Solution to Integrate Packaging Materials into Inventory and COGS

1. Create Inventory Item:

• Navigate to Lists > Accounting > Items > New.
• Select “Inventory Item.”
• Enter the necessary details:
• Name: E-Packaging materials
• Item Number: 35-1090
• Cost: Enter the cost per unit of packaging.
• Save the item.

1. Adjust Inventory:

• Navigate to Transactions > Inventory > Adjust Inventory.
• Adjust the initial quantity to reflect the current stock of packaging materials.
• Ensure the adjustment is recorded with the correct cost to reflect the bulk purchase correctly.

4. Integrate Packaging Costs into COGS

Action: Link the packaging material cost to the cost of goods sold for each dog food bag.

Steps:

1. Create a Bill of Materials (BOM):

• Navigate to Lists > Accounting > Items > New.
• Select “Assembly/Bill of Materials.”
• Enter the necessary details:
• Name: Dog Food Package BOM
• Components: Add the dog food item and the packaging material.
• Save the BOM.

1. Set Up Work Orders:

• Navigate to Transactions > Manufacturing > Enter Work Orders.
• Create a work order that assembles the dog food with its packaging.
• Ensure that the cost of the packaging material is included in the total cost of the assembled item.

5. Process Implementation

Action: Implement a process to deduct packaging materials from inventory with each sale.

Steps:

1. Sales Order Processing:

• Ensure that each sales order for dog food deducts the corresponding quantity of packaging materials from inventory.
• Navigate to Transactions > Sales > Enter Sales Orders.
• Enter the details of the sales order, including the dog food item.

1. Inventory Impact:

• Upon fulfilling a sales order, the inventory for the packaging materials should be adjusted accordingly.
• Navigate to Transactions > Inventory > Fulfill Orders.
• Ensure the fulfillment process deducts the appropriate amount of packaging materials from inventory.

6. Training & Documentation

Action: Provide training and documentation for the new process to relevant staff members.

Steps:

1. Create Documentation:

• Prepare detailed documentation on the new process, including:
• Steps to create inventory items.
• Adjust inventory quantities.
• Link packaging materials to COGS.
• Process sales orders and fulfillments.

1. Conduct Training Sessions:

• Schedule training sessions with relevant staff.
• Demonstrate the new process using NetSuite.
• Provide hands-on training to ensure understanding and proper implementation.

Conclusion

This solution will ensure that the packaging costs are accurately reflected in the cost of goods sold for each dog food bag sold. It will also provide a more accurate representation of the business’s profitability and inventory levels. Implementing this process requires careful setup and training, but it will lead to more accurate financial reporting and inventory management.