SAP ECC 6.

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PRACTICAL KNOWLEDGE SHARING

SAP MM TRAINING
PRASHUN SHETTY
CAREER COACH
CONTACT: 8971164999
 SAP Career Guidance 2020

SAP MM Consultant – Course Content

Candidate Name : Nayan
SAP MM Course Curriculum:
Introduction to SAP

Discussion on ERP and other ERP clients in the market

Comparison with SAP to other ERP clients and focusing on the points of SAP over other ERP
clients
Introduction to SAP screens and ways of calling the transaction
Definition on Configuration and Customization

Organization Structure

Definition on Organization elements Client

Company Code

Plant
Storage Location
Purchase organization
Purchasing Group

Assignment of Organization elements and making of Organization structure

Master Data in Material Management

Configuration and customization activities on Material Master

Configuration and customization activities on Vendor Master
Configuration and customization activities on Info Record Master
Configuration and customization activities on Source List Master

Procurement Cycle

Discussion of complete procurement cycle from Demand to Supply in real time perspective

Purchase Requisition

Direct Purchase Requisition

Configuration on Purchase Requisition

Request For Quotation (RFQ)

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Configuration and Customization activities on RFQ

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Quotation

Maintain Quotation
Price Comparison

Purchase Order

Standard Purchase Order

Configuration on Document type
Discussion on item category

Subcontracting Purchase Order

Complete process discussion like creating Sub contracting PO, Goods Issue, GR.
Creation and exploding of BOM
Details of consumption of components with respective movement types

Consignment Purchase Order

Complete process execution like PO creation, GR and settlement.

Stock Transport Order

Intra-Stock STO with MM route

Intra-Stock STO with Delivery

Inter-Stock STO

Service Purchase order process

Pricing Procedure

Condition Techniques
Access Sequence
Pricing determination process
Schema determination

Release Procedures

Edit Characteristics
Edit Classes
Release Procedures

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Release Group

Release Code

Release Indicator

Release Strategy

Contracts

Value Contracts
Quantity Contracts

Schedule Agreements

Schedule Agreements without Release profile

Inventory Management

Goods Receipts
Goods Issues
Transfer Posting
Movement Type Creation

Automatic Account Determination

Valuation Class
Account Category Reference
Account Postings

Split Valuation

Valuation Type
Configuration related to Split Valuation

Physical Inventory Process

Annual Inventory
Periodic Inventory
Cyclic Inventory

Invoice Verification

Invoice Verification
Credit Memo

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Subsequent Debit
Subsequent Credit

Automatic PO process

Configuration on automatic PO

Cross Module i.e Integration Configuration

Warehouse Module
Quality Module
Sales and Distribution
Finance and Controlling

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CONTENTS
Date Topics Days Page. no
15.07.2020 Introduction to SAP Day 1 7 - 19
16.07.2020 Procure to Pay Cycle (P2P) Day 2 19 - 20
16.07.2020 Enterprise Structure Day 2 20 - 32
17.07.2020 Material Master record Day 3 33 - 39
Configuration
18.07.02020 Vendor Master Record Day 4 39 - 43
Configuration
19.07.2020 Purchase Info Record Day 5 44 - 49
20.07.2020 PIR Configuration Day 6 49 - 52
20.07.2020 Source list Day 6 53 - 55
21.07.2020 Purchase requisition Day 7 56 - 60
Configuration
22.07.2020 Purchase Order Configuration Day 8 61 - 64
23.07.2020 RFQ/Quotation Day 9 65 - 67
24.07.2020 RFQ/Quotation Day10 68 - 69
24.07.2020 Pricing Procedure Day10 70 - 76
25.07.2020 Pricing Procedure Day11 77 - 81
26.07.2020 Automatic PO Creation Day12 82 - 86
27.07.2020 Release Strategy Day13 87 - 91
28.07.2020 Consignment Procurement Day14 91 - 95
29.07.2020 Subcontract Procurement Day15 96 - 100
30.07.2020 Pipeline Procurement Day16 101-103
31.07.2020 Service Procurement Day17 103-111
01.08.2020 Outline Agreement Day18 111-116
02.08.2020 Invoice Verification Day19 117-119
03.08.2020 Quota Arrangement Day20 119-123
04.08.2020 Split Valuation Day21 124-129

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INTRODUCTION
What is ERP?
• Enterprise Resource Planning (ERP) is a software that is built to organizations belonging to
different industrial sectors, regardless of their size and strength.
• The ERP package is designed to support and integrate almost every functional area of a
business process such as procurement of goods and services, sale and distribution, finance,
accountings, human resource, manufacturing, production planning, logistics & warehouse
management.
• Before we actually see in detail, what ERP is and how ERP can help in your business process,
we will understand how different departments are involved in the whole business process,
right from the ordering of the raw material – to manufacturing goods – to delivering final
products to the customer.

• Client contacts the sales team to check the availability of the product
• Sales team approaches the Inventory department to check for the availability of the product
• In case the product is out of stock, the sales team approaches the Production Planning
Department to manufacture the product
• The production planning team checks with inventory department for availability of raw
material
• If the raw material is not available with inventory, the Production Planning team buys the
raw material from the Vendors
• Then Production Planning forwards the raw materials to the Shop Floor Execution for actual
production
• Once ready, the Shop Floor Team sends the goods to the Sales Team

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• Sales Team who in turn deliver it to the client
• The sales team updates the finance with revenue generated by the sale of the product.
Production planning team update the finance with payments to be made to different
vendors for raw materials.
• All departments approach the HR for any Human Resource related issue.

Note:-

• It has many departments or business units

• These departments or business units continuously communicate and exchange data with
each other
• The success of any organization lies in effective communication, and data exchange, within
these departments, as well as associated third party such as vendors, outsourcers, and
customers.

Different ERP Packages

• SAP
• Oracle for A/C
• Seibel-CRM (Customer Relationship Management)
• People Soft-HR
• JD Edwards-Manufacturing
• BAAN
• Dynamics

SAP - Systems, Application and Products in Data Processing

• SAP Software was founded in 1972 by Claus Wellenreuther, Dietmar Hopp, Hans-Werner
Hector, Hasson Plattner and Klaus Tschira.
• SAP is a enterprise information software that was basically designed to manage resources,
information and activities that are required to complete business processes like
procurement and managing orders, billing of orders and management of human resources.
• SAP applications work with real time data. It has the ability to be configured according to
the needs of the business. It allows business to make rapid changes in their business
requirements through a common set of programs.

Why SAP?
• For Better Accuracy in Information
• For Better Handling of the Business
• Reduction of Lead Time
• On-Time Shipment
• Reduction in Cycle Time

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• Improved Resource Utilization
• Better Customer Satisfaction
• Improved Supplier Performance
• Increased Flexibility
• Reduced Quality Cost
• Improved Information Accuracy and Decision-Making Capability

What does this R/1, R/2, and R/3 stands for?

• R means Real Time Data Processing and 1 Means 1-Tier (R/1)

• R means Real Time Data Processing and 2 Means 2-Tier (R/2)
• R means Real Time Data Processing and 3 Means 3-Tier (R/3)

In 1972 first product was released i.e. R/1

• Presentation Layer
• Application Layer All Runs on the Single Server
• Database Layer

In 1979 Upgradation of R/1 was released i.e. R/2

• Presentation Layer Runs in One Single Server

• Application Layer
Both Runs in One Single Server
• Database Layer

In 1992 Upgradation of R/2 was Released i.e. R/3

• Presentation Layer → Runs in one single server

• Application Layer → Runs in one single server
• Database Layer → Runs in one single server

SAP : Three-Tier Architecture

With SAP R/3, SAP users in a new generation of enterprise software — from mainframe
computing (client-server architecture) to the three-tier architecture of database, application, and
user interface.

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Three-Tier Architecture of SAP R/3

Presentation Servers
Presentation servers contain systems capable of providing a graphical interface.

• Presentation Layer is also known as client Layer

• Presentation Layer is a user interaction
• In SAP-User interaction purpose we use GUI
• GUI stands for Graphical user interface
• Example − Desktop, Mobile Devices, laptops

Application Servers
Application servers include specialized systems with multiple CPUs and a vast amount of RAM.
• Application Layer is also known as Kernel Layer and Basic Layer.
• SAP application programs are executed in Application Layer.
• Application Layer serves as a purpose of a communicator between Presentation and
Database Layer.

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• Application server is where the dispatcher distributes the work load to the different work
processes makes the job done.

Database Servers
Database servers contain specialized systems with fast and large hard-drives.

• Database layer stores the data

• Data store can be Business data, SAP system data, SAP tables, Programs.
• Examples − Oracle, Microsoft SQL Server, IBM DB/2, Siebel, Sybase, etc.

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SAP include a number of functional modules, which support transactions to execute key business
processes, such as −

• Financial Accounting (FI)

• Financial Supply Chain Management (FSCM)
• Controlling (CO)
• Materials Management (MM)
• Sales and Distribution (SD)
• Logistics Execution (LE)
• Production Planning (PP)
• Quality Management (QM)
• Plant Maintenance (PM)
• Project System (PS)
• Human Resources (HR)

Finance and Controlling (FICO)

SAP FICO is a combination of two ERP modules, i.e., Finance Accounting (FI) and
Controlling (CO). Under Finance in SAP and at an enterprise level, the following modules take
part −

• FI − Finance
• CO − Controlling
• IM − Investment Management
• TR − Treasury
• EC − Enterprise Controlling

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SAP FI (Financial Accounting) is accountable for tracking the flow of financial data across
the organization in a controlled manner and integrating all the information for effective
strategic decision-making.
Activities Involved in SAP FI
• Creation of Organizational Structure (Defining Company, Company Codes, business Areas,
Functional Areas, Credit Control, Assignment of Company Codes to Credit Controls)
• Financial Accounting Global Settings (Maintenance of Fiscal Year, Posting Periods, defining
Document types, posting keys, Number ranges for documents)
• General Ledger Accounting (Creation of Chart of Accounts, Account groups, defining data
transfer rules, creation of General Ledger Account)
• Tax Configuration & Creation and Maintenance of House of Banks
• Account Payables (Creation of Vendor Master data and vendor-related finance attributes
like account groups and payment terms)
• Account Receivables (Creation of Customer Master data and customer-related finance
attributes like account groups and payment terms
• Asset Accounting
• Integration with SD and MM
SAP CO (Controlling) module facilitates coordinating, monitoring, and optimizing all the
processes in an organization. It controls the business flow in an organization. This module helps in
analyzing the actual figures with the planned data and in planning business strategies.
Two kinds of elements are managed in CO −

• Cost elements
• Revenue elements
These elements are stored in the FI module.
Activities Involved in SAP CO
• Cost Element Accounting (Overview of the costs and revenues that occur in an
organization)
• Cost Center Accounting
• Activity-Based-Accounting (Analyzes cross-departmental business processes)
• Internal Orders
• Product Cost Controlling (Calculates the costs that occur during the manufacture of a
product or provision of a service)
• Profitability Analysis (Analyzes the profit or loss of an organization by individual market
segments)

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• Profit Center Accounting (Evaluates the profit or loss of individual, independent areas
within an organization)

Sales & Distribution Management (SD)

SAP SD is one of the most important modules in SAP. It has a high level of integration
complexity. SAP SD is used by organizations to support sales and distribution activities of products
and services, starting from enquiry to order and then ending with delivery.
SAP SD can monitor a plethora of activities that take place in an organization such as
products enquires, quotation (pre-sales activities), placing order, pricing, scheduling deliveries
(sales activity), picking, packing, goods issue, shipment of products to customers, delivery of
products and billings.
In all these processes, multiple modules are involved such as FI (Finance Accounting), CO
(Controlling), MM (Material Management), PP (Production Planning), LE (Logistics Execution), etc.,
which shows the complexity of the integration involved.
Activities Involved in SAP SD
• Setting up Organization Structure (creation of new company, company codes, sales
organization, distribution channels, divisions, business area, plants, sales area, maintaining
sales offices, storage location)
• Assigning Organizational Units (Assignment of individual components created in the above
activities with each other according to design like company code to company, sales
organization to company code, distribution channel to sales organization, etc.)
• Defining Pricing Components (Defining condition tables, condition types, condition
sequences)
• Setting up sales document types, billing types, and tax-related components
• Setting up Customer master data records and configuration

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Supplier Relationship Management (SRM)
As the name SRM suggests, this module deals with the effective and efficient transition of
products and services between an organization and its suppliers. The main process covered in this
section is procurement of products like direct materials, indirect materials, and services. This
module can effectively integrate with planning, accounting, and inventory system.

End-to-End Procurement Cycle

Procurement process with SAP Enterprise Buyer comprises of the following major steps −

• Shopping Carts
• Approval of Shopping Cart
• Sourcing of Requirements
• Purchase Orders
• Purchase Order Approval
• Confirm Goods/Services
• Confirmation Approval
• Process Invoice
• Invoice Approval

Customer Relationship Management (CRM)

CRM deals with end-to-end customer related processes. CRM is designed to centralize the
data related to all the customers associated with an organization. It helps an organization −
• Maintain its sales, services, and build marketing strategies according the market demand
and customer data analysis.

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• Remain focused on its customers and via information analysis, help the business to know
more about its customers.
• Improve sales and services and building better relationships with customers.

Human Resource (HR)

The most important objective of master data administration in Human Resources is to
enter employee-related data for administrative, time-recording, and payroll purposes.
A new employee can be hired without using Recruitment. Instead you can hire someone
by running a personnel action in Personnel Administration, thereby creating the necessary data
for the employee to be hired.
Employee data must be kept current. After an employee is hired, circumstances can
always arise which necessitate either the entry of new data or the correction of current data. For
instance −
• An employee moves to his or her new address must be stored in the system.
• An employee gets a pay hike at the start of the year. The new salary must be stored for the
relevant date.
• An employee changes jobs within the organization. His or her organizational assignment,
working time, and salary also change.
• Data can be stored for the past, present, or future.
Note − Entering payroll-relevant data in the past triggers retroactive accounting.

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The HR module is comprised of major areas of functionality known as sub-modules. The

HR module is a true demonstration of the strength of the SAP product in Enterprise Resource
Planning.
The HR system has very strong integration points (where data is passed back and forth
without human intervention) with just about all of the other SAP modules. In addition, there is
very tight integration amongst the HR sub-modules.
The above illustration highlights some of the basic SAP HR terms as listed below.

• Business trip management

• Recruitment
• Payroll
• Personal development
• Organizational Management
• Time Management
• Workforce Planning
• ESS
• MSS
• Training and event management
• CATS
• Benefits
• Compensation management
• Personal Administration

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Material Management (MM)
Material Management deals with movement of materials via other modules like logistics,
supply chain management, sales and delivery, warehouse management, production and planning.

• A business process in SAP is termed as “Module”.

• SAP Materials Management (MM) is a part of Logistics area and helps to manage the
procurement activity of an organization from procurement.

• It supports all aspects of material management (planning, control etc).

• It is the backbone of the Logistics area which incorporates modules like Sales and
Distribution, Production Planning, Plant Maintenance, Project Systems, Warehouse
Management which are extremely obsessed on Materials Management module.

• It deals with managing the materials (products and or services) resources of an organization
with the aim of accelerating productivity, reducing costs and increase improvement and at
a similar time be versatile to accommodate changes in day to day life.

• It deals with the Procurement Process, Master Data (Material & Vendor Master), Account
Determination & Valuation of Material, Inventory Management, Invoice Verification,
Material Requirement Planning etc.

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Data Types
There are 3 types of Data they are

1. Master Data
2. Transaction Data
3. Configuration Data

1. Master Data

• Master Data is a CORE DATA that acts as a BASE for any Transaction.
• It's the Data which saves most of the Information

Example:
• When a Patient enters in to the hospital before starting the treatment, the hospital staff
will take the details of the patient. This Details acts as a Master Data, in further if the
patient again visits the hospitals, he/she don't require to give the details once again
because the data will be already available. Using this Details further billing can be made.

There are 5 Types of Master Data

1. Material Master Data

2. Vendor Master Data
3. Purchase Info Record
4. Source List
5. Quota Arrangement

2. Transaction Data

Data that is associated with processing of business transaction is called as transactional

data.

Ex-Creating PR, Creating PO, MIRO etc...

3. Configuration Data

Changing settings and data to make SAP Functionality to match the business.

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Procure to Pay (P2P Cycle)

Requirement determination:-
Whenever we found any shortage or requirement of material or services in any department
within an organization

Source Determination :-
Once the requirement of the material is listed then we go for the searching Sources like
vendors, customers to get the materials.

Vendor selection & Quotation :-

After we find out the sources we prepare quotation to get the required material for better
price and quality, later it will send to different vendors & negotiating with vendors we select
suitable vendor.

Purchase requisition :-
Once the vendor selection is done non purchasing department send purchase requisition to
purchasing department to procure the require materials.

Purchase order :-
To get the required material for organization we rise purchase order for the material and
sent to vendor. If purchase manager is not satisfied with price & vendor, he can hold the PO or may
cancel.

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Goods receipt :-
Vendor will issue the goods as per the purchase order, the goods will receive at plant, or
factory & prepare goods receipt for the same.

Invoice :-
Once the goods are delivered, the vendor will sent invoice for the delivered goods. The
invoice is verified for the respective goods & later payment done to the vendor.

Organizational Structure/Enterprise Structure

Organizational elements are broadly divided into two areas they are

• Financial Area
• Logistics Area

Financial Area
• Company Code
• Controlling Area
• Currency and More

Logistics Area
• Plant
• Storage Location
• Sales Organization
• Sales Distribution Channel
• Sales Division Etc...

Enterprise Structure : -
Enterprise structure defines various levels in an organization. These levels are placed
according to some hierarchy. Each level has some specific functionality associated with it, which
in a combined way describes the working of an organization. Also enterprise structure defines
various organizational units that are present in an enterprise. The Organizational Structure in MM
consists of following Organizational Levels:

• Client

• Company Code

• Plant

• Storage Location

• Purchasing Organization

• Purchasing Group

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Client
• Client is a commercial organizational unit in R/3 system.

• It has its own set of master data with independent table sets.

• According to hierarchy, Client is at highest level in SAP system.

• Data that is maintained at client level is valid for all organizational levels.

Company Code
• Within Client, Company code is the independent accounting unit.

• It is a legal entity that has its own profit, loss and balance statement.

• It is the smallest unit in organization for which a complete independent account set can be
replicated.

Plant
• Plant is an organizational unit within a company where activities take place. A plant will
produce goods and makes goods available for the company.

• It is unit having manufacturing facility, warehouse distribution center or a regional sales

office within logistic. It subdivides an enterprise in different aspects.

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Storage Location
• Storage location is an organizational unit which actually differentiates between different
material stocks in a Plant.

• Storage location is a place where stock is kept physically.

• Plant can be consisting of multiple storage location. All data is stored at storage location
level for a particular storage location.

Purchasing Organization
• Purchasing Organization is an organizational unit under company or plant which is
responsible for procurement activities according to requirements. It is responsible for
external Procurement.

• Purchasing organization can be at client level i.e. centralized purchasing organization.

• Purchasing organization can be at company or plant level i.e. company specific or plant
specific

Different forms of purchasing can be described as follows:

Centralized Purchasing
• Purchasing organization is not assigned to any company code it procures for all company
codes belonging to different client.

Company specific Purchasing

• Purchasing organization is assigned to a company code only, Plant belonging to the
company code can purchase through this Purchasing organization.

Plant specific Purchasing

• Purchasing organization is assigned to a Plant, only this specific Plant can purchase through
this Purchasing organization.

Purchasing Group
• Purchasing group is an organizational unit which is responsible for everyday procurement
activities within an organization.

• It is a buyer or group of buyer responsible for procurement activities in a purchasing

organization.

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All the Definitions in SAP will be done through Display IMG screen, Now we can the customization
part for the creation of company, company code, Plant, storage loc, Purchasing organization.

Create Company:
Path to create Company:
IMG => Enterprise Structure => Definition => Financial Accounting => Define Company
Transaction Code: OX15
On display IMG screen select Define Company execute icon by following the above path.

Click on New Entry icon and fill all the required details like company, company name, street,
postal code, Country, Currency, Language key etc.… as shown below.

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Create Company Code:

Path to Create Company Code:

IMG => Enterprise Structure => Definition => Financial Accounting => Edit, Copy, Delete,
Check Company Code

Transaction Code: OX02

On display IMG screen select Edit, Copy, Delete, Check Company Code execute icon by
following the above path,

We have to Copy the all the data from reference Standard Company code 1000 to new company
Code and create it by filling all the required entries as shown below.

Create Plant:
Path to create Plant:

IMG => Enterprise Structure => Definition => Logistic General => Define, Copy, Delete check
plant
Transaction Code: OX10

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On display IMG screen select Define, Copy, Delete check plant execute icon by following the above
path.

Click on Define plant later click on New Entries icon & fill all the required details as per your
requirements and save data as shown below.

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Create Storage location:
Path to Create Stg. LoC:

IMG => Enterprise Structure => Definition => Materials Management => Maintain Storage
Location
Transaction Code: OX09

On display IMG screen select Maintain Storage Location execute icon by following the above path.

Click on New Entry, Give the plant to which you are creating the Storage location & enter the
name of storage location along with description as shown below,

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Create Purchase Organization:
Path to create purchase org.

IMG => Enterprise Structure => Definition => Materials Management => Maintain Purchasing
Organization
Transaction Code: OX08

On display IMG screen select Maintain Purchasing Organization execute icon by following the
above path.

Click on New Entry and enter Purchasing Org along with description & save the data,

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Creation of Purchasing group:
Path to create:

IMG => Materials Management => Purchasing => Create Purchasing Group
Transaction Code: OME4

On display IMG screen select Maintain Purchasing Group execute icon by following the above
path.

Click on New Entry & enter the Purchasing group along with description, save the data

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To establish relationship between these levels we have to assign them to one or other in such a way
that they still lie in the same hierarchy. For Example: As Company is at top level and plant is below
it, so it is necessary that plant has some relation with company (As plant is a sub part or smaller
division of company), so plant will be assigned to company. Four basic and must assignments in
standard SAP are:

• Plant to Company code

• Purchasing organization to company code

• Purchasing organization to Plant

• Standard purchasing organization to plant

Assignment of Company Code to Company:

Path to Assign:
IMG => Enterprise Structure => Assignment => Assign Company Code to Company
Transaction Code: OX16

On display IMG screen select Assign company code Company execute icon by following above
path.

Assigned the Company Code “NL01” to respective Company as shown below,

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Assign Plant to Company Code:

Path to Assign:

IMG => Enterprise Structure => Assignment => Assign Plant to Company Code
Transaction Code: OX18

On display IMG screen select Assign plant to company code execute icon by following above path
Click on New Entry, Enter the company code, plant & save the data.

Assign Purchasing organization to Company Code:

Path to Assign:

IMG => Enterprise Structure => Assignment => Materials Management => Assign Purchasing
Org to Company code
Transaction Code: OX01

On display IMG screen select Assign Purchasing Organization to Company Code execute icon by
following the above path. We can view existing assignment and also we can change accordingly.
Click on save after making changes. Purchasing organization is now assigned to company code

Assign Purchasing Organization to Plant:

Path to Assign:

IMG => Enterprise Structure => Assignment => Materials Management => Assign Purchasing
organization to Plant

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Transaction Code: OX17

On display IMG screen select Assign purchasing organization to plant execute icon by
following the above path. Click on New entry icon enter name of plant and purchasing organization.
Click on save. Purchasing organization is now assigned to plant

The Enterprise Structure of Tata Group of Company as shown below in SAP Navigation,

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Data Types
There are 3 types of Data they are

4. Master Data
5. Transaction Data
6. Configuration Data

2. Master Data

• Master Data is a CORE DATA that acts as a BASE for any Transaction.
• It's the Data which saves most of the Information

Example:
• When a Patient enters in to the hospital before starting the treatment, the hospital staff
will take the details of the patient. This Details acts as a Master Data, in further if the
patient again visits the hospitals, he/she don't require to give the details once again
because the data will be already available. Using this Details further billing can be made.

There are 5 Types of Master Data

6. Material Master Data

7. Vendor Master Data
8. Purchase Info Record
9. Source List
10. Quota Arrangement

4. Transaction Data

Data that is associated with processing of business transaction is called as transactional

data.

Ex-Creating PR, Creating PO, MIRO etc...

5. Configuration Data

Changing settings and data to make SAP Functionality to match the business.

Material Master Data

• This is the enterprise main source of material specific data. This data will include information on the
materials that a company can procure, or produce, or store or sell.

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• Since there are different departments in an enterprise and each department works on some specific
material. So they will enter different information regarding their material. So each user department has
its own view of material master record. Material Master has divide in to 2 categories,

1. Main Data: This will include basic data (base unit of measure, weight), purchasing data
(over tolerance and under tolerance), accounting data (standard price, moving price).
2. Additional Data: This will include additional information like short description about
material, currency etc.

Material master has the four characteristics which will be discussing one by one in below context.

1. Material Types
Materials with some common attributes are grouped together and they are assigned to a
material type. This will differentiate materials and allow organization to manage different materials
in systematic manner in accordance to company’s requirement. For example: Raw Material,
Finished Products are some of the material types. Material type can be created by following the
below steps.

Path to create:
IMG >= Logistics General >= Material Master >= Basic Settings >= Material Types >= Define
Attributes of Material Types

Transaction Code: OMS2

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On display IMG screen click on Define Attributes of Material Types execute icon & here you can
create Material type by click on New entry icon or Copy from the existing one, usually prefer copy
the existing one then enter the details as per requirements.

2. Material Groups
Material group is a wider range of material type. Materials with some common attributes
are taken together and they are assigned to material group. For Example: Suppose we have some
materials which need packaging, so their material type can be electrical or food products but we
can group these material types and put them in packaged material group.

Path to Create: IMG => Logistic General => Material Master => Settings for Key Fields =>
Define Material Groups
Transaction Code: OMSF

On display IMG screen select Define Material Groups execute icon, click on New entry icon &
enter the name of the Material group along with description & save.

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3. Number Range
When we create material master record every material is recognized by a number, that number
will be unique and known as material number. We can assign number to material through two ways:

• External number assignment - While creating material you have to enter your own number
(containing alphabets or digits), and that should be unique.

• Internal number assignment - While creating material you need not enter any number
system will automatically generate a unique number to that material.

Define Number Range:

Internal number range can be defined by following the below steps:

Path to create: IMG => Logistic General => Material Master => Basic Settings => Material
Types => Define Number range for each Material Type

Transaction code: MMNR

We can define number range here and EXT (external tab, if it is checked then external
number assignment can be done in that material). Click on save. Number Range is now defined for
the material.

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4. Assignment of Number Range:
On display IMG screen select Define Number Range for Each material Type execute icon
by following path, go to group tab click on insert group & give the group name, interval later assign
the group to created material type as shown below.

Field Selection for Material type:

In SAP every screen contains fields in that some are made Hidden, Mandatory, Display &
optional as per requirement. As a consultant we need to do configuration & maintain fields as per
company requirement.

In the below image Material Group is maintained as Optional entry in Filed selection for data
Screens.

Now by doing configuration we will make it as display, before that we should know the technical
information like Table name & Field name.

We need to put cursor on field & press F1 key it will show the pop up window, select the technical
info & note down the Filed reference name i.e MARA-MATKL.

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Patch to Create:

On display IMG screen select Assign files to field selection of groups to know the selection group
for Table & Field.

Transaction Code: OMSR,

In the below image we can see the Filed name & selection group.

Maintain Field Selection for Data Screens:

Transaction Code: OMS9

Select the Maintain Filed selection for data screens by following the above path, click on
Field sel. Group enter the selection group & select the Filed reference which is need to be configure..

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In the below image, for material group filed selection is usually maintained as optional, but
now it is maintained as display as shown below. After configuring the filed selection, here we can
observe that material group is made display as shown below,

Vendor Master Record:

• This is the enterprise main source of vendor specific data. This data will include information
on vendors from which a company can procure or it can sell.

• Vendor Master Record will contain information like vendor's name, address.

Data in Vendor master record is divided into 3 categories:

• General Data: General data is maintained at client level and it is valid for all organizational
levels.
• Accounting Data/Company code data: Accounting data is maintained at company level
and it is valid for all plants belonging to that company

• Purchasing Data: Purchasing data is maintained at purchasing organization level.

Vendor master has the three characteristics

• Vendor Accounting group

• Number Range

• Assignment of Number range

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1. Vendor Account Group:
Vendors are categorized according to requirements and some of the vendors having similar
characteristics are grouped together and placed in one category. For Example: All local vendors can
be placed under one account group. Vendor Account group can be created by following the below
steps.

Path to Create:

IMG => Logistic General => Business Partner => Vendors => Control => Define Account group &
field selection (vendor)

Transaction Code: OMSG

On display IMG screen select Define Account group and field selection (vendor) execute icon

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Click on New Entry or Copy from existing one, fill all the required details & save it. The new account group has
been created as shown in below image.

2. Number Range:
When we create vendor, master record every vendor is recognized by a number, that number
will be unique and known as vendor number. As discussed in material master, in similar way we
have external as well as internal number assignment for vendor master.

Define Number Range:

Path to create

IMG => Logistic General => Business Partner => Vendors => Control => Define Number Range
for vendor master record.

Transaction Code: XDN1

Select Define Number Range for Vendor master record execute icon by following the above
path & select change Interval icon. It will create number range for customer account, click on the
Insert Interval Icon. Enter the No. range & save it.

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3. Assignment of Number Range:

After defining we need to assign it to vendor group. Number range can be assigned by
following the below steps.

On the same screen as shown above select Number Range tab

For a particular vendor group assign number range here. Click on save. Number range is now
assigned to vendor group.

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Creation of Vendor Master Record:
Vendor Mater contains list of vendors from which a company can procure or it can sell.
Vendor Master can be created by following the path or using T-code.

Vendor Master Record consists of 3 areas,

1. General data 2. Company Code data 3. Purchasing data

Path to Create:

SAP Menu => Logistics => Material Management => Purchasing => Master Data => Vendor =>
Central => Create

T-Code:
1. XK01- Create Vendor Master Record
2. MK01- Create Vendor Master Record with Purchasing Data Only
3. FK01- Create Vendor Master Record with Company Code Data Only
4. XK02- Change Vendor Master Record
5. XK03- Display the Vendor Master Record
6. XK05- Blocking the Vendor
7. XK06- Flag For Deletion
8. MKVZ- Display Vendor List

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Purchase Info Record:
Purchase info record contains information of a vendor & the material.

We can store & maintain the following data in info record,

• Current & future prices & the conditions ( freight & discounts )

• Delivery date (planned delivery time & tolerance)

• Vendor data

When we create purchasing documents the system displays data maintained in info record as default
values.

Structure of Purchasing Info Record

A PIR contains general data that is valid for every purchasing organization or every plant. It
also contains data (price & conditions) that is only valid for the relevant purchasing organization or
relevant plant.

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Options for maintaining info records:

We can maintain info records manually or automatically from quotations, PO, outline agreement.

Updating an info record automatically

When we create or change quotations, contracts & PO, we can use the info update indicator to
define that the info record is to be created or updated. While creating PO without PIR, after filling
the required entries at item level in the material data tab we have option as info update there we
have to check the info update field & save. Now info record is created in background

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• The system copies the condition from the quotation, contracts, PO to the info record
• The document number from a last PO or contract release order is updated as purchasing
document.

Info update Indicator: Quotation

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The info update indicator is set in configuration in below path

Path: SPRO==> Material Management==> Purchasing==> Environment data==> Define Default

values for Buyers

On the display IMG screen select Define Default Values for Buyers in the below image we can see
how we can change settings for indicator update in quotations.

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Info Update Indicator: Purchase Order

The condition control at plant level is set in customizing in below path,

Path:

SPRO==> Material management==> Purchasing==> Condition==> Define condition at plant

level.

On the IMG screen in SAP, select define condition at plant level, select plant & press F4 key. Here
select for which plant & maintain indicator info in purchase order as per requirements as shown
below.

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Info Records & Prices:

If the Info record is available system will copy the price & conditions from the info record, if not it
will copy from last PO. If last PO is also not available then we need to enter price manually.

Creating Purchasing Info Record

1. ME11-Create Purchase Record.

2. ME12-Change Purchase Info Record.
3. ME13-Display Purchase Info Record.
4. ME1M- PIR List with respect to Material.
5. ME1L-PIR List with respect to Vendor.

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Define Number Range:
In the below image we have standard elements like IN & IL
IN – It is for stock material
IL – It is for Non stock material

Path to create:

IMG==> Material management==> Purchasing==> Purchase info record==> Define Number

range

Transaction Code: OMEO

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On the displayed IMG screen select define number range, then select group & insert new group
maintain number range as per requirement & save data.

In the below image we can see the number range defined for group Sample in PIR.

Define Screen Layout:

Select the define screen layout as shown in above IMG screen by following path, here we can
modified fields appears on screen while creating PIR.

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In the below image usually purchasing group is made as optional entry in screen layout fields, but
now it is configured & changed to display option as shown in below image.

After the screen layout fields configuration the out come of the configuration setting we can see in
the below image which is marked with red color box

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Source List:
• Source list record contains the list of available sources (nothing but vendors) who will be
providing the materials that are required by the organization.
• For some materials there can be more than one possible source available.
• Source list specifies the time period of ordering of a particular material from a given vendor.

Source list can be created by following two ways:

• Automatically

• Manually

Automatic Creation of Source List

• Source list can be automatically created by doing some setting in material master. Automatic
source list can be created by following the below steps.
• While creating material master in purchasing view check the box for source list. Click on
save. Source list will be created automatically for the material

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Manual Creation of Source List
Source list can be created manually by following the below steps:

T-Codes

1. ME01-Maintain Source List Manually.

2. ME01-Generate Source List (For this Prerequisites is PIR)
3. ME03-Display Source List
4. ME05-Generate Source List(For this Prerequisites is PIR)

Enter the material number for which you want to maintain source list and respective plant details

Fill in all necessary details like valid periods, name of vendor, purchasing organization. Click on
save icon. Source list for the material is now maintained.
• In Source list you can define fixed vendor i.e. if the vendor is providing good materials
compared to other listed vendors then for that particular material, we can fix the vendor by
checking the Fix vendor box which is highlighted & marked with red & yellow color
• In Source list we can block the vendor by checking Blk field box which is highlighted in
yellow color. This scenario is if the vendor has not provided the goods properly in the
previous order.

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Customization of Source list:

Path to create:

IMG==> Material management==> Purchasing==> Source list

Transaction Code: OLME

On the display IMG screen select Define Source list requirement at plant level by following the
path.

In the below image we make requirement of source list at plant level.

Ex:- For plant 1000 we have made source list requirement by checking source list field as shown
below.

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Purchasing Document

Purchasing Document

Internal Purchasing External Purchasing

PR PO SA CO RFQ

Full Forms:

1. PR-Purchase Requisitions.
2. PO-Purchase Order
3. SA-Scheduling Agreement
4. CO-Contract
5. RFQ-Request for Quotation

Purchase Requisition:
• It is an internal purchasing document
• The PR is created by no purchasing department
• PR can be created manually or automatically.
• A PR is a request or instruction to purchasing department to process a certain quantity of
material or service. so that it is available at certain period of time

Configuration of PR:

Path to Create:

SPRO==> Material Management==> Purchasing==> Purchase Requisition==> Define Number

Range==> Define Document Type

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Step 1: On the display IMG screen select Define document type, copy the existing standard
document & create the new document type along with description, item interval field, no range
interval.

• Item interval: This defines the item interval b/w two-line items in the PR
• Number range interval: No. range can be maintained either Internal or external No. range.

Select Document type & click on the Allowed item category tab highlighted in the image, the defined
document types are responsible for the item categories L, K, D. What are the item categories required
keep & delete other categories as per requirement.

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Select the item category in the allowed item category tab & click on purchase requisition-document
types. Here we can enter preceding document such as RFQ, SA, PO, which means we are allowing
other documents use PR for further process in Business scenarios.

Note:
NAA: - No A/C assignment category, this indicator specifies that PO must not contain a/c assignment
category
R/S: - This indicator specifies whether release order or delivery schedules are possible in purchasing
document such as SA, Contract.
Dialog: - This indicator specifies that system issues message to users in the event combination of
document type & item category.

Step2: - Define Number Range

Path to create:

SPRO==> Material Management==> Purchasing==> Purchase Requisition==> Define Number

Range.

Select Define Number range execute icon by following the above path on IMG screen. Click on the
intervals & define the number range either internal or external as per the requirement & save Z1
interval is created.

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After defining the number range interval Z1, go back to define documents execute icon on IMG
screen, select the document & assign the defined number range interval Z1 to the defined document
ZNB

Step3: - Define Screen Layout at Document level

Select the Define Screen layout at document level execute icon, copy the existing standard one &
create the new one as ZBB shown below

Select the created filed selection key ZBB click on details here we are having different field selection
group, as per the requirement we can make filed as optional, required or display.

In below image usually plant in basic data field group is maintained as required entry in the
document, but it is check with Display option as shown in fig.

After the configuration of the filed selection group the result is as shown in below image.

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After creating the new field selection key, go back to define document on the IMG screen execute
the icon & assign the new filed selection ZBB to the newly defined document type ZNB

T-Codes to Create PR

1. ME51N-> Create PR
2. ME52N-> Change PR
3. ME53N-> Display PR
4. ME54N-> Individual PR Release
5. ME55-> Collective PR Release
6. ME5A-> PR List Display

Unit of Measure in PR
• Basic unit of measure in material master will flow into the PR

Material
Buom Ouom

PR
• Valuation Price in PR
Material

PR

Note: -
• Final PR approval to the time of PO generation is known as processing time.
• Valuation Price in PR is picked up from MMR and if not maintained it takes as Zero.
• PR can be created
1. Manually
2. With respect to MRP
3. with reference to another PR

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Purchase Order:

• A Purchase order is a formal request or instruction from a purchasing organization to a vendor

to supply or provide a certain quantity of goods or services by a certain point of time.
• PO can be created
1. Manually
2. with respect to PR
3. with respect to RFQ
4. with respect to PO
5. without any Reference

Note:

If you delete an item in PO you cannot retrieve it back, but if you block an item you can unblock
it.

Purchase Requisition Purchase Order

1. The Purchase requisition is about taking 1. The Purchase order is for purchasing the
approval or permission from the concern materials or products. It is an formal document
person who is responsible for purchasing. that the organization gives to the vendor.

2. PR is an internal document remains within 2. PO is an external document, it will send o

the organization vendors for procurement of goods.
3.PR is about permission 3. PO is about purchasing

Configuration of PO: Configuration PO is same as PR

Step 1: Define Number range

Path to Create:

SPRO==> Material Management==> Purchasing==> Purchase order==> Define Number

Range==> Define Document Type

Transaction Code: OMH6

On the display IMG screen select Define Number range by following the above path, Click
on the intervals & define the number range either internal or external as per the requirement & save
RL interval is created.

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• Internal no. assignment – In this case, a no within the no range interval allowed is assigned
by the system
• External no. assignment – In this case we can assign the number within the no range
interval allowed. We can define the intervals for external no assignment numerically &
alphanumerically.

Step 2: Define Document Type

Path – SPRO==> IMG reference==> material management==> Purchasing==> PO==> Define No.
ranges==> Define document types

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Description – In this step we have,

• Created new document type TNB along with description.

• Defined item interval.
• Define allowable item categories for document type such as D, L, K, etc..

After creation, assign document type to a no range. (internal no. range RL) as shown in image.

Step3: - Define Screen Layout at Document level

Select the Define Screen layout at document level execute icon on the IMG screen, copy the
existing standard one & create the new one as NBL.
In the below image Plant is usually maintained at Optional entry in field selection but now it
is configured and check with display

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After the configuration of the filed selection group the result is as shown in below image.

T-Codes to create PO:

1) ME21N- Create PO
2) ME22N- Change PO
3) ME23N- Display PO
4) ME29N- Release PO
5) ME28- Collective PO Release
6) ME2M- PO List with respect to Material
7) ME2L- PO List with respect to Vendor

Unit of Measure in PO

Material PIR
Base Unit Order Unit
Account Assignment

PR PO PO

Price in PO
Material PIR

Price will not flow I. PIR

II. Previous PO
III. Manually

PR PO PO

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Request for Quotation:

• It is form of invitation that is send to vendor’s to submit the quotations indicating their pricing
& terms & conditions.
• It contains details about goods or services, quantities, date of delivery & date of bid which is
to be submitted.

RFQ / Quotation
Purchase
Purchasing order

Vendor
Vendor A
A
Purchase Request for Quotation
requisition quotation
Source
of supply Vendor
Vendor B
B

Vendor
Vendor C
C
Rejection

Master data

© SAP AG

Structures of RFQ:
An RFQ consists of the RFQ header, the item

RFQ Header: Contains general information of the RFQ such as Vendor address.

Items: Contains the total quantities & delivery dates for the material or services specified in the
RFQ.

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Function Process: Creating RFQs

1
1 Initial screen
Quotation
deadline
Purch. org.
Purch. group

2
2 Item overview screen Item detail screen

Material
Quantity
Date

3
3 Vendor address Header detail screen

Vendor Collective
number number

Save Exit
© SAP AG

• Either enter RFQs with or without reference to a purchase requisition, another RFQ or an
outline agreement.
• Maintain the organizational levels and the deadline for submission of quotations on the initial
screen.
• After filled out the initial screen, enter the items for the RFQ. You can enter an RFQ for
vendors with a master record or for one-time vendors. With a one-time vendor, you must
enter the address in the RFQ.

Collective Number

RFQ campaign = common collective number

RFQ 1 RFQ 2 RFQ 3

Vendor A Vendor B Vendor C

M aterial 1
M aterial 2
M aterial 3
? M aterial 1
M aterial 2
M aterial 3
? M aterial 1
M aterial 2
M aterial 3
?
R

© SAP AG

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• You can link a number of RFQs that belong together with the help of the collective number.
enter the collective number once in the header data of the RFQ and the system then adopts it
in all the other RFQs in your item list. You can then refer to the collective number, for
example, when comparing prices and thus obtain all the associated quotations.
• The collective number can have a maximum of ten characters and can be alphanumeric.

Configuration of RFQ:

Step 1: Define Number Range

Path to create:

IMG → Materials Management → Purchasing → RFQ/Quotation → Define Number range

Transaction Code: OMH6

Select Define Number range by following the above path, click on interval and create the No. range
interval either Internal or External no. range as shown below

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Step 2: Define Document Type

Document type controls the following,

• The item no. range interval
• Links PR- Document types
• Filed selection

Path to create:

IMG → Materials Management → Purchasing → RFQ/Quotation → Define Document Types

Transaction Code: SPRO

Select Define Document Type by following the above path, click on new entries and create the
document type as shown below.

• Created new document type

• Defined item interval
• Defined allowable item categories for the document type.
• Assigned document types to a number range group
• Defined number range interval
• Chosen type of number assignment 1. Internal 2. External

Linkage determines which PR document types can be referenced for creating a particular RFQ
document type

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Step3: - Define Screen Layout at Document level

Select the Define Screen layout at document level execute icon on the IMG screen, copy the
existing standard one & created the new one as TANA.
In the below image Plant is usually maintained at Optional entry in field selection but now it
is configured and check with display

After the configuration of the filed selection group the result is as shown in below image. Here
Plant field is in display mode.

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Pricing Procedure:

• Pricing procedure is a way to determine prices in purchasing documents. It gives us

functionality to assign different calculation types for different needs.
• It is combination of different charges like Gross Price, Freight, Discount, Surcharge’s, etc.

Customization of Pricing procedure:

Path to create:
IMG → Materials Management → Purchasing → Conditions → Define price determination process
→Define Access sequence →Define Condition Type → Define Calculation Schema → Define
Schema Group → Define Schema determination → maintain Condition table

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Step1: Maintain Condition table

Condition Records and Condition Tables

Condition table A017 (info record with plant)
Cond. ty. Vendor Material Pur. org. Plant ... Cond. rec. no.

PB00 A 1 1000 1000 ... 1234

Condition table A018 (info record without plant)

Cond. ty. Vendor Material Pur. org. ... Cond. rec. no.

PB00 A 1 1000 ... 4321

Table KONP (item conditions)

Cond. rec. no. Cond. ty. ... Cond. amount ...

1234 PB00 ... 10.00 ...

4321 PB00 ... 11.00 ...

© SAP AG

• Conditions are stored in the system as condition records.

• Condition tables reference condition records. Condition tables enable you to vary the key
structure of condition records.
• There are condition tables with the following key fields, for example:
o Vendor, material, purchasing organization, info record category
o Vendor, material, purchasing organization, plant, info record category
o Vendor, material, purchasing organization, info record category, order unit

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o Purchasing document, item, plant
o Vendor/Plant
• Entries in condition tables consist of a key part and a data part. The data part contains the
number of a condition record.
• Condition records are stored in the following transparent tables, for example:
o KONP (time-dependent conditions)
o KONH (header conditions)
o KONM (quantity scales)
o KONW (value scales)

It’s a table where we can save all the fields with combination for individual condition record/
Value.

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The above figure shows the creation of Condition tables where in the right side consist of
field catalog, in which the selected field from the field catalog comes in left side Selection filed.
Here we selected the vendor & plant from filed category click on generate symbol & save the data.
The Condition table 964 is created as shown in above image.

Step2: Access Sequence

Access Sequence for Gross Price

Calculation schema Purch. order

Step Condition type
Pur. org. 1000
1 PB00
Vendor A
Condition type PB00 For plant 1000
Access sequence: 0002 Material 1
Access sequence 0002
No. Tab. Requirement
10 68 Contract item, plant-dependent
15 16 Contract item
20 67 Plant info record per order unit Plant info record exists,
variable order unit active
25 17 Material info record, plant-specific Plant info record exists
35 18 Material info record
45 28 Info record for non-stock material Item without material
...
Condition table R

No. of condition record

© SAP AG

• Access sequence is where system should search for record based on priority.
• The access sequence is a search strategy defining the order in which condition tables are
searched for relevant entries for a condition type. The order of accesses is determined by the
order of the condition tables in the access sequence.
• A vendor's gross price for a material can depend on a variety of factors. There are different
condition tables with different combinations of key fields for the various price-influencing
factors, e.g.:

o Table A068: for gross prices in plant-specific outline agreement items

o Table A016: for gross prices in the items of centrally agreed contracts
o Table A067: for order-unit-dependent gross prices in plant-specific material info
records
o Table A017: for gross prices in plant-specific material info records
o Table A018: for gross prices in material info records

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o Table A025: for gross prices in plant-specific non-stock-material info records (info
records without a material number).
• As of Release 4.0A, it is possible to differentiate between gross prices, discounts and
surcharges for different variants of a configurable material.
• Requirement routines are used to determine the prerequisites according to which the system
searches certain condition tables for relevant entries. Some condition tables are only accessed
if the document item fulfills certain criteria.

Define Access Sequence:

We can create the new Access Sequence by clicking on new entries/ copying from existing
and then we can give the Condition table as per our priority to pick the condition record/ values.

In the below image we have created the Access sequence ZGS1 and maintain the access with
condition table 964 Vendor/ Plant as shown.

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Step3: Condition Types
• Conditions are assigned with vendors regarding prices, discounts, surcharges, freight charges
etc.
• Conditions can be maintained in quotations, PIR’s, Outline agreement, PO, etc.
• Conditions can setup as header or item condition
• An access sequence may be assigned to a condition type. (access sequence not maintained
for discounts %)

Condition Types

Key Description Control

Condition class: Prices
Calculation rule: Quantity-dependent
PB00 Gross price
Condition cat.: Base price
Access sequence: Gross price

Condition class: Discount/surcharge

FRB1 Freight, absolute Calculation rule: Fixed amount
Condition cat.: Delivery costs

Condition class: Discount/surcharge

SKTO Cash discount Calculation rule: Percentage
Condition cat.: Cash discount

© SAP AG

• Condition types are defined together with their control parameters in Customizing.
• Condition types are differentiated broadly via the condition class and more finely via the
condition category.
• The calculation rule stipulates how the system calculates the condition value. For example, a
discount or surcharge can be a percentage of the gross price, a fixed amount, or a quantity-
dependent amount.
• The plus/minus sign determines whether a condition is treated as a negative or positive
amount. Negative amounts are discounts (deductions), positive amounts are surcharges
(additions).

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Define Condition Type:
We can have our own condition type by creating new entries or copying from other as per business
requirement. In the below Image we have created the condition type ZGS1 by copying the
standard condition type PB00.

In the above image we can observe that access sequence is assigned to the condition type ZGS1.

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Step4: Calculation Schema: (Pricing Procedure Determination)
• Calculation schema groups together all the condition types that are relevant in determining
price.

Calculation Schema specifies below:

• Permissible condition types

• Automatic or manual condition
• Net Price calculation i.e statistical indicator
• Order in which condition types are taken into a/c to calculate the net price
• Requirements that must be satisfied before a certain condition types are taken into a/c

• In addition, the From reference step for percentage conditions is defined in the calculation
schema. The From reference step can be combined with a To reference step.

We can maintain the pricing procedure for different vendor such as international or domestic as
the prices are different as compare to each other, For this henceforth we can have different
Calculation schema for each vendor type as well as for different organization.

Step1: - Define Calculation Schema

Calculation Schem a
Step Counter Cond. ty. Description Fr. M anu. Stat . . .

1 1 PB00 Gross price

10 1 RB00 Absolute discount X

. . . . . . . . .

10 9 ZA01 % Surcharge on gross 1 X

. . . . . . . . .

20 0 Net value incl. discount

. . . . . . . . .

31 1 FRA1 Freight % 20 X X

. . . . . . . . .

35 1 SKTO Cash discount 20 X

R
40 0 Effective price

© SAP AG

We have crested the new Calculation Schema ZGS1 with condition types as shown in figure below
by copying the standard calculation schema or we can create as per our own by clicking in New
Entries Tab.

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Step5: Schema Group

In this step we will define the schema group for vendor & the purchase organization. Then
we will assign to respective vendors and purchase organization.
This further divided into sub steps as shown in figure below:
a. Schema Groups: Vendor
b. Schema Groups for Purchasing Organizations
c. Assignment of Schema Group to Purchasing Organization.

a. Schema Group for Vendor

In this type we have created schema for Vendor group i.e click on the new entries in Schema
group for Vendor & fill all the details as per requirement & save. Now we have created XZ as a
schema vendor group as shown below

After creating the schema group for vendor, now we will assign schema group of vendor to one of
the vendors in vendor master data as shown below

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b. Schema group for Purchasing Organization
In this type we have created schema for purchasing organization i.e click on the new entries
in Schema group for purchasing org & fill all the details as per requirement & save. Now we have
created XZ as a schema group for purchasing org as shown below

c. Assignment of Schema group to Purchasing organization

We will assign Purchasing Organization 2000 to Schema Group XZ as per below figure.

Maintain Schema determination

In this step we will assign calculation schema & schema group for purchase order function as
shown below

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By clicking on the marked field as shown in above image we have maintained the schema
determination for PO by filling required entries as shown below

Step6: Maintain condition Record

T. Code – MEK1

Path to Create: Logistics → Materials Management → Purchasing → Master Data → Conditions

→ Other → Create

By following the above path or using T. Code MEK1 enter the condition table in that condition filed
& fill all the details & save. We created a new condition table 964; now let us put the condition
values for condition type ZGS1 & maintained the conditions for the record as shown below image.

Now we will create purchase order for the above-mentioned vendor. In the below purchase order we
can observed that the price is automatically filled in the PO because it is maintained for the vendor
& purchase organization in the condition record.

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The Pricing of the material can be seen in the item level Condition type then go to the analysis tab
as shown in below figure. In the Pricing Analysis we observe that The Calculation Schema ZGS1,
Condition Type and the Condition value for Gross price triggered as done in customization.

In the above Analysis pricing figure we observe the element maintain as per the sequence &
respective price found in the Material info record (Plant-specific).

From the above Customization we obtain the flow chart for Gross price as:

Calculation Vendor Schema group

Schema XZ = 400027
Condition Type ZGS1
ZGS1 Purchase. Org Schema
Group XZ = 2000

Access Sequence
ZGS1

Condition Table
964

Pricing picking priority of Access Sequence

Flow Chart for Pricing procedure

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Automatic Purchase Order:

• Automatic purchase order creation is one of the most important functionalities in SAP
Material Management. Due to this functionality, purchasing team can save time from the
manual work. In this document.
• Transaction Code for Automatic Purchase Order is ME59N

Step1: Material should have the flag for Auto PO in purchasing view as shown below.
T Code - MM01/MM02

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Step 2: Automatic purchase order flag should be activated in purchasing data of vendor master.

T Code – MK01/MK02

Step 3: Vendor has to be fixed in Source List. This is an optional activity because Vendor can be
manually given during Purchase requisition creation.
T Code – ME01

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Step 4: Info Record should be maintained for the vendor and material combination as IR is the
source for Price, tax code etc.
T Code – ME11/ ME12

Step 5: Create Purchase requisition with required quantity. If we don’t create source list with fixed
vendor, vendor should be given in Purchase requisition. If source list is already created, assign source
of supply needs to be clicked. This will update the vendor details.

T Code – ME51N

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Step 6: Purchase orders can be created automatically as per the purchase requisition or plant or
material as per the requirement. Transaction code which we use to run this is ME59N If we want to
create PO against only one PR, PR can be given as input. If you want to create PO against all the
PRs of a material, material can be given as input. Depends on the requirement, input can be given as
shown below. I have highlighted few important input fields in the input screen of

T Code - ME59N

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System will give a successful message as shown below

Display of the purchase order is provided below.

T Code – ME23N

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Release Procedure for PR :-
• Release procedure means once document is created it has to be approval
at different levels
• PR has 2 releasing procedures
1. With Classification
2. Without Classification

1. With Classification
• In this process we can release the PR at both Item level & Header level.
• This can be decided at Release group level or PR document level.
• In this procedure we can set release strategy as per company requirements.
• Most of the companies use this method for release procedure.

2. Without Classification
• Only item level release is possible with this method.
• Here as per SAP predefined requirements we can set release strategy.

Path to configuration PR Release procedure :-

• SPRO ->IMG reference ->material management ->Purchasing ->PR ->Release
Procedure -> Procedure with classification ->Edit Characteristic ->Edit Class -
>Set up procedure with classification.

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Classifications :-

Characteristics :- T-code – CT04

• In Classification, characteristics describes the properties of object. The value of
characteristic specifies these properties
• Numeric format for Figures & character format is for alphanumeric character
Ex:- Purchasing documents, Purchase group, Total value, plants….

Here new Characteristics is created as shown in fig

• Characteristics – PR document type.
• If you enter these tables field assign the multiple values in basic data, tick in
interval values you need & set the values according in value tab.

• For PR Communication structure means Table name is CEBAN and we can

assign field name as per Characteristics as shown below.

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Class :- T-code – CL02

• Characteristics are assigned to Class. It contains the list of characteristics.
• Class Type – 032 for Release process.
In the below image we can class is created & assigned to character.

Release group :-
• Release group created assign to Class.
• We can create release group as per company requirements like PR rel - ease or
different names as per the plant name.

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Release Code :-
• Release code is nothing but an Approver.
Ex - purchase officer, mana

Release indicator :-
• Here we have two indicators like,
• Release – R, Blocked – B.
Release Strategy :-
• It can be defined as per Business requirement as shown in fig,

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Consignment Procurement:-
Consignment stock is a stock where vendor put the stock in our company premises
but still vendor is the owner for that stock until we withdrawn it from the consignment
store to own stock.
• Master data required to create consignment:
1. Material master record.
2. Vendor master record.
3. PIR with consignment info category.

Using the Material 3000000000009, vendor 400065 & Info record 5300007476, PR with
item category “K “has been created as shown in the image.

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After PR creation, now created PO with item category “ K “ as using PR.

The item category “K” has following features:-
• We must enter a Material no.
• We can’t enter a price or condition in PO
• This item category can also be used in Outline agreement
• If material is always procured for the consignment stores of a plant, we have the
option to consider this with MRP using a special procurement key in the material
master record as shown in image below.

Now we created purchase order with item category “ K “ using PR and in PO we can’t
enter price or condition because price flow from PIR while doing settlement as shown in
below image.

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We need to do goods receipt for the item category “ K “ PO, these goods are posted to
the vendor consignment stock & is non valuated as shown in image below.

Now we require some stock to consume for daily production. Transfer the consignment
stock to our own stock using MVT Type MB1B - 411K as shown in below image.

Resolving Error:
Once we received the goods to vendor consignment stock, for our day to day
production we need stock in plant, while processing transfer posting from vendor
consignment to company stock we got the error message as shown in below image.

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I came to know, that error was because I was not using valuation class as valuation
modifier and due to that, the system was not able to find the exact G/L account posting.

To solve this error enter T-Code OBYC press enter & select the inventory posting with
transaction BSX as shown in image.

After clicking the highlighted one its asking for chart of a/c please give the chart required
chart of a/c & press enter. Now we have to maintain valuation class with a/c & save as
shown in below image.

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Once the accounting is maintained as shown above the issue is solved & process was
continued.

Note - Also we can consume Stock directly to production using MVT Type 201k.

When we consume the stock from consignment store for those stock only we settle the
liability to the Vendor using MRKO.
we settled for 20pc’s what we consumed as shown in below image.

Note :- For doing the settle the liability using MRKO tax code is mandatory which is
maintained while creating PIR if we don’t not maintain the tax code we can’t do
settlement to vendor using MRKO.

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Subcontracting Procurement:-
Subcontracting means job work, where some components are provided to subcontracting vendor
and the vendor converts it to the desired semi-finished/finished product.

Mainly Organization goes to subcontracting process for 2 reasons

• Price Point of You
• Quality Point of You

Possibilities in which scenario the organization goes to the subcontracting

• When the work has to be done as soon as possible and if the organization faces shortage
in the resource then the org goes to the subcontracting
• If the organization faces some space related issues.
• If the organization doesn't have required tools or machineries
• If the work flow is more
• For time consuming
• To Maintain the quality of the product

Process:
• Material Master
• Vendor
• PIR-->Info Category Select Subcontracting ( Optional)
• PR ( Optional )
• PO->Item Category is L(Subcontracting),Item Level-Material Data->Select Components
• Transfer Posting-->MB1B 541 MVT
• MIGO->Child Material gets Consumed by 543 MVT and Scrap gets Consumed by 545
MVT
• MIRO

Subcontracting Process using BOM :-

• CS01-->Created Bill of Material for Parent Material and for components as shown in
image.

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• Before moving to next process we need to maintain initial stock for the components if stock
already exists then required quantity of material to get finished goods from subcontract
vendor is transferred to vendor using T-code MB1B with Movt. type 541 to vendor as
shown in fig.

Once the components are provided to vendor, now we need to do purchase order for
subcontract vendor with item category “ L “ after entering the material, vendor , plant other
required details in PO, it will ask for components to add because as we are doing
Subcontracting PO with item category “L”.

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To add components in go to item over view and got material tab there we find components
& explode Bom fields. As we are doing Subcontracting process using Bom go to explode bom
field and expload the bom which contains the components. As shown in below image.

Note :- we can also enter the components directly while doing PO using Component field in
material tab in PO.

Here finished part qty is 10 so the components required qty to make the the finished part as
shown in below image.

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After creation of PO now we are doing Goods receipt to get finished product from Subcontract
vendor here we can see the goods movement for Finished part is 101 and Movt. Type 543O for
consumed components as shown in image.

Before doing GR the initial stock for the material 30000000000022 is Zero, now we see the
stock for the finished part using T-code MMBE, as shown in image.

Receiving by-products or Scrap from vendor :-

Procedure is same as we follow earlier but additional process is we need to maintain scrap or By-
products with negative qty in components in the purchase order.

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Components Screen-shot as shown in below :-

After adding the component qty negative in the PO and process the PO, now we need to do
Goods receipt & It will be received with 545 Mov. Type as shown in image.

NOTE:
1. Parental Material gets updated by101 MVT
2. Child Material gets consumed by 543 MVT
3. Scrap/By Product gets updated in vendor stock 545 MVT
4. To Receive scrap or by product from sub contract to own stock MB1B->542 MVT

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Pipeline Procurement: -

• In certain cases, materials are available directly for consumption and we going to pay to the
vendor for the usage only.

• In this process material flows directly from vendor premises to our plant premises
through FI/Cable/Pipe/Wire.

Creation of Pipeline procurement –

1. Material->Material type->Pipeline (Mandatory)

2. Vendor
3. PIR->Info Category->Pipeline (Tax Code and Net Price is Mandatory)
4. PR No PR and PO
5. PO
6. MB1A->201 P MVT w.r.t Cost Center
• The material with Pipe line material type 1557, Vendor 431022 using to create PIR as
shown in fig.

Note :- While doing PIR Tax code entry is mandatory which is shown in fig and another
important thing is while doing pipeline procurement we do not do PR, PO and GR. As it is
not stored and directly flows to production unit.

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After creation of PIR now do the record consumption of material using T-code MB1A with
Mvt. Type 201P.

Creation of Condition Record: - T-code MRM1

Process for creation of condition record maintain Output type – KONS (consignment) click
on key combination check with the (company. code vendor code).

In next step enter vendor code select line item click on communication field as shown in
images.

In the output field enter LP01 & save as shown in images.

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After creation of condition record, we need to do settlement to the vendor for consumption of
pipeline material using T-code MRKO.

Service Procurement: - (External Service Management)

We can use this business scenario to cover the entire service procurement process. The
process starts when you send your request to the supplier. Next, the P.O is created. Time & expenses
are entered in the system & invoice is created.
This service includes the maintenance work such as replacement of defective fans &
fluorescent tubes are to be carried out by an external service provider.

• Service are meant for direct consumption instead of keeping them in inventory.
• Service description along with unit of measure is stored as master data in record i.e is known
as Service master record.
• System stores the services that have been procured as a record in a sheet called Service Entry
Sheet.

Service management deals with the following terms:

• Service master record

• Service Purchase order
• Service Entry Sheet

Service Master configuration:

Here we actually define overall category of the services here AS03 is talking about services
which are used in MM Basic data, controlling if we want services related to Sales data, we can tick
for SD.

Organizational status for service category maintains as per requirement,

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Define Service category :-
Select standard service category & click on copy as f6. Change name & description as done below

Define no range for service category click on maintain group f6, insert new group and no range
for that group & click on maintain element/group to assign service category

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Define no range for service entry sheet
Click on change intervals, insert intervals & maintain no range.

Field selection for service master :

Maintain as per requirement.

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Service Procurement with Service Master :-
Master data will be created with “AC03”T-code & the unit of measure, service group,
valuation class, etc.. will be picked from master data during purchasing document creation.

Step 1 :-
In the below image we can observe how Service master data is created, here we enter
description, UoM, Service category which is suitable for service master record, valuation class,
material group & check with short txt change allowed because of this we can change text while doing
PO

Step 2 :-
After creation of service master record we now do the Service condition in a 3 ways using T-
codes ML33/ML39/ML47

• If we have already know the vendor & if we want service for particular plant we set price for
services which is done using T-code ML33.as shown in image,

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• If We have already know the vendor but we don’t know the plant or we required same service
to other plants, in that case we can use this scenario. T-code ML39 here vendor is responsible
for the particular service for several plants & service conditions are maintained as shown
below

• If the company is having n number of plants in such cases they go for bidding, because here
they find n number of vendors with better pricing option. Most of the companies use this
condition, as we don’t know the external vendors who will provide the better Services. This
is as shown in below image.

In the above fig we can observe that we don’t have vendor and plant fields to enter.

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Step 3 :-
Once the condition is maintained we moved to next step called Purchase order. While
creating purchase order for Service procurement we should maintain item category as “D“ is for
service’s and also maintain respective account assignment category. Here we can observe Service &
limit tabs available in the item level as we are doing service procurement as shown in below image.

Note :-

• While creating PO of stock/consumable material generally we do the

Purchase order (→master data)

Goods receipt (MIGO)
Invoice (MIRO)

• For Procurement of External services we follow different steps,

Purchase order (→Service master data)
Service Entry sheet & Acceptance (here we do not do MIGO instead we do SES & MIGO
will generate automatically in background.
Invoice (MIRO)

We don’t not enter Material in the PO as we are doing Service procurement, we enter short
description, plant &material group. At item level in the Service tab we enter the Service no which is
need to be done by the vendor as shown in image.

Step 4 :-

• After the PO creation we need to do the Service entry sheet using T-code ML81N in this
screen we select services which is done by the vendor once we enter the service’s it is need
to be acceptable and save as shown in below image.
Planned service procurement

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In the above fig we can observe P column is ticked it is nothing but Planned service order because
As per the plan that we had in purchase order vendor did service but they say they also done some
work like cleaning service which is not available in purchase order this is known as Unplanned
Service procurement. For the unplanned services, limit is set in PO at item level in limit tab.

Unplanned Service procurement – in this image we can observe U column is ticked this is nothing
but Unplanned .

Step 5 :-

• Once the Service entry sheet is done and acceptable now we need to do MIRO for the
particular service done by vendor. Here the same procedure is follow as we are did for the
procurement of stock/consumable materials as shown in image,

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Service Procurement without Service master :-

As there is no service master, details like UoM, Service, material group, etc have to be given
manually & also we should do one additional configuration setting under below configuration path
to get the G/L account automatically into Purchase order.

SPRO → IMG → Material management → Purchasing → Material master → Entry aid for items
without material master.

The same steps will follow for this procurement as we did for the Service procurement with service
master earlier.

In the below image we can see the material groups assign to valuation class o get the GL A/c
automatically into purchase order.

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Outline Agreements:
Outline agreement is a long-term purchase agreement with a vendor concerning of supplying
a material or performance of service with a predetermined terms and condition.

In outline agreement there are two types.

1. Contract agreement.
2. Schedule agreement.

Contract agreement.
In contract agreement is nothing but long purchasing agreement with a vendor, in terms of
supplying a material or a service with predetermined terms and conditions.
In contract agreement there are two types.
1. Quantity contracts.
2. Value contracts.
Quantity contracts: - This type of contract is regarded as fulfillment of agreed total quantity has
been supplied on the basis of individual release order.
Contract type: - MK.

Quantity Contract Process Flow

1. Material
2. Vendor
3. PIR(Optional)
4. PR
5. ME31K->Create Contract, Agreement Type: MK
6. Release Order->ME21N

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We created Quantity contract with agreement type MK for material 9015 & Vendor 400029 as shown
in fig.

Further we set the price & the targeted qty as shown in above image.
Now we will create the PO for the quantity contract by referring the outline agreement number in
PO as shown in below image.

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Note: In the above image we can observed that if the material quantity is exceeding it will show as
warning message or error.

Value Contract:
A value contract is a contract between the purchasing organization and the vendor to supply materials
till the given target value reaches. Once the target gets over the contract ends.

Value Contract Process Flow

1. Material
2. Vendor
3. PIR(Optional)
4. PR
5. ME31K->Create Contract, Agreement Type: WK
6. Release Order->ME21N
For Value contract we follow the same procedure as we did for the Quantity contract.

Scheduling Agreements:
A scheduling agreement is a long-term outline agreement between the vendor and the
ordering party over a predefined material or service, which are procured on predetermined dates over
a framework of time.
A scheduling agreement can be created in the following two ways –
• Creating scheduling agreement
• Maintain scheduling lines for the agreement
1. ME31L-> Create Scheduling Agreement, Agreement Type: LP
2. Create Schedule Lines ME38->Input the Scheduling Agreement ->Double click on the line item.

W orking with Scheduling Agreements

Sch. agm t. Reference Purchase
requisition sch. agm t. requisition
RFQ Central
contract Statistics Delivery
(4.0) schedule
Sched. agm t.
Vendor

One-tim e
vendor

Item /item category

Single/m ultiple
Standard item W ith m aterial opt. account assgt.
Consignm ent item
Subcontracting item m and. Cost center
W /o m aterial
Third-party item Project
Text item
OrderR

Stock transfer item Asset

© SAP AG

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• A scheduling agreement is a longer-term purchase arrangement with a vendor covering the
supply of materials according to predetermined conditions. These apply for a predefined
period and a predefined total purchase quantity.
• Scheduling agreements can be created with or without reference to an outline agreement
requisition, an RFQ, or another scheduling agreement.
• As of SAP Release 4.0A, you can create scheduling agreements with reference to a centrally
agreed contract, thus taking advantage of centrally negotiated prices.
• Neither the item categories M and W, nor the account assignment category U (account
assignment unknown) are allowed in scheduling agreements.
• Details of delivery dates and quantities are communicated to the vendor in the form of
delivery schedules.
• Delivery schedule lines can be created with or without reference to a purchase requisition.
Schedule lines can also be generated automatically via the MRP system.
• Such delivery schedules/schedule lines do not constitute separate documents, but form part
of the scheduling agreement. Procurement via scheduling agreements therefore helps to
reduce the volume of documents in use.

Types of Scheduling Agreement

1 Scheduling agreement
Agreement type LP

Sched.
agmt. Delivery schedule

2 Scheduling agreement with release documentation ( Rel. 3.0D )

Agreement type LPA

Sched. Delivery schedule

agmt.
Forecast del. schedule Release documentation

3 Scheduling agreement with release documentation ( Rel. 4.0A )

Agreement type LPA

Sched. Delivery schedule

agmt.
Forecast del. schedule Release documentation
R

JIT delivery schedule Release documentation

© SAP AG

• When using scheduling agreements for procurement purposes, you can work with or
without release documentation. Working with release documentation has the advantage
that you can see at any time when you sent which scheduling information to your vendor.

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• If you work with scheduling agreements without release documentation (LP), the current
schedule lines are automatically transmitted to the vendor after creation via the message
output control program.
• If you use scheduling agreements with release documentation, the delivery schedule lines
are not automatically transmitted to the vendor as soon as they are created. Instead, you
initially record schedule lines that are final in character in a scheduling agreement release.
Transmission of scheduling data can only take place after you have created such a release.
• There are two kinds of scheduling agreement release:
• Forecast (FRC) delivery schedules are used to give the vendor a medium-term overview
of your requirements.
• Just-in-Time (JIT) delivery schedules are used to inform your vendor of your
requirements in the near future. Such schedules may comprise a daily or even hourly
breakdown of your requirements over the next few days or weeks.
• Whether you create a scheduling agreement with or without release documentation is
determined via the release documentation indicator for the document type.

Note:
LP- Without release documentation.
LPA - with release documentation (Please see the box Rel doc. checked at defining document types
for SA)

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We created schedule agreement as shown in below image.

Schedule Lines:
T Code: ME38
We have created the delivery dates.

Note: SA is nothing but PO & GR is possible only on the delivered date if it is not then GR is not
possible it shown error.

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Invoice Verification:
In invoice verification we verify the amount against the PO to pay the respective vendor.
1. If we flagged “GR-Bsd IV” in item level in PO then we have 3-way match or it will be 2-way
match
I. e in 3-way match we need GR to post the invoice (PO-GR-IR) & in 2-way match GR is not
necessary we can post invoice with reference to PO (PO-IR).

The main reason of doing the invoice verification.

• TO maintain the vendor invoice details for received material.

• Investigation of any mismatches.
• Release the payment of matched invoice.
• Accounting entries involved.
• Details recorded for audit purposes.

Types of Logistics invoice verification.

• Invoice Verification.
• Credit memo.
• Subsequent credit memo.
• Subsequent debit memo.

1. Invoice Verification - Create PO with ME21N

Then do MIGO, after that we can do the normal invoice verification wrt PO.

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Invoice Credit memo.

The invoice credit memo, we are using at the time of, when PO qty is 10 for that we have cleared
the full payment, then we sent to the QI, at the we got to know 3 materials were rejected. For this
reason, we have to return the 3 materials to the vendor then we have to take amount return back.

While doing QI we find that 3 materials were damaged & these material should be returned to vendor.
For this we need to returnable delivery with MVT type 122 using T. Code MIGO.

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After returning those materials to vendor we have issue credit memo to vendor for that as shown in
above image.

Invoice Subsequent credit.

In this process we have raised the PO with reference to the older quotation, once the PO is shared
with vendor, vendor tell us to prices are received, means which lower to the before quoted prices. At
this time, we are going to use subsequent credit process.

Invoice Subsequent debit.

In this process we have raised the PO with not mentioning the freight charges or delivery charges,
then vendor will deliver the material then he will mention the freight charges or delivery charges on
the invoice, at this time we are going to use subsequent debit.

Parking the invoice.

Parking the invoice means, when vendor is raised invoice along with mentioning the freight charges,
warranty charges some other condition for that vendor was unable to submit the supporting document
for those. At the time we will use the invoice parking process.

Quota Arrangement:
If material is required in huge quantity then the % of quotas are allocated to several vendors
in quota arrangement record.
Ex: Assume in your organization medium amount requirement is there, but you have 3 to 4
vendors who are regular vendors or fixed vendors now if you give order to one vendor you may lose
relationship with remaining vendors to avoid this type of scenarios quota arrangement are used.

In quota arrangement you will divide through %

Quota Rating = Allocated Quantity + Quota Base Quantity
Quota
Process Flow:
1. Material Master->Purchasing View->Quota Arr->Selected S
2. Vendor Master->Create Minimum 2 Vendors
3. PIR->Optional
4. Source List->Optional
5. MEQ1->Input Material and Plant Press Enter Input valid to and double click on that line

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Type T. code in command bar as MEQ1->Input Material and Plant Press Enter Input valid to and
double click on that line

After selecting the line we have maintained the Quota for the vendors as shown below.

Here we can add new supplier in the middle of the procurement but the new vendor will get the quota
after the allotted suppliers

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The system calculates the next source from which a specific material requirement is to be
procured from among the sources that have been assigned a quota in the current validity period. This
calculation is carried out if you have the source of supply for a requested material determined by the
system.

Activities

Calculating the Quota Rating

The system assigns a quota rating to each source of supply. The quota rating is calculated as follows:

Quota Rating = Allocated Quantity + Quota Base Quantity

Quota
where

• Quota-allocated quantity

= Total quantity from all purchase requisitions, purchase orders, release orders, and scheduling
agreement schedules allocated to a given source of supply. (The quantities of quota-allocated
planned orders are also taken into account.)

• Quota base quantity

= Quantity used to control the quota arrangement when new sources of supply are included.

• Quota

= A number specifying which portion of a total requirement should be obtained from a certain source.

The source with the lowest quota rating represents the valid source, even if it has a quota rating of 0
(that is, the quota-allocated quantity and the quota base quantity have the value 0). If more than one
source of supply has a quota rating of 0, the item with the highest quota is the valid source of supply.

According to the formula, the following applies: The higher the quota, the lower the quota rating and
the higher the likelihood that the relevant source will be determined as the valid source.

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Determining the Quota Base Quantity

The quota base quantity is used only when you include a new source in an existing quota
arrangement.

The quota base quantity enables you to prevent the new source from being assigned all requirements
(in the form of requisitions or Po’s, for example) until its quota-allocated quantity exceeds the quota-
allocated quantity of one of the existing sources. This is achieved as a result of the fact that the quota
base quantity acts as an additional quota-allocated quantity in the calculation of the quota rating.

Example

Suppose you include a new vendor in an already existing quota arrangement for a material.
The existing quota arrangement consists of two vendors, each of which has been allocated 50% of
the total requirement of a material over a period. Each of these vendors has a large quota-allocated
quantity because a lot of material has been ordered from them to date during the course of the quota
arrangement period.

The new vendor is to be assigned a share of the total requirement of the material equal to that of the
two other vendors in the quota arrangement. However, in accordance with the formula for the
calculation of the quota rating, all subsequent requisitions will be assigned to the new vendor until
such time as the latter’s quota rating exceeds the quota rating of one of the other vendors.

Calculating the Quota Rating: Example

You wish to include the new vendor C in an existing quota arrangement that has been in effect for
a year and previously only included vendors A and B.

Each vendor has the quota set out in the following table:

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Quota arrangement for vendors A, B, and C

Vendor Quota Quota-allocated quantity Quota base quantity

A 3 780 0

B 2 380 0

C 1 0 260

The quota base quantity 260 for vendor C was set with Edit Base quantities Indiv. calculation .

According to the previously-discussed formula, the quota ratings for vendors A, B, and C are as
follows:

A = 780 + 0 = 260
3
B = 380 + 0 = 160
2
C=0+0 =0
2

Result: The next requisition will be assigned to Vendor B because this vendor has the lowest quota
rating. While doing PR vendor will assign to the material based on quota rating.

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Split Valuation:

It is used to valuate stock of material in same valuation area differently.

Business examples:
• Some materials are procured both domestically & abroad.
• If you want to differentiate stock on a value basis according to its origin. Split valuation is
to be set up for these materials.
• With split valuation you have the option of differentiate b/w partial stock of a material
according to particular criteria & handling them differently.

Split Valuation might be necessary in following:

• When stock of material from In-house production has different price than external
procurement.
• When the stock of material is to be distinguish by the quality.
• When different batch stock of material has different price.

Split Valuation

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Make sure that the Split valuation is active in configuration path.

we will create a Valuation type for In-house & External procurement Material and define
new valuation category. Also, we will procure the material and observe the status.

Steps to be followed: -
Step 1: Create Global Type & Global Categories

we will create global types followed by global category

We have created Valuation Types Z1 & Z2 for internal & external respectively where we allotted to
raw material with account category reference 0001.

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Step 2: Activate Global Type to Global Categories

We have created Global Categories

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Step 3: Activate Valuation Type

Here we have activated the valuation type & in the below image we can check the valuation
category at plant.

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Create new material for the assigned reference category raw material & in accounting view select
valuation category which is defined.

Extend the material into valuation types.

After creating the material, we will extend the material in to different valuation type which
option appears in starting as shown below.

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Now we will do the PO for the created material with valuation type Z1 as shown below.

We will do Goods receipt using T. Code – MIGO for created PO & receiving the goods, we can
observe the stock overview using T. Code - MMBE .

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