A SCM perspective to the Intercompany functionality

“Intercompany resides in the Financial Management series in NAV”. “IC is designed for those users who control multiple business entities to separate accounting processes”. “User can enter intercompany transaction Information only once in the appropiate documents”. “Users of previous versions of the product needed to re-key all Information manually for all companies and transactions”.

All the above are excerpts from IC White paper. So, this is nothing I am trying you to evangelize you about.

And, that is what my blog is about: if you are a SCM individual, Intercompany needs to be understood as an “administrative” functionality to copy documents/transactions from one side (one IC company) to the other. This will reduce errors when manipulating orders and transactions. Good enough. But, our standard SCM processes should not change here. We still need to have those independant. Some examples:

  • Variants: One company might use variants, the other might not. Or, one IC company (the main warehouse) might have unified or agreed naming around “Item No.”. But, this does not mean all other companies follow the same naming. As company B in IC, I might want to get different item codes for each íiem+variant since that is a different manufacturing process in my side.  Or, I might only have that item+variant in my other IC company and don’t need to define it. Or, I might have different naming convention in this company B since it is what makes sense on my business. This is why NAV is not transferring the variants by default. However, we still have functionality to offer: cross-reference functionality. If you use this, you can define what is the Item No. that your other IC company (which is a vendor/Customer here). That will work.
  • Unit of measure: same thing applies here. We might have different UOMs on each different company. Use cross-reference.
  • Locations: sometimes we are requested to transfer locations which are set on a IC order. As an example, if I set my IC purchase order for location WHITE, it means I am expecting to receive the ítem in location WHITE. And, your vendor might send this ítem from different locations … and this is the vendor internal processes to define what location this needs to be sent to. So, if you are just copying the location, it means that one IC company is buying an ítem expected to be receive in WHITE location and the other IC company will ship the same ítem from same WHITE location. From a standard and generic processes, this might not be valid in the majority of the scenarios. We might have a central warehouse (WHITE, IC company A) which is shipping to the subsidiaries (BLUE, IC company B). That is why SCM BUSINESS process might still be independant and not to copy the locations.
  • Planning: we cannot interfere our planning with IC. We might want to transfer data from one IC company to the other to try to commit to that. But, this is not valid for all fields. An example is “Promised Receipt Date” in Purchase Order. We cannot expect that if are filling this, that IC will transfer to the sales order as “Promised Delivery Date”. Who should promise and commit this order? The vendor. And, vendor’s company has a sales order to promise. We can use Order Promising functionality here and might want to copy this into the purchase order of the other IC company. But, not the other way around.

Thus, Intercompany is about avoiding re-entering order data and transactions. But, it is not to avoid what your BUSINESS is about. If you need to promise an order or if you need to define cross-references, you still need to promise the order or still to define cross-references. IC is not to replace this. 

This is the reason why Intercompany White paper provides the following note: “There are certain restrictions applying to the items that can occur in inter-company transactions. Not all item information can be transferred between companies. Variant codes, unit of measure, and location, for example, cannot be transferred. You need to add manually the location information to any document lines that require it … You can use several different methods for mapping item numbers between companies: When item numbers are the same, if Common number from the e-commerce tab on the Item Card is to be used, or if the Vendor Item Catalog is to be used to map item numbers, Intercompany Postings assumes that variant codes and units of measure are the same for the item in both companies. If you need variant codes, use the Cross-Reference functionality”. So, this is not to be seen as a limitation but to ensure businesses processes in IC companies are still independant.