SAP Integration between MM SD PP G.V.

SHIVAKKUMAR

SAP INTEGRATION BETWEEN MM+SD+PP

G.V.SHIVAKKUMAR

[email protected]

G.V.SHIVAKKUMAR [email protected]
SAP Integration between MM SD PP G.V.SHIVAKKUMAR
SAP INTEGRATION BETWEEN MM+SD+PP

Business Transaction with MM & SD:-

This material is applicable for those who had known SAP MM Purchasing before he learned SAP SD module (or the
opposite), he might see that there are similarities between these two modules. What I said is about the business
process flow. A business transaction or document in one module in a company may trigger a business transaction or
document in other module in other company. Also many consultants asking for the business integration between
SAP MM and SD but if we know the business process what company’s practing.. It is much simpler.

Material Management (MM) module is one of the core modules of SAP ERP (formerly known as SAP R/3). MM is
highly integrated with other modules such as FICO (Financial Accounting & Controlling), Sales & Distribution (SD),
Production Planning (PP), Plant Maintenance (PM), Project System (PS), Warehouse Management (WM), Quality
Management (QM), etc.

Sales & Distribution (SD) is one of the core and most-used modules of SAP R/3 products beside Financial &
Controlling (FICO), Material Management (MM), and Production Planning (PP) modules.

Company A is engaged in Procurement of material “X” and company B which sells the material “X”.

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For example: a company ‘A’ which uses SAP MM module and and company ‘B’ which uses SAP SD module have a
business transaction.

A user in company A creates a purchase requisition (PR) for a material (t-code: ME51N). The buyer (procurement
department) of that company processes that PR by converting it to some Request for Quotations (RFQs) (t-code:
ME57) that are printed and sent to some potential suppliers/vendors including company B.
When the sales person in company B receives the RFQ, he creates an inquiry in SAP SD module (t-code: VA11). The
inquiry refers to the RFQ, he may record the RFQ number in the ‘PO number’ field of the inquiry document.

Then, the sales person will analyse the request from company A. When he has determined the price, delivery terms,
term of payment, etc, he will create a Quotation in SD module (t-code: VA21). The quotation refers to the inquiry
created before.

Then the quotation is printed and sent to company A. The buyer of company A will receive the quotation that refers
to their RFQ number and input the information of it to SAP MM module through ‘maintain quotation’ transaction (t-
code: ME47). The buyer may receive several quotations from several suppliers. He will compare the quotations (t-
code: ME49) and decide from which supplier he will buy the material. Let say, he will buy the material from company
B. The buyer will create a Purchase Order (PO) in MM module (t-code: ME21N). The PO is created referring to the
quotation that has been maintained before.

The buyer will print and send the PO to the company B.

The sales person in company B will receive the PO. He may compare the PO with the quotation he sent to the
customer before. Based on that PO and referring to the quotation, he can create a Sales Order (SO) in SD module (t-
code: VA01). When the material is ready to be delivered to the customer, he can create an Outbound Delivery
document in SD module (t-code: VL01N). A delivery document triggers warehouse personnel to prepare the material

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to be sent to customer. Then warehouse personnel will post the Goods Issue transaction that refers to the outbound
delivery document (t-code: VL02N). He can print the Goods Issue document and send it with the material to the
customer as a delivery note.

When the customer’s warehouse personnel (in company A) receives the material, he can post the goods receipt
based on PO and delivery note sent by company B (t-code: MIGO_GR). He can print the goods receipt document and
give it to the company B.\

After receiving the goods receipt document, finance personnel of company B can create a billing document in SD
module refers to the outbound delivery created before (t-code: VF01). Then he can send an invoice document to
request payment from company A. He usually needs to attach the PO and goods receipt document with the invoice
sent to the customer.

The account payable personnel of company A receives the invoice and other attached documents. He performs the
three way match by checking the match of PO, goods receipt, and invoice document. If the 3 way match is OK, then
he can post an invoice receipt document in MM module (t-code: MIRO).
Then the payment process will be performed in FI module.

we have explained about the relationship between SAP SD module MM. In this article we will explain more about
thegeneral business processes covered by SD and other related modules, which are:
 Pre-sales activities
When a client (existing customer or new customer) asks or requests information (can be through a phone call,
an email, or a Request For Quotation (RFQ) document) about the products or services he needs, the sales
personnel can input that request into SAP SD module by creating an Inquiry document.In SD module, an
Inquiry is an internal document that records the information about request from prospective customer for
internal use only. In an inquiry, we record some information such as: which customer that request
information, what products or services customer needs, how many products or services customer needs, etc.
By creating inquiry, we can reduce the sales opportunity lost, especially when we need some extra time or
procedures before we can reply the customer request.If we can immediately reply the customer request (if
we have a standard products or services that the price and other condition are fixed), we don’t need the
inquiry document, we can just create a Quotation document to reply the customer’s request.
But if we can’t, we should create an Inquiry document, so when we have determined the price and other
condition to be offered to the customer, we can create a Quotation document that refers to the inquiry
document.
We can create Inquiry with “VA11” t-code.
In SD module, a Quotation is a document that legally attached for us who issued it, that contains information
about the offering to the customer, such as: which customer that been offered, what and how many products

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SAP Integration between MM SD PP G.V.SHIVAKKUMAR
or services that been offered to the customer, how much the price of the products or services, when the
delivery date of the products or services, how the term of payment that been offered to the customer, the
validity date of the offering, etc. A Quotation can be created by referring to the Inquiry document (if any) or
not, depends on the business scenario defined.
We can create Quotation with “VA21” t-code.

From the above explanation, it is clear what the differences between Inquiry and Quotation in SD module are.
Both of them are SD document in pre-sales activities.

 Sales Order processing

After we send the quotation to the customers, they will do their own purchasingprocedure to determine from
where they will purchase the products or services. If needed, they may negotiate with us about our quotation
in terms of price, terms of payment, delivery date, or something else. We may send an updated quotation
based on the negotiation. If they decide to purchase the material or service from us, they will send us a
Purchase Order (PO). Then we create a Sales Order (SO) that refers to the Quotation sent to the customers
before. We can put the customer’s PO number in our SO.
Depends on business scenario and configuration, in SAP R/3 system we can also create an SO without
referring to a Quotation. For example if we have a products orservices catalog that can be used by customers
as reference for their PO.An SO must contain the information of:
 Customer
 Materials or services sold to the customer
 Quantity of materials or services
 Pricing condition of materials or services
 Delivery dates
 Shipping processing, such as the incoterms, etc.
 Billing processing, such as terms of payment, etc.
We can create Sales Order with “VA01” t-code.

 Inventory Sourcing
To fulfill the products requirement from an SO at the required date, we can obtain them by one of these
options:
 Taking from Available stock at warehouse, if needed triggering a stock transfer between warehouses.
 Triggering a production order to produce the products in-house.
 Triggering a purchasing order to purchase the products from vendor (in case of third-party business
transaction).
There is no sales document in these activities. They are done on other modules such as Production
Planning (PP) and Material Management (MM).
 Shipping
Once the products are available at warehouse, the sales personnel can start shipping activities by creating an
outbound delivery document (Delivery Order/DO). A DO can be created by referring to an SO. A DO will

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trigger warehouse personnel to prepare the products.
We can create Delivery Order with “VL01N” t-code.If we use Warehouse Management (WM) module, a DO
can trigger a Transfer Order.
When the products are ready to be sent, the warehouse personnel posts the Goods Issue (GI) transaction that
refers to the DO. The GI transaction will reduce the inventory level of products.
We can post the Goods Issue that refers to a DO with “VL02N” t-code.
Then the warehouse personnel sends the products to the customer by transportation mode that has been
determined in SO document.
 Billing
The customer will receive the products at the delivery date promised in SO document.
The finance department will generate a billing document and send an invoice form to the customer. The
invoice will request the customer to pay the products we have sent at the price condition and terms of
payment we have agreed in SO document.
We can create Billing document with “VF01” t-code.

The main areas covered by SD module are:

 Pre-sales activities, including Inquiry and Quotation creation.

 Sales Order processing, including Sales Order (SO) creation.
 Shipping, including Outbound Delivery document creation.
 Billing, including Billing document and invoice creation.
The relationship between SD and MM, FI, PP, and WM modules
SD module is closely related and has integration with other modules, such as FI, MM, PP, and Warehouse
Management (WM).
A Sales Order (SO) from SD module can trigger an availability check and demand in materials planning of products
that will be sold to the customer. If the products are not available, it may trigger the PP module to create a
Production Order; or it may trigger the MM module to purchase the products form vendor so the product will be
available at the specified time.

Once the products are available at warehouse, SD module will create an Outbound Delivery document or Delivery
Order (DO) that asks warehouse personnel to prepare the products to be delivered to the customer. If the
warehouse uses WM module, the DO will trigger a Transfer Order document to pick the products from warehouse
storage bin.
Once the products are ready to be delivered to the customer, the warehouse personnel will post the goods issue
transaction. The inventory level at MM module will be reduced, the inventory account of FI General Ledger (G/L)
account will be credited and inventory consumption/expense account will be debited.

Material consumption
Inventory account expense account

XXX XXX

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The customer will receive the products. The finance department will generate a billing document (debit the
customer’s Account Receivable account and credit the Revenue account) and send invoice to the customer with FI
module. The Profitability Analysis (COPA) report will also be updated.

Customer’s Account
Receivable Revenue Account

XXXX XXXX

The customer pays the bill and FI module will record the payments as debit to the bank (cash) account and credit to
the customer’s Account Receivable account (so it will be zero)

Customer’s Account
Bank (cash) account Receivable

XXXX XXXX

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SAP Integration between MM SD PP G.V.SHIVAKKUMAR

The main areas covered by MM are:

Purchasing /procurement
Materials planning (MRP and CBP)
Inventory Management and Physical Inventory Management
Material valuation and Account determination
Invoice verification
In this post, I will try to explain the integration between SAP MM and other modules. I will explain it in a simple way.
Please give your opinion or suggestion by writing a comment at the end of this post.
The sales order (SO) or demand forecast of a finished product from SD module can be considered as a requirement
in SAP MM. I have explained the SD business processes at previous article.
If the finished product is available, then it can be delivered to the customer by converting SO to outbound delivery,
then perform Goods Issue (GI) transaction based on outbound delivery in inventory management.
If the finished product is not available, this requirement can trigger materials planning process in MM. Materials
planning in SAP can automatically create procurement proposals, such as planned order. Planned order can be
converted into:
Purchase Requisition (PR), if the finished product is procured externally.
Production order in PP, if the finished product is produced internally. The production order will be considered as
dependent requirement for their components or raw materials. SAP will determine these dependent requirements
by using the information from Bill of Materials (BOM) of finished product. These dependent requirements will also
trigger materials planning for the components that will create planned order of the components.
In addition, materials planning can also create purchase requisition directly as a procurement proposal (no planned
order).

The maintenance order (from PM) or network activity (from PS) can also create:

PR of material/service that is procured externally, or Reservation of the stock material.

If the stock of material is available then the reservation item can be issued with GI transaction in Inventory
Management.
If it’s not available, the reservation (which can be considered as requirement) can be processed by materials
planning to create procurement proposals, such as planned order that can be converted to PR or production order.

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SAP Integration between MM SD PP G.V.SHIVAKKUMAR
The PR will be processed by purchasing/procurement department with MM moduleto be a purchase order (PO).
Based on the PO, the vendor will deliver the material/service. Then it will be received in Inventory Management with
Goods Receipt (GR) transaction.

If the material received is finished product, we can deliver it to the customer by converting SO to outbound delivery,
then perform GI transaction in inventory management.
If the material is component or raw material, we can use it in production order to produce the finished product with
GI to production order transaction. When the finished product has been produced, we can perform the GR to
production order transaction in inventory management. Then, we can deliver it to the customer by converting SO to
outbound delivery, then perform GI transaction in inventory management.
The vendor that delivered the material/service based on PO, will send their invoice to the responsible person in the
company. Then, he/she will perform the Invoice Receipt (IR) transaction in MM. Based on the IR transaction, the
finance department will process the payment in FI module.

The GR, GI, and other transactions in Inventory Management can be linked in details to the WM module. In WM
module, we can maintain material stock at a level that more detail (which is storage bin) than MM module (which is
storage location). We can store the same materials at several storage bins in a storage location.

With QM, we can copy quality master data, such as certificate required, of a material that ordered in a PO, so the
vendor will provide it. When we post GR transaction, we can post it to quality inspection stock. We can give a
score/quality level to the material that delivered by vendor.

The GR and GI transactions in inventory management also trigger the accounting journals in FI module that in a real-
time basis update the company financial reports such as Balance Sheet and Profit & Loss Statement.

The budgeting in PS can also be linked to the PR and PO in MM to keep that the total value (price) in PR and PO does
not exceed the budget.

If you have something to add about MM integration with other modules please write on comment section.

This article would help beginners get an overall basic picture of the entire PP cycle.

Before I start, I would like to mention that I have given the learning’s i have inferred/experienced in SAP PP So if
some PP experts don’t agree with the contents of the article, I would really appreciate if they come forward and
guide us in the proper direction. As I mentioned, my only aim to write this article is to help people get a basic
knowledge of the PP cycle.

SAP PP is mainly divided into planning and execution.

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Planning contains materials planning and capacity planning. Materials planning can be done for different lengths :
long term planning, material requirements planning etc. Execution contains creation of production order, scheduling,
work flow (such as release printing), confirmations, goods movements, technical completion. Most of the above
mentioned sub processes need master data to be maintained. And when you carry out, they generate transactional
data like planned orders, production orders, accounting documents etc. Also, there are sub modules for different
types of industries like discrete production, process production (like chemicals), repetitive production, kanban, all
these normally follow the above mentioned sub processes. Now we will go thru the nuts and bolts of Production
Execution.

There are three types of production process in SAP.

1. Discrete Manufacturing 2. Repetitive Manufacturing 3. Production – Process Industries.

First let us understand what is happening in the system prior to the production execution process.

a. Planning quantities are derived and maintained in the system. b. Material Requirement Planning run will generate
the planned order for the net required quantity with the start date of the production process. c. Master data (BOM
and Routing details) will be copied in to the planned order automatically during MRP run.

Ok, I believe you got an idea about the steps involved prior to the production execution process. Next, let’s discuss
about the production execution process now.

Production Execution process contains five important steps.

1. Converting planned order to production order 2. Releasing the production order 3. Goods Issue for production
order 4. Confirmation of production order 5. Goods Receipt against production order

1. Converting Planned Order to Production Order:- Planned order has to be converted to production order to
account the entire production. Production order or process order type has to be mentioned when converting the
planned order. Entire master data will be copied to the respective order when converting the planned order. Order
type is the most important configuration setting for production execution.

2. Releasing the production order:- Release of production order is an important step in production order. Releasing
of production order indicates the commencement of production. Unless the order is released, further processing of

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order is not possible. While releasing the production order system can perform : \a. Material availability b. Capacity
availability c. Creation of Batch d. Reservation creation

3. Goods Issue for production order:- Goods issue covers issuing required components to make the finished product
to a production order. While making the goods issue, the document number can be updated in the production order.
Goods issue can be made in parallel during confirmation of operation.

4. Confirmation of production order:- Reporting of usage of components and activities are termed as confirmation.
Confirmation to the each operation will be executed according to the control key attached with each operation.

5. Goods Receipt against production order:- Once the production is completed, finished products will be received
from the production order into the respective storage area. This can be achieved through two ways :

1. Through confirmation 2. Through separate transaction.

Document number will be generated for each goods receipt. This document number can be updated in the
production or process order.

Now you will easily understand what is backflushing? It is the process of issuing components automatically while
confirming the production or process order.

Hope the above notes has given you enough idea about the SAP production execution process.

The overall PP cycle follows the following pattern:

1. Sales and Operations Planning
2. Demand Management Program.
3. MPS
4. MRP
5. Production Control
6. Settlement.
1) Sales and Operations planning.

Is used to forecast sales, create a sales plan, create a production plan and test its feasibility. Once this is done
desegregation is done to bring the requirements to the individual materials level.
2) Demand Management Program.
The individual material level plan from the Sales and Operations Planning is then fed to the Demand program to
generate independent requirements along with quantity and requirement dates.

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The Demand Management Program is the link between Sales and Operations Planning and the Master Production
Schedule/Material Requirements Planning. Input to demand program can come from Sales plan, production plan,
Manual entry, material forecast, any other plan, etc. The result of the Demand program is Planned Independent
Requirements with their quantities and requirement dates.
3) Master Production Schedule ( MPS).

The Master Production Schedule usually follows the Demand Management Program. MPS- Master Production
Scheduling only plans Master Schedule items (like type-A materials) which may be very important to the company. It
does the planning at the planned independent requirements level and one level below it (i.e. the immediate
dependent requirement level).
4) Materials Requirement Planning (MRP).

MRP analyses the demand from sales orders and forecasts. If stock is needed then a planned order is created. A
planned order consists of a suggested order quantity, a start date and a finish date.

To calculate the quantity of material required, Net requirements Calculation is carried out. This involves Lot-size
calculation which decides how much quantity to prepare.

To determine the start and finish dates, Scheduling is carried out.

Once the quantity and dates have been decided, we need to decide about the planning level (single-item, single-
level, single-item, multi-level) and the planning horizon and regenerative planning.

5) Production Control.

If the material is produced in-house, then the planned orders are converted into production orders.

Production order document contains a lot of data including.

Planning data – finished product, quantity, components and quantity.

Scheduling data – start date, end date.

Accounting data- material cost.

Warehouse data – storage locations for finished and issue

Production data – PRTs to use.

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The Production Control flow is as follows:
a. Proposal (planned order)
b. Order Creation ( reservation for components )
c. Availability check
d. Capacity planning
e. Order release ( now reservations can be issued)
f. Print Production Order.
g. Withdrawal of materials
h. Execution.
i. Confirmation( record quantity produced, who produced it, which work center,etc )
j. Warehouse Receipt
k. Order settlement.

6) Order Settlement

In order settlement, the costs collected in an order are allocated to one or more receivers. When final delivery has
been made for a production order, it can be settled. If no final delivery can be made, then the order status must be
set to “technically completed” before the order can be settled. The status of technically completed may be assigned
to a single order or to several orders.

The Made TO Order Cycle:

The sale department passes on the Made to order-Sales Order to the Material department so that material
requirement is analyzed. This is done in SAP by carrying on an MRP Run for all the levels of the product BOM. This
MRP Run would create Planned Orders for the shortages. Here the planned orders for fert sub assemblies,
Components etc, are created. This planned orders for materials produced in house are converted in to Production
order and planned orders for materials Procured from outside are converted in to Purchase order. The creation of
Production order through the planned orders will convert all the dependant requirements in to dependant
reservations.

The dates of production or purchase are decided through the total replenishment time mentioned in the material
master, If it is, in-house production, then the Route times precede over the total replenishment time entered in the
material master. And the availability of all the components is ruled by the availability checking rules and by
availability checking scopes. Thus whenever the system declares a product to be ready or available by a date it
implies that the system has checked the availability of the material with respect to the Ware house stock, in coming
stock (Receipts) and all other planned orders already existing for the product or material.

In the Made to order production, sales order produced for Fert and Sub assemblies are converted in to production
order during MRP run. The production orders created have a specific quantity, specific Basic start date and a specific
Basic Finish Date, a set of operations and a set of component attached from the BOM. In course of production the
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quantities produced in the operation for an order should be confirmed so that the current status of work is available
in real time situation. The components required for production are issued to the production order through goods
issue by a movement type 261 and the issue is always made to the reservations or to the order, thereby clearing the
reservations. Issues of unplanned components are made as new items issue and not as order issue. The quantities,
for an order which are produced completely are the put in to stock i.e. a Goods Receipt is done.

Thus the made to order cycle starts with the sales orders and converting them to Production Orders through MRP
Run and there off confirming produced quantities for an order and finally putting the order in to stock.

The Cycle of Made to order: Steps: MTO Scenario

1. Material Creation (Made To order Material with major changes of: Item Category: 0004-make to order/assem.,or
0001-make to order)

2. Route Creation

3. Creation of BOM

4. Sales order

5. Production order Scheduling, Costing, Release and Save

6. Production order Quantity confirmations for operations, Parallel task of material issue to order or to reservations
(261)

7. Fully Produced Production Quantities will be put into stock (GR)

8. Delivery against sales order

9. Invoicing.

The Made To Stock Cycle

The Made to stock scenario will start from Demand Management here we can create Planed independent
requirements manually or by using data from SOP. After MRP run system will create planned orders which we can
convert to Production order As the Stocks produced there off are not customer stock or the stock is not attached to
any specific customer. Further confirmations are done and issues of material are carried out to the production order.
Finally the production is put in to stock (GR). Here at any point of time a sales order might come in and delivery to
the customer is done from the existing stock.

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Production Master Data:-The Production Master Data consists of Material Master, Bill of Material, Work Center,
Route, and Production Line Design.

The Material Master is created first for all components involved in making the Final product. Then these
components are put in a product relationship i.e. a list of materials required to make the final product are put in a
hierarchy, this is called a Bill of Material. The next task is to identify the work centers required to produce the
product; if the work centers are already created then they can be readily put in a sequence, which would be a
sequence of work centers required to produce the product. This sequence of work centers one after the other (in the
sequence of work to be done) is called a Route.

The Cycle of Made to stock: Steps: MTS Scenario

1. Material Creation (Made To Stock Material with major changes of: Item Category: NORM )

2. Creation of BOM

3. Route Creation

4. Demand requirements

5. MRP Run

6. Creation/conversion of Production order (Made To stock), Scheduling, Costing, Release and Save

7. Production order Quantity confirmations for operations, Parallel task of material Issue to order or to reservations
(261)

8. Fully Produced Production Quantities will be put into stock (GR)

9. Sales order Creation

10. Delivery against sales order

11. Invoicing.

Here are difference between Discrete and REM and small explanation about discrete and repetitive
manufacturing:

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- A typical characteristic of discrete manufacturing is the frequent switching from one manufactured product to
another. The products are typically manufactured in individually defined lots, the sequence of work centers through
production varying for each one of these. Costs are calculated on the basis of orders and individual lots.

- In Repetitive Manufacturing, products remain unchanged over a longer period and are not manufactured in
individually defined lots. Instead, a total quantity is produced over a certain period at a certain rate.

- Discrete manufacturing typically involves varying the sequence of work centers through which the products can
pass during production. The order of work centers is determined in routings, which can often be very complex. There
can be waiting times between the individual work centers. Also, semi-finished products are frequently placed in
interim storage prior to further processing.

- Repetitive Manufacturing, on the other hand, normally involves a relatively constant flow on production lines.
Semi-finished products are usually processed further immediately without being put in interim storage. Routings
tend to be relatively simple.

- In discrete manufacturing, component materials are staged with specific reference to the individual production
lots. Completion confirmations for the various steps and processes document the work progress and enable fine-
tune controlling.

- In Repetitive Manufacturing, components are often staged at the production line without reference to a particular
order. Completion confirmations are less detailed, and the recording of actual data is simplified.

- The function of Demand Management is to determine requirement quantities and delivery dates for finished
products assemblies. Customer requirements are created in sales order management. To create a demand program,
Demand Management uses planned independent requirements and customer requirements.

To create the demand program, you must define the planning strategy for a product. Planning strategies represent
the methods of production for planning and manufacturing or procuring a product.

Using these strategies, you can decide if production is triggered by sales orders (make-to-order production), or if it is
not triggered by sales orders (make-to-stock production). You can have sales orders and stock orders in the demand
program. If the production time is long in relation to the standard market delivery time, you can produce the
product or certain assemblies before there are sales orders. In this case, sales quantities are planned, for example,
with the aid of a sales forecast.

Repetitive manufacturing
Repetitive manufacturing is period based planning and not based on orders. Normally same products will be
manufactured over longer period of time. Products will not change frequently.

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Confirmation is from back flushing and settlement is through from product cost collector for the period.
Confirmation will be without ref to planned orders.

Planned orders are sufficient to carry out shop floor activity. In master data production versions and cost collector is
a must where this is not mandatory in discrete.

You do these steps for Rem production:

MM01 : Material Master

- MRP - 4 view you click rem
CS01 : Create Bom
CR01 : Create Work Center
CA21 : Create Rate Routing
MM02 : Prodn Version
MD61 : Create PIR
MC74 : Transfer PIR to Demand
KKF6N : Create Product Cost Collector
MB1c : Create Stock
MD02 : MRP run
MFBF : Rem Back Flush

The detailed sequence of T.Codes for REM including Std cost estimate:

Material master - MM01

BOM - CS01
Price Planning - KP26
Work Center - CR01
Rate Routing - CA21
Material Master Change, enter production version - MM02 (MRP 4 View)
Product Cost Collector - KKF6N
Costing - CK40N
Backflushing – MFBF
Here integration between MM, SD,PP is well explained. It is more appreciated if any expertise advised from
everyone. Thanking you.

G.V.SHIVAKKUMAR [email protected]