Vidyabharati International Interdisciplinary Research Journal 12(1) 649-653 ISSN 2319-4979

A STUDY OF SAP ERP SYSTEM IN MANUFACTURING INDUSTRIES WITH

REFERENCE TO SAP -MM
S. Bachhav1 and J Pawar2
ASM’s IBMR, Chinchwad, Pune
1
2
Sinhgad Institute of Business Administration and Research, Kondhwa, Pune
[email protected], [email protected]
________________________________________________________________________________
ABSTRACT
In this fast-changing world and customer needs, it's imperative for organizations to transform and re-engineer
themselves to adapt to the business dynamics. Customer demands are changing continuously. Any organization’s
efficiency is measured primarily by its ability to cater to the market demands in the shortest time possible. For this to
happen, the business has to have stock of the required raw materials at the right time and must be able to use it
efficiently. A proper Material Management process ensures that there is never a shortage of materials or any gaps in
the supply chain process of the organization. The SAP MM automates the procurement and material management
activities to make the processes smoother and effective.
________________________________________________________________________________
Keywords:Systems Applications and Products in Data Processing (SAP), Enterprise Resource Planning
(ERP), Project Management, Enterprise Central Component (ECC), Manufacturing, and
Implementation,SAP-AG

Review of Literature material management procedure at the

1. Arvind Kumar Sharma, DP Sharma assembly lines.
(2010)conclude that Companies worldwide 4. Chandan Deep Singh, Rajdeep Singh
have made substantial investments in and Manpreet Singh (2013) explain that
installing & implementing SAP ERP an ERP supports a process-oriented view of
systems. Some of the unique challenges in the business as well as business processes
managing enterprise-wide projects which standardized across the enterprise. Among
were highlighted through the findings the most important attributes of ERP are its
included the challenge of re-engineering abilities to: automate and integrate an
business processes to 'fit' the process which organization’s business processes; share
the SAP ERP software supports, common data and practices across the
investment in recruiting and reskilling entire enterprise; and produce and access
technology professionals, the challenge of information in a real-time environment.
using external consultants and integrating
Objectives of the study
their application-specific knowledge and
technical expertise with existing teams. The main objective of the Paper is to study the
2. Rohit Kenge and Zafar Khan SAP ERP system in Manufacturing Industry
(2020)conclude that RP system integrates with reference to SAP -MM
all the functions in an organization like Introduction
finance, marketing, manufacturing, and
human resource with an advance real-time SAP is one of the world’s leading producers of
data collection, processing, and software for the management of business
communication with very fast speed and processes, developing solutions that facilitate
allowing the organization for a quick effective data processing and information flow
decision on the real-time issues to control across organizations.
the complete business process day today. Founded in 1972, the company was initially
3. Kees Boersma (2005) discussed In this called System Analysis Program Development,
paper, we present a case study of the later abbreviated to SAP(System, application
restructuring of an ERP system within a and Product in Data Processing). Since then, it
manufacturing company, in particular the has grown from a small, five-person endeavor
combination of Material Requirement to a multinational enterprise headquartered in
Planning (MRP) with a Just In Time (JIT)

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Vidyabharati International Interdisciplinary Research Journal 12(1) ISSN 2319-4979

Walldorf, Germany, with more than 101,000 SAP MM can be divided into five major
employees worldwide. components. These are: materials management,
With the introduction of its original SAP R/2 plant maintenance, quality management,
and SAP R/3 software, SAP established the production planning and control, and a project
global standard for enterprise resource management system. Each is divided into
planning (ERP) software. Now, SAP number of sub-components.
S/4HANA takes ERP to the next level by using SAP MM (Material management) is all about
the power of in-memory computing to process managing the materials i.e the resources of an
vast amounts of data, and to support advanced organization. These resources include man,
technologies such as artificial intelligence (AI) manpower and materials. The main
and machine learning. functionality within MM (Material
The company’s integrated applications connect management) includes purchasing, Inventory
all parts of a business into an intelligent suite management, valuation and assignment, batch
on a fully digital platform, thereby replacing management and classification. In simple
the process-driven, legacy platform. words, SAP Material Management is a
Today, SAP has more than 230 million cloud fundamental module of the SAP ERP
users, more than 100 solutions covering all (Enterprise Resource Management) system that
business functions, and the largest cloud manages the complete material supply chain
portfolio of any provider. and inventory management processes of an
SAP offers manufacturing ERP software organization.
solutions that cover the automation of every SAP MM is essentially an element of
aspect of your industrial manufacturing Logistics. It is counted as one of the most
business including R&D/engineering, important modules when talking about SAP
sales,sourcing/procurement, supply chain, ERP software. The MM application module
manufacturing, production scheduling, quality, allows the user to manage and procure the data
aftermarket service and finance. in a very organized manner. SAP MM module
has plenty of aspects such as receiving and
Introduction to SAP MM (Materials
purchasing goods, material storage, inventory
Management)
and most importantly planning based on
It is a module of the SAP ERP software consumption.
package from SAP AG that is used for MM Organization Structure
Procurement Handling and Inventory
Management.
SAP Materials management covers all tasks
within the supply chain, including
consumption-based planning, planning, vendor
evaluation and invoice verification. It also
includes inventory and warehouse management
to manage stock until usage dictates the cycle
should begin again. Concepts such as
Electronic Kanban / Just-in-Time delivery are
supported within MM.
Materials management is integrated with other
modules such as SAP SD, SAP PP and SAP
QM. SAP MM is used for procurement and
inventory management. The module has two
important master data – material and vendor.
Broadly, the various levels that can be defined Company:
for a SAP MM (Material management) Company is an Organizational unit in
implementation are: Client, Company Code, accounting which represents a business
Plant, Storage Location and Purchase organization for which individual financial
Organization. statements can be drawn according to the

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Vidyabharati International Interdisciplinary Research Journal 12(1) ISSN 2319-4979

relevant commercial law. A company can Different forms of purchasing Organization:

consist of one or more company codes. 1. Centralized Purchasing
Company Code: 2. Purchasing organization is not assigned to
A company code has the following attributes − any company code. It procures for all
1. Within client, a company code is an company codes belonging to different
independent accounting unit. company.
2. It is a legal entity that has its own profit, 3. Company Specific Purchasing
loss and balance statement. 4. Purchasing organization is assigned to a
3. It is the smallest unit in an organization for company code only. The plant belonging to
which a complete independent account set the company code can purchase through
can be replicated this purchasing organization.
5. Plant Specific Purchasing
Plant:
6. Purchasing organization is assigned to a
The basic points to be noted about a plant are
plant. Only this specific plant can purchase
as follows –
through this purchasing organization.
1. Plant is an organizational unit within a
company where activities take place. A Purchasing Group:
The attributes of a purchasing group are as
plant will produce goods and make goods
follows −
available for the company.
1. Purchasing group is an organizational unit
2. It is a unit having manufacturing facility,
responsible for the everyday procurement
warehouse distribution center, or a regional
activities within an organization.
sales office within logistic. It subdivides an
2. It is a buyer or a group of buyers responsible
enterprise in different aspects.
for the procurement activities in a
Storage locations : purchasing organization.
A storage location has the following attributes-
1. Storage location is an organizational unit, Providing Support to configure the SAP:
which actually differentiates between Support for SAP configuration is provided with
different material stocks in a plant. the help of Enterprise Structure and Master
2. Storage location is a place where stock is Data
kept physically.
3. A plant can consist of multiple storage 1. Enterprise Structure
Every organization has some framework or
locations. All data is stored at storage
structure according to which the whole
location level for a particular storage
business runs. An enterprise in the structure
location.
that represents an enterprise in SAP ERP
Purchase Organization: system. It is subdivided into various
The points to be noted about a Purchasing organizational units which, for legal reasons or
Organization are as follows − business-related reasons, are grouped together.
1. A purchasing organization is an An enterprise structure defines various levels
organizational unit under a company or a in an organization. These levels are placed
plant that is responsible for the accordingly to some hierarchy shown below in
procurement activities according to flow diagram, each levels has some specific
requirements. It is responsible for external functionality associated with it, which in a
procurement. combined way describes the working of an
2. A purchasing organization can be at the organization.
client level, which is known as a
Define Organizational Units: In material
centralized purchasing organization.
management we have scope to define
3. A purchasing organization can also be at
following entities for organizational structure.
the company or plant level, which is
1) Plant 2) Purchase Organization 3) Storage
known as company-specific or plant-
Location 4) Purchase group
specific purchasing organization.

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Vidyabharati International Interdisciplinary Research Journal 12(1) ISSN 2319-4979

2. Master Data user department has its own view of material

In Every organization is very essential to have maser record. The data screen that is used to
master data of each and every activity to be cre-ate material master can be divided into two
organized centrally for all modules and categories.
departments too.
B. Vendor Mater Data
Also we can say it’s a data with its all
specifications it stored in our system, and it can Vendor master data is the company’s main
be used by the system to gather information source of vendor-specific data. It includes
while creating PO and service, contract, infor-mation on vendor from which a company
scheduling agreement etc. can produce, or sell. Vendor master data
From point of view of material management it contains vendor’s name, address, bank account
includes material master and vendor master no. etc.
files at the core of procurement, inventory C. Information Record :
management, and invoice verification.
Procure topaycycle:
A. Material Master Data: Procure-to-pay is the process of integrating
This is the enterprise main source of material- purchasing and accounts payable systems to
specific data. This data will include create greater efficiencies. It exists within the
information on the material a company can larger procurement management process and
produce, store or sell. involves four key stages: selecting goods and
Since there are different departments in an services; enforcing compliance and order;
enterprise and each department works on some receiving and reconciliation; invoicing and
specific material, they will enter different payment.
information regarding their material. So, each

Purchase Requisition Path: Logistic Material

Procurement in every organization starts with ManagementPurchasing
gathering requirements. Once requirements are Requisitioncreate
gathered, we need to inform the purchasing Request for Quotation
organization. A purchase requirement is a Vendor selection is an important process in the
document that contains a list of requirements. procurement cycle. Once requirements are
A Purchase requisition is a request that is made gathered, we start looking for possible
to the purchasing organization to procure a suppliers who can fulfil the requirements at the
certain list of materials. best possible price. So a request is made to the
vendors to submit their quotations indicating
the price of material along with their terms and
conditions. This request is known as the
request for quotation (RFQ).

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Vidyabharati International Interdisciplinary Research Journal 12(1) ISSN 2319-4979

PATH: Logistic Material PATH: LogisticMaterial

ManagementRequest for managementinventory
quotationcreate managementGoods movement
Purchase Order
Purchase order is the formal and final Invoice Verification:
confirmation of the requirement that is sent to Invoice is received from the vendor after goods
vendor to supply material or services. A receipt, and then the invoice is verified by the
purchase order includes important information ordering party. This is the phase where the
such as name of material its corresponding vendor (seller) is paid from the company and
plant, details of purchasing organization with reconciliation of invoice can be posted by
its company code, name of vendor, and following the STEPs below
delivery date. PATH: LogisticMaterial
A purchase order can be created by following managementLogistic Invoice
STEPs verificationDocument en-tryEnter
Invoice.
Path: LogisticMaterial- Conclusion
ManagementPurchasingCreate
ERP systems were used first by the large
Vendor
manufacturing organizations on-premise to
Goods Receipt: manage the raw, in process, and finish good
After processing the Purchase order, the vendor material information communication. ERP
delivers the material to the ordering party this system acceptance rate had slow in the
process is called goods receipt. It is the phase beginning due to ERP implementation is a time
where the material is received by the ordering consuming and high investment process to
party and its condition and quality are verified. adopt for any organization; however, it is
Once the material is verified against the adopted by nearly all the business nowadays
predefined quality, a goods receipt is posted and changing the business legacy due to its
goods receipt can be posted by following exceptional benefits. An ERP system integrates
STEPs below: all the functions in an organization like
finance, marketing, manufacturing, and human
resource with an advance real-time data
collection, processing, and communication
with very fast speed and allowing the
organization for a quick decision on the real-
time issues day today to control the complete
business process.”

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