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POD-Series 1- Intra-Company Stock Transfer

A very warm Hello to you!!

This series of documents would aim at explaining the various key business processes that a finance person is expected to demonstrate the knowledge about. I would restrict myself to explaining the process as is relevant to a FICO person, however, ranging from SAP Logistics and right until the process culminates into FICO, with various accounting touch points. Hence, the name PODs (Process Oriented Discussions)

The present document aims at explaining the various stock transfer scenarios. I would broadly categorize them into

1. Intra-Company Stock transfer (Between Plants of the same company)

2. Inter-Company Stock transfer (Between Plants of different company)

Intra-Company Stock transfer

A Product ,say, P1 is manufactured in Plant A. For some reason (eg: further processing) it is transferred to Plant B of the same company code. This process is called as Intra-Company Stock transfer. Briefly, the process steps would be as below

a. Plant B raises a STO (Stock Transfer Order) on Plant A

b. Plant A might have the stock ready with it or it may need to manufacture the same

c. Once stock is available in Plant A, the same will be despatched (PGI) to Plant B (Movement type 641)

Accounting entry at this stage will be:

  Stock account Dr (receiving plant)

  Stock account Cr (sending plant)

Note that accounting entries are posted when sending plant does the PGI. After PGI, the stock is removed from the books of Plant A and the same is shown as “Stock-in-Transit” in the books of Plant B

d. Plant B receives the stock and does GR (MIGO – Movement type 101).

No accounting document is made at this stage because the accounting entries are already accounted in step c above. The impact of this step will be that the stock in the books of Plant B will now move out of “Stock-in-Transit” category and show as unrestricted stock or QI stock depending on the inspection plan.

Remember that till the time the stock reflects under Stock-in-Transit, it cant be issued for consumption in Plant B.

Experts corner:- 

Below points are meant to provide expert knowledge about this process. These are separated from the above process steps so as to target the relevant audience.

a. Material master set up in Plant A:- (Only the settings relevant to FICO)

  – Procurement Type = E (In-House manufacturing)

  – Price control = S (Standard price)

b. Material master set up in Plant B:-

– Procurement Type = F

– Special Procurement Type = Z1 (to be configured in OMD9)#1

– Price control = S or V ? #2

#1 – When a special procurement type is assigned in material master of Product P1 in Plant B, during MRP run or Costing run, the system will be directed towards Plant A.

This means, during MRP in Plant B, the requirement for Product P1 will be generated and transferred to Plant A. System will not intend to manufacture P1 in Plant B. The planned order generated upon MRP can be converted into a STO

During costing run in Plant B, system can be diverted to Plant A to read and transfer the cost estimate from Plant A

#2 – It is an important consideration / decision to be made regarding the price control of the material in the receiving plant. One school of thought is to have Price control V in the receiving plant, because the material is not manufactured in this plant. Another school of thought is to have Price control S. Preferably, S, is the one that is commonly used. This helps to roll-up the cost component split of sending plant into the receiving plant “as-is”. One can have the Price control V and still roll up the cost components in receiving plant. However, it becomes challenging in some scenarios. I would not go into details here, and they can be provided upon request in the comments section.

c. Valuation price of the material in the receiving plant:-

Valuation price of the material depends on the choice of the price control.

  – If the price control is V in receiving plant, the cost of the sending plant (Standard cost) + Any planned delivery cost (PDC) + Non deductible taxes (NDT) become the valuation price of the receiving plant. If there are no PDCs and NDTs, then standard cost in sending plant = MAP of receiving plant.

– If the price control is S in receiving plant,  you can transfer the standard cost and its components from the sending plant. If you transfer the “released cost estimate” from sending plant, then the standard cost in both the plants will be same. Hence, no Price differences or inventory valuations would occur during STO.

In order to transfer the “released cost estimate”, you must allow “Cross plant transfer” in the Transfer control of your costing variant. If you don’t allow “cross plant transfer”, then during cost estimate in Plant B, system would recalculate the cost of P1 in Plant A and update the same in Plant B. As a result, the standard cost in both plants can be different and can result in valuation gain/loss upon STO

– If the price control is S in receiving plant and you want to add the freight charges to the inventory value, then you need to use the “Additive cost” feature in Product costing. In a layman’s language, the standard cost in receiving plant would become Standard cost of sending plant + manually specified freight charges.

Note that in this case, the standard cost in both the plants would be different and would result in valuation gain during STO. The accounting entry upon PGI will be

  Stock        a/c  Dr 110 (receiving plant)

  Stock        a/c  Cr 100 (sending plant)

  Val. gain  a/c 

d. Custom validations required in the process:-

Where the material has Price control S in the receiving plant, and the standard cost is not maintained/released, then during PGI, the inventory in receiving plant will be valuated at ZERO.  This becomes a serious concern in accounting and balance sheet finalization.

Similarly, after the standard price in receiving plant is released (same as sending plant) and later on the standard price is changed in the sending plant without updating the same in receiving plant, it can result in valuation gain/loss during STO. This becomes an audit observation during finalization of accounts.

To overcome above problems, one can implement a custom check using FM MB_MIGO_BADI to check that the price of the material in the sending and receiving plant is same. If it is not, the system shall throw an error message, which will prevent the PGI

Thank you for reading the document. I would appreciate your feedback on the document, which will help me to improve it further.

Next document would focus on Inter-Company Stock transfer process.

Best Regards,

Ajay Maheshwari

PS: Links to subsequent docs are enclosed here for quick reference

POD – Series 2 and POD – Series 3

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  • Hi Ajay Maheshwari,

    Wonderful document explaining the business scenarios in a fluid manner for functional consultants.  Great kudos to you for the effort put in.

    Could you please explain what would be the cost component roll up challenge for Plant B in case we put the price control as V in receiving Plant.

    And please correct the typo mistake in point C (stock will be dispatched to Plant B) 😉

    Thanks again for the nice document and will wait for your further POD series.



    • Hi Sridhar

      If you have Price control V in receiving plant and assume you are also adding the freight component into the MAP...

      Now, if you wish to have cost components rolled up in receiving plant, you will have challenge.. Your cost components as per Std cost will get rolled up, but it wont include the freight in it...

      In short, price at which this will be issued (MAP) for consumption and price considered for Std cost would differ.. One needs to consider this angle!!

      Hope its clear..

      Br, Ajay M

  • Dear Mr. Ajay Sir,

    Great way of Explanation!!

    Perfectly summarized the process of stock transfer, Definitely this doc would be really helpful for everyone whosoever would refer.

    Personally, would share this doc with my friends and encourage them to read and share their knowledge as well.

    You are a true asset to SAP community who is sharing knowledge without expecting a penny, Hats off to you Mr. Ajay Sir,

    Have been following your posts, blogs, docs curiously and always have a wish from inside that would acquire your knowledge, explanation, style of writing & many more.

    Thanking is not enough for your contribution towards the community.

    Much much appreciated your effort.

    Thanks Heaps

    Kind Regards


  • Hi Ajay,

    I am not praising but its really very well written document. Anyone can understand in a simple terminology.

    Its better you can come up with series of PODs on important/required topics in CO also for the betterment of forum members.

    Thanks for sharing the document!!!

    BR, Srinivas Salpala

  • Hi Ajay..

    Its really very nice and informative document, we need such guidelines from you.

    Really appreciable your knowledge and efforts. 



    • Atul Bhau

      Tumche comments Badal, hardik shubecha!!

      Before anyone asks us whats going on, let me tell I am thanking Atul in Marathi Language (Thanks for your comments, is what it means) 😀

      Br. Ajay M

  • Hi Ajay

    It takes a lot of experience to compile this information into one document. Thanks for making it easy for us to digest these information in couple of minutes.

    Appreciate your commitment and keep it up.



    • Thanq Mustafa.

      Let me take this opportunity to tell you that you are a good and knowledgeable consultant. I have seen your replies and they show the good understanding you possess about system flow.

      I know you don't need a certificate from me, but just wanted to share my true feelings.

      Ajay M

      • Hi Ajay

        Today should be my lucky day. I will keep seeing this comment everytime I am low of confidence, just to rejuvenate it. Its an honor to be appreciated by the Supremo.

        Thanks Ajay and I really wish to work someday with you. Hope our lines meet very soon. 🙂



  • Hi Ajay,

    Its just a wonderful document. Well drafted with business examples. Very clear and ease understanding. Thank you a lot for shared such a nice document. Highly appreciated your efforts.



  • Hi Ajay,

    I have a confusion.....Suppose for Plant A the material(sto) will be the FG and when we transfer it to Plant B through movement type 641 , the material will become the raw material for plant B..... What will be the Price control and Price determination in Plant A and B if ML is activated..



    • Hi Nitisha

      In system, a material with material type FERT will remain as FERT material in all plants.. However, in receiving plant, you may treat it as a component...

      With our Without ML, price control S is recommended in both plants

      Br. Ajay M

  • Dear Ajay,

    A wonderful idea mooted by you by way of discussion on the processes.  I have seen many of your excellent postings, especially in CO.  I would suggest that you can pen down the FICO processes one by one so that the whole SAP community can benefit from the explanation.

    Many of the consultants are aware of the technicalities, but not the actual processes (including me in some areas though I am there in SAP for a few years now).  In view of your experience, I made the above suggestion.  It would be really nice if you also put the config steps for each process in the same document.

    It will really be helpful to many of the consultants.  It will also provide opportunities to many of the senior, experienced ones to pitch in with their suggestions based on their real life experience.

    Good luck to you on your mission!!  Wish all of us good learning....


      • Hi Ajay,

        Thanks for sharing nice document,

        i have query as u mention that ensure the same price into the both plant for the transfer materials,You have also mention to check the same price.

        my query is that since we are sending the materials for further processing to the next palnt.

        after processing on the materials ,value of the material certainly changed, it may include process cost+inventory cost+overheads+admin charges=Total price,

        During cost estimation at the receiving plant,certaily above factors matters,

        also the question raise about the cost estimate at processing plant,whether to carry?

        I am not the CO guy,but we are going to implement the CO modules at different plants,

        our stock transfer scenario is intra stock transfer.

        Mr. Aajy sir, pl. focus on the point and suggest me the best SAP Business practice.



        • Hi Dev

          When you stock transfer a Product P1 to another plant and process it further there, then the material code has to change to P2..

          That means P1 will be input material, and P2 will be output material..

          So, Cost of P1 + Cost of Processing = Cost of P2...

          Br. Ajay M

  • Hello Ajay,

    Nice document from ur end like as usual...... 🙂 Keep sharing and we are expecting more contributions from your end.

    Congrats 🙂 By getting the "Thought Leader Badge"

    Thanks & Regards,

    Lakshmi S

    • Hi Ajay,

      thanks for the reply,

      I am interest into the Best Practice scenario follow up,

      Since there is material transfer between the plants,for non excisable goods ,we have follow the simple movement types as 303 and 305,we have not opted for STO scenario,

      Pl. suggest the best practice.



  • Dear Ajay Sir,

    This is really an informative document for those who belongs to manufacturing firms,and who want to understand how real life scenarios are dealt into SAP world. It is easiest to understand and giving a practical approach.

    Really thank you for sharing your superlative knowledge with us.


    Pankaj Bhalerao.

    • Hi Pankaj Bhau

      Tumche comments Badal, Hardik Shubecha!! 🙂

      Am obliged for your comments and happy that people are finding it easy, informative 🙂

      You can also read the other 2 docs in this series (POD Series 2 and POD Series 3).. POD Series 3 is extension of Series 1

      Br, Ajay M

  • Good work..!! I know the process from a Materials management perspective, now got information from a costing perspective. Thanks for sharing your knowledge.



  • Hello Ajay,

    Thanks for the lucid  step by step explanation while showing the complete process made it look very easy  delivered as expected from  one of the best  authorities on  Controlling

  • Hi Ajay:

    I have been through the process of transferring stock cost from one plant to another with some value freight on it when there was no transportation management in picture. I want to know if it is possible to transfer the freight cost for which system raises PO automatically as per freight condition in TM. I would explain my scenario as under

    Transportation management is in use.

    Two plants,Plant A and Plant B

    Mat 1000 is FERT and has standard 100 . it needs to be transferred to Plant B from Plant A.

    Plant B makes STO.

    Plant A creates shipment document in which freight value 10  is given in the freight condition type.

    On OGP system created financial document

    Stock Dr (Plant B) 100

    Stock Cr (Plant A) 100

    Freight PO is auto created by system and during service entry sheet following accounting entries are generated

    Freight expense Dr 10

    Freight Clearing Cr 10 and later on it is invoiced and paid. These freight expenses are not added anywhere to material cost in this scenario while doing PGI. We can well replace Freight expense with Stock account here but still see PGI has already been done above. If we use additive cost option how will system cater above scenario ?

    Your guidance is required.


  • Hi Ajay Sir,

    Excellent document. I was reached to POD 3. From where I got this. Super Doc...

    I have a query. When we dispatch the material from plant A to Plant B. Its immediately increase the inventory of the Plant B in accounting books. So how we are saying that it is in SIT. And how at the time GR in Plant B, this material move from SIT to unrestricted stock.

    Do we need to do any setting from FICO side.


    Ankit Agarwal

  • Dear Ajay,

    Document is exceptional...

    I am having little doubt about the process:

    When we do the transfers, if there is any gain or loss because of price difference in the sender/ receiver plants, system is posting the prd amount against Receiver cost center.

    As we have assigned the GL in AUM.

    Is there any possibility to post the differential amount to the sender cost center...?

    Thanks & Regards,

    Pavan Kumar Arvapally

  • Hi Ajay!

    Congrats for your excellent post. Would you know tell me how the process Intra-Company Stock transfer (Between Plants of the same company) works in Brazil with movement types 862/861?

    Thanks & Regards

    Pedro Oliveira

  • Hi Ajay

    I am currently working on Transfer Pricing Setup for Intra-Company Sales.

    Have done most of the configuration, hopefully correct. However I still have few doubts and need your inputs:

    1) We are using SD route for STO from one plant to another. In SD they are anyways going to use Revenues in their condition types. Do I need to maintain separate pricing in AKE5. If so, are we not duplicating the same price and is there a way both can sync up automatically to give me internal revenues, as desired.

    2) I understand that I don't need to setup TP Variant, as Standard (000) would take care of valuations and accounting entries setup in 0KEK

    3) In case I need to configure the above, will it have a huge impact of this setup after activation of ML in Live Environment.

    4) Can you also help provide us detailed process flow for this scenario including Accounting entries.

    Appreciate (as always) your inputs.