Physical Inventory is more than just SAP – Strategic counting
In this blog I will continue with my thesis that Physical Inventory is more than just a sequence of SAP transactions, which I started in my previous blog: Physical Inventory is more than just SAP – Legal Background and Preparation
Creation of physical inventory documents and conducting the count
Hand in hand activities
I have read many questions asking “how to create automatically physical inventory documents” , in fact I could get 212 hits when using the SCN search with these key words: automatic creation “physical inventory”
Despite of having given technical instructions to achieve it I would not use it personally.
How can I know days or weeks in advance what situation I have in the morning of the counting day?
Are there already 20 trucks waiting to be be unloaded? Are all withdrawals and receipts posted? Have all transfer orders been confirmed? Is the staff available or do they suffer on yesterdays canteen food?
Creating and printing of physical inventory documents is not a long-running transaction. MI31 to create documents followed by MI21 to print the documents is done within 2 – 5 minutes. I am not talking about newbies who do it for the first time and have not even made their selves familiar with the SAP transactions, physical inventory is an activity for professionals who got trained and executed the transactions in a test system too. Hence it can be executed manually in the morning (and later during the day) manually after the head of physical inventory has ensured that all postings are done. He may call the usual subjects who causing him headaches all over the year with delayed postings.
The physical inventory does not stop all business. It may interrupt it for a few hours. The art of physical count is to affect the normal business as less as possible.
To achieve this goal of minimal interruption we need to execute the physical inventory in a strategic way.
Let us have a Google Maps view at one of our plants. I circled the areas in which we have items to count.
We have 3 large halls for materials that have to be protected from weather, which are rain and frost sensitive. Several open air storage areas for filled drums, containers and empties. 5 tank farms, 4 production facilities and rail tracks with tank wagons.
There are 11 areas to be counted by warehouse personnel. The shop floor is counted by production personnel, the tank farms too.
Let’s focus on the areas counted by the warehouse personnel.
We used to have 4 counting teams, each team is a party of 3, one who counts, one who writes the counted quantity into the form, and one with a forklift who can move pallets with material to enable counting in spaces where the goods are not stored accurate enough that people can free move in the aisles.
A few others who are not assigned to the counting teams can continue doing normal activities like loading and unloading trucks, receiving goods from production, moving raw materials to the shop floor.
The 4 teams have to count 11 areas in total, but can only count one area at a time, hence we only create inventory documents for 4 areas.
And which 4 areas is determined right on time when we know where we currently have no receipts and issues.
Most areas are sub-divided into many sections (I try to avoid the words storage location and storage bin as these words are specific to a SAP module, and this blog is regardless of the module used). In the below picture I draw 4 lines to show that this area is actually 6 sections (storage locations or bins), which means that the counting team for this area gets 6 inventory counting documents then they start going there and count.
Of course they start in one corner and count through all items in sequence of their physical appearance. They do not jump based on the sequence in the counting document, because this way they could never find items which are not listed and not expected in that area
While the teams are counting, the assistant in the office prepares the documents for the next area to be counted
When a team has finished their count, then they bring the counting sheets back to the office and get the next counting sheets in exchange.
The assistant is preparing the document for the next team and starts entering the count in SAP for the documents brought back by team 1.
When the next team has finished they get the prepared inventory documents in exchange too.
Per inventory document we approximately have 20 to 40 items.
I think you can imagine that counting an area like shown in the picture above may take about 1 hour
Creating and printing of a physical inventory document 2 to 5 minutes
Entering a counting sheet about 2 – 5 minutes too.
So it is possible to have 1 or 2 persons in the office preparing the documents and entering the count while others count.
It is even already possible to create already difference lists directly after the count is entered and to determine the items that need a recount.
The first team that has finished their regular counting activities becomes the team for the recount (except on places where they did the original count )
The second finished team does then the recount on the remaining places where first team counted.
Once the recount is done and entered, the area is released for business again. Which means the third team that finishes with count will then start doing normal business activities in those areas.
The ramp where we store our receipts and the staging area for deliveries to the customers are kept open until all other areas are completely counted. Just for the unlikely event that a vendor delivers goods ignoring that he was informed with the purchase order about the physical inventory. Similar for a customer who might come along to pick up his order. Then these 2 spaces are counted as the final activities.
With our “strategic counting”, everything goes hand in hand and we reach a minimal affect on usual business
In most cases we finished entering count, printing and posting differences within a quarter hour after the last count was physically done.