-level pricing.

Datastream 7i enables you to set LIFO or FIFO as your pricing method for each store created on the Stores form (SMSTOR); however, you can still modify price types for parts within a LIFO/FIFO store using a price type other than LIFO/FIFO, e.g., average price, last price, or standard price. The default Price type for a store is determined by the PRICETYP installation parameter.

You can set PRICETYP on the Installation codes form (BNINST); however, the parameter only determines the default price type that Datastream 7i automatically displays for Price type when you are creating a store on the Stores form (SMSTOR). You can modify the price type for each store as necessary.

After setting your price level, price type, and initializing stock, you can revalue parts in store using the Stock revaluation form (SNREVS).

When you create stock with any price type using the Parts form (SMPART), the Stock in bins form (SNSTBN), the Rapid entry of stock items per store form (SDREST), and the Equipment form (OMOBJC) (for equipment defined with In store status), Datastream 7i updates the R5BINSTOCK table with the increase in quantity, and it also creates a receipt transaction in the R5TRANSACTIONS and R5TRANSLINES tables. You can view the receipt transaction on the Receive goods form (SMRECV). Because all receipt transactions require a supplier, Datastream 7i automatically inserts an asterisk (*) as the supplier for the receipt, and the default description for each of these receipt transactions is ‘Stock initialization.’ If you are using LIFO/FIFO as your pricing method, Datastream 7i also creates a record for all stock initialization in the R5FIFO table to ensure that Datastream 7i uses the appropriate price for all future issues of stock items from stores.

The R5FIFO table stores the part, price, quantity, store, and transaction date for each receipt transaction, as well as the purchase order and purchase order line for all LIFO/FIFO stock received from a purchase order. The transaction date indicates the date the stock is inserted into inventory upon which future LIFO/FIFO transactions are based. For every transaction that increases stock, Datastream 7i inserts a new record in the R5FIFO table. For every transaction that decreases stock, Datastream 7i locates the appropriate record(s) to update or delete based on the transaction date. For FIFO pricing, Datastream 7i locates the record that was inserted into inventory first. For LIFO pricing, Datastream 7i locates the record that was most recently inserted into inventory. You can view transaction information stored in the R5FIFO table on the Stock value page of the Stock form (SMSTOC).

Datastream 7i revalues the price of materials based on LIFO/FIFO pricing as transactions involving stock occur. Datastream 7i displays the current price for LIFO/FIFO stock in Next issue price on the Stock page of the Parts form (SMPART). Datastream 7i also displays the current/next issue price for each record in Price on the Stock value page of the Stock form (SMSTOC). Datastream 7i sorts the records displayed on the Stock value page based on LIFO/FIFO pricing. The first record displayed on the Stock value page will always be the next record to be issued, and the Price for each record will always be the next issue price for that record.

FIFO pricing is used in the examples for each of the following scenarios. If you are using LIFO pricing, Datastream 7i handles LIFO pricing for each example in the same manner; however, Datastream 7i locates the record that was inserted into inventory most recently to calculate the appropriate price, rather than locating the record that was inserted into inventory first.

LIFO/FIFO affects many Datastream 7i functions, and some sections in the user documentation apply only to LIFO/FIFO. In these cases, "(LIFO/FIFO)" appears next to the text to indicate that this functionality applies only when you are using LIFO/FIFO as your pricing method.

Refer to the following topics for information on time-based inventory valuation (LIFO/FIFO).

> Understanding Time-Based Inventory Valuation (LIFO/FIFO)