A Bill of Material or a shop order can include items whose on-hand quantities are not tracked in inventory. These items are referred to as Non-stock items in the Stream System. Non-stock items are items that are considered to be available at all times.
Sales or Shop Orders Lines for Non-stock items are completely allocated to as soon as the lines are created. The quantity of a non-stock item is not adjusted by the system when the item is sold, consumed, or received. The value of nonstock items (if a cost has been specified for them) is not included in the Inventory or the WIP sub-ledger or general ledger totals, and for that reason, non-stock items with a cost must be assigned to product lines that are set up specifically for non-stock processing.
Non-stock items are typically set up to deal with items that do not physically exist like internal labor (you can bill hours of assembly department labor without first “purchasing” the labor), and they are also used for items that are not worth tracking in inventory. Some consumables like screws, tape, or literature, may have a small enough cost (or may be purchased in such a large quantity – like 1000 ft of tape or 10000 screws) that it is not practical to track the item in the system. This type of consumable item can be set up as non-stock to tell the system to just allocate the item whenever it is used. When this type of situation is set up, the non-stock components need to be ordered manually as the system will not automatically suggest reorder (it does not track the quantity and cannot tell when you need to re-order the item).
When non-stock consumable items are purchased, they are normally expensed or directly charged to the appropriate account (this would be an account like production supplies for consumables). An item like internal labor would not be purchased at all and the cost of the labor would be recognized as payroll costs were booked into the system.
When a non-stock item is entered on a shop order, the following rules apply.
• The non-stock item will be fully allocated when the order is entered. The schedule date is not used when allocating non-stock items as the item is always considered to be available.
• The non-stock item will be printed on the pull ticket for the shop order and should be pulled along with the other items for the order (this makes more sense for consumables since you would not pull internal labor - you would just do the actual assembly work).
• The cost of the non-stock item (if any is defined in the item), is automatically added to the cost of the top level item being produced when the shop order is completed. Since the non-stock component is not tracked in the inventory system, the effect is to increase your finished goods inventory and reduce your expenses for labor or production consumables. You are essentially converting an expense or cost into inventory. The system will automatically post a journal entry to record the increase to the inventory resulting from this conversion, and this is one of the reasons that the product line on each non–stock item needs to be set up properly. If the labor product line points to an Internal labor billed out account (a contra payroll account), and the production consumables product line points to a production supplies cost or expense account, then the system will be able to increase the inventory account and decrease the appropriate expense or cost account each time the non-stock items are converted into finished goods inventory.