Managing Customer Buyback with Working Loss in Dynamics 365/AX

Today we will dive into a specific use case we often encounter in the world of Plastics manufacturing.  Microsoft Dynamics ERP (whether it is Dynamics 365 for Finance and Operations or prior Dynamics AX versions) handles this business practice relatively well yet there are some gaps in the functionality which have been filled by the Ellipse Plastics product line.

The specific example involves the Customer Buyback transaction. A Customer Return is, of course, quite standard and fairly easy to complete, but what if the Customer buys an item to be consumed in a manufacturing or fabrication process as often seen in Plastics extrusion, and scrap is generated?  What if the scrap is valuable and can be purchased back from the Customer, to be used in the manufacturing process?  That resulting transaction is not a true return but rather a purchase from the Customer.

With this type of transaction, not only is the cost of manufacturing decreased, when the reclaimed material is used in place of virgin raw materials, but the environment benefits, as well!  It’s a win-win situation.

Naturally, 100% of the scrap purchased from the Customer is not recoverable.  During the process of regrinding or reclaiming, there is a Working Loss of some percentage which may be passed onto or shared with the Customer within the buyback transaction.

Here is how Ellipse Plastics manages this particular scenario.

Customer Setup

In the case of the Customer Buyback with Working Loss, the Working Loss default value can be set by Customer.

Working Loss Group

Working Loss can vary by item or groups of items, therefore the concept of a Working Loss Group has been created.

In addition, each Working Loss Group/Customer can be assigned a default working loss percentage by creating a Price/discount agreement journal.

Creating a Customer Buyback Order

A standard sales order is used to record the Customer Buyback, but an indicator has been added to the Sales Order creation form to activate in this situation.  This indicator sets the stage.

Using Item created specifically for the scrap material being purchased from the Customer, the Buyback order, is automatically populated at the line level, based on the Item, with the Working Loss Percentage from the Customer Working Loss Table first.  If a value is not found, the system will look next to the Customer Master for a Working Loss Percentage specific to that Customer.  If a value is still not determined, the system will use the Default value on the Working Loss Group.

The Working Loss Percentage is also used in calculating the Return Cost Price to insure the value of the inventory is properly stated upon receipt.

But there’s more!

There is also an Ignore Working Loss Indicator that enables the user, with proper access, to override the master data for a specific line item, when necessary due to special circumstances.  If the indicator is activated on the Customer setup, it will be activated on each line item on the Buyback Order.

Sounds exciting, doesn’t it?

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For more information please contact Ellipse Solutions at info@ellipsesolutions.com or by calling our corporate office at (937) 312-1547.