Navy ERP Release 1.1 Inventory Accuracy

1. Navy ERP Release 1.1Inventory Accuracy

2. NAVY ERP and Physical Inventories • Navy purchased SAP software (COTS) as part of the ERP program • Navy plans to use standard SAP functionality for physical inventories • Customization expensive & difficult to maintain • ERP design period complete • Differs from Current DoD Policy • No Location Survey Functionality • Bin Level vs. Line Item Inventories • Statistical Sampling dollar value

3. SAP Statistical Sampling • Used when 100% inventories are infeasible • Designed to verify book value of inventory • Sample Selection • Bins stratified by dollar value • Random sample selected from each strata. • Margin of error • Standard deviation • High dollar bins have greater chance of being selected • Sample not stratified by DoD A,B,C,D inventory categories

4. SAP Physical Inventory Functionality • SAP can generate inventories based on material characteristics (CIIC, etc) • Requires some customization • Additional SAP physical inventory methods • Annual inventory count • Continuous inventory • Continuous inventory during stock placement • Continuous inventory based on zero stock check • Cycle counting • Adhoc (Select and Count) • Quant (A single material # in mixed storage bin)

5. Key Takeaways • Navy intends to use standard SAP functionality • SAP differs from current DoD policy for sites using statistical sampling • Sites doing 100% inventories are in compliance • Additional SAP physical inventory methods mitigate risk

6. BACK UP

7. SAP Organization Terminology

8. SAP Organizational Terminology • Client -Incommercial, organizational or technical terms, a self contained unit in an R/3 system with separate Master records and its own set of tables. • Company Code – A four digit code representing an Organizational structure within SAP closely aligned with the Navy’s Budget Submitting Office (formally major claimants) structure. The company code naming convention consists of the agency code for Navy “17” and the code for the budgeting submitting office , such as “19” for NAVAIR or “39” for SPAWAR. Full examples would be 1719 for NAVAIR (General Fund) or 1739 for SPAWAR (General Fund). • Plant – A physical entity with an address where inventory is managed and valued, production or maintenance work is preformed. A ship or air squadron. • Storage Locations – The physical location within a plant where the material is stored. Warehouses or work centers.

9. Warehouse Structure

10. Depiction of the Physical Warehouse in WMS

11. SAP Organizational Terminology Warehouse Structure - Management of complex warehousing facilities to include automatic warehouses, custom-designed storage areas, high rack storage, bulk storage, fixed bin storage and all other commonly used storage areas Storage Type - A storage area, warehouse facility, or a warehouse zone that you define in Warehouse Management (WM) for a warehouse number. This is a physical or logical subdivision of a warehouse complex that is characterized by its warehouse technique, the space used, its organizational form, or its function. Section – an organizational subdivision of a storage type that groups together storage bins with similar features for the purpose of putting away stock. The criteria for grouping bins can be defined on a user-individual basis, for example, heavy parts, bulky materials, fast-moving items, slow-moving items. Storage Bin – The storage bin is the smallest available unit of space in a warehouse. The storage bin therefore describes the position in the warehouse where the goods are or can be stored. Quant – This is the stock of any material with the same features in one storage bin. The system manages different batches of a material as different quants. The quantity of a quant can be increased by an addition to existing stock. Quants can be created or deleted solely through goods movements. 11

12. MM vs WM • MM physical inventory is performed at the Storage Location • WM physical inventory is performed at the Storage Bin

13. Annual Inventory • The practice of taking an annual inventory count at the end of the fiscal year often requires an enormous effort for large warehouse complexes. The costs to a company are relatively high, and the physical counting process in the warehouse is labor intensive. In many factories, an annual inventory count would result in lost output because of the effort required. Therefore, several variations to the conventional annual inventory count are provided.

14. MM Inventory The Materials Management (MM) application component supports the following inventory methods: • Cycle counting • Adhoc (Select and Count) • Inventory sampling

15. WM Inventory The Warehouse Management (WM) application component supports the following inventory methods: • Annual inventory count (also called periodic inventory) • Continuous inventory • Continuous inventory during stock placement • Continuous inventory based on zero stock check • Cycle counting • Inventory sampling • Adhoc (Select and Count) • Quant (A single material # in mixed storage bin)

16. WM Annual Inventory You use this inventory method for storage types, for example, for which the continuous inventory method should not be used. You can also use this method to take an inventory of the storage bins and bin quantities that are normally subject to a continuous inventory method but had no movement in the current fiscal year.

17. WM Continuous Inventory With the continuous inventory method you take inventory on a selected number of storage bins in a storage type. The inventory can take place at any time during the fiscal year. • The effort for the inventory is not concentrated on a certain day or days but is distributed over the entire year. This can result in a better leveling of the workload in the warehouse. • Inventory can be conducted during slow times in the warehouse, for example, during summer vacation. • When an inventory is carried out on a continuous basis, up-to- date information about the correspondence between the warehouse stock and the book inventory is always available.

18. Continuous Inventory during Stock Placement When you define this inventory method for a storage type, the system sets the inventory indicator for the storage bin the first time goods are placed in the storage bin for the fiscal year. When you confirm transfer orders for the stock placement, inventory is taken and recorded for the storage bin. In general, inventory is not taken for the storage bin for the remainder of the fiscal year.

19. Continuous Inventory based on zero stock check When zero stock check has been defined for a storage type, the system checks whether the storage bin is empty after the stock has been picked. The transfer order for picking is printed with a notice that the zero stock check is active for a specific storage bin. When the warehouse worker removes the stock from the bin, he or she must check to see whether the storage bin is actually empty. When you confirm the transfer order for the pick, the system displays a dialog box in which you confirm that the storage bin is empty.

20. Continuous Inventory based on zero stock check When zero stock check has been defined for a storage type, the system checks whether the storage bin is empty after the stock has been picked. The transfer order for picking is printed with a notice that the zero stock check is active for a specific storage bin. When the warehouse worker removes the stock from the bin, he or she must check to see whether the storage bin is actually empty. When you confirm the transfer order for the pick, the system displays a dialog box in which you confirm that the storage bin is empty.

21. Cycle Counting Cycle counting in the Warehouse Management (WM) application component makes it possible for you to separate materials into classes (such as A, B, C...) and take inventory for each class separately several times throughout the year.

22. Quant Inventory Only the quants of the respective material are blocked for the period of the actual inventory counting. This is particular appropriate for storage bins with mixed storage: • Only the selected materials need to be counted • Only the respective quants, not the storage bins, are counted.