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Former Member

Any known constraints to use LIFO/FIFO for Inventory valuation in SAP for Retail?

A client in the Retail industry wants to use Article Master as well as Material Master for a brand new SAP implementation - Material master for Procurement and Article Master for their Sales.While helping the Client to understand Material Vs. Article and Plants vs. Sites, an important question has arisen about what would be a best Practice to valuate the inventory on a periodic basis. Since many players in the Retail industry use the Retail Inventory Method (of Accounting), which is not very compatible with IFRS, adopting a weighted average type method of Cost Method Accounting is a sensible alternative. However, since the Client is not a publicly held company, IFRS is currently not applicable to them and they are leaning towards adopting LIFO or FIFO as their method of valuating Inventory. In such a scenario, are there any known constraints to using LIFO / FIFO as Inventory Valuation methods in the Retail industry?

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1 Answer

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    Former Member
    Apr 13, 2015 at 07:55 PM

    Hello Paresh Ashar,

    In SAP, there are two types of inventory Valuations: Standard Price and Moving Average Price. SAP recommends using Moving Average Price for Retail and for Raw Materials in Manufacturing. This is to reflect market price changes in inventory valuation. Standard Price method is usually used for Finished Goods. LIFO/FIFO methods are used for Goods Issues from storage locations.

    Thanks,

    Venu

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    • Former Member

      Hi Venu

      All of us are aware that the inventory valuation method — such as FIFO, LIFO, or Averaging — has an impact on the business’s profit margin.

      I am only aware that the following Standard Functions have not been tested with Articles in SAP Retail:

      • Plant maintenance (PM)
      • Subcontracting with generic articles
      • LIFO and FIFO analysis
      • Production planning (PP-PI)
      • Using serial numbers with generic articles
      • Project System (PS)

      The caveat coming out of the fact above is to ensure sure that these functions work correctly in your project.


      Still looking for more information on any constraints of using LIFO FIFO for SAP Retail.