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A very warm Hello to you!!

This series of documents would aim at explaining the various key business processes that a finance person is expected to demonstrate the knowledge about. I would restrict myself to explaining the process as is relevant to a FICO person, however, ranging from SAP Logistics and right until the process culminates into FICO, with various accounting touch points. Hence, the name PODs (Process Oriented Discussions)

The present document aims at explaining the various stock transfer scenarios. I would broadly categorize them into

1. Intra-Company Stock transfer (Between Plants of the same company)

2. Inter-Company Stock transfer (Between Plants of different company)

Intra-Company Stock transfer

A Product ,say, P1 is manufactured in Plant A. For some reason (eg: further processing) it is transferred to Plant B of the same company code. This process is called as Intra-Company Stock transfer. Briefly, the process steps would be as below

a. Plant B raises a STO (Stock Transfer Order) on Plant A

b. Plant A might have the stock ready with it or it may need to manufacture the same

c. Once stock is available in Plant A, the same will be despatched (PGI) to Plant B (Movement type 641)

Accounting entry at this stage will be:

  Stock account Dr (receiving plant)

  Stock account Cr (sending plant)

Note that accounting entries are posted when sending plant does the PGI. After PGI, the stock is removed from the books of Plant A and the same is shown as "Stock-in-Transit" in the books of Plant B

d. Plant B receives the stock and does GR (MIGO - Movement type 101).

No accounting document is made at this stage because the accounting entries are already accounted in step c above. The impact of this step will be that the stock in the books of Plant B will now move out of "Stock-in-Transit" category and show as unrestricted stock or QI stock depending on the inspection plan.

Remember that till the time the stock reflects under Stock-in-Transit, it cant be issued for consumption in Plant B.

Experts corner:- 

Below points are meant to provide expert knowledge about this process. These are separated from the above process steps so as to target the relevant audience.

a. Material master set up in Plant A:- (Only the settings relevant to FICO)

  - Procurement Type = E (In-House manufacturing)

  - Price control = S (Standard price)

b. Material master set up in Plant B:-

- Procurement Type = F

- Special Procurement Type = Z1 (to be configured in OMD9)#1

- Price control = S or V ? #2

#1 - When a special procurement type is assigned in material master of Product P1 in Plant B, during MRP run or Costing run, the system will be directed towards Plant A.

This means, during MRP in Plant B, the requirement for Product P1 will be generated and transferred to Plant A. System will not intend to manufacture P1 in Plant B. The planned order generated upon MRP can be converted into a STO

During costing run in Plant B, system can be diverted to Plant A to read and transfer the cost estimate from Plant A

#2 - It is an important consideration / decision to be made regarding the price control of the material in the receiving plant. One school of thought is to have Price control V in the receiving plant, because the material is not manufactured in this plant. Another school of thought is to have Price control S. Preferably, S, is the one that is commonly used. This helps to roll-up the cost component split of sending plant into the receiving plant "as-is". One can have the Price control V and still roll up the cost components in receiving plant. However, it becomes challenging in some scenarios. I would not go into details here, and they can be provided upon request in the comments section.

c. Valuation price of the material in the receiving plant:-

Valuation price of the material depends on the choice of the price control.

  - If the price control is V in receiving plant, the cost of the sending plant (Standard cost) + Any planned delivery cost (PDC) + Non deductible taxes (NDT) become the valuation price of the receiving plant. If there are no PDCs and NDTs, then standard cost in sending plant = MAP of receiving plant.

- If the price control is S in receiving plant,  you can transfer the standard cost and its components from the sending plant. If you transfer the "released cost estimate" from sending plant, then the standard cost in both the plants will be same. Hence, no Price differences or inventory valuations would occur during STO.

In order to transfer the "released cost estimate", you must allow "Cross plant transfer" in the Transfer control of your costing variant. If you don't allow "cross plant transfer", then during cost estimate in Plant B, system would recalculate the cost of P1 in Plant A and update the same in Plant B. As a result, the standard cost in both plants can be different and can result in valuation gain/loss upon STO

- If the price control is S in receiving plant and you want to add the freight charges to the inventory value, then you need to use the "Additive cost" feature in Product costing. In a layman's language, the standard cost in receiving plant would become Standard cost of sending plant + manually specified freight charges.

Note that in this case, the standard cost in both the plants would be different and would result in valuation gain during STO. The accounting entry upon PGI will be

  Stock        a/c  Dr 110 (receiving plant)

  Stock        a/c  Cr 100 (sending plant)

  Val. gain  a/c 

d. Custom validations required in the process:-

Where the material has Price control S in the receiving plant, and the standard cost is not maintained/released, then during PGI, the inventory in receiving plant will be valuated at ZERO.  This becomes a serious concern in accounting and balance sheet finalization.

Similarly, after the standard price in receiving plant is released (same as sending plant) and later on the standard price is changed in the sending plant without updating the same in receiving plant, it can result in valuation gain/loss during STO. This becomes an audit observation during finalization of accounts.

To overcome above problems, one can implement a custom check using FM MB_MIGO_BADI to check that the price of the material in the sending and receiving plant is same. If it is not, the system shall throw an error message, which will prevent the PGI

Thank you for reading the document. I would appreciate your feedback on the document, which will help me to improve it further.

Next document would focus on Inter-Company Stock transfer process.

Best Regards,

Ajay Maheshwari

PS: Links to subsequent docs are enclosed here for quick reference

POD - Series 2 and POD - Series 3

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