Most neglected SAP Sub module is the Physical Inventory Module.

Normally in most of the organization Finance, Sales, Production, Purchasing,

Inventory & Plant maintenance etc. modules are given priority.

But if we implement Physical Inventory Module properly perpetually through out the
year , we will have best control on Material Inventories, which will result ultimately
in best control on working capital & support to all the modules referred above.
➢Benefits - Nice control of Logistics & Finance
1. Immediate detection of shortages , excesses , interchange, theft and leakages of
important materials.
2. Early address customer or vendor Complaints after reconciliation .
3. Physical inventory count system helps to discover or find out discrepancies and
errors and remedial actions can be taken quickly.
4. Quick valuation of closing stocks of any period ( monthly , quarterly, yearly ).
5. Beneficial in ascertaining efficiency of stores organisation & it is moral check on
the Store/ Warehouse staff to maintain proper stock records
6. Physical inventory count system helps to avoid deterioration, obsolescence as
there is constant eye on all the materials.
7. The investments in materials and supplies can be kept at the controlled level .
8. Production Or Customer will not suffer due to non-availability of any material.
9 . We can assess the effectiveness of 3PL if you have Logistics service provider
10 . Total sample counts will take at the most 1 day only at the half-year or year-
end as we are conducting Perpetual Physical Inventory Stock Counts throughout the
year.
In SAP - to use SAP ABC Analysis of materials for Effective STOCK Counts
Audits / Physical Inventory Stock Taking cycles through out the year &
Statutory Audits.
Type By Value By Quantity
“A” Materials 70% 10%
“B” Materials 20% 20%
“C” Materials 10% 70%

1st Step - Carry out ABC category analysis of Materials from

“Information system” total analysis
1. Analyze & Decide A & B Types materials.
2. Concentrate on Stock counts and documentations audits of these A & B type Materials
for effective Stock Counts Audits & Statutory Audits.
3. We have to take stock counts & Audit Documents only of 30% numbers of A & B
types Materials, but the coverage is 90% of the value of stocks. So with minimum
efforts we can cover more value for both the Stock counts

These are the 3 steps and the SAP Menu paths are given below for the same.

Step 1) By SAP Menu Path- carry out ABC Material Analysis– Manu Path -
Information system – Logistics – Inventory Management –Material- ABC Analysis- Total
Analysis- Transaction code – MC-40
Enter – 1)Object to Analyze “Plant”, 2) Period to analyze “365 days”, 3) Select Area of
“Only Stock Materials & Including MRP Consumption,” 4) Analysis Strategy : “
Usage Value in %”
A type materials = 70% Value & 10% Quantity
B type materials = 20% Value & 20% Quantity
C type materials = 10% Value & 70% Quantity
And then CLICK on Execute Or Press “F8”.

We will get list of materials of A, B, & C types. We have to select materials of A & B
types only for Stock count Audits & Documentations Audits. Take list print of A & B types
of Materials
2nd Step -Take List of stocks of these A & B type Materials on Materials level & on
batch level on Stock count date for Audit Period.
Step 2 - Take List of stocks of these A & B type Materials on Materials level & on
batch level on Stock count date for Audit Period.

By SAP Menu Path-Logistics- Mat Management- Inventory Management-

Environment- Stock – Stock for Posting date – Transaction code- MB5B - Enter the
date from 01st April 2022 to 30 th June 2022 means Period (for which stock taking &
documentation Audit is to be carried out) – Enter company Code, Plant code,
Selection Period of Audit and in stock type “Storage location Stock & Batch Stock”
& enter our selected A & B types materials codes by clicking Multiple Selection on
“Yellow Arrow” . And then CLICK on Execute Or Press “F8”.

We will get a list of our A & B type materials stocks as Opening stock on audit period
Start date , total receipts , Total Issues, & Audit period End date with Material
documents.

Step 3 - We have to check stocks of these A & B Types of Materials. ( Detail

document is attached)
Processes of SAP for MM (Logistics)
By Madhav R. Wagle , SAP ECC & S4 HANA MM trainer
Roha-09923085186/09307127750

madhavrwagle@[Link] , madhav@[Link]

Contents…...
Physical Inventory : -
1. Physical Inventory Document Create- Transaction Code MI01
2. Physical Inventory Document Change MI02 /Display MI03 /Print MI21
Go with printed document to carry out Physical Inventory on Shop Floor.
3. Physical Inventory Documents - Count Enter MI04 / Change MI05
AFTER count enter DISPLAY DOCUMENT IF REQUIRED- MIO6
4. Physical Inventory document recount document create MI11 if FOUND
difference during 1 ST COUNT
5. Difference list – MI20
6. Physical Inventory Difference post- MI07
 1. Physical Inventory Document Create:
a) Please open stock overview of the material of which
Physical Inventory is to be taken- TRAN. MMBE of all
1 locations in the factory
Logistics-MM-Inv. Mgt.-Environment-Stock- Stock
overview - MMBE -Enter Material, Plant, all locations as
RFG* ( Roha Finished Goods *(all) ) & execute
b) Another session open MI01- Phy. Inv. Document create

a)
 1. Physical Inventory Document Create:
a) System will display stock of particular material at all
locations as below-
1

a)
 1. Physical Inventory Document Create:
b) Logistics-MM-Phy. Inv. - Phy. Inv. Doc- Create- TRAN. MIO1
Enter Planned count date, Plant, Storage Location,
1 Select Posting Block ( to disable enter any transaction in SAP of the
particular material FOR WHICH PHY. INV. Is in progress) & select
Batches with w. del. Flag.
Enter Phy. Inv. Document number external “2022-23-PHY.INV1”
Phy. Inv reference as ABC analysis 2021
PI Documen Description as PHY. INV MADHAV ON 21ST- cont
process & enter

b)
Important : Select Posting Block as no movement will be
allowed in SAP.
If ours is continuous process industry then select Freeze Book
Inventory. So you we can receive & issue / transfer material
in SAP.
BUT then you have to reconcile the stock by documents.
 1. Physical Inventory Document Create:
b ) On next screen enter material , batch & select stock type as 1 for
unrestricted, 2 for Q I stock 4 for Blocked stock . ( Do not enter 3 ) .
1 We have to select Material with all batches & all stock types in that
location.
*You can find out stock type from stock overview.
** You can enter items 1 by 1 going to stock overview of other items.
& SAVE the document.

b)
 1. Physical Inventory Document Create:
1 System will display phy. Inv. Document created.

b)
 1. Physical Inventory Document Change : To add more
items or to delete items in saved Phy. Inventory
Document.
2 2. LOGISTICS-MM-INV. MGT. - PHY. INV. - PHY. INV.
DOC.- CHANGE - TRAN. MI02- CLICK
3. System will display next Screen -

A)
 1. System will display next Screen -
On next screen - Enter Phy. Inv. Doc Created & enter
2A
 1. System will display next Screen -
We can add new item by clicking-- Edit-- New ITEMS
OR change stock type if want to.
2B
On NEXT SCREEN
 1. System will display next Screen -
We can add new item BY entering material, batch , stock
2C type & click post to save Document.
 1. System will display Message on next Screen -
Phy. Inv. Doc 100023053 changed.
2D
 Phy. Inv. Doc Display & PRINT.
1. Logistics-MM-Phy. Inv.- Phy. Inv. Doc. - Display- MI03
2E 2. & Print --- MI21- DOUBLE CLICK.
ON NEXT SCREEN …...
 Phy. Inv. PRINT.
ON NEXT SCREEN …… ENTER DOC number from to
2F Plant, SELECT 1. Phy. Inv. Documents 2. Phy. Inv. Items,
3. Sort by special Stock & 4. all way put out put device as
LOCL- FOR LAND SCAPE PRINTING and click on
EXECUTE. …...
 Phy. Inv. PRINT.
ON SAME SCREEN …… in POP UP window system will
2F ask ( whether Not yet counted , partially counted & all
counted ?) .
Select NOT YET COUNTED & click on EXECUTE .
If we want print of counted also, we can take the same.
 Phy. Inv. PRINT.
2G Print Request screen - Select “ PRNIT IMMEDIATELY,
DELETE After Print” & click on Print.
 Phy. Inv. PRINT.
1. System Will display message as “ Print Request Completed” &
Print the Inventory Document.
2H 2. With the help of this document we can take [Link]. &
take counts of material with batch personally on shop floor .

Write by Pen the quantity & file / store the same papers for record
 Phy. Inv. Count Enter :
1. Phy. Inv. Counts IN SAP are to be entered from Print
on which count are TAKEN on shop-floor personally by
3 Warehouse Persons. So carry document printed to enter
stock counts manually
2. Path- LOGISTICS-MM-PHY. INV. - INV. Count-
Enter - Transaction : MI04- DOUBLE CLICK.
 Phy. Inv. Count Enter :
ENTER Phy. Inv. Doc number & date of count .
3A Click on enter.
Incase of date other than planned date system will give
information about planned date.
 Phy. Inv. Count Enter :
ENTER Phy. Inv. COUNTS as below & confirm and
3B POST.
 Phy. Inv. Count Enter :
3C
SYSTEM WILL DISPLAY Message as “ Count entered
for phy. Inv. Document 100023053”
 Phy. Inv. Count Display : Path- LOGISTICS-MM-PHY.
INV. - INV. Count- Display- MI06.
3F Enter Phy. Inv. Document number for which counts are
posted & Click on Enter.
 1. Phy. Inv. Count Display : System will Display the
counts entered on next screen AS BELOW.
2. IF WE WANT HISTORY OF THE DOCUMENT -
3G
Select the item & click Phy. Inv. History.
System DISPLAYS HISTORY as Shown on next Screen
 1. Phy. Inv. Count Display : System DISPLAYS
HISTORY as BELOW: of BOOK (SYSTEM QTY) ,
3H COUNT QTY & Difference. Please check the same if you
want to change counts enter, the same can be changed as
SHOWN IN NEXT SLIDE
3I 1. Phy. Inv. Count : CHANGE
Path- LOGISTICS-MM-PHY. INV. - INV. Count-
CHANGE .
Enter Document Number - Click on Enter.
3J
1. Phy. Inv. Count : CHANGE
Enter Fresh Count, See Phy. Inv. History, Come back &
POST.
 Phy. Inv. Count : CHANGE
System will display message “Count Changed for phy. Inv. Document
no. 100023053”
3K Recount in case of Stock difference MI11
If there is difference then recount document is to be created by MI 11
Referring original Physical Inventory document ( THIS Will over
write original document keeping note as recounted ) & create fresh
inventory document .
For this recount document again count to enter which are recounted
 4. Physical Inventory Difference LIST –
LOGISTICS-MM-PHY. INV.-Difference – List – MI20-
4 - DOUBLE CLICK -
Enter : Plant , Storage Location :
Select : Physical Inventory Document & Physical
Inventory Items
Enter count date : DDMMYY & EXECUTE (F8)
Select : all Counted in ( POP UP Window) – Execute (F8)
System will display the list
4 4. Physical Inventory Difference post : Path-
LOGISTICS-MM-PHY. INV.-Difference POST- MI07-
- DOUBLE CLICK -
4A 4. Physical Inventory Difference post :
ENTER Phy. Inv. Doc - CLICK ON ENTER.
 4. Physical Inventory Difference post :
4B SYSTEM WILL SHOW THE DETAIL OF
DIFFERENCES + OR - WITH BATCH & VALUE as
below:
We can see history by clicking phy. Inv. History.
Click ON POST.
 4. Physical Inventory Difference post :
4C SYSTEM SHOWS Message as Phy. Inventory doc posted
100023053with material documents 4900808060 -- of +
OR - .
SYSTEM TAKES CARE TO POST INVENTORY
DOCUMENTS OF Excess OR Shortage stocks.