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Physical Inventory: Cycle Counting Process


Physical Inventory is a process of taking a count of Inventory quantities present in stock at a physical location and the stocks are then matched with the quantities present in the SAP system.

If any differences are observed, difference posting is undertaken wherein the stock quantity and amount are increased/decreased as required.

There are a number of methods of conducting physical inventory namely: Periodic, Cycle Counting, Inventory Sampling and so on.

Today we are going to look into the process of Cycle Counting of physical inventory.

Cycle Counting; Here we are looking at a process the material present in our inventory are continuously counted over the entire duration of the fiscal year depending on the Cycle Counting Indicators maintained for the materials

Why is Cycle Counting Beneficial ?

  • Since a small batch/count of materials are counted at once, hence there is no need to shutdown entire operations unlike in Periodic Inventory
  • Here the materials are counted multiple times over a period of time, hence the inventory stock is always in check

Process :

A number of configurations are part of the process, let us have a look:

Maintain Physical Inventory Cycle Count Indicators (T-Code: OMCO)                                       Here for each plant, respective  Cycle Count Physical  Inventory Indicators are to be maintained.        In our case we are using the standard Indicators and associated information.

Maintain Cycle Count Indicator in Material Master (T-Code : MM01/MM02)

The field CC Physical Inventory Indicator present under General Plant Data/Storage 1 View needs to be maintained

As shown above if a material has the CC Fixed associated with it, the intention is there should be no change/ updation if even a ABC Analysis is undertaken.

Process Steps:

1. ABC Analysis ( T-Code : MIBC). 

Here as our material under consideration has CC Fixed, we are skipping the step as it is not important.

The general process is once this is undertaken the CC Indicator in the material master is updated after taking into consideration the requirements/consumption.

2. Batch Input Session: Cycle Count Physical Inventory Document (T-Code : MICN)

Depending on the input parameters, the cycle count indicators are taken into consideration and relevant output is available on executing.

User can provide inputs taking into consideration such as : Stock Type/ Material/ Plant/ Storage Location and so on.

3.Process Session : MICN Output

Here once the output is displayed, session is processed and the mode of execution can be foreground/ background as per the requirement.

The Planned Date which is in red is the date on which Cycle Count was due, the calculation of the same is clearly explained via OSS Note : 518418-FAQ-Cycle Counting

4. Physical Inventory Document Created

Upon analysis of the Detailed Log, the success message is thrown and here we can get the PI Document Number.

5. Entering the Count (T-Code : MI04)

With reference to the Physical Inventory Documents generated via MICN, user is expected to maintain the quantity and save the count.

We have entered the Count Quantity as 5 PC

6. Posting Differences (T-Code : MI07)

Here select the line items which need the difference posted, the fields of utmost importance are Difference Quantity and Difference Amount.

Depending on the configuration, reason may or may not be mandatory.

Hence on posting, a material document is generated and the process of difference posting is complete.


With regular physical inventory checks, we have the ability to keep the stocks up to date and any issues regarding incorrect stocks can be countered.

With this acting as a generic guide, I am hopeful this will help us in handling and undertaking Physical Inventory checks with a better understanding in future.





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