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Understanding Physical Inventory
An Oracle White Paper
May’2003
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Understanding Physical Inventory
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
Permitted values are
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
Permitted values are
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
Tables Columns Updated / Inserted
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
Tables Columns Updated / Inserted
MTL_PHYSICAL_INVENTORIES Nil
MTL_PHYSICAL_SUBINVENTORIES 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
Tables Columns Updated / Inserted
MTL_PHYSICAL_INVENTORIES Nil
MTL_PHYSICAL_SUBINVENTORIES Nil
MTL_PHYSICAL_INVENTORY_TAGS Nil
MTL_PHYSICAL_ADJUSTMENTS APPROVAL_STATUS set to
1 – if approved
2 – if rejected
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Permitted values are
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
Tables Columns Updated / Inserted
MTL_PHYSICAL_INVENTORIES LAST_ADJUSTMENT_DATE
TOTAL_ADJUSTMENT_VALUE
MTL_PHYSICAL_SUBINVENTORIES Nil
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_SUBINVENTORIES Nil
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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Understanding Physical Inventory
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
Information Age. Oracle Applications are trademarks
of Oracle Corporation.
Oracle Corporation
World Headquarters
500 Oracle Parkway
Redwood Shores, CA 94065
U.S.A.
Worldwide Inquiries:
415.506.7000
Fax 415.506.7200
Copyright © Oracle Corporation 2002
All Rights Reserved