physical inventory[2]
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Understanding Physical Inventory
An Oracle White Paper
May2003
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Understanding Physical Inventory
INTRODUCTION
Oracle Inventory provides several tools to aid users in controlling and improving the
accuracy of inventory records.
a. ABC Analysis
b. Cycle Counting
c. Physical Inventory
This white paper will give an overview of Physical Inventory, various steps involved,
associated tables, forms, packages, concurrent programs and reports.
EXECUTIVE OVERVIEW
Oracle Inventory provides a fully automated physical inventory feature. Physical
inventory is a periodic reconciliation of system on-hand balances with physical
counts in inventory.
Physical inventory can be performed, whenever there is a need to verify the accuracy
of system on-hand quantities. This can be done for entire organization or for
particular subinventories within an organization. Accurate system on-hand quantities
are essential for managing supply & demand, maintaining high service levels,
effective planning, minimizing inventory investment and for audit purpose.
Physical inventory and cycle counting can both be a part of annual program to
manage and improve inventory record accuracy. Cycle counting would be a daily,
weekly or monthly activity. Physical inventories might be performed at periodic
intervals - monthly, quarterly, annually and so on. One strategy is to only perform
physical inventories as required to satisfy auditors of the organization.
INTERFACES
Physical inventory integrates with Oracle Cost Management and Oracle General
Ledger. If there is a quantity discrepancy for items, Inventory derives the item costs
from Cost management and posts the inventory value changes to General Ledger.
Oracle Cost Management Physical Inventory Oracle General Ledger
Item Costs Quantity Changes Inventory Value Changes
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STEPS INVOLVED IN PHYSICAL INVENTORY
Define Physical Inventory
Take a Snapshot of system Onhand quantities
Generate Physical Inventory Tags
Enter Counts
Approve or Reject Physical Inventory Adjustments
Post Adjustments
Purge Physical Inventory information
1. DEFINE PHYSICAL INVENTORY
Unlimited number of physical inventories can be defined and maintained to count
selected portions of inventory or total inventory. A physical inventory is identified
by a unique name. To define physical inventory navigation is Inventory -> Counting-> Physical Inventory -> Define Physical Inventory
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a. Enter a unique physical inventory name in the name field
b. Select approval requirements for the adjustment. Options available are
Always: Requires approval for all physical inventory adjustments.
Adjustments program cannot be run until all the adjustments are approved.If out of tolerance: Quantity and / or Value adjustment tolerances can be
entered. Adjustments exceeding tolerances must be approved before running
the adjustment program.
Adjustment value = (Actual count - System count) x Item cost
Never: Allow any adjustment to post without approval.
Choose when to Approve adjustments
Enter Tolerances
Specify Scope
Enable or disable Dynamic Tag entry
c. Enter positive and negative approval tolerances
d. Select the scope of physical inventory
Determines whether the physical inventory is for all subinventories of the
organization or for one or more specific subinventories. Enter only quantity-
tracked subinventories
e. Indicate whether to allow dynamic entry of tags
Determines whether manually created tags can be entered. If the option is
not to allow dynamic tag entry all tags must generated before the use.
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Technical Notes:
When physical Inventory definition is saved the following tablecolumn values are
inserted / updated
Tables Columns Updated / Inserted
MTL_PHYSICAL_INVENTORIES PHYSICAL_INVENTORY_ID
ORGANIZATION_ID
ALL_SUBINVENTORIES_FLAG
Permitted values are
1 - Yes (All subinventories)
2 - No (Specific subinventories)
APPROVAL_REQUIRED
Permitted values are
1 - Required for all adjustments
2 - Not Required for adjustments
3 - Required for adjustments out of
tolerance
APPROVAL_TOLERANCE_POS
APPROVAL_TOLERANCE_NEG
(Updated if approval required is
3-If Out of tolerance and choose +ve /
-ve tolerance for quantity)
COST_VARIANCE_POS
COST_VARIANCE_NEG
(Updated if approval required is
3-If Out of tolerance and choose +ve /
-ve tolerance for cost)
DYNAMIC_TAG_ENTRY_FLAG
Permitted values are
1 - Yes (Allowed)
2 - No (Not Allowed)
MTL_PHYSICAL_SUBINVENTORIES While defining the physical inventory
if user chooses
ALL_SUBINVENTORIES_FLAG as
1 Yes(All subinventories) no data is
populated.
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While defining the physical inventory
if user chooses
ALL_SUBINVENTORIES_FLAG as
2-No (Specific subinventories) the
fields updated are
PHYSICAL_INVENTORY_IDORGANIZATION_ID
SUBINVENTORY
MTL_PHYSICAL_INVENTORY_TAGS Nil
MTL_PHYSICAL_ADJUSTMENTS Nil
Form Name: Define Physical Inventory
Short Name: INVADPPI
2. SNAPSHOT OF SYSTEM ONHAND QUANTITIES
To run the snapshot navigation is Inventory -> Counting -> Physical Inventory ->Define Physical Inventory -> Choose the Snapshot button
Snapshot must be completed before generating the tags. After taking the snapshot,
system will no longer allow to update header information of the physical inventory.
The snapshot saves all item onhand quantities and costs and uses this information as
the basis for all physical inventory adjustments rather than the current on-hand
quantity. System allows to resume transaction activities even before running the
adjustments program for the physical inventory .Therefore need to procedurally
coordinate snapshot of physical inventory with actual counting and ensure that no
transaction activity occurs in a particular location until adjustments are launched and
posted.
Once snapshot concurrent process is finished, the snapshot complete box is checked,
the snapshot date is updated and the Tags button is enabled in the define physical
inventory window.
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Technical Notes: When
snapshot is finished the following tablecolumn values are inserted / updated
Tables Columns Updated / Inserted
MTL_PHYSICAL_INVENTORIES
( MPI )
FREEZE_DATENUMBER_OF_SKUS : Number of
SKUs are calculated and updated .
MTL_PHYSICAL_SUBINVENTORIES Nil
MTL_PHYSICAL_INVENTORY_TAGS Nil
MTL_PHYSICAL_ADJUSTMENTS
( MPA )
ADJUSTMENT_ID : Number of rows
equal to NUMBER_OF_SKUS of
MPI are inserted
PHYSICAL_INVENTORY_ID
ORGANIZATION_IDSUBINVENTORY_NAME
INVENTORY_ITEM_ID
SYSTEM_QUANTITY
ADJUSTMENT_QUANTITY will be
set as ve of SYSTEM_QUANTITY
ACTUAL_COST
REVISION LOCATOR_ID
LOT_NUMBER
LOT_EXPIRATION_DATE
SERIAL_NUMBER
The concurrent program INCAPF - Freeze Physical Inventory executes the
following
Updates the Freeze date in MTL_PHYSICAL_INVENTORIES table.
Calculate and insert number of SKUs in physical inventory into
MTL_PHYSICAL_INVENTORIES table.
Adjustment records will be inserted into
MTL_PHYSICAL_ADJUSTMENTS table.
Cost of the items will be calculated and updated in
MTL_PHYSICAL_ADJUSTMENTS table
The On-hand quantity of the items will be calculated from table
MTL_ONHAND_QUANTITIES and updates in
MTL_PHYSICAL_ADJUSTMENTS.
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3. GENERATE PHYSICAL INVENTORY TAGS
Physical inventory tags are used to record the count of inventory items. Tags are
referred by its alphanumeric identification code. Oracle Inventory can automatically
generate tag numbers that can be used to enter inventory counts. Tags can be
generated only after snapshot is completed. The system also supports using numbers
generated outside the Oracle Inventory. There should be only one item on a tag but
multiple tags can refer to the same item .
Physical Inventory can be performed for items under serial control. If default tags
are generated, system generates one tag per item per serial number.
Dynamic Tag Entry : Determines whether manually created tags can be entered or
not . If the option is not to allow dynamic tag entry, all tags must be generated
before the use. Dynamic Tag Entry is allowed when tag numbers are generated
outside the system. For example when using third-party pre-numbered tags.
Option 1: Dynamic Tag Entry
No need to run the Tag Generation program
Use own tag numbers while entering the counts
Default Tags : Contain information on items in the physical inventory definition.
Generates a tag for each SKU i.e. unique combination of item, subinventory, locator,revision, lot number and serial number that exists in the subinventories of physical
inventory.
Option 2: Default Tags
Specify the starting tag number and digit increments
Run the Tag Generation program
Use system generated tag numbers to enter counts
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Blank Tags: Do not contain any information about the items in physical inventory
definition. Blank tags can be generated to enter counts for those items whose
locations are not currently recorded in the system.
Option 3: Blank Tags
Specify the starting tag number and digit increments
Specify quantity of tags or the ending tag number
Run the Tag Generation program
Use system generated tag numbers to enter counts
To generate the tags navigation is Inventory -> Counting -> Physical Inventory ->
Tags Generation -> Choose Generate button
a. Enter the name of the physical inventory.
b. Select the type of tag to create.
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c. Indicate whether it is required to show serial numbers on the physical
inventory tags. If the option is not to show serial numbers on the tags,
system will generate a tag for each item but user has to match the serial
numbers to the items manually. It is allowed to enter a value in this field
only if tag type selected is default.
d. Enter the starting tag number for example - 0001 and say user wants the
increment to be 5, then for the increment enter 1115. The increment field
should have the number of digits the starting tag has and it should have 1's
preceding what the actual increment value would be. Tag numbers may be
alphanumeric, but increment will be done only for the numeric portion.
e. Choose the Generate button to create the tag numbers and information. Note
that this process does not physically print the tags. To print the tags, user
need to run the Physical Inventory Tags report using the navigation
Inventory -> Reports -> ABC and Counting -> Run Physical Inventory Tags
report
Technical Notes: When the
tags are generated the following tablecolumn values are inserted / updated
Tables Columns Updated / Inserted
MTL_PHYSICAL_INVENTORIES Based on the increment that is entered
while generating the tags the following
columns are updated
NEXT_TAG_NUMBER
TAG_NUMBER_INCREMENTS
MTL_PHYSICAL_SUBINVENTORIES Nil
MTL_PHYSICAL_INVENTORY_TAGS PHYSICAL_INVENTORY_ID
ORGANIZATION_ID
TAG_ID
VOID_FLAG is set to 2.
Possible values are 1-Void, 2- Active
TAG_NUMBER
ADJUSTMENT_ID
SUBINVENTORY
REVISION
LOCATOR_ID
LOT_NUMBER
LOT_EXPIRATION_DATE
SERIAL_NUMBER
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Void Tags: If any of the tags are not used, they have to be voided, as this is necessary
for auditing purpose. A voided tag is not reported as a missing in the Physical
inventory Missing Tag Listing report. Tags can be voided if they are lost, damaged or
discarded before the approval or before the adjustment process. If a default tag is
voided Oracle Inventory adjusts the quantity in that location to zero.
Technical Notes:
After entering the counts and save the following tablecolumn values are inserted /
updated
Tables Columns Updated / Inserted
MTL_PHYSICAL_INVENTORIES Nil
MTL_PHYSICAL_SUBINVENTORIES Nil
MTL_PHYSICAL_INVENTORY_TAGS TAG_QUANTITY is set as equal to
COUNT_QUANTITY entered
If Tag is voided TAG_QUANTITY is
updated as Null and VOID_FLAG is set
to 1.
TAG_UOM
COUNTED_BY_EMPLOYEE_ID
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Permitted values are
1-Approved
2-Rejected
3-Posted
APPROVED_BY_EMPLOYEE_ID
Form Name: Approve Physical Inventory
Adjustments
Short Name: INADPAP
6. POST ADJUSTMENTS
After entering all the tag counts and approve the adjustments that need approval, user
can submit the process that posts the physical inventory adjustments. This will
automatically creates a material transaction, adjusting the item quantity and
debiting/crediting the adjustment account specified for the physical inventory. If the
count of an item matches with the snapshot system onhand quantity, there will be
no adjustment transaction posted.
Once the adjustment program is completed it does not allow new tag generation and
no longer will be able to make changes to the physical inventory. Oracle Inventory
will not post adjustments, if any adjustment is pending for approval.
User must approve or reject all the adjustments before running the adjustment
program. Adjustments can be previewed before actually posting them by running the
Physical inventory adjustments report. If the approval option for a particular physical
inventory is Never, Oracle Inventory does not at any time prevent from submitting
the adjustment process. For any tag that has no count entered, it assumes a count of
zero and performs adjustment transactions accordingly.
To run the adjustment program
a. Navigate to the Physical Inventories Summary window.
b. Select the physical inventory.
c. Choose Launch adjustments from the Tools menu. The Launch Adjustments
window appears.
d. Enter the Adjustment Account number against which adjustments should be
charged.
e. Enter the adjustment date.
f. Choose the Launch Adjustments button to submit the concurrent request.
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Technical Notes:
When post adjustments program is run the following table-column values are
inserted / updated
Tables Columns Updated / Inserted
MTL_PHYSICAL_INVENTORIES LAST_ADJUSTMENT_DATE
TOTAL_ADJUSTMENT_VALUE
MTL_PHYSICAL_SUBINVENTORIES Nil
MTL_PHYSICAL_INVENTORY_TAGS Nil
MTL_PHYSICAL_ADJUSTMENTS
(MPA)
GL_ADJUST_ACCOUNT
APPROVAL_STATUS is set to
3 - Posted
MMTT / MMT Records will be inserted for thedifference of quantity i.e.
[(COUNT_QUANTITY)
(SYSTEM_QUANTITY)]
DISTRIBUTION_ACCOUNT_ID of
MMT is set to
GL_ADJUST_ACCOUNT of MPA
PHYSICAL_ADJUSTMENT_ID of
MMT is set to ADJUSTMENT_ID of
MPA.
MMTT is MTL_MATERIAL_TRANSACTIONS_TEMP table
MMT is MTL_MATERIAL_TRANSACTIONS table
The concurrent program INCAPA- Perform Physical Inventory Adjustments is
responsible for posting the adjustments and executes the following
Checks for adjustment records, which are pending approval/rejection .If
there are any pending, then no adjustments will be posted.
Gets the approved records from MTL_PHYSICAL_ADJUSTMENTS for
which adjustment quantity is not equal to zero.
Gets description, tolerance from MTL_PHYSICAL_ADJUSTMENTS.
Gets period close id for adjustment date and check whether it is in open
period.
Gets transaction_id from sequence. Takes 100 transactions and then
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commit.
The adjustment transaction records are inserted into
MTL_MATERIAL_TRANSACTIONS_TEMP
If the item is lot, serial controlled the records are also inserted into
MTL_TRANSACTION_LOT_NUMBERSMTL_SERIAL_NUMBERS_TEMP and respectively
Updates the table MTL_PHYSICAL_ADJUSTMENTS with approval
status
Updates the table MTL_PHYSICAL_INVENTORIES with adjustment
date and value.
7. PURGE PHYSICAL INVENTORY INFORMATION
Purging physical inventory will delete definition from the database. Purge does not
affect any adjustments or adjustment transactions made using the physical Inventory.
Options to choose while purging are Tags only or All.
Tags Only: Purges all the tags associated with a physical inventory definition. If
irreversible mistakes are made in the count-entry phase, user can start over without
refreezing the inventory.
All: Purges the physical inventory definition, frozen quantities, tags and count
quantities.
Identify the Physical Inventory to be purged
Choose Purge option: Tags only or All
To run the purge program
a. Navigate to the Physical Inventories Summary window.
b. Select the physical inventory
c. Choose Perform purge from the Tools menu.
d. Choose purge option Tags only or All
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Technical Notes:
When Purge program is run using Tags only option the following tablecolumn values
are inserted / updated / deleted
Tables Columns Updated/Inserted/Deleted
MTL_PHYSICAL_INVENTORIES Resets the value of the fieldsNEXT_TAG_NUMBER and
TAG_NUMBER_INCREMENTS to
Null
MTL_PHYSICAL_SUBINVENTORIES Nil
MTL_PHYSICAL_INVENTORY_TAGS All records of physical Inventory will
be deleted
MTL_PHYSICAL_ADJUSTMENTS COUNT_QUANTITY is set to Null
ADJUSTMENT_QUANTITY is set as
-Ve of (SYSTEM_QUANTITY)
When Purge program is run using All option the following tablecolumn values are
inserted / updated / deleted
Tables Columns Updated/ Inserted / Deleted
MTL_PHYSICAL_INVENTORIES Purge program checks for adjustment
transaction rows of that physical
inventory in
MTL_MATERIAL_TRANSACTIONS
table with
TRANSACTION_ACTION_ID=8 .
If no rows found, deletes the header
details of physical inventory.
To reuse the physical Inventory name
the adjustment transaction rows should
be purged from table
MTL_MATERIAL_TRANSACTIONS
and run the physical Inventory
purge All
MTL_PHYSICAL_SUBINVENTORIES All records of physical Inventory willbe deleted
MTL_PHYSICAL_INVENTORY_TAGS All records of physical Inventory will
be deleted
MTL_PHYSICAL_ADJUSTMENTS All records of physical Inventory will
be deleted
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The concurrent program INCAPP-Purge Physical Inventory Information executes
the following
Gets the valid organization ID.
Checks for adjustment record approval status 3 - Posted for purging the
records
If the purge type is All the records from the tables will purged in the
following order
o MTL_PHYSICAL_ADJUSTMENTS
o MTL_PHYSCIAL_SUBINVENTORIES
o MTL_PHYSICAL_INVENTORY_TAGS
o MTL_PHYSICAL_INVENTORIES records will not be deleted if
adjustment transaction rows of that physical inventory are found in
MTL_MATERIAL_TRANSACTIONS table.
If the purge type is Tag Only
o Records will be purged fromMTL_PHYSICAL_INVENTORY_TAGS table
o Updates MTL_PHYSICAL_ADJUSTMENTS with count and
adjustment quantities
o Resets tag information in MTL_PHYSICAL_INVENOTRIES table
PACKAGES
a. INV_PHY_INV_LOVS (INVPINLS.pls / INVPINLB.pls)
This will check for valid physical Inventories. Returns the count of physical
tag records for a given serial number inputted. This will validate whether
inputted serial is within the scope of the physical inventory i.e. exists in a
subinventory which physical inventory covers. This package also includes
API's to process a tag entry in a physical count.
b. INV_UI_ITEM_SUB_LOC_LOVS (INVITPSS.pls / INVITPSB.pls)
This will check for valid subinventories and locators associated with
physical Inventory.
c. INVADPT1 (INVADPTS.pls / INVADPTB.pls)
This server side package used by the form INVADPTE to update the table
MTL_PHYSICAL_ADJUSTMENTS
d. INV_CG_UPGRADE (INVCGUGB.pls / INVCGUGS.pls)
Records that do not have a default cost group will be identified and assigned
with cost group.
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Report Name: Physical Inventory Missing Tag Listing report
Short Name: INVARPMT
This report lists the tags that are missing from a userspecified range of tag numbers.
If the counts are not entered for the tag, it is considered as missing tag. Void tags are
not considered to be missing. Use this report before initiating physical adjustments toverify all tags generated by the system.
Report Name: Physical Inventory Adjustments report
Short Name: INVARPAR
This report shows all adjustments against each SKU of physical inventory. Run this
report before processing the adjustments to get a preview of adjustment quantities
and values. This report is also automatically generated after the successful
completion of the adjustment program as a record of what was actually adjusted.
Report Name: Physical Inventory Accuracy Analysis report
Short Name: INVARPIA
Review the output of this report at various stages of physical Inventory i.e. snapshot,
entering tag counts..etc. This report can be used as a historical accuracy analysis tool.
Report Name: Physical Inventory Trend and Summary analysis report
Short Name: INVARPTS
While running the report choose to run either Summary Report or Trend Report
a) Summary report: Provides a summary of physical inventory adjustments by
subinventory. The output shows system onhand value, actual count value, resulting
adjustment value in functional currency as well as the number of tags and
adjustments performed for each subinventory.
b) Trend report: This report compares past physical inventories to gauge the
accuracy level improvement over time. It provides a summary of physical inventory
adjustment values by date and subinventory as well as number of tags and
adjustments each subinventory required.
CONCLUSION
Using physical Inventory feature requires an understanding of the customer business
process. Physical Inventory has to define as per the company cost and quantity
discrepancy approval policy.
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Understanding Physical Inventory
May 2003
Author: Cherukuri Srinivasa Rao
Copyright Oracle Corporation 2002
All Rights Reserved Printed in the U.S.A.
This document is provided for informational purposes
only and the information herein is subject to change
without notice. Please report any errors herein to
Oracle Corporation. Oracle Corporation does not
provide any warranties covering and specifically
disclaims any liability in connection with this document.
Oracle is a registered trademark and Enabling the
Information Age. Oracle Applications are trademarks
of Oracle Corporation.
Oracle Corporation
World Headquarters
500 Oracle Parkway
Redwood Shores, CA 94065
U.S.A.
Worldwide Inquiries:
415.506.7000
Fax 415.506.7200
Copyright Oracle Corporation 2002
All Rights Reserved
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