Inventory management systems and processes help companies eliminate waste, maximize operational efficiency, and make the most of your technological investment.
Read on to learn more about the SAP S/4HANA Inventory Management solution, its key features, and the main ways it can benefit your company.
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. In order for companies to plan inventory needs and communicate those needs with suppliers, manufacturers need 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. But, while this method does significantly reduce costs and waste, potential bottlenecks and distribution delays could 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 amount 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 raw materials and finished goods, and optimize physical count processes to maintain stock quantity accuracy. SAP’s 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 are created for each inventory center within an SAP environment to ensure 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.
A plant refers to the location of a company in which 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.
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 storage 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.
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.
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 scrap.
Internal movements occur when materials are transferred from one storage location 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 in 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 the SAP 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.
Your company. Your needs. Our expertise. That’s the name of the game with our consultants.
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 support 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.