PROCUREMENT CYCLE

Commented [1]: A request for quotation (RFQ) is an

invitation sent to a vendor to submit a quotation (bid) for
the supply of materials or performance of services

Commented [2]: A quotation is an offer by a vendor

regarding the supply of materials or performance of services
subject to specified conditions
A Purchase Order is a Formal request or instruction sent to a
vendor to supply or provide a
certain quantity of goods or services at or by a certain point
in time
Purchase Requisition(PR) is a request to Purchasing(buyers)
to procure a certain quantity
or service so that it is available as per the requirements. A PR
is an internal document
 Commented [3]: GR-A term used to denote physical
receipt of materials or services from Vendor
Invoice-A list of goods sent and service provided with a
statement of the amount due is termed as
an invoice. This will be provided by the Vendor to the
company

Pricing procedure steps

Price Determination Process

The basic steps that need to be performed to determine the pricing condition are:
•

Condition table is created to group together fields for which we want to maintain condition
record
•

Assign the condition tables to access sequence

•
Define condition type and assign access sequence to condition type

•
Define pricing procedure in calculation schema
•

Define vendor and purchasing Org. schema

•
Assign Calculation schema to vendor and purchasing organization schema combination
•

Maintain condition records in the condition table

Source List
For some of your materials, there is more than one source of supply. You can manage these
supply sources using source lists to control how the application-related supply sources are

used. Source list specifies the possible sources of supply for a Material over a given period of
time. It shows the time period in which a material may be ordered from a given vendor or

under a certain long-term purchase agreement. ME01 – Source List Creation

Release procedure

Special Procurement Processes

Difference in Release strategy types
Output determination

PR,PO,RFQ
OUTLINE agreement
Outline agreement types:
1) contract 2) scheduling agreement

1) Contract
A contract is a long-term outline agreement between a vendor and an ordering party over a
predefined material or service over a certain framework of time.

There are two types of contracts −

Quantity Contract − In this type of contract, the overall value is specified in terms of the total
quantity of material to be supplied by the vendor.

Value Contract − In this type of contract, the overall value is specified in terms of the total amount
to be paid for that material to the vendor.

2) Scheduling agreement
If a material is ordered on a regular basis and is to be delivered according to an exact time
schedule, then you set up a scheduling agreement. This method of procurement is typically
used when Just-in-Time deliveries are required from the vendor (for example, in the
automobile industry)
Contracts are used to inform vendors which material / service quantity is needed for which
date.A contract release order or simply release order is a purchase order created with
reference to contract (sometimes also called as contract call off).

Replenishment time period

epresents the total period of time which is required to procure or manufacture an item. The replenishment lead time is
mainly used by the availability check to calculate the material availability date

Cycle time in auto po

the amount of time it takes from when the material arrives at your receiving site, to the time the material is actually
expected to be received into stock, and available for subsequent processing

Master data available in mm

Prerequisites for Po.

What will you do if you are in India and have to create po for
someone from other country?
Conditions
 What Types of orders we can create. ( Standard consignment etc.)

reference pr pucha fir type of material kese pata karte

• Raw materials (ROH)
• Semifinished products (HALB)
• Finished products (FERT)
• Materials procured externally (FREMD)
• Process materials (PROC)
• Trading goods.
• Operating supplies.

Material groups
Material type is the division of material for the purpose of account determination
e.g.Raw,semi finish,finish

Material group is the grouping of material having common attributes

e.g.Electrical parts,mechanical parts etc

Examples of consumable items:

batteries.
computer cables.
calculators.
envelopes.
whiteboard markers.
printer paper.
Three main areas of SAP(procurement, inventory, logistics &invoice
verification)
Consignment in detail

Valuated and non-valuated stock

Valualed stocks are those which are valuated at your plant level

e.g. raw material, finished goods, etc. We have to assign a valuation class & respective G/L account to these materials.

Nonvaluated are those materials which are directly used for consumption which have very low value and are used in bulk like s crews, pins,
washers.
These materials are directly consumed to their respective cost centers.

Material type and it's control functions

Automatic account determination and it's influencing factors

Valuation area
The valuation area specifies the level at which a material is valuated. The valuation area can
either be company code or plant.

Types of invoice verification

Differences between GR based IV and PO based IV

How to extend views in Material master
Material master View can be Extended thru MM01

Movement type

Condition record
A condition record is defined as how system stores the specific condition. Example of a Condition Record − Entering the
price of a product or to specify the discount for a privileged customer. In the first two fields, the customer and material
determines the relationship between customers and specific materials.

Methods to create PO
Prerequisites/ configuration settings in ERS

How to approve purch doc( conditions)

Purchasing doc types
Subcontracting Purchase Order

In subcontracting, the vendor (the subcontractor) receives components from the ordering party with the help of which it produces
a product. The product is ordered by your company through a purchase order. The components required by the vendor (seller)
to manufacture the ordered products are listed in the purchase order and provided to the subcontractor.
Follow the steps given below to create a subcontracting purchase order.

TCode to create Purchase Order: ME21N

Subcontracting Item Category: L

consignment Purchase Order

In consignment, material is available at the organization store premises, however it still belongs to the vendor (seller)/Owner of
the material. If you utilize the material from the consignment stocks, then you have to pay to the vendor.
Follow the steps given below to create a consignment purchase order.
TCode to create Purchase Order: ME21N

Consignment Item Category: K

Stock Transfer Purchase Order

In stock transfer, goods are procured and supplied within a company. One plant orders the goods internally from another plant
(receiving plant/issuing plant). The goods are procured with a special type of purchase order known as the stock transport
order.
Follow the steps given below to create a stock transfer purchase order.
TCode to create Purchase Order: ME21N
Stock Transfer Item Category: U

Service Purchase Order

In service, a third party provides services to a company. These services include maintenance functions such as electricity and
oiling of machines. Follow the steps given below to create a service purchase order.
TCode to create Purchase Order: ME21N

Service Item Category: D

How to determine, source of supply

 1) SAP MM data types or master data types?
SAP MM Material Master Data
• Material master records.
• Vendor master records.
• Purchase info records.
• Source list records.
• Quota arrangement records.
• Service master record.
• Batch master record.
• Condition record, etc

2) Types of purchase order?

Subcontracting Purchase Order
Consignment Purchase Order
Stock Transfer Purchase Order
Service Purchase Order

Subcontracting Purchase Order?

In subcontracting, the vendor (the subcontractor) receives components from the ordering party with
the help of which it produces a product. The product is ordered by your company through a
purchase order. The components required by the vendor (seller) to manufacture the ordered
products are listed in the purchase order and provided to the subcontractor.
Consignment Purchase Order?
In consignment, material is available at the organization store premises, however it still belongs to
the vendor (seller)/Owner of the material. If you utilize the material from the consignment stocks,
then you have to pay to the vendor.

3) Inventory Management?

Procurement process starts with gathering requirements and ends with procuring goods from
vendors. Once the goods are procured from a vendor, they need to be placed in the company’s
premises in correct place so that they can be consumed when required. Inventory management
deals with placing and handling the stock received from the vendors in correct place within the
company’s premises. −

Types:
Movement Type
Goods Receipt

Reservation
Goods Issue

Movement Type?
Movement type describes the type of stock posting in inventory. It represents whether the posting
in stock is against goods receipt or goods issue. The important movement types in SAP MM are as
follows −
101 − Goods receipt for purchase order or order.
103 − Goods receipt for purchase order into GR blocked stock.
201 − Goods issue for a cost center.
261 − Goods issue for an order
301 − Transfer posting plant to plant in one step
305 − Transfer posting plant to plant in two steps - placement in storage
311 − Transfer posting storage location to storage location in one step
313 − Stock transfer storage locations to storage location in two steps - removal from storage.
122 – goods returned to vendor

4) Invoice verification types:

a) Posting of Invoice
b) Blocked Invoice
c) Evaluated Receipt Settlement (ERS)
Evaluated Receipt Settlement?
Evaluated Receipt Settlement (ERS) is an easy method of settling goods receipts automatically. If the
ordering party has agreed with the vendor on all financial terms and condition, then it need not
verify the invoice. Invoice will be posted automatically from the information present in the purchase
order and the goods receipt.
Given below are the advantages of having an ERS −
• Purchase orders can be settled and closed quickly.
• It reduces human efforts, as there is no need to verify the invoice.
• Amount and quantity variances in invoice can be avoided with the help of ERS.

5) Creating Purchase Order from Purchase Requisition:

Follow the steps given below to create a purchase order from a purchase requisition. −
TCode: ME21N
Step 1 − Enter TCode to go to the purchase order home screen. Select Purchase Requisition as shown
in the following screenshot.

TCode: ME21N
SAP PO from PR
Step 2 − Provide the purchase requisition number for which you want to create a purchase order.
Then select the execute icon.

SAP PO from PR Number

Step 3 − Drag the standard reference Purchase Requisition to the cart next to the NB Standard PO.

SAP PO from PR drop

Step 4 − Verify the details of the purchase order and do the necessary changes as per requirement.
Click on Save. You now have a purchase order from the selected purchase requisition.

Path to Create RFQ

Logistics ⇒ Materials Management ⇒ Purchasing ⇒ RFQ/Quotation ⇒ Request for Quotation ⇒
Create
TCode: ME41

6) What is organization level in SAP MM?

SAP MM Organizational structure is; Client ->Company Code ->Plant ->Storage Location ->Purchasing
Org/ Purchasing group.