Contents: Inventory Sampling

Preparations for inventory sampling

Carrying out inventory sampling

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Inventory Sampling: Unit Objectives

At the conclusion of this unit, you will be able
to:
Describe the inventory sampling procedure
List the Customizing settings for the

inventory samping procedure

Carry out inventory sampling in the

system.

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Preparations for Inventory Sampling

Stock
mgmt units

Stock mgmt levels

Sampling area

Stock population
10

Stratification

20

30

.....
Value
classes

Complete-count
area
90 100 >100

.....
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The inventory sampling procedure is based on statistical procedures.

A sample is randomly selected from the stock management units for which a physical inventory is
to be carried out, and then counted. The sample size depends on the probable degree of confidence
you require when using the data obtained from the sample to make inferences about the entire stock
management units.
The data posted for the sample stock is extrapolated, and then applied to all the stock management
units included in the inventory sampling procedure.
If the deviation between the extrapolated value and the book value is very small, and the
probability is high that any error in the extrapolation results is only very small, then the inventory
sampling procedure is considered to have been successful.
In the preparation phase, you have to carry out the following steps:
Allocate stock management levels
You have to specify which stock management units are to be included in the inventory sampling
procedure. To do this you do not assign individual stock management units to the sampling
procedure, but rather you allocate quantities of stock management units, which are known as stock
management levels.
Form stock population
The stock population is the total stock quantity in all stock management units included in the
inventory sampling procedure.
Carry out stratification

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Inventory Sampling Procedure in Action

Random selection

Strata
.....

Complete-count
area

Stock
management
unit for inventory
Physical inventory
documents

Update

Extrapolation

1000

2319

1000 2318
Inventory
1000 2317
Material A
Material B

Actual
Actual value
value of
of
selected
selected stock
stock
management
management units
units
Estimation
Extrapolated
Extrapolated actual
actual Comparison
value
value of
of all
all stock
stock
management
management units
units

Book
Book value
value of
of
all
all stock
stock
management
management units
units
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The following steps have to be carried out during the active phase:
Generate random selection
Random selection is carried out separately for each stratum of the stock management units to be
counted.
Create physical inventory documents
Carry out update
The system performs these two initial actions during the update:
It reads new count results.
It reads changed book inventory balances and book values.
Extrapolation
In the extrapolation, the physical inventory value of the sampling area is estimated, based on the latest
count results. In each stratum an average physical inventory value is calculated per item, and this is
multiplied by the number of items in that stratum. The total sum of these stratum values is the
estimated value for the sampling area.
If the entire physical inventory value (estimated value for sampling area plus actual value for
complete-count area) does not deviate from the book inventory value by more than 2% (standard
system setting), the inventory sampling procedure is considered successful.

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Inventory Sampling: Summary

In inventory sampling, randomly selected
stocks of the company are physically counted
on the balance sheet key date. If the
variances between the result of the count and
the book inventory balance are small enough,
it is presumed that the book inventory
balances for the other stocks are correct.

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