Inventory Management

Inventory Management
Representation of current physical stocks based on the
real-time entry of all transactions affecting such stocks
and the resulting updating of stock data.
Inventory Management includes the following
transactions:
managing stocks of materials (both a quantity and a value
basis
planning, entering, and documenting all stock movements
(which is a proof of goods receipts, goods issues, stock
transfers, transfer postings)
physical inventory (stocktaking)
balance sheet valuation

Inventory Management
Managing Stocks by Quantity
Change in stock & thus updated inventory levels.

Managing Stocks By Value

By value - a prerequisite for cost accounting.
Following values are updated:
the stock value for inventory management
the account assignment for cost accounting
the corresponding G/L accounts for financial accounting via
automatic account assignment

Inventory Management
Planning, Entry, and Proof of Goods Movements

Document G/R; G/I slips to facilitate physical movements and the

monitoring.

Physical Inventory

Determining and recording (by weighing, counting, measuring, or

estimating) to establish the levels of stock actually on hand.

Actual stock levels thus determined are compared with book

inventory balances and any differences that may be revealed
corrected as necessary.

Following methods of physical inventory:

periodic inventory
continuous inventory
cycle counting (inventory is counted at regular intervals within
a fiscal year)
inventory sampling (physical inventory of a small part of the
stock (sample) that is representative of the entire stock)

Inventory Management
Balance Sheet Valuation Procedures
Stocks can be valuated for balance sheet using:
LIFO valuation:
LIFO valuation allows the increase in the stock of a
material to be valuated separately. With the LIFO
method, the stocks of a material received most recently
are considered to be the first ones used. This means
that rising prices do not lead to an over-valuation of the
older (less expensive) stocks.
FIFO valuation:
With the FIFO method, the oldest stocks of a material are
considered to be the first ones used. The value of the stock
is therefore based on the most recent stock received.

IM & WM
Inventory Management and Warehouse Management
The IM system can be extended by the WM system.
IM manages the stocks by quantity and value.
WM component does even more by reflecting the special
structure of a warehouse, monitoring the allocation of the
storage bins and any transfer transactions in the
warehouse via completion confirmation procedures.

Integration within LO
Integration in Materials Management

MRP Inventory Management provides information for MRP, which

takes into account not only physical stocks but also planned
movements (requirements, receipts).
Purchasing Inventory Management posts the goods receipt with
reference to the purchase order.
Invoice verification The GR based vendor invoice is processed
later by Invoice Verification.
Reservations A material can be reserved for a cost center, asset,
order, or project.
The purpose of a reservation for an outward movement is to
ensure that a material will be available when it is needed.

Integration within LO
Integration in Production Planning (PP)
Inventory Management is responsible for staging of the components
required for production orders.
The receipt of the finished products in the warehouse is posted in
Inventory Management

Integration in Sales & Distribution (SD)

Initiate a dynamic availability check of stocks on hand.
The quantity to be delivered is marked as "Scheduled for
delivery."
Deducted from the total stock when the G/I is posted.

Integration within LO
Integration in Quality Management (QM)
Determines whether the material is subject to an inspection
operation.
And corresponding activity is initiated in the QM.

Integration in Plant Maintenance (PM)

It is possible to post goods movements with reference to
equipment BOMs.
It is possible to withdraw parts for maintenance orders.

Integration within R/3

Integration with Financial Accounting (FI)
IM by qty and by value (affects the stock value with
every GR & GI) and corresponding accounts of
financial accounting.
This is accomplished via automatic account
assignment.

Integration with Controlling (CO)

Cost accounting - goods receipts are assigned directly
to cost centers or orders.

Integration within R/3

Integration with Asset Accounting (AM)
If materials for an asset - goods movements are
assigned to the asset account.

Integration with Project System (PS)

Materials can be reserved and withdrawn for projects.
It is possible to create project stocks.

Master Data

The R/3 Company Structure

From an Inventory Management point of view
Client > Company code> plant>Storage loc.
Location of physical deposits of stock within a plant
Example: warehouse or storage area
Valuation area
Level: material's stock value is managed. The valuation
area can correspond to the following entities:
* plant
* company code
In Inventory Management, work is basically done at
plant and storage location levels.

Organization of the Mtls

Master RecordGeneral Data
Mat. No.
Description
Units

Plant Data

MRP Type
Planned. del. Time
Purchasing Grp.
Batch ind.

Consumption data

Forecast data

Valuation

Val. Price
Valuation procedure
Valuation Qty.

Storage Loc. Data

Storage period
Storage Condition

Sales Data
Delivery plant
Sales Texts

Data for IM
Is it Necessary to Enter Storage Data for All
Storage Locations?
If a material is located in a storage location, the storage data for
that storage location must exist in the material master record.
Storage data can be manually entered when the material
master record is created.
or it can be automatically created during the first goods
movement in that storage location.

Stocks - Master Record

Unrestricted-use stock

Not subject to any kind of usage restrictions

Quality inspection
stock

Stock that is in Quality Inspection

Blocked stock

Stock that Cant used

Restricted-use stock

Usage of which is Subject to certain restrictions.

Blocked Stock Returns

Was Returned by the customer. Restricted-use

stock.

Stock in Transfer

Already withdrawn at the issuing location but that

has not yet arrived at the receiving location

Reserved Stock

All quantities of a material that are reserved for

withdrawal.

Planned Receipts

Quantities whose receipt has planned with

reservations

Open PO Qty

Outstanding PO quantities for a material

GR blocked stock

Quantities of a material that were delivered by

vendors for PO that have been conditionally
accepted

Stocks - Master Record

Allowing Negative Stocks
Negative stocks are required if, for
example, goods issues are entered
before the corresponding goods
receipts