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Physical Plant inventory system makes transition to SAP

After months of preparation, Physical Plant successfully moved its inventory system into SAP, the Institute's new accounting system. Physical Plant's old inventory system was shut down on June 26, a physical inventory was taken and fed into SAP, and the stockroom was ready to reopen for business at the beginning of the fiscal year on July 1.

"Both Plant and our MIT customers will see benefits now that our inventory is integrated with MIT's purchasing and financial system," said Wendy Stone, Physical Plant's assistant director for information systems. "We will be able to get an accurate valuation of our inventory at any time, and our customers will be able to use SAP to see details on Physical Plant inventory charges that they now see on paper the following month.

"We will also save $24,000 per year in maintenance fees to the vendor of the legacy system, and limit our risk because we will no longer have an 'orphan' system supported by only two people at the Institute," Ms. Stone said.

"We got a lot of support from Management Reporting and Information Systems," she added. "We had some initial problems -- many of which we have already solved -- but the conversion process worked well because we were all focused on the same goal. We needed to become operational on schedule to avoid disruption for our customers. Management Reporting and IS provided the help we needed to do that."

Stockroom coach Tammy Doyle is enthusiastic about the new system. Now she can determine stock levels immediately because items are adjusted in real time when the stock ticket is entered.

"I also like the goods receipt function in SAP," she said. "We used to have to send all the packing slips for our received inventory upstairs to be processed periodically in a batch. Now we can create a goods receipt in SAP ourselves in the stockroom. This eliminates a step in the process, and not only saves us time but also keeps our inventory levels up to date in the system."

Robert Long is a senior accounting officer from the Controller's Accounting Office who monitors the Plant accounting system. "Because everything is done in real time with SAP, we should be able to replace the annual stockroom physical inventory with a less-costly 'cycle count.' Using the cycle count system, we would count a fixed portion of the stock each month when the stockroom is not busy using our own stockroom personnel," he said.

"Currently, at the end of each fiscal year, we have to hire and train 10 to 12 temporary people, and use around 10 additional full-time staff and tradespeople from Plant, to count the stockroom inventory," Mr. Long said. "The count takes our people away from their normal work and shuts down the stockroom for two days, resulting in inconvenience to our customers. With a cycle count, used in conjunction with the SAP inventory system, we should be able to use Plant resources more efficiently, benefit our customers and obtain some real savings."

An inventory system needs a purchasing system to drive it. Before migrating to SAP, Physical Plant used an inventory system package which ran in conjunction with the Purchasing Department's VAPS system. When Purchasing started to use SAP on Sept. 3, 1996, a vital link was lost. Purchase receipts no longer automatically updated inventory on hand, invoice payments did not automatically increase the value of inventory, and inventory levels no longer triggered the automatic issuance of purchase orders.

In January 1997, the effort to bring Plant's inventory into SAP moved into high gear. Ms. Stone worked with members of Management Reporting and IS to plan the conversion process. New stock input screens were designed, an interface with the existing bar-code reader was developed, and stockroom personnel were trained in the use of the new system. "We couldn't have succeeded without cooperation from all parties -- IS, Management Reporting and Plant," she said.

"SAP looked scary at first, but now I am pretty comfortable with it," Ms. Doyle said. "Creating new bar codes for the stockroom bins is really fast and easy now with the new system. That feature is great!"

In June, Victoria Sirianni, director of Physical Plant, and Controller James Morgan sent a memo to administrative officers about inventory-related changes in the monthly accounting statement. As of July 1, there is one entry for the cost of labor and parts bought externally, and a separate entry for stock from Physical Plant inventory.

After Plant has moved all its accounting processes to SAP, costs will again be bundled in one line item. The detailed breakdown of stock charges will no longer be listed on the monthly detailed accounting report from Physical Plant. This detail will be available in SAP to authorized users.

Working on the conversion with Ms. Doyle, Ms. Stone and Mr. Long were Michael Sherman and Lisa St. Croix from Physical Plant; James Morgan, Laurence Connelly, William Huxley and Wayne Turner from CAO; Barry Roberts, Martin Toth, Mark Barnes, Roberta Biegel, Steve Roach, Karen McCollin and Timothy Keohan from Management Reporting; Katerina Lalioti and Steven Nebiolo from Purchasing; and Theresa Regan and George Petrowsky from Information Systems.

A version of this article appeared in MIT Tech Talk on August 27, 1997.

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