Use

When determining the lowest value based on movement rate, the system checks whether a material's price should be devaluated on the basis of slow/non-movement.

Features

Calculation

A material's movement rate is determined on the basis of receipts and issues for the material and the average stock of the material:

Movement rate = total quantity of receipts/issues / material stock x 100

The movement rate for a material is identified by the percentage rate that specifies how many units of measure have been received or issued in relation to the material stock.

This percentage is compared to a preset threshold value: If the percentage rate for receipts or issues is smaller than this percentage rate, the material is considered to be slow-moving or non-moving; if it is larger, the material is considered to be fast-moving.

Movement rates can be determined in two ways:

In this case, you can monitor the movement rate for receipts and issues. If you take both receipts and issues into account, you obtain a movement rate for receipts and a movement rate for issues. A material is classified as slow-moving or non-moving if both values are smaller than the set percentage rate.

In this case, the system only considers the issues. This procedure takes considerably less time than determining the movement rate using material documents.

The material stock that is used for calculating the moving rate can be defined as the average of the closing stock balance from previous posting periods. You need to specify weighting factors for material stocks and movements. You can maintain these in Customizing or on the initial screen.

When the system determines movement rates, it only uses material movements from the period under review. To make sure that slow/non-movements from previous years are not included in the devaluation, a devaluation indicator is used:

Therefore, if you carry out lowest value determination annually, the devaluation indicator is the equivalent of the number of years that the material has been slow-moving.

In the case of materials subject to split valuation, lowest value determination based on movement rate differs as follows:

Devaluation

In Customizing for Valuation and Account Assignment, or from the initial screen, you assign a devaluation percentage to each devaluation indicator depending on the company code or valuation area and the material type.

For example, if a material of type ROH has a devaluation indicator of 2, the devaluation is 30%. Entries without a material type apply to materials for which no specific devaluation percentages are defined. If a devaluation indicator is calculated that is not specified in the table, the system takes the entry for the next lowest number in the table.

Assigning the Percentage Devaluation to the Devaluation Indicator

Base Price

When determining the lowest value based on the movement rate, the base price is the price from which the devaluation calculated is to be deducted. The following prices can be used as the base price:

Result

When you determine the lowest value based on the movement rate, you specify the base price. The lowest price is calculated as follows:

Lowest price = base price - devaluation

The system generates a list of materials with their devaluation percentages and lowest prices.

You can also have the system update the results of lowest value determination based on the movement rate in the physical inventory price fields in the material master record.

You can also generate a batch input session, which changes the material valuation prices to the lowest prices determined when it runs, or you can change the material valuation prices directly.

You can update valuation alternatives directly from the program.

See also:

Determining the Lowest Value Based On Movement Rate