Introduction to Inventory Management in SAP Inventory management is the process of efficiently monitoring the flow of products into and

out of an existing inventory in the warehouse. This process involves controlling the receipt of products in order to prevent the inventory from becoming too high where items are stored at an unnecessary cost, or too low where it can cause a stock-out and production could be halted due to lack of raw materials. In SA , the inventory management functionality revolves around the movement of materials in and out of the storage facility and the physical count of those items at regular intervals. Organizational Structure In the SAP system each storage facility is part of an organi!ational structure created in the system. "or inventory management there are two organi!ational levels which are re#uired to be created$ the plant, and the storage location. Plant - This is a physical location in the organization where some processes take place. Sometimes these processes involve stored material, sometimes maintenance or sometimes production. For inventory management, a plant will be created to represent a location that receives stores, and issues materials. Storage ocation - This descries an designated area within a plant. A storage location can be a site where inventory is held. The physical location can be a physical room, a row o! shelves, a racking system, a re!rigerated cabinet, a trailer or a space in the plant that is identi!ied by painted lines on the shop !loor. The inventory can be materials that are used in the production process, !inished goods or maintenance items. The storage location is the lowest inventory level in the inventory management !unction. Goods Movements There are a number of goods movements in the SAP system, and they can be either inbound from suppliers or the production department,

outbound to customers, a transfer of stock from another plants within the company, or an internal movements within the same plant. "oods #eceipt - This process can be either inbound !rom a supplier or can be !rom a company$s own production process. A goods receipt can be per!ormed so that the materials are immediately available !or use, or they can be placed in a %uality inspection hold so that the %uality department can per!orm tests on the items to ensure that they are within speci!ications be!ore releasing them to stock. Sometimes the goods can be placed in a blocked stock state where the company does not accept !inancial liability !or the materials as they were not ordered, or incorrect. &n that case the material is not available !or use. "oods &ssue - The items in the warehouse can either be used in the production process or sold to a customer. &n either scenario the items are issued to a production order or sales order which causes the stock level at the plant to be reduced. &n some instances material can be issued to scrap i! it is deemed unusable by the %uality department, past its shel! li!e, or damaged. &nternal 'ovements - 'aterial in the plant can be moved !rom one storage location to another be!ore it is used in production or delivered to a customer. There is a goods movement so that the material is moved !rom the main storage area to a staging location close to where the production or delivery area is located. Sometimes the material is moved to another plant i! they need the material sooner. &n that instance there is a plant to plant trans!er o! materials. (ne other internal movement is the trans!er posting, where a material is logically changed within the system. For e)ample, a material that has been received as material re%uiring %uality inspection can be changed to material that is available !or use, by per!orming a trans!er posting.