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Inventory Valuation in SAP for Retail

A stock ledger is a period-oriented repository of all inventory activity and it feeds financial reporting (i.e., ending inventory and cost of goods sold), management reporting (e.g., sales, margins, turns, ending inventory, etc.), and any other business process that takes into account inventory information.  It provides an audit trail and allows for corrections and adjustments to inventory.  It is the nervous system of a retailer that is used to calculate key metrics, monitor business performance, help identify problems and guide decision making.

Any one of several inventory valuation methods such as cost method of accounting (CMA), retail method of accounting (RMA) and a hybrid of the two, extended retail method of accounting (ERMA),  may be used by a stock ledger.  Some companies may use a single inventory valuation method or a mix of methods across companies, channels and regions or locations. 

Retail Method of Accounting is an averaging inventory valuation method that is still commonly practiced in the retail industry, particularly in the fashion segment.  Under RMA, inventory is managed primarily in retail dollars at aggregated levels, such as in class or department.  Inventory at cost and cost of goods sold are derived from applying a cost-to-retail ratio  or "cost complement" to the retail value of the inventory.  In retail, focusing on individual items can be challenging because of the large assortments and many stores, so the focus under RMA is to manage the category or department margin.

SAP's RMA Stock Ledger collects inventory transactions into stock ledger buckets throughout a period and calculates the results of ending inventory and cost of goods sold according to an RMA calculation formula.  At period close, these results are posted to the general ledger.  In addition, standard RMA stock ledger reports are available to monitor performance.

SAP Help Portal Documentation

  • Overview of RMA - BI Content →  Industry SolutionsTrade IndustriesRetail TradeSupply Chain AnalyticsStock Ledger AnalyticsRetail Method of Accounting
  • Principles of RMA Valuation in SAP Retail online documentation - Merchandise LogisticsValuationValuation: Retail Method of Accounting

SAP Service Marketplace Documentation 

Please note, the following documents are located on the SAP Service Marketplace (SMP). Special logon credentials are required to access the SMP portal. 

  • RMA Configuration Guide explains in detail how to activate and customize retail method of accounting.
  • ERMA Stock Ledger Documentation - The ERMA Stock Ledger is a BW-based combined view on retail values of sales transactions and cost values from ERP inventory management. It harmonizes different sources of inventory data, and allows for its flexible mapping to both key-figure based and account-based data models of inventory cubes.
  • Supply Chain Analytics - This collection of slides gives an overview of the stock ledger analytics and provides insight and differences between RMA and ERMA.
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