• Physical inventory process in warehouse process keeps count of physical stock. 
• Physical inventory helps maintain stock balance in the warehouse and manage balance sheet correctly 

Step 1.	Define Number Range for Physical Inventory Documents
IMG	SCM Extended Warehouse Management- EWM-Internal Warehouse Processes-Physical Inventory-Warehouse-Number-Specific Settings

Step 2.	Define Physical Inventory Area
IMG	SCM Extended Warehouse Management- EWM-Internal Warehouse Processes-Physical Inventory-Physical-Inventory-Area-Specific Settings

Step 2.1.	Assign Physical Inventory Area to Activity Area
IMG	SCM Extended Warehouse Management- EWM-Internal Warehouse Processes-Physical Inventory-Warehouse-Number-Specific Settings

Step 3.	Configure Cycle Counting
IMG	SCM Extended Warehouse Management- EWM-Internal Warehouse Processes-Physical Inventory-Warehouse-Number-Specific Settings

Example 

Configure cycle counting indicator A to have an interval of 30 working days between each cycle count and a buffer of 5 working day. 

This means that products in your warehouse using cycle counting indicator A should be counted every 30-36 working days 

Step 3.1.	Master Data Maintenance
TOCDE	SCWM/MAT1

Step 3.2.	Create Physical Inventory Document (Cycle Counting)
TOCDE	/SCWM/PI_CC_CREATE

Step 4.	Define Tolerance Group for Difference Analyzer
IMG	SCM Extended Warehouse Management- EWM-Internal Warehouse Processes-Physical Inventory-Warehouse-Number-Specific Settings-Define Tolerance Groups-

Step 4.1.	Assign Users to Tol. Group for Diff.
TCODE	/SCWM/PI_USER_DIFF

Step 5.	Define Tolerance Group for Posting Differences (EWM level)
IMG	SCM Extended Warehouse Management- EWM-Internal Warehouse Processes-Physical Inventory-Warehouse-Number-Specific Settings-Define Tolerance Groups-

Step 5.1.	User Maint. Tolerance Gr. Phys.Inv.
TCODE	/SCWM/PI_USER

Step 6.	Specify Physical-Inventory-Specific Settings in the Warehouse
IMG	SCM Extended Warehouse Management- EWM-Internal Warehouse Processes-Physical Inventory-Warehouse-Number-Specific Settings  Example, Assign Fiscal Year Variant

Step 7.	Define Priorities
IMG	SCM Extended Warehouse Management- EWM-Internal Warehouse Processes-Physical Inventory-Warehouse-Number-Specific Settings-Reason and Priority

Step 7.1.	Define Reason for Physical Inventory
IMG	SCM Extended Warehouse Management- EWM-Internal Warehouse Processes-Physical Inventory-Warehouse-Number-Specific Settings-Reason and Priority

Step 8.	Define Reason for Differences
IMG	SCM Extended Warehouse Management- EWM-Internal Warehouse Processes-Physical Inventory-Warehouse-Number-Specific Settings-Reason and Priority

Step 9.	Define Standard Reason for Each Phys. Inv. Procedure
IMG	SCM Extended Warehouse Management- EWM-Internal Warehouse Processes-Physical Inventory-Warehouse-Number-Specific Settings-Reason and Priority

Step 10.	Test Scenario: Create Physical Inventory Document
TCODE	/SCWM/PI_CREATE  Logistics-SCM Extended Warehouse Management- EWM-Physical Inventory

Note: Physical Inventory @ Activity Area, Storage Bin, Product 

Step 10.1.	Process Physical Inventory Document
TCODE	/SCWM/PI_PROCESS Logistics-SCM Extended Warehouse Management- EWM-Physical Inventory   Click on Count

Status updated to Counted 

Click on Post 

Step 10.2.	Difference Analyzer  (EWM will update difference to IM )
TCODE	/SCWM/DIFF_ANALYZER Logistics-SCM Extended Warehouse Management- EWM-Physical Inventory  Click on Post

Post difference 

Step 10.3.	Check Material Document in S/4HANA(IM)
TCODE	MB51