SAP HANA Inventory Management (IM) overview

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SAP Inventory Management
Inventory management is used to manage the inventory for the goods. It is
based on several key processes. Definition of movement types, reservations,
goods issue and goods receipt.

We have already done basic goods receipt process in the purchase order topic,
referencing it to a PO.

There are a number of functions and transactions used in the Inventory

management processes, and we will cover the most important in this tutorial.

o Movement types
Movement types are used as indicators of what is the purpose of the goods
movement (e.g. from storage location to a storage location, receipt from
purchase order, issue for the delivery, receipt from production).

Movement types have its predefined settings in standard SAP system, and
they can be customized according to your needs.

Also, you could use the same movement type for different processes if you
use movement indicators properly. For example, movement type 101 with
movement indicator B is used for goods receipt from purchase order. The
same movement type 101 with movement indicator F is used for production
order goods receipt.

o Process under Inventory Management

 Goods Receipt
 Cancel Goods Receipt

o Reservation of Inventory
Reservations are system documents that show a requirement for a certain
amount of good for production, cost center and any other need.

Reservations are important in planning/MRP/ATP as the system reserves

needed quantities before they are posted. If there weren't reservations in the
system, we might encounter a problem that we need to use the goods for
production order, but we can not post the goods issue because a sales order
has taken the goods just few minutes ago. When we create the reservation,
system doesn't allow any other document to reserve the goods for other
purpose. This also depends on the system settings for MRP/ATP. You might

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give reservations a privilege to always take the goods off the stock, even if it is
already reserved by the sales order or delivery (not quite good solution). But
you can also customize the system that sales orders don't check the
reservations when performing availability check.

You can create a reservation for the material for a number of reasons. System
can also create the reservation if the MRP settings imply that kind of system
behaviour.

o Post Goods Issue

Another important process in inventory management is goods issue posting.
Reservations are considered a specific process on their own, but essentially
reservation use a goods issue logic. When we created a material document for
reservations, we have issued goods from warehouse to the cost center,
production order etc.

Now, we can talk about other goods issuing processes. The most important of
all is for outbound delivery. The process works as follows -

1. We have an inbound delivery for our material 10599999 incoming from

sales department.
2. After the goods are loaded in the truck we should do a goods issue
posting for the delivery.
3. We are sent the delivery number 80072673 created for out material
10599999 and we need to process the delivery in inventory
management by posting the goods issue.

It is done in sales transaction VL02N mostly used by the MM users in logistics.

Departments that use this transaction can vary depending on the
organizational structure in the company.

o Transfer Posting of Goods

Transferring a quantity from one storage location to another can be
accomplished

o 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

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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.

To simplify the process, check the below diagram, these are the most common
steps for doing physical inventory.

Besides the legal reasons it is extremely helpful having the correct stock
quantities in the system matching the physical stock. Management can have
the correct information on the value of stock materials. ATP for sales is
correct. MRP is done using the correct input parameters (material stock
quantities).

Not having the correct stock levels in the system means quite the opposite.
Management has the wrong picture on the financial aspect of the stock in
possession. ATP uses the wrong data (sales might not be able to sell
something physically on stock but not existing in the system, or system might
allow selling something that isn't physically present in the warehouse). MRP
is inaccurate (production planning and other material planning processes
might be in a big problem as they are required to calculate the needs for
production/procurement based on stock levels and several other
information).

Now you see that having a clear and correct stock levels is of immense
importance for a lot of processes in a company. Now you will see how physical
inventory is done in MM module.

Types Of Physical Inventory

The following physical inventory procedures can be used in SAP system:

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 Periodic inventory
 Continuous inventory
 Cycle counting
 Inventory sampling

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

CC phys. Inv. Ind. 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.

o Special Stock & Special Procurement

In some cases, logistic processes require special procurement types to be
used:

 Consignment
 Subcontracting
 Stock Transfer Using Stock Transport Order
 Third-Party Processing
 Returnable Transport Packaging
 Pipeline Handling

For the purposes of the special procurement types, there are special stock
types.
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Item categories you can use in purchasing documents.

We will see how theses special procurement types and special stock types are
used in the following processes.

Consignment

Consignment means that the goods procured are still in vendors ownership,
but our company is keeping the material on stock and is able to sell it directly.
Goods become the property of our company only in the case of consuming.

You can see two possible consignment scenarios / processes in the diagram
below.

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In both cases, the base of the process is a goods receipt for vendor
consignment goods. After that, we will have consignment goods in our
warehouse. If we want to sell the goods from consignment stock, we can do a
stock transfer from warehouse to store consignment stock and sell directly
from consignment stock.

If on the other hand, we choose not to keep the goods as consignment stock,
we can do a transfer posting to own stock. Afterwards, we can send it to our
store and sell it as own stock.

In the consignment process, we should create a purchase info record for the
vendor/material combination, in order to predefine some information later
used in the processes.

-: The End :-