This component reduces the time and cost of a physical inventory considerably by counting only the stock of individual materials and carrying out an extrapolation to arrive at an estimated count result for all units of stock managed in the R/3 System (stock management units).

The more materials a company has, the more costly it is to carry out a physical inventory by counting all stocks. The principle of extrapolation during sample taking is also used in quality inspection in the R/3 System: only one particular sample is inspected. The result is then applied to the entire quantity.

To infer the counts for all stock management units by extrapolating the count results for individual units, the following prerequisites must be fulfilled:

• The size of the stock management units included in the physical inventory must be large enough.
• The selection of stock management units to be counted must be "representative".

Statistical procedures are used for carrying out inventory sampling:

• A sample to be counted is randomly selected from the stock management units subject to physical inventory. The size of the sample depends on the degree of probability (probable degree of confidence) with which the extrapolated value inferred from individual counts is expected to be valid for all stock management units included in inventory sampling.
• On the basis of the posted count results, the system carries out an extrapolation for all the stock management units included in the physical inventory.
• The inventory sampling is considered successful, if there is only a small deviation between the extrapolated value and the book value and a high probability that the extrapolation result contains only a minor error.

If an inventory sampling is successful, it is assumed that the estimated deviations from the book inventory balances are so small that they can be neglected. As in the case of a "standard" physical inventory, only the stock of the elements actually counted is adjusted. The stock of the remaining stock management units remains unchanged.

If an inventory sampling is not successful, a complete physical inventory must be carried out for the stock management units not counted.

Inventory sampling can be carried out in the areas of Inventory Management and Warehouse Management. The steps required to carry out an inventory sampling are the same in both areas. The only difference is the selection of the objects included in the physical inventory:

• Inventory Management

• In Warehouse Management:

As with a "standard" physical inventory, there are two methods of carrying out an inventory sampling:

• Periodic inventory sampling

• Continuous inventory sampling

In the R/3 System, there is no difference between the two methods of inventory sampling, neither in the steps used to carry out the inventory sampling nor in the calculations performed by the system. However, during periodic inventory sampling, you must ensure that the book values will not be changed during the process of inventory sampling.

The extrapolation can be based on different mathematical procedures. The R/3 System supports the procedure of mean-value estimation.