January 2005

SAP AG and
The Rushmore Group, LLC 2005 1
Materials Management (MM)
- Organizational Structures -
Unit 4
January 2005
SAP AG and
The Rushmore Group, LLC 2005 2
Business Process Integration
Materials Management (MM)
January 2005
SAP AG and
The Rushmore Group, LLC 2005 3
Organizational Data
A hierarchy in which the organizational
units in an enterprise are arranged
according to tasks and functions.
Are static data and are rarely changed
Once you have decided on an organizational
structure it is not easy to change it
The definition of organization units is a
fundamental step, it is a critical factor in
how the company will be structured
SAP Enterprise System
January 2005
SAP AG and
The Rushmore Group, LLC 2005 4
R/3
FI
Financial
Accounting
CO
Controlling
PS
Project
System
WF
Workflow
IS
Industry
Solutions
MM
Materials
Mgmt.
HR
Human
Resources
SD
Sales and
Distribution
PP
Production
Planning
QM
Quality
Mgmt.
PM
Plant Maintenance
SM
Service
Mgmt.
Client / Server
Integrated Business
Solution
EC
Enterprise
Controlling
AM
Fixed Assets
Mgmt.
Materials Management (MM)
January 2005
SAP AG and
The Rushmore Group, LLC 2005 5
Unit 4
Overview
Unit Concept
Purchasing and SAP R/3
Procurement Process
Organizational Structures
Organizational Relationships
Warehouse Management
Materials Management (MM) Integration
January 2005
SAP AG and
The Rushmore Group, LLC 2005 6
Unit Concept
The purchasing process involves the
acquisition of goods and services to
support the creation of goods and services
in the organization
In this unit the structure required for the
purchasing process is presented
Materials Management (MM)
January 2005
SAP AG and
The Rushmore Group, LLC 2005 7
Purchasing and SAP R/3
The purchasing process exists in the
Materials Management (MM) module of
SAP R/3 and Finance (FI) module
The structure includes elements of the
Materials Management (MM) and Finance
(FI) modules
Master data for the purchasing process
exists in the (MM) and (FI) modules
The purchasing process can and does
interface with the Production Planning
(PP), Warehouse Management (WM), and
Quality Management (QM) modules
Materials Management (MM) Integration
January 2005
SAP AG and
The Rushmore Group, LLC 2005 8
Components of Materials Management
Materials Management (MM)
Materials
Management
(MM)
Logistics
Invoice
Verification
Material
Master
Physical
Inventory
Valuation
MRP
Service
Entry
Sheet
Service
Master
Product
Catalog
Purchasing
Inventory
Mgmt.
Foreign
Trade/
Customs
January 2005
SAP AG and
The Rushmore Group, LLC 2005 9
Materials Management (MM) Integration
Procurement Process
(Procure-to-Pay)
Purchase
Requisition
Payment
to Vendor
Notify
Vendor
Vendor
Shipment
Invoice
Receipt
Goods
Receipt
Purchase
Order
3-
Way
Matc
h
January 2005
SAP AG and
The Rushmore Group, LLC 2005 10
Organizational Structures
Plant
Valuation Area
Storage Locations
Purchasing Organizations
Purchasing Groups
Materials Management (MM) Integration
January 2005
SAP AG and
The Rushmore Group, LLC 2005 11
Plant
Lowest valuation area
Organizational level where Material
Requirements (MRP) runs
Generally used to describe a production
site, a distribution center or centralized
warehouse
May be a physical or logical unit
Materials Management (MM) Integration
January 2005
SAP AG and
The Rushmore Group, LLC 2005 12
Valuation Area
The valuation area determines at which
level a material is valuated (inventory
value is established)
SAP R/3 allows valuation at the company
code or plant level, but recommends
valuation area be set at the plant level
Materials Management (MM) Integration
January 2005
SAP AG and
The Rushmore Group, LLC 2005 13
Storage Location
Subdivision of a plant
Where materials are managed (inventory
management)
Raw Materials
Maintenance, Repair, and Other (MRO)
Finished Product
May be a physical or logical unit
Materials Management (MM)
January 2005
SAP AG and
The Rushmore Group, LLC 2005 14
Organizational Relationships
Plant/Storage Location
Materials Management (MM)
Plant P001
Storage Location
10 (Inventory)
Storage Location
20 (Quality)
January 2005
SAP AG and
The Rushmore Group, LLC 2005 15
Purchasing Organization
Organizational unit responsible for the
procurement of materials and services.
SAP requires that purchasing
organizations be assigned at the plant
level
A purchasing organization can be
assigned to more than one plant
A purchasing organization can be
assigned to a company code
Materials Management (MM) Integration
January 2005
SAP AG and
The Rushmore Group, LLC 2005 16
Organizational Relationships
Plant/Purchasing Organization (1)
One plant multiple purchasing
organizations
Materials Management (MM)
Plant P001
Purchasing
Organization P001
Purchasing
Organization P002
January 2005
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The Rushmore Group, LLC 2005 17
Organizational Relationships
(continued)
Plant/Purchasing Organization (2)
Plant P001
Purchasing
Organization P001
Each plant has its own purchasing
organization
Materials Management (MM)
Plant P002
Purchasing
Organization P002
January 2005
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The Rushmore Group, LLC 2005 18
Organizational Relationships
(continued)
Plant/Purchasing Organization (3)
One purchasing organization for
multiple plants
Materials Management (MM)
Purchasing
Organization P001
Plant P001 Plant P002
January 2005
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The Rushmore Group, LLC 2005 19
Organizational Relationships
(continued)
Plant/Purchasing Organization (4)
One purchasing organization for multiple
company codes
Materials Management (MM)
Purchasing
Organization P001
Company C001
Company C002
Plant P002
Plant P001
January 2005
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The Rushmore Group, LLC 2005 20
Purchasing Group
Responsible for specified purchasing
activities
Often used to identify individual buyers
Used for reporting
Materials Management (MM)
January 2005
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The Rushmore Group, LLC 2005 21
Organizational Relationships
Purchasing Organization/Purchasing
Group
Materials Management (MM)
Purchasing
Organization P001
Purchasing
Group P002
Purchasing
Group P003
Purchasing
Group P004
Purchasing
Group P001
January 2005
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Organizational Structure
Materials Management (MM)
Company Code
Plant P001
Purchasing
Organization P001
Plant P002
Storage
Location 10
Storage
Location 20
Storage
Location 10
Storage
Location 20
January 2005
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The Rushmore Group, LLC 2005 23
Warehouse Management
Not required for the purchasing
functionality of SAP R/3
A separate module in the SAP R/3
environment
Many functions and elements can be
performed outside of the module
Materials Management (MM) Integration
January 2005
SAP AG and
The Rushmore Group, LLC 2005 24
Warehouse Management Elements
Receiving, identifying and sorting goods
Placing goods into storage bins
Taking inventory
Monitoring and inspecting goods in
storage
Preplanning distribution of materials
Picking and accumulating orders
Packaging, loading and shipping goods
Materials Management (MM) Integration
January 2005
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The Rushmore Group, LLC 2005 25
Company C001
Plant P001
Plant P002
Storage Loc. 30
Storage Loc. 10
Warehouse 1
Warehouse 1
Aisle 1 Aisle 1 Aisle 2 Aisle 2 Aisle 3
Rack 1 Rack 1
Rack 1
ABC123
Storage Loc. 40
Storage Loc. 20
Warehouse Management Relationships
Inventory
Management
(MM)
Warehouse
Management (WM)
Comp Code
Plant
Storage Loc.
Warehouse
Aisle
Storage Rack
Quantity
Materials Management (MM) Integration
January 2005
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Unit 4
Exercises
33. Define Valuation Area
34. Define Plant (P_ _ _)
35. Define Storage Locations for
Inventory and Quality
36. Define Purchasing Organization
37. Create Purchasing Groups
38. Assign Plant to Company Code
39. Assign Purchasing Organization to
Company Code
40. Assign Purchasing Organization to
Plant
41. Setup Parameter ID
Materials Management (MM) Integration
January 2005
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The Rushmore Group, LLC 2005 27
Unit 6
Materials Management (MM)
- Master Data and Rules -
January 2005
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The Rushmore Group, LLC 2005 28
Business Process Integration
R
u
l
e
s
MM
Materials Management (MM)
January 2005
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The Rushmore Group, LLC 2005 29
Master Data
Master data is relatively fixed
Material master data
Vendor master data
Purchasing information record
General Ledger master data
Before making the master data
configurations, you must have completely
defined the organizational structures
SAP Enterprise System
January 2005
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The Rushmore Group, LLC 2005 30
R/3
FI
Financial
Accounting
CO
Controlling
PS
Project
System
WF
Workflow
IS
Industry
Solutions
MM
Materials Mgmt.
HR
Human
Resources
SD
Sales and
Distribution
PP
Production
Planning
QM
Quality
Mgmt.
PM
Plant Maintenance
SM
Service
Mgmt.
Client / Server
Integrated Business
Solution
EC
Enterprise
Controlling
AM
Fixed Assets
Mgmt.
R/3
FI
Financial
Accounting
CO
Controlling
PS
Project
System
WF
Workflow
IS
Industry
Solution
s
MM
Materials
Mgmt.
HR
Human
Resources
SD
Sales and
Distribution
PP
Production
Planning
QM
Quality
Mgmt.
PM
Plant Maintenance
SM
Service
Mgmt.
Client / Server
Integrated Business
Solution
EC
Enterprise
Controlling
AM
Fixed Assets
Mgmt.
Materials Management (MM)
January 2005
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Unit 6, Part 1
Overview (Master Data)
Unit Concept
Procure-to-Pay Process
Vendor Master Data
Purchasing Information Record
Integration Materials Management (MM)
January 2005
SAP AG and
The Rushmore Group, LLC 2005 32
Unit Concept
The purchasing process involves the
acquisition of goods and services to
support the creation of goods and services
in the organization
Master data and rules required for the
purchasing process is presented
Materials Management (MM)
January 2005
SAP AG and
The Rushmore Group, LLC 2005 33
Materials Management (MM) Integration
Procurement Process
(Procure-to-Pay)
Purchase
Requisition
Payment
to Vendor
Notify
Vendor
Vendor
Shipment
Invoice
Receipt
Goods
Receipt
Purchase
Order
3-
Way
Matc
h
January 2005
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The Rushmore Group, LLC 2005 34
Master Data
General
Business rules and supportive information
are stored in master data records
Each master data record is unique in
name or number
Internal or external number ranges are
possible
Usually created or converted (legacy
system) in the beginning
Maintained by numerous organizations
Materials Management (MM) Integration
January 2005
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The Rushmore Group, LLC 2005 35
Master Data
General (continued)
Vendor master records are maintained by
both accounts payable (A/P) and
purchasing
Material master records are maintained by
purchasing, sales, production, accounting,
etc.
Purchasing information records are
maintained primarily by purchasing
Materials Management (MM) Integration
January 2005
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Vendor Master
Organization of the Data
Integration
Vendor 10001
General Data
Company Code Data
Financial Accounting (FI)
Purchasing Organization
Data (MM)
Materials Management (MM)
January 2005
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Vendor Master Data
A master record must be created for every
vendor
General data, Company Code data (Financial
Accounting - FI), and Purchasing Org data
(Material Management - MM)
Materials Management (MM) Integration
Purch. org data
Purchasing data
Partner functions
Company code data
Account
management
Payment
transactions
General data
Address
Control data
Payment
transactions
January 2005
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The Rushmore Group, LLC 2005 38
Vendor Master
Includes all data necessary for processing
business transactions and corresponding
with vendors
Information is shared between the
accounting and purchasing departments
Materials Management (MM) Integration
January 2005
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Vendor Master
Typical Screens
Address
Control
Payment Transactions
Accounting Information
Correspondence
Purchasing Data
Partner Functions
Materials Management (MM) Integration
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General Data Address
Address
Vendor Name
Search Term
Street address
City, Region Postal code
Country
Communication
Language
Telephone, Fax, E-Mail
Vendor Master
General Data Address
Materials Management (MM)
January 2005
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Vendor Master
General Data Control Data
Account Control
Customer
Authorization
Trading partner
Group key
Tax Information
Tax codes
Fiscal address
Country code
City code
Reference Data / Area
International locator number
Industry
Transport zone
Integration Materials Management (MM)
January 2005
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Vendor Master
Company Code Payment Transactions
Bank Details
Bank Key
Bank Account
Account Holder
Partner Bank Type
Payment Transactions
Alternative Payee
Instruction Key
Materials Management (MM)
January 2005
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Vendor Master
Company Code Accounting Information
Accounting Information
Reconciliation Account
Sort Key
Release Group
Interest Calculation
Interest Calculation Indication
Interest Calculation Frequency
Withholding Tax
Withholding Tax Code
Exemption Number
Materials Management (MM)
January 2005
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Vendor Master
Company Code Payment Transactions
Payment Data
Payment Terms
Tolerance Group
Check Double Invoice
Check Cashing Time
Automatic Payment Transactions
Payment Methods
Alternate Payee
Payment Block
Invoice Verification
Tolerance Group
Materials Management (MM)
January 2005
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The Rushmore Group, LLC 2005 45
Vendor Master
Company Code Corr. Accounting
Dunning Data
Dunning Procedure
Dunning Block
Dunning Recipient
Date of Legal Dunning Procedure
Correspondence
Local Processing
Accounting Clerk
Account With Vendor
Materials Management (MM)
January 2005
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Vendor Master
Purch. Org. Data Purchasing Data
Conditions
Order Currency
Terms of Payment
Incoterms
Minimum Order Value
Sales Data
Salesperson
Control Data
Acknowledgement Required
Returns to Vendor
Automatic Purchase Order
Default Data Material
Purchasing Group
Planned Delivery Time
Materials Management (MM)
January 2005
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Vendor Master
Purch. Org. Data Partner Functions
Partner Functions
Partner Function
Partner Name
Materials Management (MM)
January 2005
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Vendor Master
Purch. Org. Data Account Group
Vendor masters are assigned to a vendor
account group
Through field status maintenance, vendor
account groups can be setup for one-time
vendors, regional vendors, and internal
vendors
The vendor account group controls both
type and number range assignment for
vendors
Materials Management (MM)
January 2005
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Unit 6, Group 1
Exercises
60. Create Vendor Master Accounting Record for
Promotions, Ltd.
61. Create Vendor Master Purchasing Record for
Promotions, Ltd.
62. Create Vendor Master Record Centrally for
Slick Pens
63. Create Vendor Master Record Centrally for
Premier Pens
64. Create Vendor Master Record Centrally for
Boxes, Inc.
Integration Materials Management (MM)
January 2005
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Unit 6, Part 2
Overview (Rules)
Payment and Planning
Plant Parameters
MRP
Integration Materials Management (MM)
January 2005
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Rules
Defines the parameters for Master Data
and Transactions
Determines functionality for Master Data
and Transactions
Relatively fixed
Changes as policy changes
SAP Enterprise System
January 2005
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Purchasing Info Record
The purchasing info record provides
continuously updated information about
the relationship of a specific material with
a specific vendor
Order unit, price, price changes,
tolerances, reminder infos, historic data,
statistics, texts
Choice of automatic or manual updating
Materials Management (MM)
January 2005
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Source List
The source list stores information about
where to acquire a given material for a
given period of time
It specifies whether this source should be
used by Materials Requirement Planning
(MRP)
Materials Management (MM) Integration
January 2005
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Fiscal Period
In order to execute any material postings,
the current fiscal period has to be
activated
By initializing the company code for
material management, the first major
integration between Financial Accounting
(FI) and Logistics is completed
Materials Management (MM) Integration
January 2005
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The Rushmore Group, LLC 2005 55
Payment and Planning
Payment Program
Plant Parameters
Material Requirements Planning (MRP)
Materials Management (MM)
January 2005
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The Rushmore Group, LLC 2005 56
Payment Program
Invoice processing
Partial or full payment requirements
Automatic payments
Manual payments
Returns and credits (offset postings)
Materials Management (MM) Integration
January 2005
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The Rushmore Group, LLC 2005 57
Plant Parameters
Material Requirements Planning (MRP)
controllers
Individuals responsible for running and
maintaining Material Requirements Planning
data and reports
Negative stock allowance
If a material is allowed to go negative for
inventory stock
Materials Management (MM)
January 2005
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The Rushmore Group, LLC 2005 58
Materials Management (MM)
Plant Parameters
(continued)
Purchasing
Special purchasing rules
External purchasing only settings
Planned orders
Rescheduling
Conversion to purchase requisitions
January 2005
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Plant Parameters
(continued)
Document number ranges
Planned orders
Purchase requisitions
Material Requirements Planning (MRP) lists
Reservations
Materials Management (MM)
January 2005
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The Rushmore Group, LLC 2005 60
Material Requirements Planning
Detailed planning level
Primary Functions
Monitor inventory stocks
Determine material needs
Quantity
Timing
Generate purchase or production orders
Materials Management (MM) Integration
January 2005
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The Rushmore Group, LLC 2005 61
Materials Requirements Planning
(continued)
Integrates Production Planning (PP)
module with the Materials Management
(MM) module
Prerequisites for Materials Requirement
Planning (MRP)
Activate Material Requirements Planning
(MRP) for a plant
Material Master created
Material Requirements Planning view
Material Requirements Planning type
Materials Management (MM) Integration
January 2005
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Material Requirements Planning
Basic Process
Exploding the Bill of Material (if using
production)
Netting Out Inventory
Lot Sizing
Time-phasing requirements
Integration Materials Management (MM)
January 2005
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Material Requirements Planning
Net Requirements
Material Requirements Planning (MRP)
calculates the quantity of material needed,
if any, based on
Sales Orders
Material Reservations
Repair Parts
Inventory
Purchase Orders
Etc
Integration Materials Management (MM)
January 2005
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Integration Materials Management (MM)
Material Requirements Planning
Net Requirements (continued)
If adequate inventory is not available to
meet Material Requirements Planning
(MRP) needs then the system generates
Planned Production Orders
Planned Purchase Orders
January 2005
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Material Requirements Planning
Lot Sizing
Static
Based on fixed values in the Material Master
Periodic
Groups net requirements together from
multiple periods
Optimum
Calculates the optimum lot size for a several
periods of net requirements
Materials Management (MM) Integration
January 2005
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Unit 6, Group 2
Exercises
65. Display Material Groups
66. Initialize Fiscal Period for Company Code
67. Maintain Plant Parameters for Planning
68. Activate Materials Requirements Planning
Integration Materials Management (MM)
January 2005
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The Rushmore Group, LLC 2005 67
Unit 6, Part 3
Overview (Material Master)
Material Type
Industry Sector
Maintenance Features
Organizational Levels
Primary Views
Materials Management (MM)
January 2005
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The Rushmore Group, LLC 2005 68
Material Master Data
Material master data can be related to all
organizational levels
General information of a material
(description, number, base unit of
measure)
Has to be related to the highest level of
organization - the client
Materials Management (MM)
January 2005
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Material Master
Material Type
Material types group materials with the
same attributes
Material type information determines:
What views are maintained
Whether internal or external procurement is
allowed
If changes in material quantity are updated
Which general ledger accounts are updated
Materials Management (MM)
January 2005
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Material Master
Material Types
Standard material types are used in all
industries.
ROH: Raw Materials
Purchased externally only
No sales view
HAWA: Trading Goods
Always purchased externally
Sold without any change to the material
No manufacturing views exist
Materials Management (MM)
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Material Master
Material Types (continued)
FERT: Finished Products
Are produced internally
Normally no purchasing views exist
Materials Management (MM)
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Material Master
Additional Material Types
HIBE: Operating Supplies
VERP: Customer returnable packaging
LEER: Empty containers
KMAT: Configurable material
ERSA: Spare parts
DIEN: Services
Materials Management (MM)
January 2005
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Material Master
Additional Material Types (continued)
NLAG: Non-stock, non-valuated
material
UNBW: Non-valuated, stocked
material
FHMI: Production resources/tools
WETT: Competitive products
PROD: Product group
IBAU: Maintenance assembly
(Plant Maintenance)
Materials Management (MM)
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Material Master
Industry Sector
Records are grouped according to industry
sector and material type
Determines the industry specific data that
will appear on the master record
Materials Management (MM)
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Material Master
Maintenance
Defaults - speeds entry of data by using
the most frequently used field values
(plant, purchasing organization, etc.)
Reference Material - speeds entry of data
by copying data from existing material
master
Materials Management (MM)
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Material Master
Maintenance (continued)
Profiles - speeds entry of data by copying
standard data created in a profile into a
selected view Materials Requirements
Planning (MRP)
Collective entry of storage location data -
speeds creation of multiple storage
locations
Materials Management (MM)
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Material Master
Levels
Client
Description
Units of measure
Material number
Engineering data
Plant
Planning data
Manufacturing data
Purchasing data
Materials Management (MM)
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Material Master
Levels (continued)
Storage Location
Stock quantities
Materials Management (MM)
January 2005
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Material Master
Views
Basic data 1, 2
Classification
Sales: sales organization data 1, 2
Sales: general/plant data
Sales text
Purchasing
Purchase order text
Forecasting
Materials Management (MM)
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Material Master
Views (continued)
MRP 1, 2, 3, 4
Work scheduling
Storage
Warehouse management
Quality management
Accounting 1, 2
Costing 1, 2
Materials Management (MM)
January 2005
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Material Master
Material Management
Basic Data
Purchasing
MRP 1,2,3
General Plant
Data/Storage
Accounting 1
Barrel Pen
Materials Management (MM)
January 2005
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Material Master
Basic Data
General data
Basic Unit of Measure
Unit of measure in which stocks of the material are
managed
Material Group
Key that you use to group together several materials
or services with the same attributes
Division
Used to determine the sales area and the business
area for a material, product, or service
Materials Management (MM)
January 2005
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Material Master
Basic Data (continued)
Dimensions/EANs
Gross Weight
Used to check storage bin capacity
Net Weight
The weight shipped or with packaging
Weight Unit
Unit of Measure for weight
Volume
The space that the material occupies per unit of
volume
Materials Management (MM)
January 2005
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Material Master
Purchasing View
General Data
Order Unit
The unit of measure in which a company purchases
the product
Purchasing Group
A key thats used to group several materials or
services for analysis/reporting as well as search by
match code.
Purchasing Values
Purchasing Value Key
Define the reminder days and tolerance limits for
purchasing
Materials Management (MM)
January 2005
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Material Master
Plant Data/Storage 1
General Data
Container Requirements
Define the regulations that govern which type of container
the material must be stored and shipped in
Storage Conditions
Defines the conditions on how a material must be stored or
warehoused
Shelf Life Data
Minimum remaining shelf life
Minimum time the material must keep upon goods receipt
for the goods receipt to be accepted by the system
Total Shelf Life
Period of time the material will keep in total, from the date
of production or receipt to the shelf life expiration date
Integration Materials Management (MM)
January 2005
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Material Master
MRP 1
General Data
Purchasing Group
The buyer(s) who are responsible for certain
purchasing activities
MRP Procedures
MRP Type
Determines whether and how the material is planned
Reorder Point
If stock falls below this point, the system is flagged to
create a planned order
MRP Controller
The person(s) responsible for the material planning
Materials Management (MM)
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Material Master
MRP 1 (continued)
Lot Size Data
Lot Size
The lot sizing procedure to calculate the quantity to
be produced or procured
Minimum Lot Size
The smallest order quantity
Fixed Lot Size
The quantity to be ordered
Materials Management (MM)
January 2005
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Material Master
MRP 2
Scheduling
Planned Delivery Time
Number of calendar days needed to obtain the
material
Scheduling Margin Key
Used to determine the floats required for scheduling
Net Requirement Calculation
Safety Stock
Specifies the quantity whose purpose is to satisfy
unexpectedly high demand in the coverage period
Materials Management (MM)
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Material Master
MRP 3
Availability Check
Specifies whether and how the system checks
availability and generates requirements for materials
planning
Materials Management (MM)
January 2005
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Material Master
Accounting 1
Current Valuation
Price Control Indicator
The price control used to valuate the stock of a material
Price Unit
Number of units to which the price refers
Standard Price
The valuation of material stocks at standard prices means
that all goods movements are valuated at the same price
over an extended period
Moving Average Price
The system calculates the moving average price
automatically by dividing the material value in the stock
account by the total of all storage location stocks in the
plant concerned
Materials Management (MM)
January 2005
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Unit 6, Group 3
Exercises
69. Define Attribute of Material Types (Set
Updating/Deselect Classification)
70. Create Material Master for Trading Goods
71. Create Material Master for Operating
Supplies
Integration Materials Management (MM)
January 2005
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Materials Management (MM)
- Rules -
Unit 10
January 2005
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Business Process Integration
R
u
l
e
s
MM
Materials Management (MM)
January 2005
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Rules
Defines the parameters for Master Data
and Transactions
Determines functionality for Master Data
and Transactions
Relatively fixed
Changes as policy changes
SAP Enterprise System
January 2005
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R/3
FI
Financial
Accounting
CO
Controlling
PS
Project
System
WF
Workflow
IS
Industry
Solutions
MM
Materials
Mgmt.
HR
Human
Resources
SD
Sales and
Distribution
PP
Production
Planning
QM
Quality
Mgmt.
PM
Plant Maintenance
SM
Service
Mgmt.
Client / Server
Integrated Business
Solution
EC
Enterprise
Controlling
AM
Fixed Assets
Mgmt.
Materials Management (MM)
January 2005
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Unit 10
Overview
Reservations
Tolerances
Purchasing
Goods Receipt
Invoice Receipt
Automatic Account Assignment
Invoice Verification
Materials Management (MM)
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Materials Management (MM)
Reservations
A request to have a material ready for
issue at a future date for a production
order, sales order, etc.
The purpose of a reservation is to ensure
that a material is available when required
and not assigned to another use
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Materials Management (MM)
Purchasing Tolerances
A tolerance limit is set for allowed variance
before a warning/error message is
displayed
Price variance
Compares the price in the purchase order
with the valuation price stored in the
material master
Maximum cash discount
This tolerance limit is set to assure that
cash discounts do not exceed allowable
discounts
January 2005
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Goods Receipts Tolerances
Purchase order price quantity there are
two tolerance levels maintained per item
The maximum percentage variance before a
goods receipt postings is not allowed
A percent variance that generates a warning
message but allows posting
Moving average price variance the
maximum allowable moving average price
change allowed
Materials Management (MM)
January 2005
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Invoice Receipts Tolerances
Many tolerance limits that can be
configured for invoice receipts: price,
quantity, and blanket purchase orders
These tolerances include:
Amount for item with or without order reference
Form small differences automatically
Percentage Over/Under Quantity Variance
Exceed amount: quantity variance
Blanket purchase order value and time limit
Price variance
Materials Management (MM) Integration
January 2005
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Automatic Account Assignment
Automatic account assignment is created
to avoid manual postings of financial
transactions which follow goods
movements to reflect the values of
transferred materials
Automatic account assignment is used
across all modules to keep track of the
values of materials that are being
consumed (e.g., production), or transferred
into other valuation areas of the company
Materials Management (MM) Integration
January 2005
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Automatic Account Assignment
(continued)
Automatic account assignment is a set of
rules and master data which enable the
financial tracking of logistics movement
Materials Management (MM) Integration
January 2005
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Automatic Account Assignment
(continued)
Internal processing keys
Inventory Postings
BSX
Offsetting Entry for Inventory Postings
GBB
Materials Management Small Differences
DIF
Cost (price) differences (PPV)
PRD
Goods receipt / inv. receipt clearing acct
WRX
Materials Management (MM) Integration
January 2005
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Automatic Account Assignment
(continued)
Rules to setup automatic account
assignment
Internal processing key - GBB key to offset
inventory postings
Valuation grouping code - groups valuation
areas together
Example: valuation area is plant, five plants
exist in the company, all five plants use the
same accounts.
Multiple valuation groups are possible
Materials Management (MM) Integration
January 2005
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Automatic Account Assignment
(continued)
Account modifier modifies the internal
processing key for various movement
types
Valuation Class points to the material
type (from the material master)
Chart of Accounts chart of accounts
mapped to company code
General Ledger (G/L) Account as
defined by financial accounting
Materials Management (MM) Integration
January 2005
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Automatic Account Assignment
(continued)
Account category reference:
Builds the link between material types and the
valuation class(es)
Material Type Account Category Reference Valuation Class
ROH 0001 Reference for Raw Materials 3000/3001/3002/3003
HIBE 0002 Reference for Operating Supplies 3030/3031
HAWA 0005 Reference for Trading Goods 3100
FERT 0009 Reference for Finished Products 7920
Materials Management (MM) Integration
January 2005
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Automatic Account Assignment
(continued)
What: Where Valued: Why 1: Why 2:
Where Value
is recorded:
Material Valuation Area
Goods
Movement
Additional
Information
Chart of
Accounts
Represented
By:
Valuation
Class
Valuation
Grouping Code
Transaction
Event Key
Account
Modifier G/L Account
Points To: Material Type Plant
Materials Management (MM) Integration
What: Where Valued: Why 1: Why 2:
Where Value
is recorded:
BPEN000 Plant P000 Good Issue
Issued to
Consumption
Chart of
Accounts -
C000
Represented
By: 3100 G000 GBB VBR 790000
Points To: HAWA Plant P000
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Transaction Event Key: GBB Inventory Posting Offsetting Entries
Account
Modifier
Description of Usage of Account
Modifier Key Material Movement Type
Goods Receipt From Purchase Order with
Account Assignment post to consumption
(exp.>rev.) i.e., non-inventory purchases
101 > 102 GR from Purchase Order>Reverse
AUF Goods Receipt From Production Order post to
production settlement
101 > 102 GR from Production Order>Reverse
122 RE return to order
BSA Goods Receipt Into Initial Stock only used once
for posting inventory off-set for initial stock data
load
561 > 562 GR to Initial Stock Unrestricted>Reverse
563 > 564 GR to Initial Stock Quality Insp>Reverse
565 > 566 GR to Initial Stock Blocked>Reverse
VAX Goods Issue To Sales - post to Cost of Goods
Sold (COGS)
231 > 232 GI to Sales Order (MM)>Reverse MM
531 GD, goods issue to delivery
623 > 624 GI cust. Returnable packaging>Reverse
633 > 634 GI customer consignment>Reverse
VBR Goods Issue to Consumption - post to material
consumption (i.e., expense>revenue)
(e.g., goods issue to job or production order)
201 > 202 GI to Cost Center>Reverse
221 > 222 GI to Project>Reverse
251 > 252 GI to Sales>Reverse
261 > 262 GI to Order>Reverse
291 > 292 GI to All Acct. Assignments>Reverse
401 > 402 TP Own from Sales Order>Reverse
Materials Management (MM) Integration
January 2005
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Goods Receipt
Materials can be received as stock items
or non-stock items
Receipt is possible from external or
internal sources
Individually / collectively
Tolerance limits can be set for goods
receipt
Special movement type for initial inventory
load
Materials Management (MM)
January 2005
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Goods Receipt
(continued)
Stock items can be received into restricted
or unrestricted stock
Non-stock items are received into orders,
projects, cost centers
Materials that are usually received into
inventory can also be received into orders,
projects, cost centers
Materials Management (MM) Integration
January 2005
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Invoice Verification
Set parameters for invoice verification
Quantity, price, receiving date, P/O quantity
Updates material master if moving average
price
Automatic account assignment for price
differences - if allowed
Verify actual versus target
Materials Management (MM) Integration
January 2005
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3-Way Match
Purchase order
- Target quantity -
- Target price -
Goods receipt
- Actual quantity -
Invoice receipt
- Actual price -
Materials Management (MM) Integration
January 2005
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Accounts Payable
Settlement
Financial Accounting (FI)
Purchase
Order
Goods
Receipt
Invoice
Receipt
Debit Credit
Payment
Program
Verification
January 2005
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Unit 10, Group 1
Exercises
89. Set Default Values for Inventory
Management Reservations
90. Maintain Purchasing Tolerance Limits
91. Maintain Goods Receipt Tolerances
92. Maintain Invoice Receipt Tolerances
93. Set (Review) Valuation Control
94. Assign Valuation Area Grouping
95. Define (Review) Valuation Classes
Materials Management (MM) Integration
January 2005
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Unit 10, Group 2
Exercises
96. Configure Automatic Postings for
Goods Movement
97. Configure Automatic Postings for
Taxes
98. Set Parameters for Invoice Verification
99. Create Default Values for Invoice
Verification
100. Maintain Default Values for Posting
Keys
Materials Management (MM) Integration
January 2005
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Unit 11
Materials Management (MM)
- Transactions -
January 2005
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Business Process Integration
MM
Materials Management (MM)
January 2005
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SAP Enterprise System
Transaction Data
Includes internal and external exchanges
that describe business activities
Unlike master data, aggregate
transactional data is dynamic - it
constantly changes, usually many times
per day
January 2005
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R/3
FI
Financial
Accounting
CO
Controlling
PS
Project
System
WF
Workflow
IS
Industry
Solutions
MM
Materials
Mgmt.
HR
Human
Resources
SD
Sales and
Distribution
PP
Production
Planning
QM
Quality
Mgmt.
PM
Plant Maintenance
SM
Service
Mgmt.
Client / Server
Integrated Business
Solution
EC
Enterprise
Controlling
AM
Fixed Assets
Mgmt.
Materials Management (MM)
January 2005
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Materials Management (MM) Integration
Procurement Process
(Procure-to-Pay)
Purchase
Requisition
Payment
to Vendor
Notify
Vendor
Vendor
Shipment
Invoice
Receipt
Goods
Receipt
Purchase
Order
3-
Way
Matc
h
January 2005
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Basic Procurement Process
Requirements Determination - Purchase
Requisition
Vendor Selection
Order Processing - Purchase Order
Order Tracking
Goods Receipt and Inventory Management
Invoice Verification
Payment
Materials Management (MM) Integration
January 2005
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Purchase Requisitions
Internal document
Requesting a certain quantity of material
or service on a certain date
Can be created:
Manually
Automatically (Materials Requirements
Planning (MRP), sales orders, etc.)
Release approval procedures are optional
Materials Management (MM)
January 2005
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Purchase Requisitions
Sources
Manually created by user department
Office supplies
Projects
Prototype materials
Automatically created by
Planning (Material Requirements Planning
(MRP), Master Production Schedule (MPS))
Plant Maintenance
Production Orders
Sales Orders
Materials Management (MM)
January 2005
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Purchase Requisitions
Processing
Create purchase requisition (manually or
automatically)
Determine source of supply
Release procedure (optional)
Assign vendor and process
Materials Management (MM)
January 2005
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Purchase Requisitions
Creating
Default data for line items
Delivery dates, plants, purchasing groups, etc.
Maintain line item data
Materials, quantities, delivery dates, etc.
Maintain account assignment (if required)
Cost center, General Ledger accounts, project
number, etc.
Check data
Save
Materials Management (MM) Integration
January 2005
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Purchase Orders
Purchase Orders are:
A formal request to a vendor to provide
materials or services
An internal planning and tracking tool
Purchase Orders identify:
Vendor
Material and/or service
Quantity and price
Delivery dates
Terms of payment
Materials Management (MM)
January 2005
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Purchase Order Structure
Header - information specific to the entire
purchase order
Vendor
Currency
Payment terms
Materials Management (MM)
January 2005
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Purchase Order Structure
(continued)
Line item details
Account assignment
Delivery schedule
Materials or services quantity
Price
Description
Item category
Materials Management (MM)
January 2005
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Purchase Order
Output
Request for Quotations
Purchase Order
Order Acknowledgment
Materials Management (MM)
January 2005
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Purchase Order
Output Format
Printed and mailed
E-mail
Electronic Data Interchange (EDI)
Faxed (hardcopy or electronic)
eXtensible Markup Language (XML)
Materials Management (MM)
January 2005
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Goods Receipt
Goods receipt with reference to a
purchase order
Copy data from purchase order
Delivery notification
Invoice verification
Updates purchase order history
Inventory update
Automatic update of General Ledger (G/L)
accounts
Materials Management (MM) Integration
January 2005
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Goods Receipt
(continued)
You can search for the purchase order
number with
Material number, vendor number, etc.
Materials Management (MM) Integration
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Goods Receipt
Destinations
Stock - given a storage location, can be
posted to three different stock statuses
Unrestricted-use
Quality inspection
Blocked stock (valuated)
Consumption - can be assigned a recipient
or unloading point
Goods receipt for blocked stock - updates
inventory, but material is not valuated
(conditional acceptance)
Materials Management (MM)
January 2005
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Goods Receipt
Movement Types
Movement types - stock transactions
Goods receipt
Goods issue
Stock transfer
Movement type determines which
Quantity fields are updated
Stock types are updated
General Ledger (G/L) stock or consumption
accounts are updated
Fields are displayed during document entry
Materials Management (MM) Integration
January 2005
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Goods Receipt
Movement Types (continued)
101 - goods receipt for purchase order into
warehouse/stores
102 - reversal of goods receipt for
purchase order into warehouse/stores
122 - return delivery to vendor
501 - receipt w/o purchase order into
unrestricted-use stock
Materials Management (MM)
January 2005
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Goods Receipt
Account Postings
Inventory account is debited at standard
price
Goods Receipt/Inventory Receipt (GR/IR)
clearing account is credited at purchase
order price
Price difference account is debited
(credited) with difference between
standard price and purchase order price
Materials Management (MM) Integration
January 2005
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Goods Receipt
Effects
Purchase Order (PO) history and
Purchase Order (PO) updated
Material Master - stock and value updated
Notification of goods receipt issued
(optional)
Transfer request to Warehouse
Management system (if active)
Materials Management (MM) Integration
January 2005
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Materials Management (MM) Integration
Goods Receipt
Effects (continued)
Material and financial documents created
and/or updated
Stock and consumption accounts updated
Inspection notification in Quality
Management (QM) - if active
January 2005
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Invoice Verification
Matches the vendors invoice to the
purchase order and the goods receipt (3rd
part of 3-way match)
Matches price and quantity
Updates the purchase order and its history
Updates accounting information
Materials Management (MM) Integration
January 2005
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Invoice Payment
Selects invoices for payment based on the
payment terms in the vendor master or
purchase order
Generates payment for released invoices
Updates accounting information
Materials Management (MM) Integration
January 2005
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3-Way Match for Payment
Financial Accounting (FI)
Purchase
Order
Goods
Receipt
Invoice
Receipt
Debit Credit
Payment
Program
Verification
January 2005
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Accounts Payable
Settlement Process
Determines:
Open items to be paid
When they will be paid
Bank from which payment will be made
Payment medium
Who will get paid
Payment process creates a financial
accounting document to record the
transaction
Materials Management (MM) Integration
January 2005
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Financial Accounting (FI)
Materials Management (MM)
Integration Points
Invoice
Receipt
Payment
Program
Goods
Receipt
AP
(Vendor)
Dr Cr
GR / IR
$100
Bank
Dr Cr
Inventory
$100 $100 $100
Dr Cr Dr Cr
Materials Management (MM) Integration
$100 $100
January 2005
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Automatic Account Assignment
Debit posting $100
VBR goods issue
material expenses
inventory account
721###
Movement type 251
(Goods issue to
consumption Sales
Order)
Credit posting $100
GBB offsetting to
consumption raw
material account
201###
Materials Management (MM) Integration
January 2005
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Unit 11
Exercises
101. Create Purchase Order for Slick Pens
102. Create Purchase Order for Premier Pens
103. Create Purchase Order for Promotions,
Ltd.
104. Create Goods Receipt for Purchase
Order
105. Create Invoice Receipts from Vendors
106. Post Payment to Vendors
Materials Management (MM) Integration
January 2005
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Unit 12
Materials Management (MM)
- Transactions -
January 2005
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Business Process Integration
MM
Materials Management (MM)
January 2005
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SAP Enterprise System
Transaction Data
Includes internal and external exchanges
that describe business activities
Unlike master data, aggregate
transactional data is dynamic - it
constantly changes, usually many times
per day
January 2005
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R/3
FI
Financial
Accounting
CO
Controlling
PS
Project
System
WF
Workflow
IS
Industry
Solutions
MM
Materials
Mgmt.
HR
Human
Resources
SD
Sales and
Distribution
PP
Production
Planning
QM
Quality
Mgmt.
PM
Plant Maintenance
SM
Service
Mgmt.
Client / Server
Integrated Business
Solution
EC
Enterprise
Controlling
AM
Fixed Assets
Mgmt.
Materials Management (MM)
January 2005
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Unit 12
Overview
A company may want to establish a long
term purchasing relationship with a vendor
Its is accomplished through a purchasing
contract (outline agreement or blanket
order)
Purchases of that material from that
vendor are then simplified and streamlined
Materials Management (MM)
January 2005
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Buyer/Supplier Relationships
Four Types
Antagonistic parties view each other as
the enemy (lose/lose)
Adversarial each party attempts to
maximize their gain (win/lose)
Cooperative parties understand the
benefits of working together (win/win)
Collaborative parties look for
opportunities to create value (win/win)
Materials Management (MM)
January 2005
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Buyer/Supplier Relationships
Long term partnerships are the objective of
the supplier evaluation and selection
process for contracts
Traditional purchasing process
Creates an environment of mistrust and low
bidder mentality
Leads to higher total purchasing costs
Materials Management (MM)
January 2005
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Supplier Evaluation and Selection
Identify need for long term supplier
contract
Determine specific sourcing requirements
Identify potential suppliers
Determine method of evaluating suppliers
Select supplier for contract
Negotiate and execute contract
Materials Management (MM)
January 2005
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Benefits of Managing the Supply Base
Contract with only world-class suppliers
The fewer suppliers the lower the
purchasing overhead
Purchasing can pursue strategic sourcing
issues, instead of clerical functions
Streamline the supply chain
Improved overall quality
Improved delivery performance
Materials Management (MM)
January 2005
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Outline Agreement
Long-term purchase agreements
Outline agreements can be subdivided into
the following types:
Contracts
Scheduling agreements
Outline agreements can be subject to a
release (approval or clearance) procedure
Materials Management (MM)
January 2005
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Contract Process Overview
Step one is to identify and evaluate
suppliers
It may involve supplier development
The goals are:
Develop partnerships with good suppliers
Reduce total cost of purchased materials and
services
Materials Management (MM)
January 2005
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Contracting Questions
How will potential suppliers be evaluated
and selected?
What procedures will be required to
manage the contracts (and suppliers)?
How will performance be measured?
How many are too many suppliers?
Too many suppliers cost money
Supplier integration
Collaborative agreements
Supplier development
Without material production shuts down
What is the risk?
Materials Management (MM)
January 2005
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Contract Management
Supplier performance metrics
On-time delivery
Material and/or service quality
Returned materials
Expedite issues
Pricing analysis
Problem resolution procedures
Improve or else
Continuous improvement process
When to end the contract
Materials Management (MM)
January 2005
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Creating a Contract
Is a long-term agreement with a vendor to
provide a material or service
For an agreed upon period of time
At a negotiated price or quantity
Can be created manually or with reference
to purchase requisition, Request for Quote
(RFQ)/quotation etc.
Materials Management (MM)
January 2005
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Two Types of Contracts
Quantity contracts are agreements with a
particular vendor to purchase a specific
quantity of materials. Example: Target
quantity of 50,000 meters of electrical wire
at $2/meter. (MK)
Value contracts are similar to quantity
contract except the agreement is to
purchase an established monetary value
of materials. Example: Target value of
$100,000 for electrical wire. (WK)
Materials Management (MM)
January 2005
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Quotations/Contracts Process
Requirement for material is identified
Process followed to select a vendor
Request for Quotation (RFQ)
Maintaining a Quotation
Comparison of Prices
Creating a Contract
Creating a Release Order
Materials Management (MM)
January 2005
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Request for Quotation (RFQ)
Is an invitation to a vendor to indicate their
terms and conditions (in particular, their
price) for the supply of a material or the
provision of a service by submitting a
quotation
Identifies the required material, quantity,
and delivery dates
Materials Management (MM)
January 2005
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Quotation
A quotation contains the vendor's pricing
and conditions for providing the material or
service stated in the Request for Quotation
(RFQ)
In the SAP component Materials
Management (MM) Purchasing, the RFQ
and quotation are the same document.
You enter the vendor's pricing and
conditions in the original RFQ).
Materials Management (MM)
January 2005
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Maintaining a Quotation
Enter each vendor's quotation in the
associated Request for Quotation (RFQ)
Compare prices using the price
comparison list
Store the best quote in an info record
Optionally, send rejection letters to the
losing bidders
Materials Management (MM)
January 2005
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Comparison of Prices
You can compare the prices from all
quotations from the competitive bidding
process using the price comparison list
The comparison list ranks the quotations
by item from lowest to highest price
Materials Management (MM)
January 2005
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Creating a Release Order
Purchase order that references a contract
is called a release orders, they specify:
Number of the contract
Quantity to be released
Delivery date
Release order documentation (open
quantity, quantity released to date, total
value) is automatically updated against the
contract when a release order is created
Materials Management (MM)
January 2005
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Creating a Release Order
(continued)
The vendor data, price data, and the
delivery terms and conditions are copied
directly to the release order.
Release orders can be created from a
proposed purchase requisition generated
off an Materials Requirement Planning
(MRP) run (net requirements).
Manually
Automatically
Materials Management (MM) Integration
January 2005
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Unit 12
Exercises
107. Create Purchase Outline Agreement
(Contract) for Stock Items
108. Run Materials Requirements Planning
Single Item, Single Level
109. Convert Proposed Purchase
Requisition to Release Order
110. Create Goods Receipt
111. Review Outline Agreements
112. Create Invoice Receipt from Vendor
113. Post Payment to Vendor
Materials Management (MM) Integration