Informational Systems – Warehouse

1. Identify and discuss the key organizational levels relevant to inventory management and warehouse management.
a. Storage location. The key organizational level associated with inventory management. Storage locations are associated with plants, which in turn are associated with company codes.

b. Warehouse. The key organizational level in warehouse management. A warehouse is associated with one or more combinations of plant and storage location.

The association between storage locations and a warehouse provides the linkage between IM processes and WM processes. When linking warehouses to storage locations, the following rules apply:
– A warehouse must be linked to at least one storage location.
– A warehouse can be linked to storage locations across multiple plants.
– A storage location can be linked to only one warehouse.
– Not all storage locations must be linked to a warehouse.

2. Discuss the key master data relevant to warehouse management.
The key master data in warehouse management are material master and storage bins.
a. Material master. If a company stores a material in a storage location that is associated with a warehouse, then it must include additional data in the master record for that material. These data are included in the warehouse management view of the material. Master data are typically defined for specific organizational levels. The organizational levels relevant to the warehouse management view of master data are warehouse, plant, and storage type. Three types of data are relevant to the warehouse management view: basic data, data used in defining stock placement and removal strategies, and data regarding the storage bins where the materials will be stored.

b. Storage bins are the smallest unit of space in a warehouse. They are the areas where materials are physically stored. Storage bins can vary in size from small containers (for nuts and bolts) to large areas for bulky materials (pallets of soft drink cases). They can be containers on shelves or designated spaces on a warehouse floor where pallets of materials are stored. Storage bins have unique addresses that identify their location in a warehouse. These addresses are frequently based on a coordinate system. In a shelf storage environment, for example, a bin address can include a row (or an aisle) number, a stack number, and a shelf number.

3. Define the four types of goods movements in IM, and provide an example of each type.
a. Goods receipt. Goods receipt is a movement of materials into inventory; it results in an increase in inventory. Typically raw materials and trading goods are received from a vendor as part of the procurement process, and finished goods are received from the shop floor after the production process has manufactured them.

b. Goods issue. Goods issue is a movement of materials out of inventory; it therefore results in a decrease in inventory. In the fulfillment process, a goods issue indicates a shipment of finished goods or trading goods to a customer against a sales order. In the production process, a goods issue reflects the issuing of raw materials or semifinished goods to a production order.

c. Stock transfer. Stock transfers are used to move materials from one organization level or location to another within the same enterprise in a simple way. Material can be moved between storage locations within one plant, between plants in one company code, or between plants in different company codes.

d. Transfer posting. Transfer postings are a straightforward way to change the status or type of stock, such as unrestricted use, in quality inspection, blocked, or in transit. Transfer postings do not necessarily involve the physical movement of goods (e.g., changing the material number of a material), but they always result in a change to the status or type of goods.

4. Explain the material and financial accounting impacts of goods movements in IM.
a. Goods receipt. Both material and financial accounting documents might have to be created.

b. Goods issue. Appropriate material, FI, and CO documents are created.

c. Stock transfer. Both material and financial accounting documents might need to be created.

d. Transfer posting. Material document is created. However, whether there is a financial accounting impact depends on the organizational levels involved in the goods movement.
Storage location-to-storage location transfer. Because materials are typically valued at the plant level rather than the storage location level, a transfer between storage locations in the same plant does not affect valuation. Therefore, no FI document is created. This observation applies only if all quantities of the same materials are valued in the same way. When materials are valued differently, the transfer has a financial accounting impact, and an FI document is created.

Plant-to-plant transfer. Because materials are valued at the plant level, a plant-to-plant transfer represents a change in the value of the materials. Consequently, there is an FI impact, and an FI document is created.

Company code-to-company code transfer. In this scenario, two FI documents are created – one for each company code.

5. Analyze the differences between one-step and two-step stock transfers.
a. Number of steps.
The one-step procedure executes both tasks — issue and receipt — as a single step. In the two-step procedure they are completed in separate steps.

b. Number of material documents created.
In a one-step stock transfer only one material document is created. In a two-step stock transfer two material documents are created.

c. Value of the material.
The value of the material at the receiving plant is the same as that of the supplying plant in the case of one-step stock transfer, but it might not be the same in a two-step transfer.

d. Stock status.
In a one-step transfer, the stock of the issuing plant is reduced, and the stock of receiving plant increases. In the two-step transfer, the materials are placed in the “in-transit” stock status at the receiving location because they do not arrive immediately at the destination location. Later, when they are physically received at the destination location, a second step (receipt) changes their status from in-transit to unrestricted use (or another status).

e. Usage.
When the two locations are physically close to each other and there is no significant time lag between issue and receipt, the one-step procedure is more appropriate to use. In contrast, if locations are not physically close to each other and the time lag between issue and receipt is significant, the two-step procedure is more appropriate. The two-step movement also might be required if the same individual does not have authorization to make changes at both locations.

6. Identify several possible scenarios for stock transfers, and explain the key differences between these scenarios.
a. Storage location-to-storage location transfer. A stock transfer between two storage locations within the same plant is referred to as a storage location-to-storage location transfer.

1. Materials received from a vendor or from production are initially stored in a temporary
staging area and are subsequently moved to a more permanent location at a later date.
2. All materials received from a vendor must be inspected for quality before being placed
in their permanent locations.

b. Plant-to-plant transfer. A movement of materials between two plants within the same company code is called a plant-to-plant transfer.

c. Company code-to-company code transfer. A movement of materials between two
plants in different company codes is called a company code-to-company code transfer.

7. What is a stock transport order used for? What are the advantages of using an STO?
A STO is a transaction document that is used to acquire materials internally, from another plant within the enterprise. It is similar to a purchase order, which is used to acquire materials externally from a vendor.
Using an STO to move materials between plants, as compared to using stock transfers, has numerous advantages.
– When an STO is created, the company can carry out an availability check to assess material availability in the supplying plant.
– Delivery costs and the selected carrier can be added to the STO.
– Quantities in the STO and planned deliveries and receipts can be included in material planning in both plants.
– Purchase requisitions can be converted to STOs rather than POs.
– The history of the various tasks associated with the STO can be monitored via the purchase order history section of the STO.
– Goods can be received into different stock statuses, such as in quality inspection and blocked stock.
– Goods received can be posted to consumption accounts rather than material accounts.
8. Explain the differences between using stock transport orders without delivery, with delivery, and with delivery and billing.
a. One-step and two-step procedures.
Only the two-step procedure is possible for STOs without delivery. However, both one-step and two-step procedures can be utilized for STOs with delivery and with delivery and billing.

b. Price.
In contrast to the other two scenarios, in STOs with delivery and billing a purchase price is included in the STO based on pricing conditions and info records.

c. Stock mode.
For STOs with delivery and billing, the materials are classified as in-transit CC at the receiving plant until they are actually received. At that time the status is changed to unrestricted. For the other two scenarios the materials are classified as in transit and then subsequently changed to unrestricted.

d. Valuation.
For STO with delivery and billing, valuation is based on the purchase price in the STO. For STO with and without delivery, valuation is based on the valuation price of the sending plant.

e. Billing step at the sending plant and invoice verification step at the receiving plant are involved in STOs with delivery and billing.. They do not exist for the other two scenarios.

f. Delivery step is included for both STO with delivery and STO with delivery and billing. There is obviously no delivery step for STO without delivery.

9. Describe the steps in the warehouse management process in terms of triggers, tasks, data, and outcomes.
There are three steps in the warehouse management process: plan, execute, and confirm warehouse movement. The data are the same for all three steps. However, the triggers, tasks, and outcomes vary, as described below.
a. Plan warehouse movement

Triggers – either an activity in inventory management or a need to transfer materials within a warehouse.
Tasks – create a transfer requirement, create a posting change notice
Data – organizational data, master data, user input
Outcomes – transfer requirement, posting change notice
b. Execute warehouse movement

Triggers – transfer requirement, delivery document, or an internal (within the warehouse) need
Tasks – create transfer order
Data – organizational data, master data, user input
Outcomes – transfer order, update transfer requirements
c. Confirm warehouse movement

Triggers – completed transfer of materials
Tasks – update transfer order
Data – organizational data, master data, user input
Outcomes – updated transfer order, updated source documents

10. Explain the role of the warehouse management process as it relates to
(1) the procurement process, (2) the fulfillment process, and (3) the production process.

a. The procurement process. When the goods received from a vendor in the procurement process are received into a storage location that is warehouse managed, then WM steps must be completed to put away the materials into storage bins. The materials received are placed in the interim receiving storage area, which is a physical link between the procurement and the warehouse management processes. The ERP system automatically generates a transfer requirement. The transfer requirement is triggered by IM activity involving a WM-enabled storage location. It serves as the information link between the procurement process and the warehouse management process. When materials need to be moved from the interim storage area into warehouse bins, a transfer order is created to facilitate this movement. When the order is generated, the ERP system proposes destination bin numbers into which the employees can place the materials. The transfer order will indicate the planned (target) quantities and bins. Inventory is tracked at both at the storage location level and the warehouse level. Warehouse inventory is the sum of the inventory in the interim storage areas and the warehouse bins. Warehouse inventory is always equal to storage location inventory.

b. The fulfillment process. The creation of an outbound delivery for a sales order triggers the WM activities. When a sales order is generated, an outbound delivery is created. To pick materials from the warehouse, a transfer order needs to be created. No physical movement has yet taken place. After the TO is created, the materials are picked from the proposed storage bins and placed in the interim (shipping) storage area. The TO is then updated to indicate the quantity picked and the bins from which they were taken. As in the case of procurement, the interim storage area is the physical link between the fulfillment and WM processes. At this point, a physical movement of materials has occurred. After the transfer order is updated, it is confirmed and saved. At this point the reference document that triggered the warehouse movement is updated to indicate the quantity of materials moved.

c. The production process. The production order generates a transfer requirement for the materials that are needed for production. In response, a TO is created, the materials are moved into an interim storage area, and the TO is confirmed. After the production process is completed and confirmed, the finished goods are received into storage. The materials are physically placed in an interim storage area. A transfer order is then created, the materials are moved from the interim storage area into bins, and the TO is confirmed.

11. Explain the relationship between storage location inventory and bin inventory.
Warehouse inventory is the sum of the inventory in the interim storage areas and the warehouse bins. Warehouse inventory is always equal to storage location inventory.
12. Describe the different options for the order of postings in WM and IM and the consequences of each option on IM and WM inventory status.
The typical order of postings in procurement and in the goods receipt part of production is goods receipt followed by WM steps. In fulfillment and the goods issue part of production, the typical order is WM steps followed by the goods issue.
In the case of a goods receipt, the quantity of materials in both the storage location and the interim bins is increased. When the WM steps are completed and the materials are put away, the quantity of inventory in the interim bins is reduced, and the quantity in the permanent bins is increased. In the case of a goods issue, the WM steps completed first cause the quantity in permanent bins to be decreased and the quantity in the interim bins to be increased. Then, when the goods issue is posted, the quantity in both the interim bins and storage location is reduced. At all times, the total quantity in storage location is equal to the total quantity in warehouse bins (interim plus permanent).
Occasionally, the order of postings is reversed. For example, materials from the production floor are placed directly into permanent bins, and the goods receipt is posted later. Or, when a shipment must be sent to a customer urgently, the materials are removed from the permanent bins and shipped (goods issue), and the WM steps are recorded later. In both cases, negative quantities in the interim bins are posted to ensure that the total quantity in the storage location and warehouse are equal.
13. Identify the key reports available in warehouse management and the significant information found in these reports.
The storage location inventory report displays inventory at the storage location level.
The bin status report displays a list of bins that contain materials. Double-clicking on a bin produces a drilldown report that conveys details of the materials.
Another key report in warehouse management is a report indicating a list of transfer orders.
Finally, the stock overview indicates the current warehouse stock inventory level. The quantities displayed in the report will change to reflect any goods movements, such as goods issue, goods receipt, and transfer orders.