INVENTORY MANAGEMENT

INTRODUCTION TO INVENTORY MANAGEMENT

....................................EXPLORING THE TYPES OF STOCK
...................................MOVEMENT TYPES

GOODS RECEIPT AGAINST PURCHASE ORDER.............................. Transaction Code: MIGO

 INTRODUCTION TO INVENTORY MANAGEMENT

Inventory management refers to the process of managing inventory items, such as raw
materials, finished as well as semi-finished goods, and scrap or obsolete items of an
organization.

The implementation of inventory management in an organization not only ensures an

uninterrupted supply of materials and services to a plant but also prevents any
interruptions or delays in the production or manufacturing process.

Maintaining a correct and up-to-date inventory helps to reduce the inventory costs as well
as prevent the blockage of working capital. In addition, inventory management is essential
for correct planning and budgeting, as it provides a correct assessment of funds that are
allocated to purchase inventory items.

. While storing, goods need to be kept in bins in such a way that when required for goods
issue (GI), it will be easy and convenient to do so.
For goods that have a shelf life (expiry date), it is important to keep them in
batches so that all goods with the same expiry date are kept at one place.

Similarly batch-produced goods needs to be kept in batches so that goods from

one batch is not get mixed with another batch. The quality of one batch differs from that of
another batch
 EXPLORING THE TYPES OF STOCK

In inventory management, stock is classified into different types depending on its usage.

UNRESTRICTED STOCK
Refers to the type of standard stock, which is used for regular production processes.
Quality evaluation checks are performed for this stock before sending it for
consumption purposes.

QUALITY INSPECTION STOCK

Refers to the standard stock that is under the quality evaluation process.

Quality inspectors are appointed by an organization to evaluate the quality of the standard
stock.

The use of the stock under quality inspection is temporarily suspended until the completion
of the quality inspection process.

You can block the usage of stock material depending on the results of the quality inspection
process.

In other words, the materials under quality inspection are transferred to either the
unrestricted-use stock or the blocked stock after their quality evaluation.
BLOCKED STOCK

Refers to the standard stock, which is blocked in the quality inspection process and is not
used for production.

The primary reason of blocking the standard stock is its unsatisfactory quality evaluation
report. Arrangements are made for the earliest replacement of the stock that is blocked due
to its damaged condition.

Sometimes, items have to be kept in the blocked stock due to some error in their
purchasing, taxation, or billing documents. In addition, the materials provided by vendors for
promotion are placed in the blocked stock, as these are not used for production purposes.
 MOVEMENT TYPES
In SAP, a concept called movement type deals with material movements when
transactions happen.

This movement of stock is reflected in the SAP system by a three digit. The numbers
ranging from 101 to 999.

Any material can be received by the customer, when it is sent by the vendor. Similarly
from a stock lying at any storage location, a material can be issued for consumption or
for transfer to another plant or storage location.

Whenever there is any movement of the material, the SAP system will propose or perform
the following activities.
1. A Material Document is created as proof of change in the quantity of the material.

2. An Accounting Document is created as proof of change in the value of the material.

3. The stock of the material is updated automatically provided it is defined as ‘Stock

Material’ and also for which the quantity and value needs to b be updated automatically in
the configuration screen.

4. And if the movement happens against a reference document, like Purchase Order, then
the document will also be automatically updated.
 Some of the commonly used Movement Types are

101 - Goods Receipt against Purchase Order.

122 - Return Delivery to Vendor.

201 - Goods Issue to Cost Center (internal department / entity).

221 - Goods Issue to Project.

231 - Goods issue to Customer against Sales Order.

241 - Goods Issue to Asset

261 - Goods Issue to Production (against Production Order).

301 - Stock Transfer between Plants (within the same Company Code).

311 - Stock Transfer between Storage Locations (within the same Plant).
501 - Goods Receipt without reference to a Purchase Order.

561 - Initial Stock Update.

 GOODS RECEIPT AGAINST PURCHASE ORDER

Navigational Path:

SAP Menu

– Logistics

– Materials Management

– Inventory Management

– Goods Movement

– Goods Movement (MIGO) [Transaction Code: MIGO]

 Goods receipt can be posted against various documents. Select the required document
from the drop-down. In this case, we are selecting purchase order. Select the
movement type according to the requirement.
Purchase order document number
1 2 5
3 4 plant Movement type

6
Select quantity and
where to placed

7
How the stock
8 is used
Every thing is
satisfied
Distribution of material in multiple storage location and multiple stock type

1
press
Distribute
quantity icon