Physical Inventory Process in SAP

              Physical inventory is a process of determining that the inventory quantities are exact, or if there are differences in quantity mentioned physically presently and that mentioned in the SAP system. Basically, after you are finished with physical inventory, your system and physical stock levels must be the same.                  

                     Your Enterprise carries out a physical inventory for a particular key date. In this process, you check the stocks of material in the storage locations,counting the quantities in unrestricted-use stock as well as those in blocked and quality inspection stock.

                      In some cases, you manually enter the physical inventory documents in the system, but you use the batch input function for most materials. If there is any doubt about a count result,you initiate a recount.

It is mandatory for legal reasons, and in the most of the times it is conducted once a year.

                              In the SAP system, a physical inventory can be carried out both for a company’s own stock and for special stocks . Inventory for a company’s stock and for special stocks (such as consignment stock at a customer, external consignment stock from the vendor, or returnable packaging) must be taken separately (in different physical inventory documents), however.

                             Note that the blocked stock returns and the stock in transfer cannot be inventoried. If these stocks are still to be counted in a physical inventory, you must transfer post these stocks to other stocks capable of inclusion in a physical inventory.

The stock in a warehouse can be divided into stock types. In the standard system, a physical inventory can be carried out for the following stock types:

·         Unrestricted-use stock in the warehouse

·         Quality inspection stock

·         Blocked stock

Physical Inventory Procedures

Periodic inventory: Most of the time companies use this kind of inventory. In most cases, it is done once a year, and this kind of inventory is called an annual physical inventory. That means that material stock is counted once a year. Most of the times at the end of the year or after the season ends (in seasonal industries).

                             In a periodic inventory, all the enterprise’s stocks are physically counted on the balance sheet key date. Every material has to be counted. During counting, the entire warehouse must be blocked for material movements.

Continuous inventory: All materials are counted at some point in the year, but that can be at any day appointed for. So we can count some material in February, others in April and so on. A single material can be counted on a single date. This type of inventory is mainly utilized in warehouse management based warehouses, but it can be done in inventory management too.

                                    In the continuous inventory procedure, stocks are counted continuously throughout the entire fiscal year. In this case, it is important to ensure that every material is physically counted at least once during the fiscal year.

Cycle counting: This type of inventory allows us to set a period for regular intervals for physical inventory on the material level. So a fast moving and high value material can be counted four times a year, while slow moving and low value material can be counted once a year. The indicator for this is set in material master in the Plant/Storage Location 1 View, in the field

 Inventory sampling: Only a number of randomly selected materials are counted on the balance sheet key date, and if those materials show small enough differences, the other materials can also be considered to have a correct stock levels. Not really used that often, as it is essentially an approximation, but in some cases it can be used if material and warehouse structure imply that.

At which level Physical inventory is carried out?

1. Material

2. Plant/storage location

3. Batch

4. Special Stock

5. Stock type

(These levels are called stock management unit. These are all an IM level. At the WM level physical inventory is carried out at storage type and storage bin level)

Independent of the physical inventory procedure, the physical inventory process can be divided into three phases:

1. Physical inventory preparation

This includes creating a physical inventory document, blocking materials for posting, as well as printing and distributing the physical inventory document.

2. Physical inventory count

Firstly, the stocks in the warehouse are counted and the count results are entered in the count list. These are then transferred from the count list to the system in the step “enter physical inventory count”.

3. Physical inventory check

Using the list of inventory differences, you can check variances in the stocks. You should check whether the transferred count result is correct (change count) or whether you want to initiate a recount.

If the difference is accepted, it is posted and stock is corrected.

 (*)Differences are to be posted in this posting period.