PHYSICAL

INVENTORY

-NIKHIL KADUKAR
(SAP MM)
WHAT IS PHYSICAL INVENTORY?

• Physical inventory is a process of determining that the inventory

quantities are exact, or if there are differences in quantity mentioned
physically present 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.
• It is mandatory for legal reasons, and in the most of the times it is
conducted once a year.
WHAT ARE THE TYPES OF PHYSICAL
INVENTORY?
• 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 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).
• 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.
• 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
STEPS IN PHYSICAL INVENTORY
INITIAL SCREEN OF PHYSICAL INVENTORY
DOC
GOODS MOVEMENT IN CASE OF VARIANCE

• 701 – Goods Receipt for unrestricted stock

• 702 – Goods Issue for unrestricted stock
• 703 – Goods Receipt for quality inspection stock
• 704 – Goods Issue for quality inspection stock
• 707 – Goods Receipt for blocked stock
• 708 – Goods Issue for blocked stock