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262 CHAPTER 7 Inventory and Warehouse Management Processes

Demo 7.10: Bin status report

CHAPTER SUMMARY

Inventory and warehouse management (IWM) processes are concerned with the
storage and movement of materials in an organization. IWM is closely related to
the procurement, fulfi llment, and production processes. Inventory management
(IM) involves the movement of goods in and out of plants, and warehouse man-
agement (WM) involves processes that permit sophisticated management of
materials within and in-between plants. WM is typically used by organizations that
have large quantities of expensive inventory that must be managed very closely.
The WM process is typically initiated by a transfer requirement, which is
triggered by an activity in IM that creates a need to transfer goods. A transfer
requirement is used to plan the movement, which is then executed by a transfer
order. Once the transfer order is created, the materials are physically moved
to and from the storage bins and then the transfer order is confi rmed. Transfer
requirements and interim storage areas are the key links between IM and WM.
IM consists of four goods movements: goods receipt, goods issue, stock
transfer, and transfer posting. Goods movements are accomplished using spe-
cifi c movement types that determine the information needed to execute the
movement and the general ledger accounts that are affected.
Goods receipt is a movement of materials into inventory; it therefore results
in an increase in inventory. Typically raw materials and trading goods are received
inventory from a vendor as part of the procurement process, and fi nished goods are
received from the shop fl oor once the production process completes making them.
Goods issue is a movement of materials out of inventory; it therefore
results in a decrease in inventory. Typically a goods issue is associated with a
shipment of fi nished goods or trading goods to a customer against a sales order
or an issue of raw materials or semifi nished goods against a production order.
Stock transfers are used to move materials within the enterprise from one
organization level or location to another in a simple way. Materials can be moved
between storage locations within one plant, between plants in one company
code, or between plants in different company codes.
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,
but they result in a change to the status or type of goods.
In more complex situations, transfers are accomplished with stock trans-
port orders (STOs), which simulate one plant “purchasing” materials from
another plant that “sells” the materials. STOs can be done without delivery,
with delivery and with delivery and billing, depending on the level of complexity
needed and organization’s accounting policies. STOs offer many advantages
over simple stock transfers or transfer postings, but also require more complex
activities to complete.
Warehouse management (WM) operates on the concept of warehouses as
logical units that manage and track the movement of goods in and out of storage
locations. A warehouse must be associated with at least one storage location.

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