Accounting for the cost of "robbed" (salvaged) parts from used /junk equipment

(Compliments of Jeff Taylor)


In the past our old parts manager created different items for the same part for new or used, and sometimes he did that for different manufacturers so he could track reliability. In the end nothing was ever tracked and we ended up with a bunch of duplicate parts. Nothing is more fun than having a tech call in to ask if we have an item, and having to search through all the different version of that item number. Royal pain actually. We discussed having all the salvage parts come in at no cost into a "salvage" warehouse so avg cost wouldn't be affected, but when you transfer the item to the tech warehouse for them to use it, avg cost ended up being affected then anyway. In the end we decided that if we were using salvaged parts we actually WERE affecting average cost because we had some parts that didn't cost us anything. That's basically the definition of average cost of parts / how many you have, so we ended up simply doing an inventory adjustment to bring them back into inventory at no cost. We also decided that once a machine was designated as salvage we stripped all the useful parts from it and adjusted them into inventory, then trashed the frame with anything remaining. 

Before this we had a wall of salvaged parts that only one of the techs could identify what the part was, and no record in inventory of what we had. Ended up buying parts we actually had on the shelf, so we then decided to get them all in inventory so we knew what was going on.

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