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concepts related to items in inventory management

Jun Wang Profile Picture Jun Wang 4,262 Super User
When comparing NetSuite to other ERP solutions like Business Central, it's essential to understand how they approach inventory management differently. While Business Central primarily categorizes items into item, non-inventory item, and service item, NetSuite takes a more nuanced approach by dividing concepts further.
The analysis below highlights the distinctions between Assembly, Kit/Package, and Item Group within NetSuite's inventory management system, offering examples to illustrate each category:


 Assembly
- Members Can Include: Inventory items, non-inventory items, assemblies, service items, other charges.
- Pricing: The item price is independent of its members' prices.
- General Ledger Accounts: Identifies separate COGS, income, and asset accounts from its components' accounts.
- Inventory Impact: Building an assembly decreases the asset accounts of member items and increases the asset account of the assembly.

Example: A bicycle assembly. When creating a bicycle, various parts like the frame, wheels, and gears (inventory items), along with labor (service item), are combined. The price of the completed bicycle assembly can be set independently of the cost of each individual part. In accounting, costs from different parts are rolled up into the finished assembly's cost, and once assembled, the inventory asset value increases for the bicycle while decreasing for the individual components.

 Kit/Package
- Members Can Include: Inventory items, non-inventory items, assemblies, kits, service items.
- Pricing: The item price is independent of its members' prices.
- General Ledger Accounts: Able to identify a separate income account.
- Inventory Impact: Fulfilling a kit decreases the asset account of member items and increases the asset of the kit.

Example: A computer starter kit that includes a laptop (inventory item), a laptop bag (non-inventory item), antivirus software (service item), and a pre-assembled component like a mouse (assembly). The kit can be priced at a bundle rate, regardless of the individual cost of each item. When sold, the income can be tracked in a separate income account for kits, and inventory assets are reduced for each component while increased for the overall kit.

 Item Group
- Members Can Include: Inventory items, assemblies, kits, service items.
- Pricing: The item price is dependent on its members' prices.
- General Ledger Accounts: No account designation available.
- Inventory Impact: Fulfilling a group decreases the asset account of member items.

Example: A gift basket that includes a variety of goods such as chocolates, wines, and cheeses (inventory items), and maybe a corkscrew (assembly). The price of the item group will be the total of all the members' prices. In accounting, there is no separate account designation for the group; it's a direct summation of the individual items' values. When the gift basket is sold, the inventory assets for each individual item are reduced.

By understanding these different types of items in NetSuite, businesses can manage their inventory more effectively, set prices in alignment with their strategy, and keep their general ledger accurately reflecting their operations.

 

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