Physical Inventory Process In SAP MM

Physical Inventory Process In SAP MM

Physical  inventory process involves accurate physical count of material in the plant or warehouse for inventoried stock.  Following type of stocks can be inventoried :

  • Special stock ( Returnable packaging material stock, consignment stock etc.)
  • Organisation’s own inventory

Physical inventory is carry out in warehouse on a regular basis. Inventory of the following stock types has to be taken at time of physical count. It is undertaken at storage location level and system generate separate document for each storage location. For physical inventory process maintaining storage location is mandatory. Since storage location data is active we can take physical inventory.


  • Unrestricted Stock
  • Blocked Stock
  • Quality Inspection Stock

Following are the types of physical inventory :

  • Periodic Inventory
  • Cycle Counting
  • Inventory Sampling
  • Continuous Inventory

Cycle counting for physical inventory is carried out by following A,B,C, and D principles.

Periodic Inventory

  • A physical count of the entire stock.
  • During counting material movements in the plant or warehouse should be block. i.e. movement of inventory is not allow when physical inventory counting is going on.
  • Proper counting of every product or material is require.

Cycle Counting

  • Continuous inventory count during the year at regular intervals.
  • Cycle counting indicator is set for physical count of the material

Inventory Sampling

  • Random selection of stock for physical counting
  • For the minor differences in physical and book inventory which is within tolerances, company treat stock balance as correct, which depends on the policy of the said company.

Continuous Inventory

  • In this method, stock count is continuous during the year.
  • Counting of every material at least once in a year.

physical inventory process in sap mm

There are three phrases of physical inventory process as shown in the above image :

  1. Physical Inventory Preparation
  • Creation of physical inventory document.
  • Distributing inventory document.
  • Inventory  blocking for movement during physical count.

2. Physical Inventory Count

  • Physical counting of inventory takes place and counting results are enter in the sheet.
  • In the option of enter physical inventory count, all these findings are enter into system.

3. Physical Inventory Check

  • After entering of inventory count in the system, we can check check variances in the stock through list of inventory differences.
  • Re count option is also available if the physical count is incorrect.
  • The system posts the difference and adjusts book stock accordingly.
  • After posting, the system generates accounting documents.

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See Also :  What Is A,B,C And D Indicator For Cycle Count

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