1. Appendix: Variations in Inventory Processes
Contents:
Physical Inventory
Consignment
Business Partner Catalog
Initial Quantities
Inventory Revaluation

2. Variation in Inventory : Purpose
In this unit, you will:
Carry out a physical inventory and post the differences in quantity and value with the correct expense and revenue accounts
Create a consignment warehouse and transfer items to the new warehouse
Set up a business partner catalog for items that one of your customer regularly orders.
See how to enter opening balances for inventory items
Examine how to revalue materials

3. Inventory Variations: Business Example
Periodically you need to perform a cycle count to verify the on-hand stock quantities as they appear in SAP Business One match the physical count.
You have a consignment warehouse at a customer site. When the customer uses items from the warehouse, you create an invoice to bill the customer for their use.
One of your customers regularly orders items that they know by a different item number. You set up a business partner catalog to reference these item numbers.
You sometimes need to enter an opening balance for a new item.
In the year-end closing process, you decide to revalue costs for inventory items.

4. Physical Inventory: Unit Overview Diagram
Variation in Inventory Processes
Topic 1: Physical Inventory
Topic 2: Consignment
Topic 3: Additional functions for items
Topic 4: Initial quantities
Topic 5: Inventory revaluation

5. Physical Inventory 1. Print Inventory Documents 2. Perform Count
Inventory Tracking
Inventory Tracking
Stock Posting
1. Print Inventory Documents
2. Perform
Count
3. Record Count
Results
4. Post Differences
Hide Quantity Stored
Status: Not Counted
Do not Allow Postings
Record the Quantities Counted in the
Warehouse
Correct Quantities Stored
Status: Counted
Periodically you conduct a physical count of the items in your warehouse.
Inventory tracking is carried out in four steps: Choose Inventory  Inventory Transaction  Initial Quantities, Inventory Tracking and Inventory Posting
1. You use the system to print out the inventory documents.
2. You perform the actual count.
3. You record the count results in the system.
4. You post the stock differences.
After the inventory has started (that is, when the count begins in step 2), you should prevent postings from being made in the system. Otherwise, the result might be incorrect. To do this, you can disable the document numbering function by choosing Administration  System Initialization  Document Numbering, or by setting the Locked indicator for each item/warehouse in the item master data.
Profit or Loss as a Result of Inventory Differences
Item List per Warehouse
Note Results
No Changes in Quantity or Value

6. Inventory Differences
Inventory Posting
Inv. Offset Incr
By Price List
Last Revaluation Price
Item Cost List
Inv. Offset Decr
Date
Item No.
Item Description
In WH
Counted
Difference
Price
A Battery Standard
100
102 2
12 EUR
Inventory/Stock Posting
Enter St. Bal.
Inv. Tracking
Stock Posting
Items – Selection Criteria
Code From To
Vendor From To
Warehouse
You must post the inventory differences to update the warehouse stock and the values in accounting. Choose Inventory  Inventory Transactions  Initial Quantities, Inventory Tracking and Inventory Posting, choose Inventory Posting tab page
You can base the value on a price from a selected price list, the Last Revaluation Price or the Item Cost List.
If you want to use the cost option, recalculate the current costs before you post the inventory differences. You can do so using the warehouse stock valuation report. Choose Inventory  Inventory Reports  Inventory Valuation Report.
You can also correct the quantities without affecting the values in accounting by allowing the inbound posting without a price.
Allow Posting without Price
Price Source for WH Stock Posting

7. Inventory Cycles Item Master Data Inventory Cycle Frequency: weekly
Menu
Inventory Cycle
Administration
Frequency:
Definitions
weekly
Next Alert Date:
Setup
Time:
Inventory
Inventory Cycles
Item Master Data
Inventory Data
WH 01: Cycle Code week Alert y / n Next Date
Cycle Count Recommendations
All items that are currently scheduled for inventory count.
Alert Overview
Inventory cycles can help you track inventory counts for items.
You can define inventory count cycles under Administration  Setup  Inventory  Inventory Cycles.
You can assign inventory cycles for an item in the item master record (Inventory Data tap) or for items groups in the item group definition (under Administration).
SAP Business One issues an alert message and/or entries in the Cycle Count Recommendations report, according to the cycle definition you specify for the items. In this report, you can display all items currently scheduled for inventory count.

8. Exercises for Physical Inventory

9. Consignment: Unit Overview Diagram
Variation in Inventory Processes
Topic 1: Physical Inventory
Topic 2: Consignment
Topic 3: Additional functions for items
Topic 4: Initial Quantities
Topic 5: Inventory Revaluation

10. Consignment Stock at Customer
Invoice
2c. Invoice
2a. Withdrawal
Production 1.
Company
Delivery
Customer
2b.
Confirmation
SYSTEM
2a,b,c. 1.
Invoice
WH 01
WH 03
Consignment stock is stock that your company delivers to the customer but from an accounting perspective, remains your company's possession until it is consumed.
1. If you deliver items to your customer in the form of a consignment, you can enter the stock transfer from your warehouse to the consignment warehouses in the system.
2a. The customer withdraws the items from the consignment warehouses at his site (for example for production).
2b. The customer confirms the quantities of stock that have been withdrawn from the warehouse (for example by phone).
2c. Your company then bills the customer accordingly. This includes the goods issue in the consignment warehouse.
You model the customer consignment process in SAP Business One using additional warehouses. In this scenario, the system finds the price list and associated price defined in the customer master record. The value at the point at which the stock is transferred is still assigned using the moving average price. The system does not post the liabilities (= price * quantity) until the invoice is created.
You have to create a warehouse for the consignment to enable the consignment stock to be managed separately from your other item stocks. If you maintain consignment stock for several of your customers, you should create a consignment store for each customer so that the stocks for each customer can be monitored more easily. You can then display the consignment stocks using the warehouse reports.
Stock Transfer
Goods Issue from WH 03
Customer
Company

11. Inventory Transfers for Customer Consignment
Additional info for customer consignment
Inventory Transfer
Customer
Name
Issuing Warehouse for the entire stock transfer document
Ship To
Contact
From WH 01
Item No.
Item Description
To Warehouse
Quantity
Price
Total
Receiving Warehouse for each item
You use the Inventory Transfer function to transfer stock from one warehouse to another.
A stock transfer can also be carried out as a consignment for a customer. The items are then stored in and sold from the customer's warehouse.
To enter a stock transfer in the system, choose Inventory  Inventory transactions  Inventory Transfer.
Enter a customer for stock transfers that contains a customer consignment. Do not enter a customer in the document if the stock transfer is not linked to a customer.
The system uses the cost price to calculate the prices for the journal entry.
Price List OK
Cancel

12. Accounting for Transfers to Consignment
Inventory Item
Sales Item
Purchased Item
Fixed Assets
Inventory Transfer
Stock account
(Warehouse 01)
Stock account
(Warehouse 02)
100
100
Warehouse 01
Warehouse 02
When you post a stock transfer from warehouse 02 to warehouse 01, the system creates a stock transfer document and a journal entry. The journal entry posts the value of the transferred goods on the debit side of the stock account of warehouse 01 and on the credit side of the stock account of warehouse 02. The stock accounts are retrieved from the Stock Account fields on the Inventory tab of the item master record.
To post a stock transfer, choose Inventory  Inventory Transactions  InventoryTransfer.

13. Exercises for Consignment

14. Additional functions for items: Unit Overview Diagram
Variation in Inventory Processes
Topic 1: Physical inventory
Topic 2: Consignment
Topic 3: Additional functions for items
Topic 4: Initial quantities
Topic 5: Inventory revaluation

15. Alternative Items 1 2 Alternative Items Item No. A00012 Item No.
Remarks
Match Factor
B04711 …
100,00
F00771 …
80,00 2
Sales- or Purchasing Document
Alternative Items – Selection Criteria
Vendor/Customer
E4002
Item No.
A00012 WH 01
Item No.
Description
Quantity WH
Item No.
Match Factor
Available
A00012 … 50 01
B04711
100,00 25
1 You can define alternative items by choosing Inventory  Item Management  Alternative Items.
Alternative items are defined per item and you can build a hierarchy of alternative items by defining alternatives to the alternatives.
Remarks: Enter any free text as a remark for the alternative item.
Match Factor: Enter the value to specify the matching degree in points. Higher value represents higher match.
In our example, item A00012 has two alternative items – B04711 and F The matching factor defined for item B04711 is 100 and for item F00771 – 80. If there is no item A00012 in the warehouse, item B04711 can replace it because it has the highest matching factor.
Reverse Link: Select the alternative item and choose Reverse Link to create a reverse relationship between the alternative item and the original item. This means that both items are defined as alternative items for each other.
2 You can select alternative items while you create documents in sales or purchasing. You can display the list of alternative items and replace an item. Choose Goto  Alternative Item or use the right mouse click in the item line.
F00771
80,00
144

16. Packaging Unit 10 Units 1 Box Purchase / Sales Order
Item Quantity No. of Packages
11 2
Packaging units are used in the sales and purchasing processes.
You can define a packaging unit for sales and a packaging unit for purchasing in the item master record.
In addition, you define the quantity in the base unit of measure for each packaging unit.
In the marketing document, the system then automatically calculates how much packaging will be needed for the required quantity.
Example: Ten units can be delivered in one box. You order a quantity of 11 units. The system then calculates that two boxes will be needed.
This information can be very useful for the goods receipt area when deliveries are received.

17. Factors Inventory Unit Quantity = F1xF2xF3 Twin Pack Default Value
Item Master Data
Purchasing Data Sales Data
Purchase Sales
Factor
Factor
Factor
Factor
Inventory Unit
Quantity = F1xF2xF3
Twin Pack
Purchase Order
Factor 1 Factor 2 Factor 3 Qty
Default Value
Factors are used as variables in purchasing and sales to automatically calculate quantities in the document.
An example: You stock a 1.20 meter high fence which is sold by length in meters. However, the price for the sold quantity is based on square meters. To calculate the surface area (quantity) on which the price is based, the system must multiply the sold length by the height of the fence.
Four factor fields can be defined in the item master record. The default value for each field is 1.
You can also make changes to each factor field in the document to change the multiplier:
Example: Your vendor informs you that he will pack four twin packs in a box in the next delivery as part of a special campaign. This means that each box will contain eight bottles instead of six.
When you change the data manually in the quantity field, the system sets all the factors to one. The entered quantity overrides the factor calculation.
If you use the factors for a large number of your items, you can use the settings for the transactions in Purchasing or Sales to display the fields directly when you enter the document. In this case, you do not need to call up the row information to change them.
Factor 1 = Number of boxes ordered
Factor 2 = Number of TP per box
Factor 3 = Number of bottles per TP
Box with 3 Twin Packs

18. Business Partner Catalog Numbers
Form Settings- General
BP Items
Define Business Partner Catalog Numbers
Code
Item No.
Description
S7000
Catalog No.
A Color Printer
select
Vendor
Catalog No.
Purchase Order
Description
Quantity
S7000
Item
Document Type
Color Printer
You can enter items in a document via this business partner catalog number.
Therefore you have to enter an item catalog number of a business partner (customer or vendor) in the business partner catalog. Choose Inventory  Item Management  Business Partner Catalog Numbers
You can enter a 1:n relationship between a business partner and several items or a 1:n relationship between an item and several business partners.
For the documents you have to activate the functionality to enter items via the the business partner catalog number through the Form Settings – General tab page. Select the Display BP Catalog Number indicator.
You can use this catalog number for purchasing documents and for sales.

19. Manufacturer Catalog Number
Item Master Data
Item Number
A1000
Purchasing Data
Form Settings- Table Format
Default Vendor
Mfr. Catalog No.
V7000
select
CP123991
Purchase Order
Vendor
V7000
Document Type
Item
Item No.
Description
Mfr. No.
Quantity
A Color Printer CP
You can display the manufacturer number in the purchasing and sales documents, and print it on relevant documents.
The pre-requisite is entering a number for an item of the default vendor in the Item Master Data in the field Mfr Catalog No.
To display the field, you have to select the field Mfr. No. via the Form Settings – Table Format tab page for the documents.
In the user defaults print tab, additionally you have the option to set documents to print vendor catalog numbers instead of the item numbers.

20. Exercises for Additional Functions for Items: Business Partner Catalog Numbers

21. Initial Quantities: Unit Overview Diagram
Variation in Inventory Processes
Topic 1: Physical Inventory
Topic 2: Consignment
Topic 3: Additional functions for items
Topic 4: Initial quantities
Topic 5: Inventory Revaluation

22. Defining opening balances for inventory items
Use the Initial Quantity window to post:
Opening inventory account
Warehouse
Item Numbers
Quantities
Item cost price
New items introduced
to warehouse outside
purchasing or production
processes?
Use the
Initial Quantities
transaction.
At some point you may need to define opening balances for inventory.
How to enter initial quantities into stock accounts: Inventory  Inventory Transactions  Initial Quantities, Inventory Tracking, Inventory Posting and choose the Initial Quantity tab.
Select the range of item codes or the range of vendors for an item. You can also use item properties or item groups to narrow the selection of items.
The items are entered into a chosen warehouse. You must select one warehouse at a time.
To enter the item cost you need to consider the client’s valuation system. The item cost may be the client’s purchase price. If moving average is used to manage the legacy stock value, use the last average purchase price from the legacy system. If the standard method is used, use the client’s purchase price. If FIFO is used, you should enter multiple document lines (rows) for an item using the goods receipt template in DTW or multiple rows in the initial quantities window. Each row will have a different cost to match to the legacy system cost. Note: the client’s legacy valuation may be inaccurate, since there is often no perpetual inventory.
If the initial quantity is zero, the last purchase price is not updated.

23. Inventory Revaluation: Unit Overview Diagram
Variation in Inventory Processes
Topic 1: Physical Inventory
Topic 2: Consignment
Topic 3: Additional functions for items
Topic 4: Initial Quantities
Topic 5: Inventory Revaluation

24. Inventory Revaluation – Price Change
On Hand: 100
Price: 100
New Price: 125
On Hand: 100
Price: 125
2500
Stock
2500
Stock Gain
Inventory revaluation allows you re-evaluate your item costs and inventory value without changing quantity levels. Typically revaluation is done during the year-end closing process.
The supported valuation methods are: Moving Average, Standard and FIFO.
To perform a material revaluation, choose Inventory  Inventory Transactions  Inventory Revaluation.
SAP Business One allows you to revaluate your items by either entering a new price (price change) or by posting a debit or a credit for a certain quantity (Inventory Debit/Credit).
If you want to base your stock valuation on a new price, select Price Change in the Revaluation Type field. Then enter the item code, the warehouse and the new price. The system posts a revaluation document and a journal entry that adjusts the balance of the stock account and posts the offsetting entry on either the Increase G/L account (for a stock increase) or the Decrease G/L account (for a stock decrease).
This works identically for items which are valuated with moving average price and standard price. For items controlled by FIFO, revaluation is done at each FIFO layer.

25. Inventory Debit/Credit – Moving Average
Qty to revaluate: 100
On Hand: 100
Price: 100
On Hand: 100
Price: 160
6000
Stock
6000
Increase GL
Debit/Credit: 6000
Qty to revaluate: 120
On Hand: 100
Price: 100
On Hand: 100
Price: 150
5000
Stock
6000
Increase GL
1000
Price Difference
If you want to change the value of a certain quantity, select Inventory Debit/Credit in the Revaluation Type field.
Then enter the item code and the warehouse, as well as the quantity and incremental value difference for the quantity. If you want to reduce the value, enter the difference as a negative number.
The quantity specified is used only for the recalculation of the item cost. For example, if you know a price mistake was made in a certain receipt document, you may want to specify the related quantity. The quantity in stock does not change. The value of the entire inventory is updated regardless of the quantity specified here.
If the quantity is equal to or smaller than the quantity in stock, then the system posts a journal entry the adjusts the balance of the stock account by the difference and posts the offsetting entry to a stock revaluation gain or loss account, depending whether the value difference is positive or negative.
If the number in the quantity field is greater than the in stock quantity, the amount recorded in the journal entry is proportionally divided between the inventory and a price difference account (according to the item’s valuation method and the current in stock quantity). This is shown in the bottom half of the graphic above.
The slide shows the postings for an item with moving average price valuation. If the item is valuated with a standard price, the system posts the debit not on the stock account but to a variance account.

26. Inventory Revaluation for FIFO layers
Number
Revaluation Type
Price Change
Item No
Description
Whse 1
A1000
Calculator 01
No cost price is shown at the item level
FIFO Layers
Doc No
Entry Date
Current Cost
New Price
Open Qty
PD 57 10 5
Each FIFO layer’s cost price is independently displayed and can be revalued
RE 22 15 10
SI 7 20 50
When revaluating items controlled by the FIFO method, the existing FIFO layers are displayed and each layer can be independently revalued.
The cost is not displayed at the item level in the Inventory Revaluation window, instead you can view and change the cost for each individual FIFO level.
When using the FIFO method where there are items in the FIFO layer, an inventory debit or credit results in a posting to the inventory account and the stock revaluation gain or loss account.
Add
Cancel

27. Inventory Variations: Unit Summary
You are now able to:
Perform physical inventory tasks
Set up consignment for a customer
Create business partner catalog numbers
Name the steps in creating opening balances for inventory
Describe the process of inventory revaluation