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Inventory Management 233

and FI documents are created. However, the materials shipped technically
do not belong to the receiving plant in the other company code. Therefore,
the value of inventory is unchanged at the receiving plant. The materials are
classifi ed as “in-transit CC,” which is different from the “in-transit” category
previously discussed. Materials in the in-transit category are included in valu-
ation, whereas those in the in-transit CC category are not.
When the company receives the materials at the receiving plant, it records a
goods receipt against the STO. As in the procurement process, the quantity held
in unrestricted use increases, material accounts are debited by the value of the
materials received, and the GR/IR account is credited. Corresponding material
and FI documents are created. Note that, in contrast to the other two scenarios
involving STOs, the valuation in this scenario is based on the purchase price in
the STO. The supplying plant then creates an invoice based on this price, which
is the selling price from the perspective of the fulfi llment process. Thus, the valua-
tion of materials does not refl ect the valuation price of the delivery plant. Rather,
it is based on an agreed-upon transfer price between the companies within an
enterprise. When the billing document is created, the system updates the appro-
priate revenue and receivables accounts in the sending plant’s general ledger.
The receiving plant then verifi es the invoice, as in the procurement pro-
cess. The system updates appropriate accounts payable and GR/IR accounts in
the receiving plant’s general ledger. Corresponding FI documents are created
as well. In contrast to the purchasing process, the receiving plant does not make
any explicit payments to the supplying plant. Rather, when the invoice verifi -
cation step is completed, it makes payment via a transfer of funds between
appropriate accounts in the two company codes. At this time, the accounts
receivable account and accounts payable account are also updated. As usual,
corresponding FI documents are created.
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 qual-
ity inspection and blocked stock.
• Goods received can be posted to consumption rather than mate-
rial accounts. (Refer to the discussion of stock versus consumable
materials in Chapter 4.)
To review, inventory management is concerned with managing and mov-
ing materials between storage locations within a plant or between two plants.
The plants can belong to the same company code or to different company
codes. Several options for moving materials are available depending on the type
of movement. However, in all the options we have considered, the movement
is at the storage location level. Recall that storage locations are places where

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