Posted by: ahmedashfaque | August 22, 2014

What is SAP – inventory management 1

Inventory management is an important activity in most companies. Companies buy raw materials and store it. Companies make semi-finished or work in progress materials and need to store them until they are issued for further processing in manufacturing. Companies make or buy finished goods and need to store them until they are sold or used.

To ensure materials are in good condition, companies need to keep them in a safe and tamper proof environment so that they are not spoiled or damaged. Materials which have a expiry date must be stored in such a way that the batches of materials which have the nearest expiry date are consumed or sold before the ones which have expiry dates long in the future.

Many materials are kept inside boxes, bins or any other form of containers. To identify the materials, a label must be displayed on the container to know which materials are there inside. Which materials in what quantities need to be moved in or out also need to be considered. To have goods movements fast and efficiently through the storage location definitely needs good planning for stocking of materials.

Stocking of materials require space. How to use the storage space efficiently, stocking planning plays an important role. Which materials need to be moved faster than the other materials needs a removal strategy.

Many companies now a days have large storage facilities in the form of warehouses. To manage such large warehouses requires advance planning and strategies for all the factors mentioned in the above paragraphs.

SAP has a separate module called SAP warehouse to handle inventory management for companies. But even before we discuss warehouse management, it is important to understand the inventory management activities. In SAP materials management, there is a sub module called Inventory management (SAP MM IM) which takes care of inventory management activities at the top most level. All goods receipts,goods transfers and goods issues get initiated in SAP MM IM. In SAP MM IM you can define your inventory location in form of storage locations. So total increase in inventory quantity through all goods receipts are tracked at storage location level. Similarly total decrease in inventory quantity through all goods issues and goods transfers are tracked at storage location level.

In fact if you do not need to track which materials are kept at what place inside a storage location then you do not need the warehouse module. The SAP MM IM module is enough in such cases.

But if you need to divide the storage location in many storage areas and then need to identify which materials are kept in each storage area then you definitely need a warehouse management system.



  1. […] the previous post, we had seen important considerations for managing inventory in your company. In this post we will […]

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