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SystemField Inventory & Supply Chain

Distributor Channel Inventory Reconciliation

Channel inventory reconciliation that reads each distributor's monthly report as it arrives, balances every product family to what was shipped, and drafts the returns reserve for country finance and the controller to sign.

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Follow one Spanish report to a signed reserve ↓
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The problem

A quarter-end stocking order looks like hospital demand to planning

Trauma and spine implants outside the home market go through independent distributors. Each sends a monthly stock and sales report in its own language, layout and codes: a Spanish PDF, a German spreadsheet, an EDI file, a table pasted into an email. An analyst retypes it, guesses at the new codes, and writes off what does not balance as timing.

Meanwhile the quarter-end stocking order with a right of return is booked as revenue, and planning reads it as demand. The over-stock shows up when the plates come back, after the quarter has been reported.

Built forCountry finance managersDistributor managersDemand plannersInternational controllers

The Problem Today

A quarter-end stocking order with a right of return looks like revenue until the distributor returns it.

14,400
Distributor reports each year at a large device maker our estimate
2 hours
To retype and balance one report by hand our estimate

Four files, lined up by hand

  • Stock sheet
  • Invoices
  • Agreement
  • Code list
  • Codes retyped every monthEach distributor names the same plate its own way
  • Orders read as demandA stocking order looks like hospital sales

The Solution

  1. Read as it arrivesAny language and layout, each line matched to a product code
  2. Balanced to sell-inOpening plus sell-in, less sell-out and returns, against reported
  3. Over-stock and its causeMonths of stock against the agreement, and the order behind it
  4. Two people signCountry finance signs the reserve; the controller countersigns

Built-in controls

  • No signature until each proof is opened
  • Messages to distributors use approved wording
  • Held lots never count as sellable stock

What You Get

Each country closes the quarter knowing what its distributors really hold, and what may come back.

846 hrs
A year of reading and balancing back, across 47 distributors our estimate
  • True sell-out to planningHeld lots and unconfirmed codes kept out
  • Reserves drafted before the closeEach return right priced while the quarter is open
  • Differences proved by paperEach unit explained by a document or asked about
Working day four of the close

Channel inventory for one monthly report, the morning reserves are due

Reserves for the quarter must be signed by tomorrow at 17:00. Of 47 distributors, 31 reports balance, 6 do not, 6 are late, and 4 have arrived unread. One of those is a Spanish PDF uploaded at 06:58.

demoSample data throughout: the distributor, its hospitals, the people, the plates and each figure.

  1. 0109:10

    47 distributors on one strip; the plate distributor's report is unread

    Country finance manager

    The strip across the top shows each distributor's report as read and balancing, read but not balancing, arrived but unread, or late. The plate distributor's monthly report sits open as it arrived: four pages in Spanish, local codes and names, lots and expiry dates. Nothing has been read yet.

  2. 0209:10

    212 Spanish lines read in place, each matched to a product code

    Country finance manager

    The agents lay their reading over each line: the product code with a confidence, the quantities picked out, which stock is on consignment, which lot is on quality hold. Three local codes are new this month. One of them could be a curved or a straight plate, and the screen says so rather than choosing.

  3. 0309:12

    174 plates differ; 166 are explained by a document and 8 are asked about

    International controller

    Opening stock plus sell-in, less sell-out and returns, comes to 9,670 plates against 9,496 reported. The gap breaks into 120 in transit with a proof of delivery, 46 moved to consignment at two hospitals, and 8 adjusted on page two with no reason. Those 8 become a question, in approved wording, that only the distributor manager may send.

  4. 0409:14

    4.1 months of plates on hand, against an agreement maximum of 2.5

    Country finance manager

    Months of stock is the stock the distributor owns over its average monthly sell-out for the last three reports. Screws sit at 2.4 and spine at 2.3, both under the line. The plates are well over it, and a month earlier they were not. Something arrived in the last days of the quarter.

  5. 0509:15

    3,870 plates ordered in the quarter's last days, worth $1,199,700

    Country finance manager

    The order behind the over-stock was placed and invoiced in the last ten days of the quarter, which is exactly what the agreement's return clause covers. Without it, the plates would sit at the maximum. The order, the invoice and the proof of delivery open from the same callout.

  6. 0609:16

    A drafted reserve of $310,000 for 1,000 plates the distributor may return

    Country finance manager

    The reserve works forward to the end of the return window: stock owned, plus the distributor's planned orders, less forecast sell-out, less the maximum it may hold then. The answer is a plate count, priced at the order's average. Each step opens a proof tab, and the screen says the figure rests on the distributor's own planned orders.

  7. 0709:17

    She reads all five proofs to the end before she can sign

    Country finance manager

    The sum, the stock balance, the order with its clause, the forecast and the distributor's return history each count as read only after time on screen. With all five read, she signs in her own session with a reason. At $310,000 the reserve is over the countersignature line, so it moves to the controller.

  8. 0809:19

    The controller reads the same proofs in her own session and countersigns

    International controller

    Her reading is counted apart from the first signer's. Nobody signs twice, and a send-back would clear both signatures and mark the evidence pack unsigned. Once she countersigns, the entry posts: revenue down by $310,000, a refund liability up, and $74,000 as an asset for the plates expected back.

  9. 0909:25

    Planning gets sell-out; 36 plates on quality hold stay out of sellable stock

    International controller

    The feed sends what hospitals actually used, by product, instead of what was shipped. A proximal humerus lot on quality hold is counted in the distributor's stock but kept out of sellable stock. Codes not yet confirmed go at family level only. The feed then waits for the demand planner to accept it or send it back.

How 9,662 plates on hand become a reserve for 1,000

The reserve works forward to the last day the distributor may return the order.

Plates the distributor owns at quarter end9,496 reported, plus 120 in transit and 46 on consignment9,662
Plus its own planned orders for the next three months3,696
Less forecast sell-out to the end of the window− 6,650
Expected stock on the last return day6,708
Less the most it may hold then2.5 months of forecast sell-out− 5,708
Plates it may returnUnder the 3,870 the order allows1,000
Refund liability at $310 a plateWith $74,000 as an asset for the plates expected back$310,000

demoSample data, from the working solution.

Around the close

Codes, terms and the network behind channel inventory reconciliation

What the distributor manager, country finance and the distributor itself see on the other screens.

47 distributorsEach distributor by country, language, format, arrival and months per family, with the 31 reports that balance waiting to be accepted as one sampled batch.
Local codesThe three new code matches with their confidence and units, waiting for the distributor manager. A person confirms each one after opening it.
Agreement termsThe clauses that change revenue, cited: the right to return quarter-end orders, price protection and maximum stock.
Arriving and lateReports that arrived but are unread, and late ones with reminders drafted in approved wording. Changed wording would go to compliance first.
The distributor's viewThe distributor sees its own reconciliation and the lot hold notice, with the eight plates still unexplained. No reserves, terms or other distributors.
Audit trailReadings, code matches, both signatures and the posting, each with who, why and the session, ready to export.

demoSample data, from the working solution.

What a spreadsheet reconciliation would have written off as timing

All three turn up in this month's sample report, on the screens above.

Eight plates with no reason

A count adjustment on page two, line eleven. They stay out of the stock the distributor owns until it answers with a document.

A code that could be two plates

One new local code reads as a curved plate at 58% or a straight one at 31%. Only straight plates shipped that month, and a person decides.

A held lot counted as sellable

Thirty-six plates sit on quality hold. They count as the distributor's stock and stay out of what planning may sell.

demoSample data, from the working solution.

Who reads the reports

Seven agents read and balance, and none of them posts or signs

They read, match, balance and draft. People confirm, sign and send.

Report reader

Reads each report in its own language and layout, with page and line.

  • Never guesses an unreadable cell
  • Takes stock fields only
Code mapper

Matches local codes and proposes new ones with confidence and the other possibility.

  • Never confirms a new match
Stock balancer

Balances opening, sell-in, sell-out and returns against reported, and works months of stock.

  • Never changes a reported figure
Difference finder

Explains differences only with documents and drafts the question.

  • Never writes off a difference
Agreement terms reader

Marks return rights, price protection, maximum stock and quarter-end orders, citing the clause.

  • Never decides the accounting
Reserve drafter

Drafts the returns reserve with its sum and sources.

  • Never posts
  • Never signs
Planning feed writer

Sends accepted sell-out to demand planning.

  • Never sends sell-in as demand

What country finance teams ask about channel inventory reconciliation

What is channel inventory reconciliation?

Channel inventory reconciliation checks what a distributor says it holds against what the maker shipped it, less what it sold and returned. Here each report is read as it arrives, in its own language, and each product family is balanced with the differences explained by documents.

Does it decide the accounting for a right of return?

No. It drafts the reserve with its sum and the clause behind it. Country finance signs, and the international controller countersigns large ones. Nothing is posted to the ERP by an agent.

What if the distributor's report is in another language or format?

It is read in place as it arrived, whether a PDF, a spreadsheet, an EDI file or an email table. Each value keeps its page and line, so a reader can check it against the original.

How are new local product codes handled?

The code mapper proposes a match with a confidence and the other possible code. The distributor manager confirms it after opening it. Until then, sell-out for that code goes to planning at family level only.

Can we write off a small difference as timing?

Not through an agent. Each unit is explained by a document or turned into a question. A wider tolerance for unexplained units is a settings change that waits for the controller's signature.

Does the distributor see our reserves?

No. The distributor's portal shows its own reconciliation, notices and questions. Reserves, agreement terms and other distributors stay on the maker's side.

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Send us one distributor report
and that month's invoices.

We will balance it to sell-in and show what the distributor really holds.

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