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Inventory and Warehouse Management Process
Chapter 7
1 Magal and Word | Integrated Business Processes with ERP Systems | © 2011
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Learning Objectives1. Discuss the four goods movements
associated with inventory management.2. Describe the organizational levels in
warehouse management.3. Analyze the master data associated with
warehouse management.4. Identify and explain the key steps in the
warehouse management processes.
2Magal and Word | Integrated Business Processes with ERP Systems | © 2011
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Learning Objectives5. Demonstrate how inventory and
warehouse management processes are integrated with other processes.
6. Effectively use SAP® ERP to execute the key steps in the warehouse management process.
7. Extract and analyze meaningful information about the warehouse management process utilizing SAP ERP.
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BackgroundInventory and warehouse management
processes are concerned with the storage and movement of material within an organization.
Chapter 4 introduced the underlying activity in inventory management (goods movement).
The four goods movements types are:Goods receiptGoods issueStock transferTransfer postingMagal and Word | Integrated Business Processes with ERP Systems | © 2011
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Background
Warehouse management – processes that enable companies to manage materials more effectively.
Linkages exist between inventory management and warehouse management.
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Inventory Management
Focus is on the extension of the goods movement.
Goods movement involves specific movement types.Information needed to execute the movements.General ledger accounts are affected.
The key organization level is storage location. Most relevant master data:
Material masterPlant/data storage material master view
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Goods Movements
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Goods ReceiptMovement of materials into inventory
(increase)Can take place during the production
processCan result in the creation of material and
financial accounting documents for both production and IM-WM processes
Can post goods receipts without reference to an orderInitial receipt of inventoryUnplanned receiptMagal and Word | Integrated Business Processes with ERP Systems | © 2011
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Goods IssueResults in a decrease in inventoryIn the fulfillment process, it indicates a
shipment of finished goods or trading goods to a customer against a sales order.
In the production process, it reflects the issuing of raw materials or semifinished goods to a production order.
Can be unplanned.Materials may be withdrawn for internal
consumption.
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Transfer PostingsAre used to change the status or type of
materials in stock.Four common stock statuses:
Unrestricted useIn quality inspectionBlockedIn transit
Can be used in other situations that do not necessarily involve a physical movement of materials.
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Stock TransfersUsed to physically move materials within
the enterprise from one organizational level or location to another.
Three options are available for organizational levels: Between storage locations within one plantBetween plants in one company codeBetween plants in different company codes
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Stock Transfers Three options are available for moving
material, regardless of the organizational level:One-step procedureTwo-step procedureStock transport order (STO)
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One-step and Two-step Procedures
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Storage Location-to-Storage Location Transfer
A transfer between two storage locations within the same plant
Reasons why:Temporary staging areaQuality inspection
A one-step or a two-step procedure can be used.One-step procedure: materials can be in any stock
status (supplying location) to any stock status in (receiving location).
Two-step procedure: possible only when the materials are in unrestricted use at the supplying location.
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Storage Location-to-Storage Location Transfer
Transfer between storage locations in the same plant does not affect valuation (same valuation).No financial impactNo financial document
Split valuation (when valuation is not the same)Financial impactFinancial documentMultiple material accounts
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Stock Transfer within a Plant
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Plant-to-Plant TransferMovement of materials between two plants
within the same company code A one-step or a two-step procedure can be
used.Difference is the stock status at the receiving
plant.Typically, only materials in the unrestricted
use status can be moved between plants.Material documents are created.Financial impact (FI document)
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Plant-to-Plant Transfer
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Demo 7.1 Plant-to-Plant Stock Transfer (1 Step)
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Review Plant-to-stock stock transfer (1 step)
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Company Code-to-Company Code Transfer
Movement of materials between two plants in different company codes
A one-step or a two-step procedure can be used
Two FI documents are created, one for each company codeOne line item is for the material account.One line item is for a clearing account
created to accommodate such a transfer.
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Stock Transport Orders
Plant-to-plant movements have limitations.Stock transport orders are a solution.In the STO process one plant “purchases” the
materials and another plant “sells” them. Can involve steps from the procurement,
fulfillment, and inventory management processes.
There types of stock transport orders:Stock transport orders without deliveryStock transport orders with deliveryStock transport orders with delivery and billing
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Stock Transport Orders without Delivery
Involve steps from purchasing and inventory management
STO created directly or referenced to other documents (PR)
Only the two-step procedure can be usedMaterial document created to record movementGoods receipt recorded against the STOOne or two FI documents may be createdFinancial impactGeneral ledger accounts
Material accountsClearing accountsMagal and Word | Integrated Business Processes with ERP Systems | © 2011
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Stock Transport Orders without Delivery
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Demo 7.2: Stock Transport Order without Delivery
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Review stock transport order without delivery
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Stock Transport Orders with Delivery
Delivery document is created (picking and packing) prior to goods issue.
The order is treated like a sales order.A one-step or a two-step procedure can be
used.One-step procedure: Only one material
document is created, and the materials are placed in unrestricted use at the receiving plant.
Two-step procedure: Material movement and financial impact are identical to those associated with an STO without delivery.
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Stock Transport Orders with Delivery
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Demo 7.3: Stock Transport Order with Delivery
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Review stock transport order with delivery
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Stock Transport Orders with Delivery and BillingSTO includes both the delivery document
(shipping step) and the billing step from the fulfillment process at the sending plant.
STO includes the invoice verification step from the procurement process at the receiving plant.
Purchase price is included in the STO based on pricing conditions and info records.
The supplying plant creates a delivery document authorizing the shipment.
Goods issue is posted at the sending plant.Goods receipt is posted at the receiving plant.
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Stock Transport Order with Delivery and Billing
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Organizational Data in WM
Key organizational data are the warehouse.Warehouse is associated with one or
multiple combinations of plant and storage location.
Association between storage locations and a warehouse provides the linkage between IM processes and WM processes.
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Organizational Data in WM
When linking warehouses to storage locations, the following rules apply:A warehouse must be linked to at least one
storage location.A warehouse can be linked to storage
locations across multiple plants.A storage location can be linked to only one
warehouse.Not all storage locations must be linked to a
warehouse.
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Organizational Data in Warehouse Management
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Organizational Data In WM
A warehouse is divided into smaller areas in a hierarchical manner
Storage typeStorage section/picking areaStorage bin
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Storage TypeStorage type is a division of a warehouse
based on the characteristics of the space, materials, or activity.
Storage types can also be based on how materials are stored or on material specification.
The assignment of storage locations to a warehouse links IM activities to WM activities.
Interim storage areas represent the physical links between IM and WM.
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Structure of a Warehouse
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Storage SectionA storage section groups bins with similar
characteristics:Fast-movingSlow-movingHeavyLight Small
Each storage type must have at least one storage section.
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Picking AreaA picking area is a division of a storage
area based on removing or picking materials.
Storage bins are grouped based on similar picking strategies.Specific employees who are authorized to
pick from specific binsA delivery can be allocated to multiple
picking areas to facilitate parallel picking.
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GBI’s San Diego Plant Layout
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Structure of GBI’s Warehouse in San Diego
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Bins in Rack Storage
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Fabric Storage
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Rolled Steel Storage
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Master Data in Warehouse Management
Material master and storage bins are key master data.
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Material MasterMaterial master has been previously
discussed in the context of several processes.
Material located in a storage location associated with warehouse management requires additional data in the material master.
Organization levels:WarehousePlantStorage typeMagal and Word | Integrated Business Processes with ERP Systems | © 2011
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Material Master Warehouse management view:
Basic dataData used in defining stock placement and
removal strategiesData regarding the storage bins where the
materials will be storedBasic data are relevant to all processes.Some data are redefined for warehouse
management.Placement and removal strategiesBin-related data
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Demo 7-4 Review WM View of Material Master
Review warehouse management view of material master
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Storage BinsStorage bins are the smallest unit of space
in a warehouse.Can vary in sizeUnique addressCan store different materials (quants)
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Storage Bin Addressing
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Storage Tubs (Bins)
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Quants in A Storage Bin
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Demo 7-5 Review storage bins, and display stock in storage binsReview storage bins and display stock in
storage bins
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Processes in Warehouse Management
The warehouse management process is typically triggered by goods movement in other processes such as:ProcurementFulfillmentProductionInventory management
Transfer requirement is used to plan the movement of materials in and out of warehouse.
Movement of materials is accomplished with a transfer order.
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Warehouse Management Process
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Plan Warehouse MovementTransfer requirement is generated
automatically when goods movement involves warehouse-managed storage locations.
Transfer requirement is created manually to facilitate internal movement of materials.
Posting change notice is used to change the status of a material.
Source requirement for warehouse movement:Material documentDelivery documentProduction order
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Elements of the Plan Warehouse Movement Step
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Data in a Transfer Requirement
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Reference Documents for a Transfer Requirement
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Execute Warehouse MovementCommon warehouse movements:
Picking Putting awayPosting changes
Transfer order is used to execute warehouse movement.
Transfer order can be created directly from transfer requirement or posting change notices.
Transfer order can be created manually to facilitate internal warehouse transfers.
Transfer order consists of a header and one or more line items.
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Elements of the Execute Warehouse Movement Step
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Data in a Transfer Order
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Structure of a Transfer Order
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Reference Documents for a Transfer Order
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Confirm Warehouse Movement
Transfer order authorizes warehouse employees to physically move materials from source bin to destination bins.Once the materials have been moved, the
movement is confirmed.The same transfer order created to authorize the
physical movement of materials is used for confirmation
ERP system automatically updates the associated reference documents such as :Delivery documentTransfer requirementPosting change notice
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Elements of the Confirm Warehouse Movement Step
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Warehouse Management In Procurement
Plan warehouse movementInterim storage area is the physical link between
the procurement and warehouse management processes.
Transfer requirement is created.Execute warehouse movement
Ready to put away materials from interim storage area into warehouse bins.
Transfer order is created.Confirm warehouse movement
Physically move materials from interim storage area into warehouse bins.
Transfer order is updated with confirmed quantity and location.Magal and Word | Integrated Business Processes with ERP Systems | © 2011
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Inventory Impact - Procurement
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IM and WM Steps in Procurement
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Demo 7.6: Procurement Process with Warehouse MovementsReview the procurement process with
warehouse movements
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Warehouse Management in Fulfillment
Plan warehouse movementInvolves fulfillment processes and both
inventory management and warehouse management processes
Sales order generates a transfer requirement, which serves as the link between fulfillment processes and warehouse management processes
Execute warehouse movementTime to pick materials from warehouseTransfer order created based on transfer
requirement
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Warehouse Management in Fulfillment
Confirm warehouse movement Materials have been picked from proposed
bins and placed into interim shipping storage areas.
Transfer order is updated with confirmed quantity picked and bins from which they were picked.
Goods issue posted after materials have been shipped.
Financial and controlling impact in inventory management.
Fulfillment process continues through invoice and payment steps.
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Inventory Impact - Fulfillment
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IM and WM Steps in Fulfillment
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Demo 7.7: Fulfillment Process with Warehouse Movements
Review the fulfillment process with warehouse movements
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Warehouse Management in Production
Involves both goods issue (production) and goods receipt (storage).
Production order generates a transfer requirement.Transfer order is created for materials placed into
interim storage area.Goods issue has a financial impact and material
outcomes.After the production process has been completed
and confirmed, finished goods are placed into warehouse bins.
Transfer order is created and confirmed after the finished goods are placed into warehouse bins.
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IM and WM Steps in Production
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Warehouse Management in Stock Transfers
Warehouse management activities can be initiated by stock transfers and transfer postings.
Transfer requirements are automatically generated by ERP system when goods movement involves warehouse management storage locations.
Material documents are created when IM activities involve goods issue and goods receipt; they may result in a financial impact
No FI impact generated by an internal transfer between storage locations within same warehouse.
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WM Scenarios for Stock Transfers
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Demo 7.8: Internal Warehouse Transfer
Review the internal warehouse transfer
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Order of Postings in WM and IM
Posting in warehouse management and inventory management by which the order inventory management and warehouse management activities are completed can vary from one scenario to anotherGoods issue in inventory management for a sales
order or production posted before warehouse management activities confirmed
Put away in warehouse management is before goods receipt posted in inventory management
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Scenarios for WM and IM Activities
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Inventory Impact When IM Precedes WM
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Inventory Impact When WM Precedes IM
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Reporting
Warehouse management reporting is similar to reporting in other processes that have been discussed.
Warehouse management reporting options are:ReportsWork listsOnline listsInformation system
Document lists such as transfer requirements and transfer order can be generated.
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List of Transfer Orders
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Demo 7.9: List Report — List and Transfer Orders
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Review list report – list and transfer orders
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Storage Location Inventory Report
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Warehouse Inventory Report – After GR and TR are Created
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Warehouse Stock – After TO Is Created
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Warehouse Stock – After Transfer Order Is Confirmed
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Bin Status Report
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Storage Bin Details
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Quants in a Bin
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Demo 7.10: Bin Status ReportReview bin status report
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