The R/3 system makes various physical inventory methods available to the user. The methods have different time scales and organizational inventory procedures.

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

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

Cycle Counting allows fast-moving items to be counted more frequently than slow-moving items, for example.

With the continuous inventory method, stocks are counted continuously during the entire fiscal year. In this case, it is important to ensure that every article is physically counted at least once during the year. Continuous inventory affords a high degree of flexibility, as counting can be distributed over the full year.

The first time a bin is occupied, the Warehouse Management (WM) system requests a physical inventory. When stock placement is confirmed, a physical inventory is carried out and entered in the system. No further physical inventory is usually carried out for the bin in the same year.

This method usually involves a high percentage of storage bins being involved in the physical inventory. Sometimes no stock is actually placed into a bin in the course of a fiscal year, however. Bins into which no stock has been put away are subject to a periodic inventory at the end of the fiscal year.

The zero stock control method exploits the fact that a storage bin is emptied when stock is removed.

A note is made on the transfer order document indicating that the storage bin has to be checked. When stock is removed, the warehouse clerk checks whether the bin is actually empty. The transfer order is confirmed with the results of the count. If the bin is not empty, the stock balance is corrected automatically in the Warehouse Management system. The difference must also be adjusted subsequently in Inventory Management.

Physical inventory is thus complete for the storage bin.

The larger the number of articles stored in a company, the more time and expense is involved in counting the stocks of the articles. The time and trouble involved in a physical inventory can be reduced considerably by restricting counting to a limited number of articles and extrapolating the results for all stock management units. This sampling principle is also used in quality inspection – only a sample is inspected and the results extrapolated for the whole quantity. The results of a physical inventory carried out in this way are only permissible when certain requirements are met:

• The number of stock management units participating in the physical inventory must be large enough
• The number of stock management units participating in the physical inventory must be representative
• A number of statistical methods are used to carry out inventory sampling:
• A sample is taken at random from the stock management units taking part in the physical inventory. The size of the sample depends on the probable degree of confidence that is to be obtained when the results of the count are extrapolated for all stock management units.
• Using the results posted, an extrapolation is carried out for all stock management units participating in the inventory sampling.
• If there is only a small variance between the extrapolated value and the book value and a high probability that any error in the extrapolation process is very small, the inventory sampling is considered as successful.

An inventory sampling is considered as successful when the estimated differences that are established are so negligible that they can be disregarded. As in classical physical inventory, only stock values of the elements that are actually counted are corrected; the stock values of the other stock management units are not changed. If an inventory sampling is not successful, a complete physical inventory is carried out for the stock management units that were not counted.

In this case a count is made on a periodic basis. No warehouse movements or changes to the book balances are made while sampling is in progress.

This can take place over a long period of time. Book balances are periodically updated in line with the data obtained. Changes in book values are therefore included in inventory sampling calculations.