Entering content frameComponent documentationPhysical Inventory 


This component allows you to carry out a physical inventory of your company’s warehouse stocks for balance sheet purposes. Various procedures can be implemented for this.


In SAP R/3, physical inventory can be carried out both for a company’s own stock and for special stock. Inventory for a company’s stock and for special stocks (such as consignment stock at customer, external consignment stock from vendor, or returnable packaging) must be taken separately (in different physical inventory documents), however.

Note that the blocked stock returns and the stock in transfer cannot be inventoried. If these stocks are still to be counted in a physical inventory, you must transfer post these stocks to other stocks capable of inclusion in a physical inventory.

The stock in a warehouse can be divided into stock types. In the standard system, a physical inventory can be carried out for the following stock types:

  • Unrestricted-use stock in the warehouse
  • Quality inspection stock
  • Blocked stock


If batch status management is active, the first stock type covers both unrestricted-use stock and restricted-use stock.

Inventory of all stock types mentioned can be taken in a single transaction. For the materials to be inventoried, one item is created in the physical inventory document for every stock type.

Physical inventory takes place at storage location level. A separate physical inventory document is created for every storage location.

If a material does not exist in a storage location, this means that no goods movement has ever taken place for the material in the storage location. The material, therefore, has never had any stock in this storage location. The material does not exist at stock management level in the storage location. It is therefore not possible to carry out a physical inventory for the material in this storage location.

This is not to be confused with a material for which a goods movement has taken place and for which the stock balance is currently zero. A physical inventory must be carried out in this case, since storage location data is not deleted when the stock balance is zero.

Physical Inventory Procedures

SAP R/3 supports the following physical inventory procedures:

  • Periodic inventory
  • Continuous inventory
  • Cycle counting
  • Inventory sampling

Periodic Inventory

In a periodic inventory, all stocks of the company are physically counted on the balance sheet key date. In this case, every material must be counted. During counting, the entire warehouse must be blocked for material movements.

Continuous Inventory

In the continuous inventory procedure, stocks are counted continuously during the entire fiscal year. In this case, it is important to ensure that every material is physically counted at least once during the year.

Cycle Counting

Cycle counting is a method of physical inventory where inventory is counted at regular intervals within a fiscal year. These intervals (or cycles) depend on the cycle counting indicator set for the materials.


Cycle Counting Method of Physical Inventory allows fast-moving items to be counted more frequently than slow-moving items.

Inventory Sampling


Structure linkMM Inventory Sampling randomly selected stocks of the company are physically counted on the balance sheet key date. If the variances between the result of the count and the book inventory balance are small enough, it is presumed that the book inventory balances for the other stocks are correct.

Updating the Logistics Information System (LIS)

The physical inventory is connected to the Logistics Information System (LIS). When inventory differences are updated in the LIS, they are displayed both on a quantity and on a value basis. The physical inventory items are aggregated at inventory number level, plant level, storage location level, and material level. If you need more detailed information on the inventory differences in the LIS, you can access the list of inventory differences directly from the LIS and continue the analysis at item level.


The posting of physical inventory differences is subject to certain time constraints:

  • The posting period is automatically set during counting. Therefore, the inventory difference must be posted to the same period or - if postings to the previous period are allowed - in the following period.
  • The fiscal year is set by specifying a planned count date when creating a physical inventory document. All subsequent postings to this document must take place in this fiscal year and/or in the first period of the following fiscal year, if postings to the previous period are allowed.



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