Allowing negative stock for posting in SAP

                       Allowing negative stock for posting in SAP is a critical configuration that should be approached with caution, as it directly impacts inventory accuracy and financial reporting. It's typically enabled for specific business scenarios where actual physical stock might be consumed before the goods receipt is formally recorded in the system (e.g., in highly automated production environments with backflushing, or certain consignment scenarios).

                It's generally permitted in very specific business scenarios where the physical consumption of a material occurs before its official goods receipt (GR) or inventory update is recorded in the system. The key is that while the system temporarily shows a negative balance, there's an expectation that the corresponding positive movement (like a GR) will follow shortly to correct it.

 Here's a detailed explanation of the necessary steps, configuration points and the levels at which these settings are applied:

Understanding Negative Stock Posting

When negative stock is allowed, the system permits a goods issue (GI) or consumption posting even if the physical stock in a specific storage location is zero or insufficient. This results in a negative quantity being recorded for that material in that storage location.

Levels of Configuration for Negative Stock

The ability to allow negative stock is controlled at three primary levels in SAP, with a hierarchy of precedence:

1. Plant Level: This is the highest level and acts as a general enabling switch. If negative stock is not allowed at the plant level, it cannot be allowed for any storage location or material within that plant.
2. Storage Location Level: This level provides more granular control. We can allow negative stock for specific storage locations within a plant, even if the plant itself generally disallows it (or if it's allowed at the plant, we can restrict it here). This setting overrides the plant-level setting for that particular storage location.
3. Material Master (Storage View 2): This is the most specific level. We can configure individual materials to allow negative stock, even if the plant or storage location settings might otherwise prohibit it. This setting overrides both the plant and storage location settings for that specific material.

Hierarchy of Precedence (from most specific to most general): Material Master (Storage View 2) > Storage Location > Plant

Necessary Steps and Configuration

Let's break down the configuration steps:

1. Configure at the Plant Level

• Purpose: To generally allow negative stock for a plant.
• Transaction Code: OBY6 (Global Parameters for Company Code) - Correction: This is for company code, not plant. The correct path is via customizing for plants.
• IMG Path: IMG > Materials Management > Inventory Management and Physical Inventory > Goods Receipt > Allow Negative Stocks
• Steps:

1.             Execute the IMG activity "Allow Negative Stocks".

2.             Select "By Valuation Area" (which is usually the Plant in most implementations).

3.             Find your Plant and mark the "Negative Stocks" checkbox.

4.             Save your changes.

• Note: If you enable it here, it means you can allow it. It doesn't mean it's automatically allowed for all materials/storage locations.

2. Configure at the Storage Location Level

• Purpose: To allow negative stock for specific storage locations within a plant.
• Transaction Code: OBY6 (Global Parameters for Company Code) - Correction: This is not the transaction. The correct path is via SPRO.
• IMG Path: IMG > Materials Management > Inventory Management and Physical Inventory > Goods Issue / Transfer Postings > Allow Negative Stocks in Storage Locations
• Steps:

1.             Execute the IMG activity "Allow Negative Stocks in Storage Locations".

2.             Select your Plant.

3.             For each Storage Location where you want to allow negative stock, mark the "Neg. Stock" checkbox.

4.             Save your changes.

• Important: This setting applies to all materials in that storage location unless overridden by the material master.

3. Configure at the Material Master Level

• Purpose: To allow negative stock for a specific material, regardless of plant or storage location settings (if they are more restrictive). This is typically used for specific materials that need this flexibility, e.g., materials used for backflushing in production.
• Transaction Code: MM01 (Create Material), MM02 (Change Material)
• Steps:
1. Go to MM02 (Change Material).
2. Select the material you want to change.
3. Go to the Storage View 2 tab.
4. In the "Plant data" section, under "Specific to plant/storage location", locate the "Negative stocks" checkbox.
5. Mark this checkbox.
6. Save your changes.

Pre-requisites and Considerations

• Understanding Business Requirements: Clearly define why negative stock is needed. Is it for backflushing, process efficiency, or managing specific scenarios like consignment?
• Inventory Reconciliation: With negative stock, physical inventory counts become even more crucial. You must have robust processes in place to reconcile negative book balances with actual physical counts.
• Financial Impact: Negative stock can complicate valuation, especially if you're using moving average price (MAP). If stock goes negative and then positive with a different price, it can cause material ledger inconsistencies.
• User Training: Ensure that users understand the implications of negative stock and how to manage it. They need to know that a negative balance in SAP means there's a physical discrepancy that needs to be addressed (e.g., missing goods receipt).
• Physical Inventory Processes: You must have strict control over your physical inventory. Allowing negative stock means that SAP is no longer strictly enforcing a "physical stock first" rule.
• Authorizations: While directly enabling negative stock is configuration, ensuring that users can correctly post goods movements (e.g., MIGO) that might lead to negative stock is part of their roles and authorizations.

Recommendation: Enabling negative stock is a significant decision. It's generally advised to keep it disabled unless there's a compelling business reason, backed by strong inventory control processes and frequent physical inventory counts. Always consult with your SAP functional consultants and business process owners before making such a change in a production environment.