Inventory management in SAP is generally the entire process of efficiently and effectively monitoring flow of products out of and into an existing inventory inside the warehouse. This entire process involves efficiently controlling receipt of products so as to prevent inventory from becoming very high where the items are stored at unnecessary cost, or very low where it may lead to a stock-out and the production could be stopped due to the lack of needed raw materials.
Inventory management in SAP functionality generally revolves around movement of items to and from the warehouse and also the physical count of the stored materials at regular intervals.
Organizational Structure
In SAP every single storage facility is a part of a good organizational structure created inside the system. There are two organizational levels which need to be created for inventory management; the storage location and the plant.
- Plant
- Storage location
The plant is the physical location in organizations where some of the processes take place. These processes sometimes involve the stored items, sometimes production or sometimes maintenance. For the inventory management, a good plant is created to fully represent a location which receives, stores as well as issues materials.
This describes a designated area within the plant. It is a site where the inventory is held. Physical location may be a racking system, a trailer, a physical room or row of shelves. Inventory can be maintenance items, finished goods or materials used in the process of production. In inventory management function, storage location is actually the lowest level of inventory.
Goods movements
There are various goods movements in SAP system; they can either be outbound to the customers, inbound from the suppliers or production department, stock transfer from another plant within the company or interval movement within one plant.
- Goods receipt
This process can either be inbound from suppliers or from a production process of the company. A goods receipt may be carried out so that all materials are available for use immediately, or they may be placed in the quality inspection hold to enable the quality department to perform tests on the materials in order to make sure that they are well within the specifications before they can be released to stock.
- Goods issue
Items in the storage facility can either be sold to customers or used in the process of production. In either way, the materials are issued to a sales order or production order, this causes the level of stock at the plant to reduce. In some instances, items are issued to scrap if they are deemed unusable by a company’s quality department, damaged or past their shelf life.
- Internal movements
Materials in a plant may be transferred from a storage location to the next before they are delivered to customers or used in production. There is a movement of goods so that material is moved from main storage location to a certain staging location that is close to where delivery or production area is located. If the material is needed sooner, it’s transferred to another plant.
Inventory management tracks the value and quantity of a particular material as it gradually progresses through the location. Stock is well managed by the storage locations, which represent the logical sections of sites where all goods are stored. Inventory management offers limited information about the individual lots.
The Features of Inventory Management in SAP
1. Fully integrated within core modules (PP, FICO, SD, MM)
2. Accounting posting in real time
3. Manages special stocks (consignment stock, sales order stock)
4. Simple to use
5. No visibility of the outstanding picking requests
6. Limited reporting on the picking accuracy (actual vs. planned)
7. Inventory management is very well suited for:
- Small facility that has a simplified layout.
- Lower inventory levels on hand
- Visual Controls for enhancing material handling
- Simplified processes of handling materials
- Outsourced warehouse operations
- Only require visibility of the aggregated inventory for storage location.
Inventory management in SAP Business One
Streamlined and accurate inventory management is important to your overall ability to easily deliver on promise and also maintain inventory cost control and customer satisfaction. Inventory management tools in SAP Business one Enterprise Resource Planning and business management solution assists manage the detailed warehouse data, manage the material requirements planning and track and record the movements of stock.
SAP Business One efficiently records the goods issues and goods receipts in any storage facility. By integrating the individual item price lists or prices, you simultaneously update the inventory valuation. The SAP Business One effectively integrates accounting and inventory transactions.
As a result, levels of stock are adjusted, the inventory accounts debited or credited, and the applicable inventory variances well accounted for once the stock movement is posted in the SAP Business One. The inventory transfer functionality usually allows you to easily move the items from one storage facility to another.
Inventory management in SAP Business One features
1. Powerful Item Management
SAP Business One easily allows you to efficiently manage items individually or by group. SKU’s, item codes, supplier catalogues and foreign description.
2. Units of measure and costing
Manage stock using costing models (including first in, first out (FIFO), average cost), by store/warehouse or across the business. Multiple unit conversions and units of measure.
3. Goods issue and receipt control
Record goods issues and receipts; track the stock transfers; enable drop-ship, consignment, and other orders.
4. Serial number tracking
An automatic creation of the warranty records if needed.
5. Lot and batch tracking
SAP Business One provides full traceability
6. Pick and pack manager
This capabilities allows you to effectively manage the picking as well as packing process within 3 queues.
7. Stock takes
Easily perform inventory as well as cycle counts.
8. Up-to-date, efficient reporting
SAP Business One generates reports with up-to-date data present in various dashboards and formats and based on the perpetual inventory.
Benefits
1. Reduce inventory costs
With improved materials planning and inventory control.
2. Improve business insight
With very powerful inventory and warehouse reporting tools.
3. Improve the service to customers with fewer stock-outs and shortages and on-time delivery
4. Gain efficiency by effectively automating processes and also using integrated Material Requirement Planning and production functionality.
Conclusion
Inventory management in SAP functionality is very helpful and important to warehouse operators in order to ensure effective management of your product flow.