physical inventory.pdf

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Understanding Physical Inventory

An Oracle White Paper

May’2003


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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 On–hand 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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Technical Notes:

When physical Inventory definition is saved the following table–column 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


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


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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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 table–column values are inserted / updated


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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MTL_PHYSICAL_ADJUSTMENTS Nil

Form Name: Generate Physical Inventory tags

Short Name: INVARPGT

Concurrent program INCAPT - Generate physical Inventory Tags executes

the following

Gets ORGANIZATION_ID for particular PHYSICAL_INVENTORY_ID

from MTL_PHYSICAL_INVENTORIES table

NEXT_TAG_NUMBER and TAG_NUMBER_INCREMENTS will be

calculated and updated in MTL_PHYSICAL_INVENTORIES

Inserts the records to MTL_PHYSICAL_INVENTORIES using the

sequence MTL_PHYSICAL_INVENTORY_TAGS_S

Generates tag numbers based on the starting tag number & the increment

and insert the records in to table MTL_PHYSICAL_INVENTORY_TAGStable

Generates pre printed tags by fetching rows from

MTL_PHYSICAL_ADJUSTMENTS table for a

PHYSICAL_INVENTORY_ID and insert tag numbers in

MTL_PHYSICAL_INVENTORY_TAGS table

4. ENTER COUNTS

Generated tags are used to record the physical counts. After recording the physical

counts user must enter the quantity for each tag. To enter the Tag counts thenavigation is Inventory -> counts -> Physical Inventory -> Tag Counts.

Navigate to the Physical Inventory Tag Counts window. Enter name of the employee

that performed the physical inventory in the Default Counter field. This is used as a

default for the Counted by field of each tag.

If the default tags are used, the system will display the tags with relevant item

information. User need to enter only the quantity counted for each tag. User can also

query a subset of tags by any combination of tag number, item, revision,

subinventory, locator, lot and serial number.

If blank tags are used in the physical inventory, user can query up the tags by tag

number. The system displays the tags but no item information. Need to enter the

count quantity as well as the item information i.e. item name, subinventory, locator,

revision, lot and serial numbers.

If dynamic tags are allowed in physical inventory definition user can enter tag

numbers generated outside the system. User needs to enter the count quantity as well

as the item information.


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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 table–column values are inserted /

updated


MTL_PHYSICAL_INVENTORIES 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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COST_GROUP_ID

MTL_PHYSICAL_ADJUSTMENTS COUNT_QUANTITY

ADJUSTMENT_QUANTITY set as

equal to [(COUNT_QUANTITY)–

(SYSTEM_QUANTITY)]

Form Name: Physical Inventory Tag Counts

Short Name: INVADPTE

5. APPROVING PHYSICAL INVENTORY ADJUSTMENTS

Oracle Inventory supports two types of physical inventory approval tolerances i.e.

quantity tolerances and cost tolerances. For each type, it is allowed to specify a

positive and a negative limit. The adjustments that can be viewed from this window

are determined by the approval option selected while defining the physical inventory.

If a particular adjustment is approved, physical Inventory Adjustments program

adjusts inventory balance by that quantity. If an adjustment is rejected, Oracle

Inventory does not change the system on–hand quantity.

Navigation to approve physical Inventory adjustments is Inventory -> Counting ->

Physical Inventory -> Approve Adjustments

a. Select the physical inventory and choose approve.

b. Enter the name of the employee approving the adjustments.

c. Select an adjustment to approve or reject and check the Approve/Reject

option.

User must either approve or reject all adjustments of the physical inventory before

running adjustments program.

Technical Notes:

When physical Inventory records are approved the following table–column values

are inserted / updated


MTL_PHYSICAL_INVENTORIES Nil


MTL_PHYSICAL_INVENTORY_TAGS Nil

MTL_PHYSICAL_ADJUSTMENTS APPROVAL_STATUS set to

1 – if approved

2 – if rejected


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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 on–hand 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


MTL_PHYSICAL_INVENTORIES LAST_ADJUSTMENT_DATE

TOTAL_ADJUSTMENT_VALUE


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 table–column values

are inserted / updated / deleted

Tables Columns Updated/Inserted/Deleted

MTL_PHYSICAL_INVENTORIES Resets the value of the fields NEXT_TAG_NUMBER and

TAG_NUMBER_INCREMENTS to

Null


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 table–column 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 will be 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 user–specified 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 on–hand 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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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

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