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Friday, 6 September 2019

Moving Average Price (MAP) and Physical Inventory process Overview - SAP MM

Moving Average Price (MAP) and Physical Inventory:

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Moving Average Price:


We all know material will be evaluated at plant/Company code level and once you evaluate the price for the material, we need to update in the material master- based on material type. If the material is Finished good, then material price will be moving average price and semi-finished goods may have standard price indicator in material master.

For finished goods, its good to have moving average price because as per the market value the price will change daily.

For semi-finished goods they cannot be changed daily because it’s not a product, mainly it’s a consumable material which will use for support product and it’s a standard price.


In our country when ever the budget proposal happens, then they will decide whether this finished goods price should be decreased or not, but they will not worry about consumable materials
Note: We are doing all above things to know the report of spends and correct GL hitting after posting MIGO for a material.

When we are updating price in material master, these things will keep in mind and update the price indicator respectively because its effecting the GL accounts in background.

If you have knowledge on account determination, then the above scenario will affect the PRD transaction key- Price difference account.

How it works:

Once we are maintaining the material then we are updating price control as V or S.

After updating how the price will change for price indicator V-Moving average price, this filed in material master will change daily if we are doing MIGO with the combination of material and plant.
For standard price the price will not change automatically, if required we need to change it manually.

How price is changing for V (Moving average price)-in material master:

Here the price needs to change whenever the MIGO was done for PO
We have one standard formula that on what basis, the price will change in material master.

                              Previous MAP * Previous stock + PO price per quantity * GR Quantity
MAP=                   ---------------------------------------------------------------------------------------------
                                                                   Previous stock + GR Quantity

Check out the formula

Note 1: Where check the previous MAP price in material master for that material and in the same screen we can find out the stock present for that material.

Note 2: Once you get that information then check the current PO price per quantity and GR quantity.
If you are creating PO, then take that info like if you are creating PO now for 100 quantity where per 1 quantity is 10 EUR then GR quantity as 100.

Note 3: Check the previous stock for that material in material master and GR quantity that you are doing now.

Example: lets think previous MAP is 10 and previous stock is 125 and current PO price is 15 with current GR quantity as 100

Now for denominator- Old GR quantity is 120 and new GR quantity is 100

                                                    10 * 125 + 15 * 100
MAP=                   ---------------------------------------------------- =12.22

The new price is 12.22 EUR

Now check the material master price in that material- Moving average price – the price will be 12.22 EUR.

Physical Inventory:

Every company will have stock of materials in warehouse for there production activities and everyday the respective persons needs to update the entry and exit of stock in the plant and sometimes it may affect the production if we are not doing this properly.

Example: we all know PR’s will be created by System and manually but if incise system wants to create PR then it will check the level of stock in plant and once the level of stock decreases then automatically system will create PR for that material. To do that correctly the system stock should be updated correctly and there are many scenarios that people tends to forget the updating the inventory with correct numbers and for that SAP has been recommended the physical inventory.

If the level of stock decreases by 50% then system will create auto PR’s with fixed vendors.
End of the day of physical inventory both the stocks needs to match -if not we will post the differences and match it in SAP.

Physical Inventory:

the concept is the warehouse stock should match with physical stock in plant and this counting will be done manually in plant.


 Every company they will follow this physical inventory process and its recommended by SAP to do, like for every 3 months or 6 months this physical inventory check should happen and this is the process done in SAP and warehouse persons will update and provide the stock to respective person to update in SAP.

Few companies they will check this physical inventory monthly because they don’t to be in trouble of production loss.


This activity mostly done in weekends and once we are doing this will mark freeze option or block option to avoid incorrect count in physical inventory.

Once we are decided to check for physical inventory then respective team will open T-code MI01 and create a physical inventory.

Create Physical Inventory: MI01---

Where we will enter the plant, material and storage location and save the screen
Now the physical inventory has been created.

1.      Posting Block:

We are marking posting block indicator such that there will be no inventory postings done in SAP before completing this physical inventory for this material.

If the physical inventory is taking 10 days, then up to 10 days there will be no postings done in SAP.

2.      Freeze book inventory:

If we select this option, then system will allow for postings in SAP, but the physical inventory number will be frozen or locked with that number such that there will be no difference in number of counts.

Most of the companies will prefer this option because we don’t know how much time it may take for counting.

Print Physical Inventory: MI21

Enter physical documentary number and execute, so that it will allow you to print.
Whatever they created for material they need to segregate as per the material group wise and take a printout of that what we created.

Once we have taken the print of that physical inventory then we need to send that print to the respective warehouse person then they will count and update in paper that stock is this much.

Enter count for Physical Inventory: MI04

Once we get the count from the warehouse person, then the count needs to be entered in the system as per the material through MI04.

Update the physical inventory number and execute then it will show the material then update the quantity in quantity field and save the screen.

MI05- if we need to correct the number what they have updated then we can update it.

Post Physical inventory: MI07

Once you have posted above step now, we need to do the posting the difference.

Go to MI07 and enter the physical inventory number then system will automatically show the difference in quantity and just check with original quantity in system then post the differences -Save
Here we have only 2 cases the quantity in the physical stock is more than the system stock
Quantity in the system stock is more than the physical stock
Or else both the stocks are matching with correct quantity.

Here once we are posting the differences the system will automatically generates the movement types accordingly.

Movement types-

701/702- Unrestricted Stock

703/704- Quality Inspection

707/708- Blocked Stock

System will automatically pick up as per the stock selected in MI01- here we have 3 options to select that physical inventory needs to be done from which stock.

701- Goods receipt for Warehouse Unrestricted stock
               It Means Counting stock is more than System stock

702- Goods issue for Warehouse Unrestricted stock
               It Means System stock is more than Counting stock

703- Goods receipt for Warehouse QI stock
It Means Counting stock is more than System stock

704- Goods issue for Warehouse QI stock
It Means Counting stock is more than System stock

707- Goods receipt for Warehouse Blocked stock
It Means Counting stock is more than System stock

708- Goods issue for Warehouse QI stock
It Means Counting stock is more than System stock

Please comment your doubts in the comment section of the Blog

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