Independent IFS Cloud practice · Inventory and finance design
Know whose stock is in the building before anyone values it
IFS Cloud part ownership is, in the words of the IFS documentation, the identification of the type of ownership combined with an owner for a specific quantity of a part. Stock in the building is not always the company’s stock. If the ownership type is set wrongly, value is booked that does not belong to the company, or stock that the company owes is missing from the books. This article describes system behaviour as the page states it. Which accounting treatment applies is a decision for your finance function and your auditors.
Key takeaways
- The page lists seven ownership types, not four: company-owned, company rental asset, consignment, supplier-loaned, supplier-owned, supplier-rented and customer-owned.
- Ownership is kept for a quantity in an inventory location, so the same part can have different owners in different locations.
- Accounting transactions are created for company-owned and consignment stock. For supplier-loaned and customer-owned stock the page states that none are created and that the inventory value is zero.
- Ownership on a purchase order line must match at receipt and cannot be changed at receipt.
- Consignment stock becomes company-owned when it is consumed, shipped or moved to a new location.
- The test table has one scenario per behaviour the page describes, with an owner for each.
1.Which ownership types exist and how does each behave?
IFS Cloud lets you handle the same part number in inventory as company-owned stock, company rental asset stock, consignment stock, supplier-loaned stock, supplier-owned stock, supplier-rented stock and customer-owned stock. The table gives what the page says about the four types whose behaviour it describes in detail, and about the temporary supplier-owned type.
| Type | What the page says | Accounting effect on the page |
|---|---|---|
| Company owned | The default setting for a part’s ownership type | Accounting transactions are created for the inventory transactions, because the parts affect inventory value |
| Consignment | The company will eventually purchase the material, using an existing purchase order, when the stock is used or sold | Accounting transactions are created |
| Supplier loaned | On loan until the equivalent item that is being repaired by the supplier is returned | Accounting transactions are not created; zero inventory value |
| Customer owned | The material will be transformed (maintained, repaired, overhauled, or used as a component) and eventually returned to the customer | Accounting transactions are not created; zero inventory value |
| Supplier owned | A temporary ownership between the arrival and the receipt into stock, if the Ownership Transfer Point is set to Receipt into Inventory | See the section on postings below |
Company rental asset and supplier-rented stock are the two remaining types in the list. For them, read the page before you design, because this article does not describe their behaviour beyond the list itself.
2.Where is ownership kept?
Ownership is kept per quantity in an inventory location, and the page states that the same part can have different owners if they are kept in different inventory locations. The part ownership setting for a specific part in an inventory location applies only if the quantity of that part is greater than zero.
An inventory location cannot keep stock with different ownership types or owners for the same part. The page names a site option, Allow Multiple Owners for Inventory Part on One Location, which changes this when it is enabled. That option is a design decision, so decide it with the warehouse team and not by default. The location model is covered in warehouse structure design in IFS Cloud.
3.What does each type mean for value and accounting?
The page states that postings for the transactions are only created when they relate to company-owned or consignment parts. Stock of the other types does not create postings under that statement, and supplier-loaned and customer-owned stock additionally carry a zero inventory value.
This is the point at which finance and the warehouse have to agree. A consignment part creates accounting transactions, while a customer-owned part is physically in the building, creates none and carries a zero inventory value. Finance decides what that means for the books. The way business events become ledger entries is covered in posting control in IFS Cloud, and valuation in inventory valuation methods and cost levels. Neither is repeated here. Monitoring consignment stock that never reconciles is a separate topic.
4.How does ownership enter the system through requisitions, purchase orders and receipt?
Purchase order lines for order codes 1 and 5 (Normal and Express Order) allow you to specify all ownership types, and for supplier-loaned, supplier-rented and consignment stock the owner will be the supplier on the purchase order. The ownership and owner of the material received must match the part ownership on the purchase order line at the time of receipt, and the part ownership of the material cannot be changed at the time of receipt.
Purchase requisitions are narrower. All purchase requisitions allow only Company Owned and Company Rental Asset ownership types, except when created by a process that supports additional types. A buyer who needs consignment stock therefore sets the ownership on the order line, because a standard requisition does not allow it.
The design consequence is that the ownership decision happens at the purchase order line; ownership must match at receipt and cannot be changed there. The receipt itself is covered in goods receipt, inspection and put-away in IFS Cloud. Tracked parts add lot and serial numbers to the same step, as described in lot and serial tracking decisions in IFS Cloud.
5.What happens to ownership when stock is used, moved or counted?
Consignment stock is purchased and becomes company-owned stock when it is consumed, shipped or moved to a new location. You cannot move consignment stock via transit without transferring ownership. A transfer of ownership is initiated from the Inventory Part in Stock page, and the page lists transfers that are not allowed, among them consignment to any type of ownership other than company-owned.
Other functions limit which ownership they accept:
- Demand: demand for a company-owned part must be fulfilled (reserved, picked, issued, shipped) with a supply that is either company-owned or consignment.
- Planning: planning is available only for company-owned and supplier-owned supply, demand and inventory.
- Counting: you can exclude different types of ownership from the count report, and counting differences are handled differently for consignment stock.
- DOP and RMA: use of externally owned stock is not allowed in DOP, and RMAs are only allowed when the ownership is Company Owned.
The shipment side of moving stock is described in shipment order in IFS Cloud.
6.Which design decisions belong to finance, purchasing and the warehouse together?
Three groups each own a decision, and none can take the others’ decisions for them. Finance owns the accounting treatment of each type. Purchasing owns the ownership specified on the purchase order line, because the line is where ownership enters. The warehouse owns the location layout, including whether a location may hold more than one owner for the same part.
Opening stock needs its own decision: whether stock that is on a supplier’s consignment at go-live is loaded with an ownership type and owner, and how. The plan for that belongs in the IFS Cloud data migration plan and in the data migration checklist.
7.How do you test ownership before go-live?
Test ownership with one scenario for each behaviour the page describes, and write down the expected value and postings before the scenario runs.
| Scenario | Expected result | Owner |
|---|---|---|
| Receive consignment stock against a purchase order line | Ownership and owner match the order line; postings are created | Buyer and finance |
| Consume consignment stock | The stock becomes company-owned | Warehouse lead and finance |
| Receive supplier-loaned stock | Zero inventory value and no accounting transactions | Finance |
| Receive customer-owned stock | Zero inventory value and no accounting transactions | Finance |
| Place two owners of one part in one location | Not possible unless the site option for multiple owners is enabled | Warehouse lead |
| Change ownership at receipt | Not possible; ownership must match the order line | Receiving clerk |
8.What does an ownership design checklist contain?
An ownership design is ready for go-live when each of the checks below has a document behind it.
- The ownership types the business uses are listed, with the seven types of the page as the reference.
- Finance has written down the accounting treatment of each type in use.
- The site option for multiple owners in one location is decided.
- Purchasing knows that ownership is set on the purchase order line and cannot be changed at receipt.
- Opening consignment stock has a loading plan with type and owner.
- The count report excludes or includes ownership types by decision.
- The six test scenarios are recorded with evidence.
9.Frequently asked questions
What is part ownership in IFS Cloud?
Part ownership in IFS Cloud is the identification of the type of ownership combined with an owner for a specific quantity of a part. The IFS documentation lists seven types: company-owned, company rental asset, consignment, supplier-loaned, supplier-owned, supplier-rented and customer-owned stock.
What is the difference between consignment and supplier-loaned stock?
Consignment stock in IFS Cloud is supplier stock that the company eventually purchases, using an existing purchase order, when the stock is used or sold, and accounting transactions are created for it. Supplier-loaned stock is on loan until the equivalent item being repaired by the supplier is returned, and the page states that no accounting transactions are created and the inventory value is zero.
Does customer-owned stock count in inventory value?
No, according to the IFS Cloud documentation. Customer-owned stock is material that will be transformed (maintained, repaired, overhauled, or used as a component) and eventually returned to the customer. Accounting transactions are not created for it, and its inventory value is zero. Finance decides how the business treats this in its books.
Can the same part have different owners?
Yes, if the stock is kept in different inventory locations. An IFS Cloud inventory location cannot keep stock with different ownership types or owners for the same part, unless the site option Allow Multiple Owners for Inventory Part on One Location is enabled. Ownership for a part in a location applies only while the quantity there is greater than zero.
Who should decide the ownership model, finance or the warehouse?
Finance decides the accounting treatment of each ownership type in IFS Cloud, purchasing decides the ownership entered on the purchase order line, and the warehouse decides the location layout. The three decisions interact, because ownership set on an order line cannot be changed at receipt and postings are created only for company-owned and consignment stock.
10.About the author
Dariusz Myśliwiec: 18 years hands-on with IFS, including IFS Cloud. Based in Kraków, delivering remotely across Europe and globally through an independent practice. You talk to the consultant who does the work, not a sales layer.
IFS is a registered trademark of IFS AB; this practice is not affiliated with IFS AB.
Do you hold stock you do not own, and do the numbers show it?
An ownership-model review with finance and the warehouse covers the types in use, how ownership is set on purchase order lines and what happens at receipt and use.