1. ZI Inventory Management Integration
SAP University Alliances
Version 3.6
Authors: Stefan Weidner
Chris Bernhardt
Lisa Seymour
ZI Inventory Management Integration
Product
SAP ERP 6.07
ESEFA curriculum
Level
Undergraduate
Postgraduate
Beginner
Focus
Integration of inventory
Inventory management systems support the management of inventory levels in increasingly complex supply chains. Inventory management systems use the perpetual inventory management system that integrates with financial accounting as well as the procure-to-pay and sales-to-cash business processes.

2. ES Fundamentals for Business
Introduction to the course
Introduction to Zambikes and its business processes
Enterprise Systems Knowledge 1 . The Zambikes Model Company
Navigation
Procure to Pay and Accounting Concepts
Enterprise Systems Knowledge 2. The ERP Business Case
Sales to Cash
Inventory Management
Summary
ES Fundamentals exam

3. IM Integration unit overview
Introducing Inventory Management
Zambikes inventory challenges
IM organizational structure
IM master data
Material master with controls
IM processes
Stock transport orders
Goods movements
Stock counts
Controls
IM managing and reporting

4. Introducing Inventory Management
Inventory or stock is an organizational resource that is sold, or used for manufacturing items for sale, or for providing services.
Inventory is recorded as an asset in financial statements.
The unit cost price for an inventory item includes all costs incurred to get the item to its current state (ready for sale if selling).
Why manage inventory?
Inventory is how retailers / manufacturers make profit.
Prevent lost sales and production delays.
Prevent cash being tied up in too much inventory or too many slow-moving items.
Prevent inventory losses.
Ensure financial statements are correct.
Recall Zambikes inventory challenges.
Financial statements for companies include assets, liabilities and equity.
Inventory is recorded as an asset in financial statements.
The unit cost price for an inventory item includes all costs incurred to get the item ready for sale.
The unit cost price is different to the sales price. The sales price should include a mark-up.
Inventory is often an organization’s greatest asset and therefore needs to be managed.
Insufficient inventory means lost sales and production delays.
There are more profitable ways to use cash than to tie it up in too much inventory or too many slow-moving items.
Incorrect inventory receipting and storage can lead to substantial losses.
Unmanaged inventory often means your financial statements are incorrect.

5. IM organizational structure
Global Bike Group
GB Inc. US
Dallas
Miami
San Diego
Zambikes Company Ltd.
Lusaka
Trading Goods
Semi-finished Goods
Finished Goods
Miscellaneous
Mungwi
Raw Materials
GB Germany GMbH
Heidelberg
Hamburg
Client
A self-contained unit in a SAP system with its own set of tables.
Company code
Smallest organizational unit for which financial statements need to be prepared.
Plant
Within a company.
Facility for manufacturing, distribution, storage, or rendering services.
Storage location
Allows for differentiation between the various stocks of a material in a plant.
Shipping point
Is the part of the company responsible for the type of shipping, the necessary shipping materials and the means of transport.
Company codes
Storage locations
Client
Plants

6. Material master views Sales data Purchasing data Warehouse Mgmt. data
Basic data
Mat. Plan. data
Material master
Forecasting data
Storage data
Controlling data
Quality data
Accounting data
The material master
Contains all the information about a material that a company needs in order to manage it.
It is used by most components within the SAP system.
Sales and Distribution
Materials Management
Production
Plant Maintenance
Accounting/Controlling
Quality Management
Material master data is stored in functional segments called Views.

7. IM material master views
Basic Data view has general information relevant for the entire organization:
Name Weight Unit of measure
Client XXX
Accounting specific information:
Valuation
item cost price
General Plant / Storage view has storage location specific information:
Stock qty
Plant. LU00
Storage loc. FG00
Storage loc. TG00
For inventory management the material master contains the:
The quantity of a material in every plant and storage location in the General Plant Data/Storage 1 screen.
The item cost price (moving average price or standard price) of a material in the Accounting 1 screen for every plant.

8. The stock type determines whether inventory can be sold or counted.
Stock types
The stock type determines whether inventory can be sold or counted.
Valuated stock
Unrestricted-use stock
Stock in quality inspection
Blocked stock
Stock in transfer
Stock in transit
In the material master record, various stocks are managed at plant level and at storage-location level for both the current period and the previous period. The plant stocks (except for stock in transfer and stock in transit at plant level) are calculated as the total of all the storage location stocks. The following section describes the stock categories in the material master record.
Total valuated stock: Sum of all valuated inventory of a material. It consists of the valuated inventory your company owns. Materials that are not valuated would be non-stock materials and consignment materials.
Unrestricted-use stock: Company's own inventory that is physically located in a plant, valuated, and not subject to any kind of usage restrictions.
Quality inspection stock: Company's inventory that is in quality inspection. Inventory in quality inspection is valuated but does not count as unrestricted-use stock.
Blocked stock: Company's inventory that should not be used. It is not for unrestricted use in inventory management.
Stock in transfer: Quantity that was already withdrawn from stock at the issuing location (plant, storage location) during a two-step stock transfer but that has not yet arrived at the receiving location (plant, storage location). Stock in transfer is managed in the valuated stock of the receiving location, but it does not yet count as unrestricted-use stock. It can also not be inventoried.
Stock in transit: Stock in transfer that is created for a stock transfer via a stock transport order.

9. All changes are visible.
Master data controls
Maintained centrally (through authorisations) and can’t easily be deleted.
All changes are visible.
The material master contains the valuation of a material and therefore it needs to be protected. There are built-in controls in ERP systems. For example, in SAP ERP:
Master data changes can only be done by a few users. Other users are prevented by their authorisations.
Master data can’t be deleted; can only be flagged for deletion (see Figure 1).
Items flagged for deletion can be archived; only once archived can data be deleted.
All master data changes are visible in change documents which detail exactly which changes were made (see Figure 2).
The screen shots in the example above have been taken from another SAP system. The material number was FLLIAN0023 and the user was INF011.
Figure 1
Figure 2

10. Inventory management processes
Enterprise systems use the perpetual inventory system
Daily recording of any inventory leaving or entering the organization’s control
Recorded as a goods movement
A stock transport order can be used to request stock from one plant to another plant
Inventory (stock) counts are a control as they highlight inventory risks
Lost inventory
Incorrect goods receipting
Enterprise systems use the perpetual inventory system which keeps track of inventory real-time and is updated whenever inventory leaves or enters the organization’s control.
Inventory management risks can be substantial:
Lost inventory refers to inventory that could be stolen or inventory that has been damaged due to improper storage.
Incorrect goods receipting can take many forms:
Not counting the quantity accepted. The number of items accepted is what needs to be paid for and this might be more than the actual number received or actually ordered.
Not checking the quality of items accepted. Once the items are accepted, if they are damaged, they still need to be paid for.
Accepting items that were not ordered. This can result in the costs of returning items.

11. The impact of goods movements
A material document is created.
An accounting document is generated if the goods movement needs to update FI.
GR example
For all goods movements, the system also creates a material document to show the transaction in the system.
An accounting document is generated if the goods movement needs to update Financial Accounting (FI).

12. Goods movements can update FI
The accounting document contains relevant information to post to FI such as:
Document date
Posting date
G/L account numbers
Associated amounts (debit and credit)
Company code is derived from the plant
Which of these will generate an accounting document?
Goods receipt of material from a vendor
Goods receipt of material from another plant
Goods issue to a customer
Scrapping stock
Most goods movements update financial accounting. These are reviewed in these slides. An important one which updates financial accounting is:
Scrapping of stock (stock to stock movement)
Not all goods movements update financial accounting. For example the following don’t update FI:
Plant to plant movement (this is always within a company code)
Storage location to storage location movement (this is always within a plant)
Some stock to stock movements (for example unrestricted use to quality inspection stock)
Goods receipt for a transport order
Goods issue for a transport order within the same company code.

13. Goods movements and the material master
A material document can update the material master
The quantity in storage locations
The valuation of a material
Material valuation
Standard price or moving price
Moving price:
Total cost for all items / number of items
Recalculated for goods movements with vendors
Material valuation
To valuate the materials various prices are stored in the material master record, such as:
Future, current or previous standard prices.
Moving price.
Valuation is preset as follows in the standard SAP ERP system:
Moving price is used for materials procured externally.
Standard price is used for in-house produced materials.
The moving price in SAP:
Is the weighted average cost of an item of inventory.
It is the total cost for all items / number of items.
Needs to be recalculated for goods movements with vendors.

14. The Inventory Workshop

15. A stock transport order
Issuing plant
Receiving plant
Stock transp.
order
Storage location 1
Unrestricted-
use stock
Storage loc 3
Unrestr.-use
stock 2
Stock in
transit
Stock in
quality insp.
Goods
issue
Blocked
stock
A stock transport order and its subsequent documents has several features and advantages over individual goods movements:
• Purchase requisitions can be converted into purchase orders or stock transport orders.
• The receipt can be planned at the receiving plant.
• You can enter delivery costs and a forwarder/carrier in the stock transport order.
• The goods receipt for the transport order can be posted to unrestricted-use stock, stock in quality inspection or to blocked stock.
• The entire process (goods issues and goods receipts) can be monitored via the PO history.
Goods
receipt

16. Many types of goods movements
Plant 1
Plant 2
Storage loc. 1
Storage location 2 5
Vendor
Production
Unrestricted-
use stock 1 6 4 7
Stock in quality inspection
Storage location 3 8 3 2
Production
Customer
Blocked stock
Some examples of goods movements in the diagram above:
Goods receipt from vendor
Goods receipt from production
Goods issue to customer
Goods issue to production
Company code to company code movement
Plant to plant movement (within a company code)
Storage location to storage location movement (within a plant)
Stock to stock movement (to change stock type, for example unrestricted-use to blocked stock)

17. The difference between stock counted and book inventory is posted.
Posting stock counts
The difference between stock counted and book inventory is posted.
The material document updates the material master.
The inventory G/L accounts are updated (via an accounting document).
At stocktake you count your physical inventory.
When you post the stock count, the system posts the inventory differences between stock counted (physical inventory) and the amount on the system (book inventory).
The material quantity is updated in the material master (via a material document).
The inventory G/L accounts are updated in financial accounting (via an accounting document).

18. Built-in IM controls
Inventory counts highlight incorrect goods movements.
Need to be performed by a different user (segregation of duty).
Differences posted need to be within tolerances set per user.
Once you post a goods movement you can’t delete it.
Inventory (stock) counts are a control as they highlight inventory risks such as incorrect goods movements.
For that reason the person performing and posting the stock counts needs to be different. This is a segregation of duty control.
Differences posted need to be within tolerances set per user.
To further control goods movements:
Once you post a goods movement you can’t delete the goods movement. To correct errors, you need to first cancel the incorrect document and then create a new document.

19. Managing and reporting on inventory
Some important reports:
Low stock levels
Slow or fast moving stock
Lost stock
Document lists:
Material documents
Accounting documents for material documents
Cancelled material documents
Reasons for movement
Total quantity/value of stock for different master data
Inventory levels at all levels in the organizational hierarchy relevant to stock
To manage inventory the following reports are important:
Identifying low stock levels
Identifying slow- or fast-moving stock
Identifying lost stock
Document lists:
Material documents
Accounting documents for material documents
Cancelled material documents
Reason for movement
You can report on the total quantity or value of stock for different master data
E.g. stock types, material master records
You can report for all levels in the organizational hierarchy relevant to stock
E.g. Storage location, Plant, Company code, Client

20. IM Integration unit review
Introducing Inventory Management
IM organizational structure
IM master data
Material master with controls
IM processes
Stock transport orders
Goods movements
Stock counts
Controls
IM managing and reporting

21. Recap: Inventory Management
Which of the following organizational data elements are used in inventory reports? There are two (2) correct answers.
Material
Purchasing organization
Storage location
Plant
Which of the following transactions can increase the value of inventory in a company? There are two (2) correct answers.
Purchase order
Goods issue
Goods receipt
Post stock count
Which of the following goods movements can have an impact on financial accounting? There are two (2) correct answers.
From unrestricted-use to stock in quality inspection
Goods receipt for a transport order
Plant to plant movement
Goods issue to production
Material to material (stock to stock) movement