The Key Figure ‘Dead Stock’ in SAP-ERP
What is dead stock in SAP? It has nothing to do with farm animals and neither is it safety stock. The dead stock portion of your inventory is simply that amount of stock, that you do not dip into, during a defined period of time. It is waste… unused inventory.
If we do an analysis in the LIS, we can see how far the stock comes down posting issues and how it goes back up after a receipt… day by day. So naturally, you can see the lowest point during any given period. That is your dead stock portion of that period… at least approximately. And I say approximately, because if you call this graph up from the LIS transactions that are based on info structures (MC.9, MC.A etc.), then you get the ending inventory day by day – and not the lowest point during that day. If, on the other hand, you are using the document evaluations (MC50), then your dead stock calculation is accurate, since that transaction goes through all goods issue and goods receipts documents, that were ever posted within the period of examination. But that comes at a price: runtime! and if you are not on HANA yet, you will have to talk to your user about patience and the appropriate scheduling of coffee breaks.
Looking at one of those evaluation graphs, you can see that the dead stock during 2008 was at 6,000 and in 2009 we had dead stock that we never dipped into, of 2,800.
The dead stock key figure is an excellent measure to build hitlists and find ‘high opportunity’ items. Especially if you make it more meaningful and relate it to your average inventory holding. The higher the percentage of dead stock of your average inventory, the more you have waste lying around.
Now as I mentioned before, the LIS transactions do not really produce the key figure dead stock (even though you can make a guess in the graph) and neither does any report looking at the material consumption table MVER. The only way to get dead stock in ERP, is by using transaction MC50, which does the calculation by going through every single document (that is why that transaction is a ‘Document Evaluation’ transaction). And depending on the period of examination and the amount of materials you are looking at, this calculation can run for a very long time (days or even a week). And, to make matters worse, you can not just simply save the result in a table and add on to it later. No, you would have to start the analysis for a new period all over again.
Not so, if you use the Inventory Cockpit, another great Add-on tool by SAP Consulting (see my videos and blogs on Add-On tools by SAP Consulting). The Inventory Cockpit is based on the analysis result of the MRP Monitor, but… it also uses some additional key figures like dead stock and slow moving items. And those key figures are being calculated using the Material Document Aggregation, short MDA, the data basis for the Add-Ons. The MDA, as the name implies, aggregates material documents and therefore has the exact information necessary, to calculate dead stock and slow movers. But even better… it allows you to save the result in a table (many versions of it if you want) and then gives the great ability to append to the table month by month.
In other words… you save your own material consumption information in a table, much more detailed than table MVER, append to it every period and use the information – like dead stock values – whenever you need to… without the necessity to run hour long calculations.
One use for the dead stock is in evaluations within the Inventory Cockpit. the Inventory Cockpit allows you to set target inventory levels (that can be calculated based on past consumption, replenishment lead time and MAPE) and analyze your inventory levels with grahics that put the LIS to absolute shame.
More detail on the Inventory Cockpit will follow in one of my videos, but ere is a taste and some screen shots.
Inventory Analysis with the LIS is still possible, but tedious and not very effective. If you are already doing it, by all means continue… and look to replace some functions by better tools like the Monitors discussed here. But if you are not and you are looking to do something effective in SAP… Do NOT spend money on these people that show you the ‘hidden power of the LIS’. It’s a worthless undertaking that gets you nowhere. The entire suite of Add-On tools by SAP Consulting (all within the standard SAP namespace) will cost you about a quarter of the money these opportunists will charge you for a six months inventory reduction program. And then they walk away and you will ask yourself ‘what now?’. With the Monitors your staff is empowered and ready to continuously and sustainably optimize inventory levels, safety stocks, use the right lot size procedures, decide properly on MTS versus MTO, keep dead stock down, correct lead times and much more!