In the dynamic landscape of modern business, optimizing inventory management is no longer just about tracking stock; it’s a critical lever for eliminating waste, maximizing operational efficiency, and fully realizing the value of technological investments. Relying on outdated or fragmented approaches can lead to costly inefficiencies, missed opportunities, and a significant drain on resources. This is where SAP S/4HANA Inventory Management emerges as a powerful, integrated solution.
Designed to provide real-time insights and streamline complex processes, this module enables companies to gain precise control over their inventory. This article will explore the comprehensive capabilities, key features, and tangible benefits of the SAP S/4HANA Inventory Management solution, demonstrating how it can revolutionize your inventory operations and drive substantial value for your organization.
Brief Inventory Management Overview
Inventory management involves the process of ordering, managing, storing, and distributing a company’s products. Key inventory management processes include managing physical inventory (i.e., raw materials, finished products, etc.), processing and storing goods in plants and storage locations, and streamlining inventory processes for improved efficiency throughout your entire inventory system.
While there are a number of different methods of inventory management, here are a few of the main ones, as well as their core features and benefits for customers..
- Materials Requirement Planning (MRP): This method is sales-forecast dependent, and it helps companies handle planning, scheduling, and inventory controls for the distribution of their materials or goods. For companies to plan inventory needs and communicate those needs with suppliers, manufacturers require accurate sales records and forecasts. MRP helps ensure timely forecasts and accurate records to help manufacturers fulfill orders for customers.
- Just-in-Time Management (JIT): The JIT model helps companies maintain the lowest stock levels possible before requiring a refill. By only keeping the materials needed to produce products and only storing the amount of inventory needed to fill demand at any given time, JIT helps companies save money and reduce waste in the long run. However, while this method significantly reduces costs and waste, potential bottlenecks and distribution delays may arise if there’s an unexpected increase in demand.
- Economic Order Quantity (EOQ): The EOQ formula identifies the amount of inventory a company should order to reduce overall costs. The formula is based on the assumption of constant consumer demand, and the costs of inventory include both setup and holding costs. This model intends to reduce excess inventory and limit the number of orders a company makes in a given time period.
What is SAP Inventory Management?
SAP Inventory Management software enables users to keep better track of the movement of warehouse stock, including basic materials and finished goods, and optimize physical count processes to maintain stock quantity accuracy. The SAP Inventory Management solution helps companies manage, monitor, analyze, and interpret supply chain data more efficiently, including important data from material documents and other relevant SAP reports.
Organizational Levels
Organizational levels are created for each inventory center within an SAP environment to ensure that an adequate inventory management process is taking place, such as that inventory is stored, assigned, and managed properly. Companies leverage organizational levels to track the location of materials, goods, and products throughout their full supply chain lifecycle.
Plant
A plant refers to the location of a company where materials are assigned and storage, maintenance, production, and inventory valuation processes are completed. The plant represents the physical location where materials and products are produced and stored before being distributed to external warehouses and end-use customers.
Storage Location
A storage location defines a specific area within a plant where inventory is held. Storage locations are used to differentiate material stocks within a plant, including raw materials, semi-finished goods, and finished products. These storage locations can be as simple as a line drawn on the warehouse floor or as complex as a structured racking system, but their purpose remains the same — separation and differentiation of materials and products within one location.
Primary Movement Types in SAP
The “goods movement” feature in the SAP MM Inventory Management solution allows users to keep better track of how and when goods change locations throughout the supply chain.
These movements, including the basic goods receipt process and more complex internal goods movements, can occur within an organization or can be associated with goods exchange between suppliers and customers.
Each goods movement will include an associated material document to maintain more accurate inventory levels and optimize material management processes throughout the entire supply chain.
Goods Receipt
A goods receipt can either come from a company’s internal production process or inbound processes from suppliers, and the company can either approve the materials for immediate use or place them in a quality inspection hold to ensure they meet quality specifications before being released as inventory stock. Inventories outside of the company can also be blocked if orders have not been placed yet to ensure no incurrence of unnecessary expenses.
Goods Issue
In the issuance of goods, companies can either process inventory in the warehouse for production or sell directly to customers. Whether being used in the production process or sold to customers, the inventory items must be issued to a sales or production order, reducing stock levels within the plant. If materials are considered to be damaged, unusable, or past their shelf life, they will be sent to the scrap.
Internal Movements
Internal movements occur when materials are transferred from one location of storage to another within a plant before it is used in production processes or delivered to a customer. For example, a material requiring quality inspection can be transferred to quality inspection within a plant before being sent to production.
T-Codes in SAP Inventory Management
A transaction code (aka “T-code”) in SAP is a 4-digit shortcut key, each containing a unique combination of letters and numbers. These unique codes provide direct access to important transaction information within your system. T-codes are involved in key processes that help companies control the movement of materials and goods to and through production.
While there are many different T-codes associated with SAP Inventory Management, here are a few of the most important ones:
- MB1A: Goods withdrawal
- MM60: Materials list
- MIGO: Goods movement
- MB1C: Goods receipt
- MM02: Change material
- MBST: Cancel material document
Getting Started with Us
Implementing a new Inventory Management system within your SAP software can be a bit of a challenge without the right team and resources for the job. Luckily for you, this is where Surety Systems comes in to help. Our team of senior-level SAP consultants has the skills, experience, and SAP system expertise needed to lead your team to success with no added work for your team and no unnecessary headaches.
How Can We Help?
Whether you need help implementing a brand new SAP ERP system, an extra hand optimizing business processes with advanced SAP integrations, additional inventory management support like managing complex warehouse logistics, or anything in between, our team of consultants is here to help.
And, even better, we’ve included a sample profile of one of our top-notch SAP consultants to give you a better idea of what to expect when partnering with us:
Surety Senior SAP Inventory Management Consultant
- US Citizen
- 25+ years of experience within SAP MM, PP, & QM modules
- Specializes in SAP Materials Management, specifically Inventory Management
- Expert in all SAP MM-IM areas
- Completed 14 Full Life Cycle Implementations
- Worked directly at SAP America for ~8 years
Contact us today to learn more about our SAP consulting services or get started with one of our top-of-the-line consultants.
