You're facing inventory valuation discrepancies in your ERP system. How will you resolve them effectively?

The physical inventory count or the cycle count will be the basis of truth when facing such situations. It's worth investing resources to fix inventory discrepancies early so it does not affect values or financial reporting figures later on.

The inventory movement types can be purchase receipt or return, sales or manufacturing issue or return, transfer from or to storage or manufacturing location and physical adjustment. Quantity discrepancies are due to physical inventory movements incorrectly or not recorded in the ERP system. Incorrect unit costs are most probably caused by purchase movements. The purchase return value of a stock item needs to be based on the same unit price as the related purchase. It is important to test this scenario in an ERP system.

Em indústrias produtoras de itens alimentícios, um ponto extremamente relevante, que ocasiona diferenças entre o stock em sistema e o stock físico, é o denominado "consumo real vs consumo teórico". O consumo teórico são as quantidades calculadas dos ingredientes necessários para fazer, em geral, uma unidade de venda (é a "receita"). Tal informação constitui a BOM ("Bill of Materials"). O consumo real é a quantidade que realmente foi utilizada pela produção. Portanto, se a fórmula, por qualquer razão, diverge do consumo real, haverá discrepâncias. Logo, se há um desvio constante em determinado material, é recomendável rever as fórmulas e os desperdícios em linha.

Ce type d'erreur provient le plus souvent d'un mauvais paramétrage des articles, soit au niveau des coefficients entre les différentes unités, soit au niveau du paramétrage des tarifs. Toutefois, l'erreur peut aussi être causée par une erreur sur les quantités. D'après mon expérience, ce problème peut se manifester de deux manières : 1. Une valeur de stock très élevé (si le coût de revient des articles est surévalué) 2. Une augmentation significative de la marge (si le coût de revient des articles a fortement baissé) En fonction de la situation, soit on se basera sur une extraction de l'inventaire, avec une sélection des articles avec les plus forte valeur de stock, soit on se basera sur une analyse du pourcentage de marge sur les articles.

Resolving inventory valuation discrepancies in an ERP system requires a systematic approach to identify root causes and implement effective solutions. Compare the use of standard cost method (predetermined cost) versus actual cost method (based on real costs incurred). Conduct a physical inventory count to reconcile actual stock levels with ERP system records. Implement regular cycle counting to verify inventory accuracy in specific segments or locations. Perform spot checks or random audits to validate inventory transactions and data integrity.

Evaluating inventory valuation methods in SAP S/4HANA is crucial. For example: FIFO might better reflect inventory turnover, ensuring accurate financial reporting and compliance. Considering the impact on financial statements and tax implications, and maintain consistency across all business units. Using SAP’s tools to adjust historical data if switching methods and leverage real-time insights to monitor and refine your approach. This ensures accurate, compliant financial records and supports strategic decision-making.

Conducting a comprehensive system audit is essential to identify and resolve inventory valuation discrepancies and ensure overall ERP system integrity. Determine specific objectives of the audit, such as verifying accuracy of inventory records, assessing compliance with accounting standards, or identifying process inefficiencies. Define the scope of the audit, including inventory valuation methods, transactional processes, system configurations, and organizational units involved. Assemble a multidisciplinary audit team with expertise in inventory management, finance, IT systems, and auditing standards.

ERP transactions which update inventory are related to different functional departments like stock control, purchasing, manufacturing, sales and after-sales services using relevant ERP modules. A training course for completing end-to-end business processes with the ERP can be provided to cross-functional participants for learning how their tasks are interdependent and what they need to record in the ERP system to avoid inventory errors.

Revalue the entire inventory and set right the discrepancy. Ensure proper input data has been updated for all Item in the ERP to have a right kind of valuation. Have a SOP on the valuation

Consider investing in technologies that can automate inventory counts - think RFID + automated counts every 4 hours (drones, AGV, etc). Process control points to reduce discrepancies can also considered for high value/critical goods.