Physical Inventory

The Physical Inventory process is divided into three phases: 1. Creation of PI documents a. MI01 Create single inventory document b. MI31 Create multiple physical inventory documents 2. Entry of count results a. MI04 b. MI20 listing of differences 3. Posting of differences a. MI07 & Movement Type 701 & 702 The physical inventory is carried out on the basis of stock management units. A stock management unit is a non-divisible part of a stock of materials for which a separate book inventory exists. A stock management unit is uniquely defined by: Material Plant, storage location Stock type Batch Special stock Each stock management unit of a material is counted separately, and the inventory differences are posted per stock management unit. For example, record the quantities of unrestricted-use stock, stock in quality inspection, and blocked stock of a material separately in each case.

1. Physical Inventory Document

A physical inventory document contains data that includes: The plant and storage location The date on which the count is to take place (planned count date) The materials to be counted The batches that are to be counted (in the case of batch management requirement) The partial stock that is to be counted (in the case of split valuation) The stock types to be counted The status of the item The status of the PI document

2. Entering Physical Inventory Count

You can enter the stock figures in the system with and without reference to a PI document. In the PI document, the count status of the item is set to Counted and the count date is updated in the document header. The difference between the count result and this book inventory is the inventory difference. You can analyze this difference via the list of differences. The list of differences contains the following information on each item: Quantity counted Book inventory Difference quantity Difference amount You can perform the following functions with the list of differences: Enter, change, display count Post difference Display, change document Recount document or item

3. Post Difference

You can post the inventory differences either via the list of differences or via separate transactions. When an inventory difference is posted, the system creates a material document that corrects the stock figures, and an accounting document recording the necessary account movements. Note: You can specify a reason for the inventory difference discovered for each item. For example, you can record that a certain difference is due to theft.

Customizing
You can define tolerances for the posting of inventory differences for a user group under Physical Inventory Define Tolerances for Inventory Differences. Depending on the user group, you can define the following value tolerances for the posting of inventory differences: Maximum amount per physical inventory document Maximum amount per document item. The system fixes the posting period of the accounting document automatically when the first count is entered for the physical inventory document. The inventory difference either must therefore be posted in the same period or, if back posting to the previous period is allowed, in the following period. The fiscal year is set as a result of specification of the planned count date when the PI document is created. All further postings for this document must be made in this fiscal year or in the first period of the following year if back posting is allowed.

Demonstration: Carrying Out the Physical Inventory

1. From the Easy Access screen, choose Logistics Materials Management Physical Inventory Physical Inventory Document Create 2. Enter the following data: Plant: 1000 (Hamburg) Storage Location: 0001 (material warehouse) Physical Inventory Number: 123456 3. Choose Enter. 4. Enter the following data: Material: m-10 Stock Type: 1 (unrestricted-use) Material: m-10 Stock Type: 2 (quality inspection) Material: m-10 Stock Type: 4 (blocked) 5. Save the physical inventory document. 6. To enter stock count results choose: Logistics Materials Management Physical Inventory Count Enter 7. Check the PI document number shown. 8. Choose Enter. 9. Enter the following data: Stock figure for stock type 1: 39 pc Stock figure for stock type 2: 1 pc. 10. Choose Set Zero Count and then save the count results. Hint: Optional: Here you can also display the status of the PI document (shown in the header): Counted. The document statistics show 3 items as counted. 11. To post difference from list of differences choose: Logistics Materials Management Physical Inventory Difference List of Differences 12. Select according to the PI document created in the foregoing. 13. Select item 1 14. Choose Goto Recount Document 15. Choose Enter. 16. Post the physical inventory document. 17. Make a note of the physical inventory document number. 18. Select items 2 and 3 in the list of differences. 19. Choose Post Difference.

20. Choose Post. Hint: Optional: Display the physical inventory document: Statistics: 2 items posted, 1 recounted 21. To display the material document choose: Logistics Materials Management Physical Inventory Environment Mat. Document for Material. 22. Select according to Material m-10. 23. Position the cursor on the uppermost item (goods movement 703) 24. Choose Environment Material Document 25. To display accounting document, choose Document Info tab in the material document header, then FI/CO Documents. 26. Choose Accounting Document.

Determination of Book Inventory

When the count results are entered, the system determines the current book inventory. This book inventory is compared with the counted quantity entered, with any discrepancy representing the difference quantity to be posted.

Blocking Goods Movements

You can block all goods movements relating to a stock management unit for the purposes of a physical inventory by means of the Posting Block indicator in the PI document header. In the Storage Location view of the material master record, the Physical Inventory Block indicator shows the value X (material blocked for movements due to physical inventory). When the count result for the relevant stock management unit is entered, the block is lifted. In the material master record, the physical inventory blocking indicator is set to A (physical inventory of material not yet completed). The indicator is unset when the inventory difference is posted.

Freezing Book Inventory

If it is not possible to block the goods movement for organizational reasons, you can freeze the book inventory in the PI document at the time of the count. To do so, set the Freeze Book Inventory indicator in the PI document. This prevents goods movements from changing the book inventory figure that is relevant to the inventory-taking process. Customizing Physical Inventory Allow freezing of Book Inventory at Storage Location

Adjusting the Book Inventory in the PI Document

This function defines the system behavior when a goods movement is posted for a material that is currently subject to an active physical inventory. Updating of the book inventory in the PI document may be due to the following reasons: The Freeze Book Inventory indicator is set in the PI document The count results have been entered in the PI document The Adjust Book Inventory indicator specifies that when a goods movement is entered, the system recognizes that this posting would have had an effect on the book inventory in the PI document. Customizing Physical Inventory Settings for Physical Inventory If the indicator is set, the system checks and adjusts by the amount of the goods movement. The Adjust Book Inventory indicator has three instances: 1. Not active (._.) 2. Active. If the dates of goods movement and physical inventory are the same, the physical inventory was before the goods movement (.1.) 3. Active. If the dates of the goods movement and physical inventory are the same, the physical inventory was after the goods movement (.2.)

Postings Resulting from Physical Inventory

The account movements that take place when the physical inventory differences are posted depend on which stock you have inventoried.

Own stock Consignment stock belonging to a vendor

Own Stock
When inventory differences are posted, the stock figures in the material master record are changed. The total stock is automatically adjusted to the counted quantity. If the counted quantity is less, the stock account is credited with the value of the inventory difference multiplied by the price. The offsetting entry is made to the Expense Account. If the counted quantity is greater, the stock account is debited with the value of the inventory difference multiplied by the price. The offsetting entry is made to the Revenue account.

Vendor Consignment
When the inventory differences are posted, the vendor consignment stock is automatically adjusted to the counted quantity. Because this stock is managed on a non-valuated basis, there is initially no posting on the accounting side. An accounting document is nevertheless created.

If the quantity of consignment stock counted is less than the book inventory, it is assumed that the difference was withdrawn from consignment stock and subsequently disappeared. The amount is posted to the Expense account. If the quantity of consignment stock counted exceeds the book inventory, it is assumed that larger withdrawals from consignment stores were posted than actually took place.

Simplification of Physical Inventory

Combining Physical Inventory Steps
In every physical inventory, you go through three basic phases: 1. Create physical inventory documents 2. Enter count 3. Post inventory difference The following options are available if you wish to combine steps in the physical inventory: Enter count without physical inventory document (1 and 2) When a count is entered without a document, the system automatically creates a PI document when you save. You post the difference with reference to this PI document. Enter count and post physical inventory difference (2 and 3) The count results are entered for an already existing PI document and the inventory differences are immediately posted when these results are saved. Enter count without PI document and post inventory difference (1, 2, and 3) All three phases are carried out in one step. The count results are entered. When they are posted, the system generates a PI document and posts the inventory difference. Hint: In the standard system, a PI document is not created automatically when the goods movement is posted. This can be activated in Customizing for the movement type.

Batch Input
The batch input procedure takes place in two steps: 1. A batch input session containing all relevant data is generated. 2. The batch input session is processed and the data it contains is imported into the SAP system. Batch input offers the advantage of automating process steps. You can access the main menu of the batch input service via System Services Batch Input Sessions or via transaction SM35. A batch input session consists of one or more transaction calls with the data to be processed by the transactions. In a physical inventory, this procedure can be used for the mass-processing of data and for transferring the count data.

Inventory Sampling
Calculation Basis
The inventory sampling procedure is not a complete inventory. A sampling area, in which only some of the stock units are inventoried, is formed from the total stock. The result of this sample is extrapolated to the value of the total stock.

Inventory Sampling
In inventory sampling, the extrapolation error is minimized. This is achieved by parameters that you define in a special profile.

Customizing
Inventory Management and Physical Inventory Physical Inventory Inventory Sampling Create Inventory Sampling Profiles. The definition of the inventory parameter must be discussed with the companys external auditor.

Form the Stock Population from Stock Management Levels

A stock management level is the quantity of all stock management units that match in plant, storage location, material type and stock type, from the warehouse management, warehouse number and storage type perspectives. Customizing Inventory Sampling Define Stock Management Levels The total quantity of stock management units from an inventory sampling is indicated as the stock population.

Forming Strata and Drawing Samples

To reduce the number of required counts, the random selection and extrapolation take place in individual strata. Forming the stratification is based on the class division; individual subsequent classes are grouped together into strata.

Update
During the update, the system performs the following actions: . Read extra posted count results . Determine changed book inventories and values . Determine any necessary subsequent random selections

Extrapolation
There are two different types of extrapolation: . A provisional extrapolation exists when differences were posted only for some of the stock management units to be counted. Any number of provisional extrapolations can be created; only the most recent one is actually saved. . A final extrapolation exists when all differences are posted, all count results are entered in the calculation, and a subsequent random selection is not necessary. A final extrapolation can only be executed once as no new results can be added.