Physical Inventory Overview

Purpose: Performing a physical inventory is the process of counting the actual items that you have in one or more warehouses (or a portion of a warehouse), comparing the quantity counted (or physical quantity) to the on-hand quantity on the system, and updating the system with the correct inventory counts.

The system provides several options to assist you with the physical inventory process. You can:

• use your own batch sheets or tickets, system-generated tickets, or RF devices to perform the count. If you use system-generated batch sheets or tickets, you can print the current on-hand quantity or suppress those numbers.

• perform the physical inventory for the entire warehouse, for selected areas of the warehouse, or cycle count.

• single count or double count each item, and recount items when the first and second count vary.

• establish allowable variances by item, by dollar amount, or by percentage for variance reporting.

• optionally, clear all existing LPNs from the system and recreate the LPN file.

In this topic:

• The Physical Inventory Process

• Generating the Physical Inventory

• Entering Counts

• Physical Inventory Reporting

• Updating CWDirect with Physical Inventory Counts

• Steps to Performing a Physical Inventory

• Canceling a Physical Inventory

The Physical Inventory Process

Purpose: You can use some or all of these steps to perform a physical inventory, depending upon how your system is configured.

• Generating the Physical Inventory for the selected warehouse, locations, status or cycles

• Printing Batch Sheets or Tickets, if you are not using your own forms

• counting the inventory and recording the counts

• Entering Counts, or uploading the information from an external system

• using Physical Inventory Reporting to perform an initial analysis to determine any item count variances

• optionally, enter a second and/or final count, and review variances as necessary

• Updating CWDirect with Physical Inventory Counts with the new inventory counts

Physical Inventory Process Summary

The table below explains how you process physical inventories, based on the setting of the Entry Method (A01), File Generation Output (A09), and Upload Counts (A12) system control values.

Entry Method	Generation Output	Upload Counts	Results
If you are uploading counts from an external system:
blank	NONE or blank	Selected	Use Uploading Physical Counts (MPIU) to upload counts from an external system.
SHEET	Any value except TICKETS	Selected	Use Uploading Physical Counts (MPIU) to upload counts from an external system and enter the second and final counts using the Entering Counts Using Physical Inventory Worksheets (MPIE) menu option. If the File Generation Output (A09) system control value is set to SHEET, LOCATION or AISLE, the system prints the Physical Inventory Batch Work Sheet to aid in the count.
TICKETS	TICKETS	Selected	Use Uploading Physical Counts (MPIU) to upload counts from an external system and enter the second and final counts using the Entering Counts Using Physical Inventory Worksheets (MPIE) menu option. The system prints Physical Inventory Tickets to aid in the count.
If you are entering counts using the Enter Physical Counts (MPIE) menu option (by sheet or ticket):
SHEET	SHEET, LOCATION, or AISLE	Unselected	Print the Physical Inventory Batch Work Sheet and enter counts using the Entering Counts Using Physical Inventory Worksheets (MPIE) menu option.
TICKETS	TICKETS	Unselected	Print Physical Inventory Tickets and enter counts using the Entering Counts Using Physical Inventory Worksheets (MPIE) menu option.

Generating the Physical Inventory

Overview: When you perform a physical inventory, the system creates a snapshot copy of the Item Location file. The snapshot file contains the items, locations, and on-hand quantities (perpetual count) for each item being counted as of the time you generated the physical inventory.

Which item/locations are included in the physical inventory: The selection criteria you define on the Generate Physical Inventory Screen determines which item/locations the system includes in the physical inventory. You can limit the physical inventory to:

• a specified Warehouse.

• specified Zones. Within zone, you can further limit the physical inventory to a Range of aisles.

• A Range of locations.

• Select item statuses.

• Select cycle counts.

• A Maximum number of item locations to count.

Note: Only item/locations that meet all of the selection criteria defined are included in the physical inventory.

LPNs: If you use LPNs to manage your warehouse, you can select the Clear LPN file before generate field to clear the LPN file and rebuild the LPN records when you enter or upload counts.

Generating multiple physical inventories: You create a separate physical inventory with a unique control number each time you use Generating a Physical Inventory (MGPI). The system allows you to have multiple physical inventories in process at one time, based on the Number of Outstanding Physicals (A05) system control value.

Before starting a physical inventory: It is recommended that you take the following steps before you generate a physical inventory:

• confirm or void all outstanding pick slips in all included item locations

• complete or cancel all replenishments, batch inventory transactions, and work orders for all included item locations

• clear the billing data queue

Taking these steps will help prevent inventory transaction errors, such as a negative on-hand quantity, or physical inventory miscounts.

Inventory Freeze and Item Location Exclusions

When you generate a physical inventory, the system sets the Physical freeze flag for each item location included in the physical inventory to Y if you set the Freeze Item During Physical (A10) system control value to Y. Freezing the item location prevents the system from:

• including the item location in another physical inventory

• generating pick slips (see Introducing Pick Slip Generation)

• using the item location in primary location replenishment (see Replenish Primary Locations)

• using the item location in warehouse replenishment (see Replenish Warehouses)

• receiving inventory to the item location (see Receiving Purchase Orders (PORC))

• processing any inventory transactions for the item location.

A physical inventory freeze for an item location prevents various opportunities for miscounts and inventory transaction errors.

You can also set the Reservation freeze flag for the item location to Y through the Create Item Location Screen or the Change Item Location Screen. This flag determines if pick slips print or if a replenishment occurs. Since the Physical freeze flag controls these transactions also, the Reservation freeze flag is only supplemental during a physical inventory.

The system resets the Physical freeze flag and the Reservation freeze flag when you perform the physical inventory update. In situations where the flags are not reset (for example, if there was an inventory transaction error), you can use Resetting the Freeze Flags (RPFF) to unfreeze the item location.

Additionally, any item location whose Item transfer pending flag is set to Y will be excluded from the physical inventory.

Using Physical Inventory Batches

You can assign batch numbers to the physical inventory output to control the number of item/locations or the number of locations (based on the settings defined in the Batch Size (A08) and Batch Grouping (L64) system control values) that are included in each batch. Batching item/locations or locations in the physical inventory table allows you to:

• limit the number of item/locations or locations in each batch.

• enter counts for each batch separately.

• perform the inventory evaluations and updates for each batch separately.

When you use batching, the system assigns a batch number to each group of item/locations or locations when you generate the physical inventory. The batch tables are keyed by control number and batch number, which allows you to perform each function in the physical inventory process separately for each batch.

Using batches can make your count entry process much easier, as it facilitates multiple operators entering counts batch-by-batch at separate terminals.

To assign batch numbers: The Assign Batch Numbers (A07) system control value defines whether the system groups a physical inventory into one or more batches.

• If set to N, all item/locations are included in a single physical inventory and all physical inventory functions take place for each item/location at the same time.

• If set to Y, the system assigns one or more batch numbers to the physical inventory.

Assigning batch numbers allows you to generate Physical Inventory reports by specific batch, and update the system with physical inventory counts by batch. This may make your count entry process easier, since you can have more than one person entering counts at one time with less chance of mistakenly overwriting each others' entries. However, if you assign batch numbers, you cannot produce a variance report that includes all item/locations in a warehouse.

Defining a batch: The following system control values determine when the system starts a new physical inventory batch.

The Batch Grouping (L64) system control value defines how the system defines a physical inventory batch.

• ITEM/LOC indicates the system counts item/locations to reach the batch size.

• LOCATION indicates the system counts locations to reach the batch size.

The Batch Size (A08) system control value defines the number of item/locations or the number of locations to include in a batch before starting a new batch.

Example: You generate a physical inventory for warehouse 1 that includes the following item/locations.

Item	Location
IT1	A010101
IT2	A010101
IT3	A010101
IT3	A010102
IT3	A010103
IT4	A010103
IT5	A010103
IT4	A010104
IT5	A010105

The Batch Size (A08) is 3.

Batch Grouping (L64)	Results
ITEM/LOC (the system counts item/locations to reach the batch size)	The system creates the following batches: Batch 1 includes the following item/locations: 1. IT1/A010101 2. IT2/A010101 3. IT3/A010101 Batch 2 includes the following item/locations: 1. IT3/A010102 2. IT3/A010103 3. IT4/A010103 Batch 3 includes the following item/location: 1. IT5/A010103 2. IT4/A010104 3. IT5/A010105
LOCATION (the system counts locations to reach the batch size)	The system creates the following batches: Batch 1 includes the following item/locations: 1. IT1/A010101, IT2/A010101, IT3/A010101 2. IT3/A010102 3. IT3/A010103, IT4/A010103, IT5/A010103 Batch 2 includes the following item/locations: 1. IT4/A010104 2. IT5/A010105

The setting of the File Generation Output (A09) system control value also determines when the system starts a new batch.

File Generation Output (A09)	Batch Grouping (L64)	System starts a new batch when:
SHEETS	ITEM/LOC	• The warehouse changes, or • The number of item/locations reaches the maximum Batch Size (A08).
SHEETS	LOCATION	• The warehouse changes, or • The number of locations reaches the maximum Batch Size (A08).
LOCATION	ITEM/LOC	• The zone changes, or • The number of item/locations reaches the maximum Batch Size (A08).
LOCATION	LOCATION	• The zone changes, or • The number of locations reaches the maximum Batch Size (A08).
AISLE	ITEM/LOC	• The aisle changes, or • The number of item/locations reaches the maximum Batch Size (A08).
AISLE	LOCATION	• The aisle changes, or • The number of locations reaches the maximum Batch Size (A08).
TICKETS	ITEM/LOC	The number of item/locations reaches the maximum Batch Size (A08).
TICKETS	LOCATION	The number of locations reaches the maximum Batch Size (A08).
NONE	N/A	If File Generation Output (A09) is set to NONE, the system does not assign batch numbers. In this situation, the entire physical inventory is assigned to batch 1.

Printing Batch Sheets or Tickets

Output format: You have the option of printing batch sheets or tickets when you generate the physical inventory. The File Generation Output (A09) system control value determines which type will print. This setting must be consistent with the Entry Method (A01) system control value. Valid combinations are:

Entry Method (A01)	File Generation Output (A09)	Results
TICKETS	TICKETS	The system prints a Physical Inventory Ticket for each item/location in the physical inventory.
SHEET	SHEET	The system prints the Physical Inventory Batch Work Sheet. • If Assign Batch Numbers (A07) is set to Y, item locations appear in alphanumeric sequence by location code, then item code, then by the Sort sequence number for the SKU. Page breaks by location type and batch quantity (specified in the Batch Size (A08) system control value). Batches may be split across sheets. If a batch splits across sheets because of different location types, the sheets within the batch appear in location type sequence (PRIMARY, SECONDARY, BULK, then TEMPORARY). • If Assign Batch Numbers (A07) is set to N, item locations appear in location type sequence (PRIMARY, SECONDARY, BULK, then TEMPORARY), then alphanumeric sequence by location code, then alphanumeric sequence by item code, then by the Sort sequence number for the SKU. Page breaks by size of batch sheet and location type, but not by location code.
SHEET	LOCATION	The system prints the Physical Inventory Batch Work Sheet. • If Assign Batch Numbers (A07) is set to Y, item locations appear in alphanumeric sequence by location code, then item code, then by the Sort sequence number for the SKU. Page breaks by location and batch quantity. Batches are not split across sheets. A blank sheet appears between each batch sheet. • If Assign Batch Numbers (A07) is set to N, item locations appear in location type sequence (PRIMARY, SECONDARY, BULK, then TEMPORARY), then alphanumeric sequence by location code, then alphanumeric sequence by item code, then by the Sort sequence number for the SKU. Page breaks by size of batch sheet and location code.
SHEET	AISLE	The system prints the Physical Inventory Batch Work Sheet. • If Assign Batch Numbers (A07) is set to Y, item locations appear in zone/aisle sequence, then alphanumeric sequence by item code, then by the Sort sequence number for the SKU. Page breaks by size of batch sheet and zone/aisle. • If Assign Batch Numbers (A07) is set to N, item locations appear in location type sequence (PRIMARY, SECONDARY, BULK, then TEMPORARY), then alphanumeric sequence by location code, then alphanumeric sequence by item code, then by the Sort sequence number for the SKU. Page breaks by size of batch sheet and location code.
TICKETS or SHEET	NONE or Blank	The system does not print a Physical Inventory Ticket or Physical Inventory Batch Work Sheet when you generate a physical inventory. Note: If you enter NONE or leave the File Generation Output (A09) system control value blank, the Upload Counts (A12) system control value must be set to Y. Set the Entry Method (A01) system control value to: • TICKETS if you upload a first count, but enter subsequent counts with tickets • SHEET if you upload the first count, but enter subsequent counts with sheets • blank if you upload first counts only.

If you attempt an invalid setting an error message will display, either at the Physical Inventory Values (Screen 1) (C15) umbrella screen, or when you attempt to generate the physical inventory.

Print current on hand quantity? If you are using the system-generated batch sheets or tickets, you can print the current on-hand quantity in the item location on the forms. The Print On Hand Quantity (A11) system control value controls whether the on-hand quantity prints.

Printing batch sheets or tickets: The batch sheets and tickets that print during the generation process are for the first count. You can print sheets or tickets for a second or final count through Entering Counts Using Physical Inventory Tickets (MPIE), Entering Counts Using Physical Inventory Worksheets (MPIE) or Reprinting Batch Sheets or Tickets (RPIF).

Entering Counts

Determining the count entry format: The setting of the Entry Method (A01) system control value controls how you enter counts.

Entry Method	Results
If the Upload Counts (A12) system control value is set to Y:
blank	Use Uploading Physical Counts (MPIU) to upload counts from an external system.
SHEET	Use Uploading Physical Counts (MPIU) to upload counts from an external system and enter the second and final counts using the Entering Counts Using Physical Inventory Worksheets (MPIE) menu option.
TICKETS	Use Uploading Physical Counts (MPIU) to upload counts from an external system and enter the second and final counts using the Entering Counts Using Physical Inventory Worksheets (MPIE) menu option.
If the Upload Counts (A12) system control value is set to N:
SHEET	Use the Entering Counts Using Physical Inventory Worksheets (MPIE) menu option to enter the first, second, and final counts.
TICKETS	Use the Entering Counts Using Physical Inventory Worksheets (MPIE) menu option to enter the first, second, and final counts.

How many counts? The Number of Counts Required per Physical (A13) system control value controls whether you must enter a second count:

• If you set this field to 1, you must enter only a first count or a final count. However, you have the option of entering a first and second count, or a first and final count, or a first, second, and final count.

• If you set this field to 2, you must enter both a first count and a second count. However, you have the option of also entering a final count.

Uploading Physical Inventory Counts from an External System

If you are using store-and-forward devices, you can upload the counts either from a tape or a file:

• If the counts are on tape, you use Physical Inventory Tape Upload (MPTU) to transfer the counts to the Physical Inventory Upload file (INPIUP).

• If the counts are currently in the non-CWDirect physical inventory file (PIUPLD), you use Physical Inventory Upload Screen (PIUP) to transfer the counts to the Physical Inventory Upload file.

• You then use Uploading Physical Counts (MPIU) to transfer the counts from the Physical Inventory Upload file to the Physical Inventory file (INPHY).

• If there are resulting errors, you can use Work with Physical Inventory Upload Screen (WPIU) function to review and correct them.

The upload process is illustrated by the chart below:

Entering Physical Inventory Counts with Sheets

When you use the Entering Counts Using Physical Inventory Worksheets (MPIE) menu option, the system uses the most recent count for every item/location at the time you process the physical inventory update. If the first count you entered for an item/location is correct, you need not enter it again. See the table below for count entry examples.

First Count	Second Count	Final Count	Physical Inventory Update
10	none	none	10
none	11	12	12
none	15	Field Exit	0

The system informs you if any item locations have unentered counts at the completion of each count, both with a screen message and the No Entry Audit Report. If you make any entry, even 0, the system records this item location as having been counted.

When you enter or change counts in Entering Counts Using Physical Inventory Worksheets (MPIE), you should take care not to Field Exit through any previously entered counts. To the system, this is the same as entering 0 as the count for the item location. If this is the last count you enter for the item location, the system will reset the on-hand quantity for the item location to zero when you process the physical inventory update.

Important: You must press Enter after entering counts in Entering Counts Using Physical Inventory Worksheets (MPIE) but before repositioning or paging down to have the system accept your counts. If you have more than one person entering counts for the same batch at one time, each one should enter a different location in the scan field so that they do not overwrite each others' entries. Additionally, each person should be sure to exit by pressing F3 or F12 so they do not lock the batch.

Entering Physical Inventory Counts with Tickets

When you use the Entering Counts Using Physical Inventory Tickets (MPIE) menu option, you enter counts one ticket at a time. The system does not perform the same batch validations with tickets as it does with sheets, such as for unentered counts.

Accepting Physical Inventory Counts

The process of accepting counts varies depending on whether you use tickets or sheets.

• Sheets: When you accept a first or a second count, that count is then closed. You cannot perform additional entry or make any changes for that count. The exception is the final count, which you can always change as long as you have not processed the physical inventory update.

• Tickets: You can generate tickets for the next counts at any time through the Generate Physical Inventory Tickets Screen (Second or Final Count). You do not need to have entered all the count quantities for the first count tickets before you begin to enter second counts; however, you cannot enter a second count for a ticket before entering a first count.

Generating Sheets/Tickets for Second and Final Physical Inventory Counts

You can generate batch sheets or tickets for the second or final count on request during count entry, or through Reprinting Batch Sheets or Tickets (RPIF). Generally, you generate sheets or tickets for the second count when the first count for the batch has been entered. You generally generate sheets or tickets for the final count when the second count for the batch has been entered.

Note: When you use tickets, you must first print tickets for subsequent counts through ticket entry to have the system assign new ticket numbers; use the Reprint Physical Inventory File function for reprinting existing tickets only.

Adding Records to the Physical Inventory

You can add item locations to the physical inventory when the first count is being performed, if necessary. You might do so if you find the wrong item in a location during the count. For example, if you have a ticket or batch sheet entry for item AA100 in location A010101, and you find item BB100 in that location instead, you can add a record for item BB100 to enter the count.

The system adds the record to the Item Location file when you process the physical inventory update.

You can also add LPNs to the file while entering counts. This may be useful if you set the Clear LPN file before generate field to Y at the time you generated the physical inventory. The system rebuilds the LPN records when you process the physical inventory update.

You can also use the create physical inventory option to correct existing LPN records. When you create a physical inventory record during first count entry, you assign it an existing LPN. When you process the physical inventory update, the new LPN record overwrites the previously existing LPN.

You can create a new physical inventory ticket or sheet record during the first count only.

Physical Inventory Secured Features

The following secured features control access to physical inventory count entry:

• Physical Inventory Generation (A04)

• Physical Inventory First Count Entry (A58)

• Physical Inventory Second Count Entry (A59)

• Physical Inventory Final Count Entry (A02)

• Physical Inventory First Count Accept (A61)

• Physical Inventory Second Count Accept (A62)

• Physical Inventory Final Count Accept (A63)

Physical Inventory Reporting

Purpose: You can generate the following reports during the physical inventory process:

• Physical Evaluation Variance Report by Unit Variance or Physical Evaluation Variance Report by Item Warehouse (if you use FIFO costing), which provide the variance amount between the on-hand quantity and the current count for each item location. The variance is reported by units, unit percentage, cost, or cost percentage. Selecting this option does not process any file updates.

• Compare Physical Inventory Counts by Batch Report, which lists the first count quantity, second count quantity, and the variance between the two counts for each item location.

• Physical Inventory Ticket Listing, which lists the item location information for each ticket.

• Outstanding Physical Listing, which lists the physical inventory files in process. The report lists each batch that has not yet been updated.

• No Entry Audit Report, which lists each item location without an entered count.

• Zero Count Report, which lists each item location whose last entered count is zero, but which previously had a count entered that was greater than zero.

• Physical Inventory Evaluation Variance Report with Update, which provides the same information as the other variance reports. When you select this option, the variance information is reported and the live files are updated with the new on-hand quantities.

You can also generate:

• Compare Physical Count Tickets Report

• Physical Inventory New On Hand Change Report

• Unprocessed Physical Inventory Records Report

• Reserved Quantity Greater Than On Hand Report

• LPN Total Greater Than Item Location List

• Physical Inventory Upload Error List

• Physical Inventory Item Location Audit Report

Updating CWDirect with Physical Inventory Counts

Overview: Once the physical counts have been entered and the variances have been reviewed, the live files can be updated with the results of the physical inventory. This occurs when you run the Physical Inventory Evaluation Report with Update under Printing Physical Inventory Reports (MPIR).

The system does the following to determine the new on-hand quantity for each item location included in the physical inventory when the update is performed:

1. The on-hand quantity in the Physical Inventory file is subtracted from the last physical count entered for the item location to determine the variance amount.

2. The variance amount is either added to or subtracted from the on-hand quantity in the Item Location file to determine the new on-hand quantity as a result of the physical inventory.

Example:

A physical inventory file was generated on June 1. Item AA100 had an on-hand quantity of 100 units in location A010101. During the count, only 97 units of the item were found in that location. The system recorded a variance of -3. The physical counts were completed on June 3. On June 4, five units of AA100 were shipped from location A010101. On June 5, the reconciliation process was completed and the physical inventory update was processed. The on-hand quantity for item AA100 in location A010101 was changed to 92 units.

The variance amount from the snapshot file, not the last physical count, was posted to the live files. This update method allows you to conduct business during the physical inventory process if you need to. However, you should do so with care, because it is possible to create errors or miscounts.

Complete vs. partial update: When you process the physical inventory update function, you can update the on-hand quantities for each item location included in the physical inventory file, or you can update the on-hand quantity for only those item locations for which a count was entered.

For example, if you are doing a complete physical, the system will post the variance amount to each item location for which you entered a count. If a count was not entered for an item location included in the file, the on-hand quantity is set to zero.

If you are performing a partial physical inventory, the system will post the variance amount to each item location for which you entered a count. If you did not enter a count for an item location in the physical inventory, the on-hand quantity in that item location will not be changed.

File updates: When you process the physical inventory update, the system updates the following:

• The On-hand quantity in the Item Location file and the On-hand quantity in the Item Warehouse file

• The Last physical date in the Item Location file

• The Reservation freeze flag and the Physical freeze flag in the Item Location file, if the Freeze Item During Physical (A10) value in the System Control file is set to Y.

• The system writes an inventory transaction history record for each item location updated as a result of the physical inventory (the transaction type is P). If there were any item locations with zero quantities when you began the physical inventory, and whose counts were not changed during the process, the system deletes these item location records at this time and writes a record of this action to the Inventory Transaction History file as well. However, the system does not delete an item's primary location as a result of physical inventory updating.

Unreserving reserved order lines: When you perform the physical inventory update, if the on hand quantity for an item warehouse is less than the reserved quantity, the system:

• unreserves order detail lines starting with the most recent reservation, using this calculation:

 

quantity reserved - quantity on hand = quantity to unreserve

 

• once the necessary reserved quantity of the item is unreserved, the system backorders the item in the warehouse where is was reserved.

Note: If the item is in more than one batch, the on hand quantity for the item warehouse is the net result of all batch updates.

Example: You perform a physical inventory update for item AA100 in multiple batches.

On hand quantity in item/warehouse = 22 (location A on hand = 18, location B on hand = 4)

Reserved quantity in item/warehouse before the physical inventory update = 16

Example 1: You perform a physical inventory update for batch 1 (location A only)
Count	Variance	Results
10	8-	Since the physical inventory count for location A (10) is less than the original on hand quantity for location A (18), the variance is 8-.   new on hand quantity 10 - original on hand quantity 18 = variance 8-   The new on hand quantity for the item warehouse is 14   10 in location A + 4 in location B = 14 in item warehouse   Since the new on hand quantity for the item warehouse (14) is less than the reserved quantity (16), the system unreserves 2 order detail lines and places them on backorder:   item warehouse quantity 14 - reserved quantity 16 = 2 unreserved order detail lines (reserved quantity = 14)

Example 2: You perform a physical inventory for batch 2 (location B only) after the batch 1 update
Count	Variance	Results
11	7+	Since the physical inventory count for location B (11) is greater than the original on hand quantity for location B (4), the variance is 7+.   new on hand quantity 11 - original on hand quantity 4 = variance 7+   The new on hand quantity for the item warehouse is 21.   10 in location A + 11 in location B = 21 in item warehouse   Since the new on hand quantity for the item warehouse (21) is greater than the reserved quantity (14), the system sends a record to Evaluate Backorders to try to reserve backordered order detail lines. Since we unreserved 2 order detail lines in example 1, the system can reserve the 2 detail lines again and bring the reserved quantity up to 16. The system can also reserve 5 more backordered detail lines if they exist and bring the reserved quantity up to 21 to match the on hand quantity.

Example 3: You perform a physical inventory for batch 1 and batch 2 together (location A and location B)
Count	Variance	Results
Loc A = 10 Loc B = 11	8- 7+	Since the physical inventory count for location A (10) is less than the original on hand quantity for location A (18), the variance is 8-.   new on hand quantity 10 - original on hand quantity 18 = variance 8-   Since the physical inventory count for location B (11) is greater than the original on hand quantity for location B (4), the variance is 7+.   new on hand quantity 11 - original on hand quantity 4 = variance 7+   The new on hand quantity for the item warehouse is 21.   10 in location A + 11 in location B = 21 in item warehouse   Since the new on hand quantity for the item warehouse (21) is greater than the reserved quantity (16), the system sends a record to Evaluate Backorders to try to reserve any backordered order detail lines.

Reporting: The Physical Evaluation Variance Report by Unit Variance or Physical Evaluation Variance Report by Item Warehouse print when the update process is complete. These reports list the item locations that were updated, the new on-hand quantity, and the variance amount.

The variance amounts are reported by:

• units

• unit percentage

• cost

• cost percentage

At this time, the Physical Inventory New On Hand Change Report, the Unprocessed Physical Inventory Records Report, and the Reserved Quantity Greater Than On Hand Report print as well.

Steps to Performing a Physical Inventory

Instructions: Use the following steps to perform a physical inventory if you are using system generated batch sheets or tickets, or your own tickets.

1. Complete all processes that affect inventory. For example, complete all inventory receipts, inventory transactions, suspense placements, shipment confirmation and billing. Alternatively, you can void outstanding pick slips and cancel outstanding batch inventory transactions, work orders, and replenishments.

2. Generate the physical inventory for the desired warehouses or portions of warehouses. See Generating a Physical Inventory (MGPI),

3. Perform the first count for each item location. Use the Enter Physical Inventory Counts function to record the first count on the system, or upload the counts as described under Entering Counts. See Entering Counts Using Physical Inventory Tickets (MPIE) or Entering Counts Using Physical Inventory Worksheets (MPIE).

4. Generate the batch sheets or tickets for the second count if you are using the system-generated forms. See Printing Physical Inventory Reports (MPIR) or Entering Counts Using Physical Inventory Tickets (MPIE).

5. Print the Physical Inventory Evaluation Report to analyze the results of the first count without processing the update. See Printing Physical Inventory Reports (MPIR).

6. Perform the second count for all uncounted or changed item locations, if desired. Enter or upload the counts.

7. Print theCompare Physical Inventory Counts by Batch Report or Compare Physical Count Tickets Report to analyze the differences between the first and second counts.

8. Print the Physical Inventory Evaluation Report to analyze the results of the second without processing the update.

9. Generate the batch sheets or tickets for the final count if you are using the system-generated forms.

10. Perform a final count for all item locations where the first and second counts differ, if desired.

11. Print the Physical Inventory Evaluation Report to analyze the results of the first second without processing the update.

12. Print the Physical Inventory Evaluation Report to analyze the results of the final without processing the update.

13. Print the Physical Inventory Evaluation report with Update when the physical inventory is complete and you want to update the live files.

Canceling a Physical Inventory

To cancel: You can cancel a physical inventory batch at any time with Canceling a Physical Inventory (CPHI). When you submit the cancellation, the system deletes the records from the Physical Inventory file and resets the Reservation freeze flag and the Physical freeze flag, to N.