CIL SAP MM TRAINING V 4 0

Faculty Profile
Sachin Haibatti
o Bachelor Of Engineering from University Of Mysore
o Overall 16 + years of experience in Procurement and
Inventory Management which includes 10+ years of
experience in SAP Materials Management (MM)
o Worked on BIG implementation, upgrade, and
support projects for,
 SAIL (Steel Authority Of India), India
 General Motors Corp, China
 Nissan Motors Corp, Japan
 Coach, USA
 Ashok Leyland, India
 Client Trucks India Ltd, India
Copyright © 2017 Tech Mahindra. All rights reserved. 1
SAP MM Overview
Presented By,
Sachin Haibatti

Materials Management Overview
Agenda 1 ERP Overview
2 Overview of Organization Structure
3 Procurement Cycle
4 Purchasing Master data
5
Special Procurement Process
6
Inventory Management / Valuation
7
Logistics Invoice Verification
8
Reporting & Analytics

SAP HISTORY

Fundamental of ERP (1/2)
Q) What does ERP stand for
Ans: ERP is the abbreviation of Enterprise Resource Planning, it's a standard

procedure or program to optimize all processes (Sales, Logistics, Production,
Quality, Finance) of enterprise management.
Q) What does SAP stands for
Ans: SAP the company was founded in Germany in 1972 by five ex-IBM engineers,
SAP stands for Systeme, Andwendungen, Produkte in der Datenverarbeitung which
- translated to English - means Systems, Applications, Products in Data
Processing.
Q) What are key portion of SAP system
Ans: On broad level , it is divided into 1) Functional Side ( various modules for
business functions 2) Technical side (Developer , system administrator )
Fundamental of ERP (2/2)
Q) What does SAP R/3 indicates

Ans: The R/3 indicates Real time data processing , 3 tier
client server architecture. It has three layers
1) Presentation Layer
2) Application Layer
3) Database layer

Overview of SAP Modules in ECC 6.0
Project at HSL has following
SAP Application modules in the
scope for Implementation.
 Finance (FI)
 Controlling (CO)
 Materials Management (MM)
 Production Planning (PP)
 Plant Maintenance (PM)
 Quality Management (QM)
 Sales & Distribution (SD)
 Product Lifecycle Management
(PLM)
 Project System (PS)
 Human Capital Management
(OM /PA / Payroll )
SAP Client –Server Architecture

ASAP Methodology Phases

ASAP Methodology for Implementation
• SAP delivers the Accelerated SAP (ASAP)
Methodology, developed by SAP to optimize the
success of implementing the ERP SAP.
• It provides the templates, methods, accelerators that
Presently We have been built on the success of thousands of
are here previous SAP Implementation.
• The ASAP methodology adheres to a specific road
map that addresses the following five general
phases.
Project Business Final Go live &

Realization
Preparation Blueprint Preparation Support
Key Task Key Task

• Project Kick Off • Project Team Training
meeting • Business Work shop (As Is )
• Project • Scope Validation
Infrastructure ramp • Detailed Design ( To Be )
• Project Charter Sign • Data Migration Workshop
Off • BBP Sign off

Manufacturing Industry

Introduction
Organizational StructureIntroduction

Organization Levels
Company code
This level represents an independent accounting unit
within a client. Each company code has its own balance
sheet and its own profit and loss statement.
Example: a subsidiary company, member of a
corporate group.
A plant is an operating unit for production and material Plant

requirements planning or simply a grouping of one or
several storage locations with stocks of material that
are geographically close to one another. A plant is
assigned to one company code.
Example: production facility, branch within a
company
Organization Levels
Purchasing Organization
An organizational unit responsible for procuring

materials or services for one or more plants
and for negotiating general conditions of
purchase with vendors. The purchasing
assumes legal responsibility for all external
purchase transactions.
Purchasing Group
The purchasing organization is further subdivided into
purchasing groups (buyer groups), which are responsible
for day-to-day buying activities.
A purchasing group can also act for several purchasing
organizations. But it is always Unique.

Organization Levels
Storage location
Storage Location is the level at which materials are stored

within a plant. There can be one or more storage locations
Within a plant. These are always assigned to plant
and can have many addresses.
Storage location Examples:
0001 Finished goods

0002 Semi finished products
0003 Raw materials

Procurement Cycle
Purchase Order
Purchase
Purchase Order
Order
Purchase Order
8. Payment
1. Requirements
determination
2. Source
determination
7. Invoice verification
Purchase Order
Purchase
Purchase Order
Order
Purchase Order
6. Goods receipt and 3. Requisition assigned
inventory management to a Vendor
5. Order follow-up 4. Order processing

Overview Of Materials
Management

Introduction Introduction
Introduction
The Materials Management (MM) module integrates and supports the

procurement and inventory functions occurring in day to day business
operations such as purchasing, inventory management, reorder point
processing, etc.
SAP MM optimizes all purchasing process in the materials management

sector. By effective stock-keeping and warehouse administration. SAP MM
reduces the procurement and stocking expenditure, integrates auditing of
accounts and also allows automatic assessment of suppliers.

MM Organization Structure
Company Code
0001 0002 0003

Plants
Storage 0001 0001 0002

Locations
Purchase Org 0002

Procurement Cycle
Procurement Environment
Requisition
8 Payment Requirements determination

1
Vendor Purchase
invoice order
? 10
20
7 30
Invoice Verification 2 Source determination
Procurement
6 Goods receipt
3 Vendor selection
Purchase
order
10
10
20
20
30
30
5 Purchase order monitoring 4 Order processing R
 SAP AG
SAP Data
Company, Company Code, Plant,

Organizational
Purchase Organization, Plant, Sales
Data
Organization etc.
Material Master, Vendor Master, Customer

Master Data
Master, Service Master etc.
Transactional Purchase Requisition, Purchase Order,

Data Request for Quotation, GR/GI and IR etc.

Master Data

Master Data
Master data that supports Materials Management in SAP:
Material Master
Vendor Masters
Purchasing Information Records
Pricing Conditions
Source Lists
Quota Arrangements
Service Master

Material Master
 The Material Master contains all data required to define and manage
material. It integrates data from engineering, manufacturing, sales and
distribution, purchasing, accounting, and other departments.
 The material master is used as a source of data for purchase order
processing throughout the procurement cycle.
General Data
Sales Data
Purchasing
Data
Accounting
Material Master
Data Manufacturing
Data

Material Master Number Range
o Internal Number
Range
o External Number
Range
o Maximum of 18
digits

Material Master Views

Material Master Record

Initial Screen
Material
Industry Sector
Material Type

Industry Sector

Material Type
Material Type
Operating
Raw materials
supplies
Semi-finished
Spare parts
products
Finished products Empties
Trading goods Other
 SAP AG

Material Group; Old Material Number

Hazardous Material

Material master record
o GR Processing Time
o Post to Inspection Stock
o Manufacturer Part Number

Price Control

Base Unit Of Measure
Order Unit
Purchasing Group

Material Number Saved

Vendor Master
 The Vendor Master includes all data necessary for processing business
transactions and corresponding with vendors.
 Information is shared between the accounting and purchasing departments.
 Data is grouped into three categories:
 General data
 Accounting data
 Purchasing data

Vendor Master Data
Vendor Master Record

Vendor
master
record
General data
Purchasing
data Accounting data
R
 SAP AG
Vendor Master Data

Vendor Master Data
Vendor Group/Vendor Account Group

Vendor Master Data
Partner Function

Vendor Master Data
o Order Currency
o Terms Of Payment

Vendor Master Data
o Incoterms

Vendor Master Data
o Mode Of Transport Boarder
o Office Of Entry

Purchasing Information Record
 Purchasing Information Records describe the supply relationship for a material

and a vendor.
 Data includes:
Material number
Vendor number
Vendor-specific data on deliveries, delivery tolerances, and pricing and text
 During purchase order entry, data can be proposed from the purchasing
information record to the order.

Purchasing Information Record

Purchasing Pricing procedure
This component enables you to store pricing stipulations agreed with the
vendor (such as applicable discounts or surcharges, or stipulations regarding
the payment of freight costs) in the system. You can enter these conditions in
quotations, outline purchase agreements, and info records. The system then
applies the conditions in determining the price in purchase orders (POs).

Purchasing Pricing procedure

Source Lists
A source list specifies the possible sources of supply for a material over a given
period of time. It shows the time period in which a material may be ordered from a
given vendor or under a certain long-term purchase agreement.
1.1.95 - 30.6.95
Source list
Vendor 1 allowed 1.7.95 - 31.12.95
Material M1 Vendor 2 allowed Vendor 1 fixed
Plant 0001
Vendor 3 allowed

Source Lists
1.7.95 - 31.12.95
Vendor 1 fixed

Quota Arrangements
 A quota arrangement divides the total requirement of a material over a

period among certain sources of supply by assigning a quota to each
source.
 If a quota arrangement exists for a material, it is taken into account in

the source determination process.

Quota Arrangements

Service Master Data
Every organization acquires goods to complete its business needs. Besides these
goods procurement, an organization may require occasionally some kind of
services.
1. Hiring Vehicles
2. Plumbing Work
3. House Keeping
4. Electrical Work Etc.
Note - Services are meant for direct consumption instead of keeping them
in inventory.

Service Master Data
Types of Services
Planned Services -
In planned services at the time of procurement specifications like quantity and
price are known in advance. It means nature and scope of service is clear before
procurement.
Unplanned Services -
In unplanned services at the time of procurement specifications like quantity and
price are not known in advance. It means nature and scope of service is not clear
before procurement. These services can be extended as per the requirement.

Service Master Data

Purchasing Documents

Procurement Cycle
Purchase Order
Purchase
Purchase Order
Order
Purchase Order
8. Payment
1. Requirements
determination
2. Source
determination
7. Invoice verification
Purchase Order
Purchase
Purchase Order
Order
Purchase Order
6. Goods receipt and 3. Requisition assigned
inventory management to a Vendor
5. Order follow-up 4. Order processing

Purchasing documents
Purchase RFQ
requisition
RFQ
Purchase requisition ?
Quotation Quotation
Purch.order
Quotation A ? B Purchase order
31. 1.
Contract
Scheduling
Contract agreement

Questions
1. What is SAP?
2. Explain what is SAP MM?
3. What are the essential components in SAP MM?
4. Different types of Master Records
5. What is the difference between Source List and Purchasing Info Record
6. Explain 3 tier architecture of SAP R/3
7. Name few important modules of SAP ECC 6.0
8. Explain the activities that we carry out in realization phase
9. Explain CIL Organization Structure
10. Explain organization levels in a typical manufacturing industry

Questions
11. Explain Procurement Cycle
12. List different type of SAP Data
13. Give examples for Material Type
14. Types of Number Ranges in Material Master?
15. Give examples for Material Group
16. What is the significance of Hazardous Material field in Material Master?
17. What is GR Processing Time
18. How price of the material is calculated (Price control)?
19. What is Purchase Group?
20. What is Account Group?

Purchase Requisition (PR)

Requirement Determination
 Materials requirements are identified either in the user departments or

via materials planning and control.
 Enter purchase Requisitions yourself, or they can be generated

automatically by the materials planning and control system

Purchase Requisition
Purchase Purchase Goods Invoice

Requisition for Order Receipt Processing
Goods/
Vendor
Services invoice
Purchase Purchase
Requisition Order
10 10
20 20
30 30
Planning, Reporting, and Analysis
Purchase Requisitions:
 Request or instruction to the purchasing department to procure a

certain quantity of a material or service on or by a certain date.
 Are created directly by a requesting department or automatically via
material requirements planning (MRP/PM/SD)
 Are internal documents not used outside the company.
Purchase Requisition Processing
MRP
Direct Entry
Purchase
Order
Purchase requisition Release strategy
Determine source of supply


Source Determination
 The Purchasing component helps to identify potential sources of supply based

on past orders and existing longer-term purchase agreements. This speeds
the process of creating requests for quotation (RFQs).
Quota Arrangement Purchase Requisition
Source List
Outline Agreement Purchasing Info Record

Request For Quotation (RFQ)

Request for quotation/ quotation
Requirements known. RFQ 1 RFQ 2

Procure from which
source?
?
Vendor 1 Vendor 2
Quotation 1 Quotation 2
Quotations entering
Price comparison list
Quotation comparison & Purchase Rejection

order
Decision making
Request for quotation/ quotation

Purchase Order (PO)

Purchase Order
Goods/
Vendor
Services invoice
Purchase Purchase
Requisition Order
10 10
20 20
30 30
Purchase orders:
 Represent the formal approval of a purchasing transaction with a vendor.
 Identify the following items such as:
 Vendor
 Material and quantity ordered
 Price and terms
 Delivery date and location
Purchase Order Processing
Purchase
Order Statistics Order
• Standard
History
Direct Entry
or Purchase
Requisition
Purchase
Requisition
Stock Material
Consumable Material Account Assignment
Service (cost center, asset,
internal order)

Purchase Order

Inventory Management (IM)

Inventory Management
Describes the basic business processes of Inventory Management in the SAP

System:
 Goods Receipts
 Stock Transfers
 Goods Issue
 Transfer Posting

Goods Receipt

Goods/
Vendor
Services invoice
Purchase Purchase
Requisition Order
10 10
20 20
30 30
Goods receipt record the inward movement of goods or materials by:

 Verifying the receipt against the order.
 Valuating material at purchase order price.
 Creating material and accounting documents to record the event.
 Updating the purchase order history.
 Providing basis for invoice verification (2nd part of 3-way match).

Goods Receipt

Goods Receipt for Stock Material
Goods Receipt
Purchasing
Documents
Items Goods
1.
2.
Receipt
3.
RUHR
RUHR
TRUCKING
TRUCKING
Vendor Warehouse/Stores
Entering the goods receipt increases the inventory
level of a material that is procured for stock

Stock types for goods receipt
Goods receipt
Goods receipt blocked
blocked stock
stock
Unrestricted-use
Unrestricted-use stock
Unrestricted use Stock stock
Warehouse
Stock
Stock inQuality
in
Stock in
quality
quality inspection
inspection
Inspection
Vendor
Vendor Blocked
Blocked stock
Blockedstock
Stock
Account assignment
Account assignment object
object
Cost
Cost center
Cost center
Order
Order
Order
…...
......
......
Result Of Good Movements
 Movement types differentiate among the following stock transactions:
 Goods receipt
 Goods issue
 Stock transfer
 Transfer Posting
 Movement type determines which:
 Quantity is updated
 Stock types are updated
 General ledger stock or consumption accounts are updated
 A three-digit code identifies the particular movement to be performed (e.g.,
101 = purchase order receipt).

Documents for Goods Movement
Warehouse
Goods movement
Receipts Issues
Material Accounting
document document
Records movements that Records movements that affect

affect inventory balances. valuation of inventory.
Accounting
Copyright © 2017 Tech Mahindra. All rights reserved. document 81
Documents for Goods Movement

GR Blocked Stock
Purchase Order
Purchase Requisition Goods Receipt
Qty. -100; Vendor - X
Qty. -100 Qty. -100; Vendor - X
Material – X;
Material - X Material – X
Price – 100 PC
Plant
Vendor
Unrestricted GR Blocked
Stock Stock
Cost Center
Inspection
Blocked Stock
Stock
Warehouse/Storage Location
Return Delivery
Purchase Order
Purchase Requisition Goods Receipt
Qty. -100; Vendor - X
Qty. -100 Qty. -100; Vendor - X
Material – X;
Material - X Material – X
Price – 100 PC
Subsequent Delivery
Qty. -100; Vendor -
Plant X
Material – X
Unrestricted
Stock
Inspection
Blocked Stock
Stock Vendor
Warehouse/Storage Location
Goods Issues Goods Issues
What is Goods issue ?
A goods issue (GI) is a goods movement with which a material withdrawal or

material issue, a material consumption, or a shipment of goods to a
customer is posted. A goods issue leads to a reduction in warehouse stock

Goods Issues
From Warehouse
From Consignment Stores
Consumption Issue
Asset
Sales Sampling
Order Scrapping
Cost center Quality

Stock Transfer & Transfer Posting
Material/Goods Transfer
Stock transfer Transfer posting
From storage From

From From QM to
From plant location to consignment
material unrestricted
to plant storage stores to
to material use
location warehouse

General Concepts General Concepts
 There are two types of goods transfers:
 Stock transfers involve a physical movement of goods.

 Transfers can occur from:
 Company to company
 Plant to plant
 Storage location to storage location
 Transfer postings involve a change in stock type or
material number. Generally, they are not connected
with a physical movement.
 Material documents are created to record the activity.
 Financial documents are created only when there is a valuation change
(e.g., plant to plant).
Transfer Posting
oLogical transfer of
material from one stock
type to another stock type
oFrom material to material
oFrom special stock to our
own stock

Reservation
 Reserving of material/goods in advance for future purpose either for cost
center or production
From Warehouse
From Consignment Stores
Consumption Issue
Asset
Sales
Order
Cost center

Reservation

Physical Inventory
Physical Inventory
Verification of physically existing stock with book/system stock is known as
physical inventory
1. Manual Physical Inventory
2. Cycle Counting
1
Unrestricted use
2
Quality inspection
3
Blocked stock

Physical Inventory
The Physical Process
Inventory Process
Create physical
inventory document
Set blocking indicator Arrange for

recount
Print physical
inventory
document
Change
count
Enter count results
List of
differences
Post differences

Outline Agreement

Outline Agreements
An outline purchase agreement is a longer-term agreement between a

purchasing organization and a vendor regarding the supply of materials or
the performance of services within a certain period according to predefined
terms and conditions. (Outside SAP, such agreements may be referred to by
a number of terms, including "blanket", "master", "framework" or "umbrella"
agreements)
In the SAP System, such agreements are subdivided into:

 Contracts
 Scheduling agreements

Contracts
What is a Contract ?
Contract is a form of longer- term purchase agreement
against which materials or services are released (ordered, or called off)
according to need over a certain predefined period.
Contracts can take the following forms:
Quantity contracts
Use this type of contract if the total quantity to be ordered during the validity
period of the contract is known in advance. The contract is regarded as
fulfilled when release orders totaling a given quantity have been issued.
Value contracts
Use this type of contract if the total value of all release orders issued against
the contract is not to exceed a certain predefined value. The contract is
regarded as fulfilled when release orders totaling a given value have been
issued.
Centrally Agreed Contract
The price will be negotiated and agreed with Vendor by the central purchase
organization
Value & Quantity Contract
RFQ w.r.t PR Quotation from Quotation
Mat-X; 10000PC Vendor Comparison
PR for Agreement
Mat –X
10000PC
Contract Vendor Selection
w.r.t RFQ/PR
1 Jan 18 to 31st Dec 18
st
Mat – X; Vendor – X
Qty. 10000PC
Rs. 100/PC
PR for Purchasing
Mat –X Goods Receipt
Contract Release Order
100PC Mat – X
w.r.t PR (PO)
Qty. 100PC
Mat – X
Vendor – X
Qty. 100PC
Invoice Receipt
Mat – X
Qty. 100PC
Payment to Vendor
Value Contract

Quantity Contract

PR w.r.t Contract

Scheduling Agreements
What is a scheduling agreement ?

An outline agreement against which materials are procured at a series of
predefined points in time over a certain period.
Delivery Schedules :
Delivery of the total quantity of material specified in a scheduling agreement
item is spread over a certain period in a delivery schedule, consisting of lines
indicating the individual quantities with their corresponding planned delivery
dates.
Scheduling Delivery
agreement schedule

Scheduling Agreement
Quotation from
Request for Quotation Vendor
Purchase Requisition w.r.t PR
Mat-x
Qty. 1000 pc
Scheduling Agreement
Quotation
w.r.t PR/RFQ
Comparison
Qty. 1000; Vendor –X
Rs. 100/PC
1st Jan 19 to Dec 21
Delivery Schedule w.r.t SA

Delivery Date Scheduled Qty.
10th Jan 19 100 10th GR 100 PC and IR 100 PC
29th Jan 19 100 29th GR 100 PC and IR 100 PC
10th GR 100 PC and IR 100 PC

10th Mar 19 50

Other Procurement Processes

Import Procurement Process
INDIA Local Bank SWITZERLAND Local Bank
PO +
Plant Letter of Plant
Credit to
Overseas Bill Of
Lading
Goods Receipt
Vendor
Airport/Shi
pyard
Customer
Bill Of
Country
Entry or
Boarder
Customs
Shipyard/
Duty
Airport
Invoice from
Vendor
Payment to
Vendor
Asset Procurement Process
What is Asset/Capital Goods?
They are purchased and used to help your company produce finished goods or
provide services to the customer. They are reported as assets on a company's
balance sheet and often can be depreciated over time.
Examples of capital goods include,
1. Buildings
2. Machines
3. Equipment
4. Furniture
5. Fixtures
6. Computer

Asset Master Request For Maintain
Quotation Quotation
Purchase
Requisition
Material
Master
Quotation
Comparison
Material Purchase
Description Order
Vendor
Selection
Invoice Goods
Verification Receipt
Payment Run

Non Stock Material Procurement Process
Request For Maintain
Quotation Quotation
Purchase
Requisition
Material
Master
Quotation
Comparison
Purchase
Order
Vendor
Selection
User
Invoice
Department
Verification
Payment Run

Non Valuated Material Procurement Process
Quotation Quotation
Purchase
Requisition
Material
Master
Quotation
Comparison
Purchase
Order
Vendor
Selection
Invoice
Verification
Goods
Receipt
Payment Run
RTP Material Handling (Returnable Transport)
Some ordered material will be delivered by the vendor by packing
with non ordered material and whenever ordered material is totally
consumed, the empty packaged items will be returned to the vendor
and these returning empty packaging items are called as RTP
materials

RTP Material Handling (Returnable Transport)
Quotation Quotation
Purchase
Requisition
Diesel with
Barrel
Quotation
Comparison
Purchase
Order
Invoice Vendor
Verification Selection
Goods
Receipt
Barrel
Payment Run
Non Ordered
Items

Special Procurement Process

Special Procurement Processes
 Pipeline Process
 Consignments Process
 Sub contracting Process
 Stock Transport Order Process
 Third-party processing
 Blanket Purchase Order
 External Services Process

Pipeline Procurement Processes
What is Pipeline stock?
 In this process material flows continuously from vendor premises to
our plant premises through pipe/cable/wire/
Examples – Oil, Water Cane, Gas, Electricity Etc.

Pipeline Procurement Processes
Goods Issue
Pipeline Agreement From Pipeline to
Mat – X Cost Center or Prod
Vendor – X Order
Plant – X Mat – X; Vendor – X Print/Transmit GI
P Org. – X Qty. 100 KG document to Vendor
Rs. 100/KG of Gas Plant -X
Automatic Settlement (IR)

(settle pipeline liabilities to vendor for
consumed or GI qty.) Send auto settlement
Mat – X; Vendor – X; Plant – X document to Vendor
Rs. 100/KG; Qty. 100KG
Payment
Payment to vendor
Consignment Processes
What is Consignment stock ?
 In consignment processing, the vendor provides materials and stores them
on your premises. The vendor remains the legal owner of the material until
you withdraw materials from the consignment stores.
 The invoice is due at set periods of time, for example, monthly. In addition,
you can also arrange with the vendor that you take over ownership of the
remaining consignment material after a certain period of time.

Consignment Procurement Process
Consignment
Agreement Purchase
Mat –X Order
Purchase
Vendor – X Goods
Requisition
Plant – X Receipt as
Rs. 100/PC Special Stock
Goods Issue
Material – X
Vendor – X
Against
Print/Transmit Quantity 10PC
Production
GI Document Order
Automatic Settlement (IR) Against Sales

Print/Transmit (settle consignment Order
Settlement liabilities to vendor for
Document consumed or GI qty.)
Mat – X; Vendor – X
Copyright © 2017 Tech Mahindra. All rights reserved.
Plant - X 119
Subcontracting Procurement Processes
Process:
 You order the end product using a subcontract order. The

components that the vendor needs to manufacture the end
product are specified in the purchase order.
 In Inventory Management, the components are posted to the stock

of material provided to vendor. The components are then supplied
to the vendor.
 The vendor performs its service and delivers the ordered material
(the end product). The consumption of the components is posted.
 The vendor charges for his or her service. The invoice is posted in
Invoice Verification

Subcontracting Procurement Process
Prerequisites for MRP
Plant
Plant
Purchase Order No:
*Vendor : ***
Activate MRP
Set PC
10 L Product A 100 up planning file
Vendor (Sub contract)

Product A (Engine)
Materials
Materials
Components Maintain MRP data:
valid MRP type
Products B 100 pc valid material status
A
Products C 200 PC
Material
Prerequisites for MRP
R
 SAP AG
Plant
Plant
Activate MRP
Product C Set up planning

Product B
Materials
Finished Product A
Materials
Maintain MRP d
valid MRP
valid mate
A
Material
 SAP AG

Subcontracting Procurement Process
Info Record
Create BoM Product A
for Product A Sub Cont. - X
Comp B & C
Purchase
Order
Storage Location Invoice

Component B & C Verification
Goods
Receipt
Payment Run

Third Party Procurement Process
Third-Party Processing
 In third-party processing, an enterprise forwards a sales order to an

external supplier, who sends the goods directly to the customer. The
sales order is not processed by your company, but by the vendor.
Third-party items can be entered in purchase requisitions, purchase
orders, and sales orders.
 Third party processing is linked to the Sales and Distribution

component (SD). If the sales order contains third-party items, the
system creates a purchase requisition from the order.

Third Party Procurement Process
Own Company
Order PO
Delivery
Vendor
Customer
Stock Transport Process
STO Process
 Stock transport Order can transfer the stock from one plant to
another plant within the company code and one plant to another
plant across the company code.
 Can process the STO with delivery and without delivery. If process
with delivery we can obtain delivery cost for the particular
transportation.
 With delivery material cost will increase due to adding the delivery
cost.

Stock Transport Goods Issue
Stock
Transport
Order Plant 2
Plant 1
Goods Receipt
Goods Issue Stock In Transit
for Purchase Order
Unrestricted for Purchase
Order
Use Stock

Intra Company Stock Transfer
COMPANY
Plant A Plant B
Supplying Plant Receiving Plant
PR Received
Purchase Request
Transfer Posting
Goods Received

Inter Company Stock Transfer
COMPANY COMPANY
Plant A Plant B
Supplying Plant Receiving Plant
PO Received
Purchase Order
Goods Issue
Goods Received
Billing Document Invoice Received
Payment Received
Payment Run
External Services Process
MM External Services Management offers two basic ways of specifying services:
 As planned services with description, quantity, and price.
By “planned services” we mean services whose nature and scope

is known to you at the start of a procurement project or transaction.
 As unplanned services with the setting of a value limit only.
By unplanned services, we mean services that cannot be specified

in detail because their precise nature and scope are not initially
known, or services which - for various reasons - you do not wish to
plan.

RFQ w.r.t PR
Quotation from Quotation
Service-X
Vendor Comparison
1000 AU
PR for Agreement
Service –X
1000 AU
Contract Vendor Selection
w.r.t RFQ/PR
1 Jan 19 to 31st Dec 19
st
Service – X; Vendor – X
Qty. 1000 AU
Rs. 1000/AU
PR for Purchasing Service Entry Sheet

Service –X Contract Release Order Service – X
10 AU w.r.t PR (PO) Qty. 10 AU
Service – X
Vendor – X
Qty. 10 AU
Invoice Receipt
Service – X
Qty. 10 AU
Payment to Vendor
PO for Services

Service Entry Sheet

Release Strategy/Procedure

Release Procedure
In the procurement process, there are many documents which are vendor
facing/external document and are also treated as a legal documents which under
go approval process as per the DoP (Delegation of Power)
In SAP, the different levels of approval is handled using Release Strategy
The below listed documents can under go approval process/release strategy,
1. Request for Quotation

2. Purchase Requisition
3. Purchase Order
4. External Service Entry Sheet

Release Procedure
Release Strategy for PR –
Item Value Release Code
>100000 INR 10. Assist. Manager
Plant - 1000 20. Manager
30. Sr. Manager
Release Strategy for PO -

Total Net Order Value Release Code
10000 to <100000 INR X1. Sr. Officer
> 100000 INR X2. Manager
X3. Sr. Manager
X4. Associate VP
X5. VP

Release Strategy
Maintain
Release Quotation
Release Strategy
Strategy Request For
Quotation
Purchase
Requisition Purchase Quotation
Order Comparison
Release
Strategy
Invoice Vendor
Verification Selection
Goods
Receipt
Payment Run
Release Procedure
Before Release
After Release

Release Procedure
Purchase Order
Before Release
After Release

Output Determination

Output Determination
Physical Inventory
Every purchasing document, material document and invoice
documents can shared with the external vendor or internally via
Fax/Mail/ALE/EDI
Internal
Vendor Non SAP R/3
SAP
EDI, XLM SAP ECC 6.0 ALE, IDoc
ALE and EDI are middle ware tools

ALE, IDoc
ALE – Application Link Enabling
EDI – Electronic Data Interchange
IDoc – Intermediate Document
Vendor
SAP R/3

PO Document
Physical Inventory

Logistic Invoice Verification

Objectives
 Describe the basic business process of Invoice entry in Accounts payable
for various kinds of Material and Service Purchase Orders in the SAP
System:
 Overview of the process

 Various Approaches and Solutions
 Posting/paying an invoice
 Price Variance handling
 Delivery costs

Types of Invoice Transactions
 Invoice or Debit Memo
 Credit Memo
 Subsequent Credit
 Subsequent Debit

Invoice Processing
Goods/
Vendor
Services invoice
Purchase Purchase
Requisition Order
10 10
20 20
30 30
Invoice verification:
 Matches the vendor’s invoice to the purchase order
 and the goods received
 Matches price, and quantity.
 Updates the purchase order and its history.
 Updates accounting information.

InvoiceVerification
Invoice Verification Environment
Environment
Purchase G/L accounts:

G/L Accounts
Order Vendor
Invoice
?
Assets
Invoice
Verification
Cost Centers
Vendor
Invoice Projects
Goods Receipt
Orders
Material Master
Vendor Master Posting an invoice in the SAP System

Conditions updates purchasing and accounting data
Invoice verification accesses data from purchasing, inventory

management, material master, and vendor master files.

Information in an Invoice


Vendor Payment
 Accounts payable reads the invoice file and pays all posted invoices due.
(Payment runs can be automated to occur at specific times.)
Vendor Bank
Financial 1000 Payment
Payment 1000
Accounting program
program
Motor Sports International 1449

1234 Main Street
New York, NY 10181 Date _______________
Pay to: ________________________________________

________________________________________________________
_______________ _________________
Released 12930 39040 2020 20202 10923 1449
Invoice

Credit Memo
 Collecting the excess amount from the vendor in case vendor fails to
deliver the remaining quantity
Purchase Requisition Purchase Order Goods Receipt
Qty. -100 Qty. -100; Vendor - X Qty. -100; Vendor - X
Material - X Material – X; Material – X
Price – 100 PC
Quality Inspection Payment Run Qty. – 100
Accepted Qty. – 80 Qty. – 100 Vendor – X
Rejected Qty. - 20 Vendor – X Material - X
Material -X
Return Delivery
Qty. 20 Credit Memo Payment
Vendor – X Qty. 20; Amount-2000 Amount 2000
Material - X Vendor – X
Material - X

Subsequent Debit
 If vendor ask for additional amount on already invoiced quantity
Purchase Requisition Purchase Order Goods Receipt

Qty. -100 Qty. -100; Vendor - X Qty. -100; Vendor - X
Material - X Material – X; Material – X
Price – 100 PC
Subsequent Debit Invoice Verification

Qty. 100; Price – Payment Run Qty. – 100
10/PC; Vendor – X Qty. – 100 Vendor – X
Material - X Vendor – X Material - X
Material -X
Payment
Amount 1000

Subsequent Credit
 On already invoiced quantity, if price is reduced due to price fluctuations or
low quality then vendor needs to pay the difference/negotiated amount to
the customer Goods Receipt
Purchase Order
Qty. -100; Vendor - X Qty. -100; Vendor - X
Material – X; Material – X
Qty. -100
Material - X Price – 100 PC
Subsequent Debit Invoice Verification

Qty. 100; Price – Payment Run Qty. – 100
10/PC; Vendor – X Qty. – 100 Vendor – X
Material - X Vendor – X Material - X
Material -X
Payment
Amount 1000

Material Requirement
Planning (MRP)

MRP - Process MRP - Process
MRP:
The main task of material requirement planning is to ensure material

availability, that is, to procure the requirement quantities for in-house
production and for sale on time.
Dependent requirements are the quantity of components necessary for the

production of a finished product or an assembly.
( Production orders and Reservations )
Independent requirements are received by sales department in the form of

customer requirements from the market, and demand management plans
sales using a sales forecast.

Material Requirement Planning
MRP - Process
Consumption Based Planning (CBP)
Forecast Based
Reorder Point Planning Time Phased Planning
Planning
Manual Reorder Point Automatic Reorder Point

Planning Planning

MRP overview
MRP Independent
Dependent Requirements
Requirements
Reservations Planned Order
Convert
Capacity
Planning
Production Order Purchase Schedule lines
Requisition
Purchasing
Sales Order functions
Processing
Invoice verification
Purchase Order
Final costing
Warehouse


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Faculty Profile

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Agenda 1 ERP Overview

2 Overview of Organization Structure

4 Purchasing Master data

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Ans: ERP is the abbreviation of Enterprise Resource Planning, it's a standard

Q) What does SAP stands for

Q) What does SAP R/3 indicates

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Project Business Final Go live &

Key Task Key Task

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A plant is an operating unit for production and material Plant

An organizational unit responsible for procuring

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Storage Location is the level at which materials are stored

Storage location Examples:

0001 Finished goods

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5. Order follow-up 4. Order processing

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The Materials Management (MM) module integrates and supports the

SAP MM optimizes all purchasing process in the materials management

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0001 0002 0003

Storage 0001 0001 0002

Purchase Org 0002

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8 Payment Requirements determination

5 Purchase order monitoring 4 Order processing R

Company, Company Code, Plant,

Material Master, Vendor Master, Customer

Transactional Purchase Requisition, Purchase Order,

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Purchasing Information Records

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Finished products Empties

Trading goods Other

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Vendor Master Record

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