Cross-Subsidiary Fulfillment

Background

Cross-Subsidiary fulfillment is a NetSuite feature available on OneWorld accounts. Once the functionality is enabled, you will have the possibility to fulfill sales orders and receive returns across multiple subsidiaries.Therefore, an order made in the original subsidiary can be sent to different subsidiary at the moment of the fulfillment. It means that you will be able to fulfill sales orders not only from locations belonging to the original subsidiary but also from all the other locations present in your NetSuite environment. If you encounter a shortage of stock for a certain item in the original transaction subsidiary locations, it will be possible to select a location from another subsidiary where some stock is still available.Moreover, this feature allows you to choose more than one location per transaction. It means that a sales order can be fulfilled from locations in multiple subsidiaries and not only one as it is the case when the Intercompany Cross Subsidiary Fulfillment functionality is not activated.Additionally, the return process is also impacted. You can indeed create a return material authorization (RMA) linked to one subsidiary and receive the transaction lines in multiple locations belonging to other subsidiaries.

Functionalities

Cross-subsidiary fulfillment setup

Before using the cross-subsidiary fulfillment functionalities, you will need to enable a couple of features on your NetSuite environment. To do so, log in to NetSuite with an administrator role (you might be able to do it with another role, depending on its permissions). Then, go to Setup > Company > Enable Features. Under the Items & Inventory subtab, check the Multi-Location Inventory and Intercompany Cross-subsidiary Fulfillment boxes.Note: we advise you to make this setup in a Sandbox/demo environment first.

Then, specify the Global Inventory Relationships (Lists > Supply Chain > Global Inventory Relationship). Global Inventory relationships are rules that automatically select the locations items should ship from.

On the sales order, the cross-subsidiary fulfillment feature will make available two new fields on the item lines:

• Inventory Location
• Inventory Subsidiary

Cross-subsidiary fulfillment walkthrough

The first step is to create a Sales Order (Transactions > Sales > Enter Sales Orders).In this example, we are using a customer belonging to the United Kingdom subsidiary. As you can notice, there is no inventory available in the location (London) for the item in question.

Therefore, you need to find another location where the item is available. The cross-subsidiary fulfillment feature allows us to choose a location (Dublin) belonging to another subsidiary (Ireland).

Now that you have a sales order with available inventory, you can fulfill the sales order (click on the Fulfill button).On the Item fulfillment generation page, review the relevant information and select the items you wish to fulfill. Then, click Save.

Looking at the GL impact on the item fulfillment, you will notice that NetSuite debits the cost of goods sold and credits the inventory. The cost of goods sold are recognized on the subsidiary where the order ships from and not on the subsidiary where the subsidiary was originally placed.

After fulfilling the order, you will be able to bill it (click on the bill remaining button on the sales order).Note that the invoice takes place on the original subsidiary and location. Review the information on the invoice and save it.

Looking at the GL impact on the invoice, you will see that the trade debtors account is debited and the revenue account is credited. If any VAT was set up, the VAT account will be credited.

Cross-Subsidiary Charges

You now have revenues in the subsidiary (United Kingdom) where the sale order was placed and costs in the subsidiary where the goods were shipped from (Dublin). Therefore, intercompany cross charges take place.To use the standard intercompany cross charges functionality, go to Transactions > Financial > Manage Intercompany Cross Charges.You will then see the list of transactions ready to be cross charged. You will have the opportunity to generate those using the Generate Transactions button.

Once your Cross Charge Workbench is empty, go to your journal list (Transactions > Financial > Make Journal Entries) and find the cross charge journals (Filter the Type to Cross Charge Journal).Note that one cross charge journal per subsidiary involved in the transaction is created.One the one hand, a cross charge journal will be created to recognize revenues in the subsidiary that fulfilled the sales order. One the other hand, a journal will be generated to recognize costs in the invoicing subsidiary.The Cross Charges Workbench is a standard Cross Charges NetSuite process that generates Journal entries for the recognition of intercompany costs and revenues. At Novutech, we can build customized cross charging processes (created via scripts) that generate intercompany invoices and bills. If you wish to recognize cross charges directly on invoices and bills instead of journal entries, do not hesitate to reach out to us.Note: before using the intercompany cross charges, you should set up the NetSuite intercompany features.

Conclusion

The Cross-subsidiary fulfillment feature enables your NetSuite account to handle sales orders and returns across multiple subsidiaries. In other words, you will not be limited to fulfill your sales orders from a location belonging to the originating order subsidiary. Regarding the recognition of your intercompany cross charges, Novutech offers the possibility to customize your process according to your needs. Do not hesitate to reach out to us and visit our website (https://www.novutech.com/) for more information.

In short

• You will have the opportunity to fulfill sales orders and order returns across multiple subsidiaries.
• Novutech offers a custom-made process to recharge, via a set of predefined rules, the right amounts from one subsidiary to another one with intercompany bills and intercompany invoices (and not cross charge journal entries, as the standard functionalities would do).

Prerequisites: OneWorld NetSuite account & Intercompany setup (cross-subsidiary charges).