Materials Management

Overview
 Topics

ENTERPRISE STRUCTURE
PURCHASING INFO RECORD
SOURCE LIST
QUOTA ARRANGEMENT
PURCHASE REQUISITION
RFQ & QUOTATION
PURCHASE ORDER
SCHEDULE AGREEMENTS
CONTRACTS
STD PO
BLANKET PO
SUBCONTRACT PO
THIRD PARTY PO
CONSIGNMENT PO
STO
PRICING CONDITIONS
SERIALIZATION
BATCH MANAGEMENT
MATERIAL VALUATION
SPLIT VALUATION
PHYSICAL INVENTORY
AUTOMATIC ACCOUNT ASSIGNMENT
LOGISTIC INVOICE VERIFICATION
EXTERNAL SERVICE MANAGEMENT
CONSUMPTION BASED PLANNING
VENDOE EVALUATION
Materials Management

ENTERPRISE
STRUCTURE
 Materials Management
Enterprise Structure

 a.Company
b.Company code
c.Controlling Area
d.Plant
e.Purchasing Organization
f.Storage Location
g.Assignments
Materials Management
Enterprise Structure (Config)
Plant
Materials Management
Enterprise Structure (Config)
Plant
Materials Management
Enterprise Structure (Config)
Assign Plant to Company Code
 Materials Management
Enterprise Structure (Config)
Purchase Organization


Organizational unit responsible for companies
requirements. Negotiates Purchasing conditions.
Materials Management
Enterprise Structure
Materials Management
Enterprise Structure
 Materials Management
Enterprise Structure

 a.Company
b.Company code
c.Controlling Area
d.Plant
e.Purchasing Organization
f.Storage Location
g.Assignments
 Materials Management
Components

 a.Company
b.Company code
c.Controlling Area
d.Plant
e.Purchasing Organization
f.Storage Location
g.Assignments
 Materials Management
Components

 a.Company
b.Company code
c.Controlling Area
d.Plant
e.Purchasing Organization
f.Storage Location
g.Assignments
 Materials Management
Components

 a.Company
b.Company code
c.Controlling Area
d.Plant
e.Purchasing Organization
f.Storage Location
g.Assignments
Materials Management
Enterprise Structure
 Materials Management
Master data – Material Master

 Material Master
b.Vendor Master
c.Purchasing Info Record
d.Source List
e.Quota Arrangement
 Materials Management
Master data – Vendor Master

 Material Master
b.Vendor Master
c.Purchasing Info Record
d.Source List
e.Quota Arrangement
Materials Management

PURCHASING
INFO
RECORD
 Materials Management
Master data – Info Record

 Relation between vendor and material. This helps manual

entry and copies the data into purchasing document.
 The information in the Info record is from the
negotiation between the purchasing dept and the vendor.
 Standard, Contracting, Pipeline, Consignment

 The purchasing info record in particular provides info on:

 the unit cost of a material or a service
 the planned delivery times

the materials and sales prices negotiated in the past
with a vendor

 Can be updated automatically from Quotation, Purchase

Order and Outline Agreement.
 Materials Management
Info Record (Configuration)


The nbr range is already predefined for stock and non-
stock materials, you may define new ones if necessary.
Materials Management
Master data – Info Record
Materials Management
Master data – Info Record
Materials Management
Master data – Info Record
 Materials Management
Master data – Info Record

 Subcontract purchasing info records are created

manually and are based on material groups, if the
subcontracting is based on a production order are on
materials
 The same purchasing info record may be used for
different materials as long as the price and service
remain the same.
 Consignment purchasing info records must be
created manually at plant level before any
consignment order is placed
 Contains at least the price of the consigned material
and the correct tax code
Materials Management

SOURCE
LIST
 Materials Management
Master data – Source List

 Source List contains the sources of supply (vendors) for

a particular material for a certain plant for a predefined
period.

Enables in determination of a procurement source to be
automated at purchase requisition level.
 Have control to make the source list
 Fixed
 Blocked
 Appropriate for MRP.
 The order of Source determination follows as :
 Quota Arrangement
 Source List
 Outline Agreement
 Info Record
 Materials Management
Source List (Configuration)


Activate the Source List at the Plant Level
 Materials Management
Master data – Source List


 Materials Management
Master data – Source List


 Materials Management
Master data – Source List
 Automatic creation of Source List – From Info record or agreement. No
indicators need to be set.
Materials Management

QUOTA
ARRANGEMENT
 Materials Management
Master data – Quota Arrangement


Quota arrangements allows to define target
percentages and distribute them between two or more
purchasing contracts. A quota arrangement has the
highest priority in the sourcing process.
 Materials Management
Quota Arrangement (Config)


Number Range : The number range is predefined, and
may be defined if necessary.


Quota Arrangement Usage Key: Defines how QA are
used in purchasing.Can be used in PO, Schd Agreement,
Planned Ord, PR, MRP, Prod Ord.
 Materials Management
Master data – Quota Arrangement (Config)

 These keys are defined with usage combinations.

 This key can be used in material master record at
plant level.
Materials Management
Master data – Quota Arrangement
Materials Management
Master data – Quota Arrangement
Materials Management

PURCHASE
REQUESTION
 Materials Management
Purchase Requestion


Internal document requesting for procurement of material or
services.

Created manually or autoamatically from MRP.

Indirect PR is created from - production order, plant
maintenance order, project systems, mrp.
 Direct PR is one created is created manually using SAP txn.
Materials Management
Purchase Requestion (Configuration)
 Materials Management
Purchase Requestion (Config-Document types)


Define new
document types
and allowed item
categories for each
documents type
 Materials Management
Purchase Requestion


The number range is
already pre defined and
you may also define your
own number range.
Materials Management

RFQ
and
QUOTATION
 Materials Management
Request For Quotation


Once the PR is created, the purchasing dept can be
send out a RFQ to the certified vendors requesting the
quotations.
 Materials Management
Quotation


Once the purchasing dept has received responses
(quotations) from the vendors these are entered into the
system, and comparision is made so that the
appropriate vendor is accepted.
 Materials Management
RFQ and Quotation (Configuration)


 Materials Management
RFQ and Quotation (Configuration)


The number range is
already pre defined
and you may also
define your own
number range.


Define new document
types and allowed
item categories for
each documents type
 Materials Management
RFQ and Quotation (Configuration)


 Materials Management
RFQ and Quotation (Configuration)


Materials Management

PURCHASE
ORDER
 Materials Management
Purchasing Value Key (Configuration)

 Purchasing Value Key is useful for

setting reminder for the material.
 Purchasing value key determines
the following things:
 There are 3 keys
1) In how many days before or after the
vendor has to be reminded or urging
letters for the material procurement.
2) Over and under deliveries tolerances.
3) Order acknowlegdement requirements in
PO.

Set this in the Purchasing view of

material master.
 Materials Management
Purchasing view (Material Master)

Set this in the Purchasing view of material master.

Materials Management
Purchasing (Configuration)
Materials Management
Purchasing (Configuration)
Materials Management
Purchasing (Configuration)
Materials Management
Purchase Orders (Configuration)
Materials Management
Purchase Orders (Configuration)
Materials Management
Purchase Orders (Configuration)
Materials Management
Purchase Orders (Configuration)
Materials Management
Purchase Orders (Configuration)
Materials Management

SCHEDULE
AGREEMENTS
 Materials Management
Schedule Agreements

 A long term agreement between purchasing dept and the

vendor for material or service for defined period of time.

Terms and conditions are negotiated for the period of
agreement.
 Two types of outline agreement
 Schedule Agreement
 Contracts

In the case of schedule agreement, the material is procured
based on the schedule agreed between purchase organization
and and vendor. This is good for REPETATIVE
MANUFACTURING as production consumes same qty of
material and can be planned accordingly.

A SA can be made for Consignment, Subcontracting & stock
transfer.

Created manually by Txn ME31L.
Materials Management
Schedule Agreements (Configuration)
Materials Management

CONTRACTS
 Materials Management
Contracts


A long term agreement between purchasing dept and the
vendor for material or service for defined period of time.

Terms and conditions are negotiated for the period of
agreement.

Two types of outline agreement
 Schedule Agreement
 Contracts

In the case of contracts, the release order is issued for the
materials when the plant requires them.

A contract can be either
 Quantity Contract (WK)
 Value Contract (MK)
 Central Contract (DC)

Contracts ca be made for standard items.

Create manually by Txn ME31K.
Materials Management
Contracts (Configuration)
Materials Management
Contracts (Configuration)
Materials Management
Contracts (Configuration)
Materials Management
Contracts
Materials Management
Contracts
Materials Management
Contracts
 Materials Management
Contracts

1. Click the "item conditions" button

Materials Management

RELEASE
PROCEDURES
 Materials Management
Release Procedures

• Release Strategy - Works on “pull” strategy, i.e., the user

should enter a transaction, enter his/her Release Code,
and receive a list of the appointed documents waiting to be
released
• Release Procedure can be with Classification and without
Classification.
• Procedure without classification is available for only PR.
This procedure provides for the approval at the item level
of a requisition.
• Procedure with classification provides with option of
specifyingly more requirements than just "value", "material
group", "account assignment", and "plant". As a result, you
have more flexibility in setting up the release procedure.
Materials Management
Release Procedures (Config)
 Materials Management
Release Procedures (Config)
 Create Characteristics (CT04)
 Materials Management
Release Procedures (Config)

 Create Class (CL02) – Characteristics must be assigned to the

Class. The Class Type for release stratergy is (032).
 Materials Management
Release Procedures (Config)

 Define Release Groups – Is same as release levels.

 Materials Management
Release Procedures (Config)

 Define Release Codes – Is an Identifier, with a person responsible

for approving.
 Materials Management
Release Procedures (Config)

 Define Release Indicator – Shows the release status. In standard

system, PR release status is either “Blocked” or “RFQ/Purchase
Order”. The “RFQ/Purchase Order” status indicates that PR has
been fully released and can now be converted into an RFQ or PO.
 Materials Management
Release Procedures (Config)

 Define Release Stratergy – Is a combination of Release Group

and release Code. The Release Group combines the release

codes (think of them as release levels) & each combination

gets assigned a release strategy. For each release level (or code)

you will define the prerequisites required to get to that release
 level, release status, and the characteristic values that place
 the release into that release level.
Materials Management
Release Procedures (Config)
 Materials Management
Release Procedures (Config)


 Materials Management
Release Procedures (Workflow)

 Works is the “push” strategy, i.e., a document that is waiting

to be released is sent via email to the person’s mailbox.
After releasing the document, it is sent to the next person’s
mailbox.
Important -Workflow is built on the ground of the Release Strategy; first you
create the Release Strategy, then you add the Workflow to it
 Activate the Workflow – Txn SWU3
 Materials Management
Release Procedures (Workflow)

 Txn SWETYPV
 For PO – enable (activate) event BUS2012
 For PR – enable (activate) event BUS2009
 Materials Management
Release Procedures (Workflow)

 Txn PFTC
 Task type: Workflow template
 Task (PO release): 20000075  display
 Materials Management
Release Procedures (Workflow)

• Choose Release Codes and enter “1” in the “Workflow”

field.
 Materials Management
Release Procedures (Workflow)

• Choose Workflow and enter the relationship between a

Release Code and an SAP user.
Result: All releases will be directed to the user email
Materials Management

STANDARD
PURCHASE
ORDER
 Materials Management
Standard PO(Doc type “NB” & Item Cat blank)

 An External doc issued by purchasing dept to vendor.

Materials Management

BLANKET
PURCHASE
ORDER
 Materials Management
Blanket PO or Framwork Orders
(Doc type FO Item Cat 'B')

 Blanket Purchase Orders

refer to the business
process where you have a
Purchase Order with a
validity period (start / end
date) and a limit on the
item. No Goods Receipt
takes place. Payment is
triggered by Invoice.
 Materials Management
Blanket PO or Framwork Orders
(Doc type FO Item Cat 'B')

 Multiple invoices can be processed.

 Invoices must be processed within the validity period spesified in PO.
 Total value of invoices must not exceed the limit spesified in PO item.

The validity period is spesified on PO Header Level, while the Limit is
on Item level. PR creation is Optional.
 PR doesn't have validity period fields, although the limit can be
spesified on item level. So if users create PR's then they could type the
validity period simply as text in one of the long text fields.

During invoicing, if the date is outside validity period or the amount is
bigger, either a Warning or Error will occur. This setting is done in
customising.

Examples on where this business process can be used include:
Services: example buying travel. Perticular if the receipt process is
not very formalised. It is also sometimes used for utilities (water,
electricity...).
 Materials Management
Blanket PO or Framwork Orders
(Doc type FO Item Cat 'B')

 Overall Limit is the value that will be used to in the check during
invoicing.
 If Commitment is switched on in Costing, the Expected value is
the value of the commitment against in this case the Cost
Centre. The actual will be posted during invoicing.
 Account assignment is mandatory, so this process is non stock
purposes only. Stock can not be procured using this method
(For stock a GR is required).

Because no Goods Receipt (GR) will take place, the GR
indicator is switched off when the item category is selected.
Materials Management
Blanket PO or Framwork Orders
(Doc type FO Item Cat 'B')
 Materials Management

SUB CONTRACTING
PURCHASE ORDER
 Materials Management
Subcontracting PO (Item Cat “L”)

 In Subcontract, some or all of the componenets

are provided to the vendor and the end product is
received against this PO and at this instance the
consumption of componenets occurs. Later the
invoice from vendor is received and settled.
 Price on the PO is copied from the subcontract
Info record (conditions should be configured).
 Components provided to vendor are managed as
special stock “O” (unrestricted or quality) at plant
level if the stock is physically stored at the
vendor's location.
 Materials Management
Subcontracting PO (Item Cat “L”)

 Usually the account assignment is “F” (since this is

triggered from production.
 MRP is run to generate 2 levels of PR, one for the
end material, other for the components.
 If components to be delivered to subcontractor
directly then the delivery address needs to be
changed on the PO and check subcontract vendor.
 Materials Management
Subcontracting PO (Item Cat “L”)

 BOM has to be maintained.

 The qty of the components (initially copied from
BOM) can be changed in the PO.
 When the final product is received, 541 O goods
movement occurs as part of the consumption of
the components.(541 and 543 are hidden mvmts)
 When the final product is received, and if actual
component consumption is more than specified,
then perform transaction subsequent adjustments,
a 543 O goods movement occurs as part of the
consumption of the additional component qty.
Materials Management
Subcontracting PO (Configuration)
 Materials Management

THIRD PARTY
PURCHASE ORDER
Materials Management
Third Party PO (Item Cat “S”)
 Materials Management
Third Party PO (Item Cat “S”)

 In third-party sales processes, a customer receives

materials from a reputed sales partner for which the
materials are sourced from another manufacturer.
 In the material master Procurement type must be
“External” (i.e., vendor-supplied), or “Both” ( If
procured externally and also produced internally)
 A sales order is created with proper document type
and third party item category.
 Third-party orders are strongly influenced by master
data.
 Materials Management
Third Party PO (Item Cat “S”)

 A PR must be created autoamtically when the

sales order is saved.
 A purchasing contract (ME31K) needs to be
created with Info Update flag checked so that Info
Record gets created automatically.
 Materials Management
Third Party PO (Item Cat “S”)

 A Source List (ME01) must be created.

 Set Automatic PO flag in Material & Vendor
Master.

 Batch job ME59N is run for PO to be generated

with Item Category “S”
 Materials Management
Third Party PO (Item Cat “S”)

 PO is sent to the vendor (output determination).

 Vendor ships material to customer.
 A communication in the form of ASN creates
Inbound delivery (data from PO is adopted) via a
background job VL31N.
 A GR posting (MIGO) is performed (may be as
background) against the inbound delivery.
 The GR posting may trigger a Customer Invoice
creation VF06 with reference to sales order and
may be sent to customer via EDI.
 Materials Management
Third Party PO (Item Cat “S”)

 Vendor invoice is entered using MIRO or can be

automated using Evaluated Receipt Settlement
(ERS), in this case no longer vendor invoice is
required and the trasaction MRRL.
Materials Management
Third Party PO (Item Cat “S”)
Materials Management
Third Party PO (Item Cat “S”)
 Materials Management

CONSIGNMENT
PURCHASE ORDER
 Materials Management
Consignment PO (Item Cat “K”)


Material which is stored at plant location but still
owned by vendor until the plant withdraws is
called consignment.

Not necessary to create a new material master
record for consignment, same material number can
be used.

An Info record with infotype consignment for
price, this is mandatory.

A PO is created with item category “K” requesting
the vendor for the consignment stock.

The stock is not valuated at the time of GR since it
is consignment stock.
 Materials Management
Consignment PO (Item Cat “K”)


The material is valuated only when withdrawn for
production or into own stock.

No price can be entered at the PO creation.

No invoice can be entered for settlement.

Can have PR and outline agreement with cat 'K'.

You may use MRP by using special procuremet
key on material master.

Consignment stock can be unrestricted, quality
inspection, blocked.

On MMBE the consignement stock has a special
stock indicator.

GR using 101 K
 Materials Management
Consignment PO (Item Cat “K”)

 Transfer posting from consignment to own stock

use movement type 411 K.
 For invoice settlements, use MRKO report to
view settled and non-settled consignment
withdrawals.
 Update the vendor and make the settlements.
 Consignment QI to Consignement stock - 321K
 Materials Management

STOCK TRANSPORT
ORDER
 Materials Management
Stock Transfer Order (Item cat 'U')

 Transfer of materials from plant to plant using

STO purchase order.
Materials Management
Stock Transfer Order (Configuration)
Materials Management

PRICING
CONDITIONS
 Materials Management
Pricing

 Condition types – Represent a simple function that

tells what type of calculation is to be perfomed.
 Access Sequence – This is a search strategy by
which the system searches a valid condition record
of a condition table. Each condition type has an
access sequence. This allows the condition type to
access condition table.
 Condition Tables – Contains number of fields that
are selected and records are created to assign
values to these fields.

Calculation schema - Specifies which condition
types are to be taken into account in which
sequence.
Materials Management
Pricing (Configuration)
 Materials Management
Pricing (Config)
Access Sequence


Materials Management
Pricing (Config)
Access Sequence
Materials Management
Pricing (Config)
Condition Types
 Materials Management
Pricing (Config)

 You can restrict the amounts or scale values in the relevant contition records.
 The limits are defined at the level of the condition type.

 The exclusion indicator prevents the

use of too many condition types in the
price determination process.
 In the standard system, it determines
that either the automatic or the manual
price is applied, but not both

To be able to use the exclusion
indicator, you must first maintain a
requirement in the step Define
Calculation Schema.
Materials Management
Pricing (Config)
Calculation Schema
 Materials Management
Pricing (Config)


Materials Management
Pricing (Config)
Inventory Management
 Materials Management
Inventory Manangement

 Movement Types
 Materials Management
Inventory Manangement

 Plant Parameters
Materials Management
Inventory Manangement
Materials Management
Inventory Manangement
Materials Management
Inventory Manangement
 Materials Management
Inventory Manangement

 To be Configured at Cut-Over
Materials Management
Inventory Manangement
 Materials Management
Inventory Manangement

TRANSFER POSTING vs STOCK TRANSFER

A transfer posting usually refers to a change in a material’s stock (for
example, release from quality inspection, accepting consignment material).
In a transfer posting, the material can remain in its original storage bin or be
transferred.
Stock transfers and transfer postings are used to represent organizational-
relevant transfers within the company (for example, decentralized storage).


Transfer Goods – Unrestricted to QI Stock
Transfer Goods – QI stock to Unrestricted

Transfer Goods – Unrestricted Stock to Blocked Stock

Transfer Goods – Blocked Stock to Unrestricted

Transfer Goods – SLOC to SLOC (1 Step)

Transfer Goods – SLOC to SLOC (2 Step)


Transfer Goods – Plant to Plant (1 Step)

Transfer Goods – Plant to Plant (2 Step)

Transfer Goods – Plant to Plant using Stock Transport Order
Materials Management
Inventory Manangement
 Materials Management
Inventory Manangement


Materials Management
Inventory Manangement
Materials Management
Inventory Manangement
 Materials Management
Inventory Manangement

 a.Movement Types
b.Plant parameters settings
c.Goods Movement settings
d.Goods Receipt
e.Transfer postings
f.Account postings
Materials Management

SERIALIZATION
 Materials Management
Serialization


Unique identification given to an single item.

A serial number profile must be assigned to each materail
that is to be serialized.

This assignment is made at plant level in the material
master record.
Separate serial number profile to a material for each

plant. However, a material can have a mandatory serial

number in one plant but not in others.

Serial Number procedure needs to selected correctly to
use the serialization in QM, IM, SD, PP, Handling Units.

Serial numbers can be assigned for goods receipts,
goods issues, stock transfers and stock transport orders.
 Materials Management
Serialization
 Serial number usage in the serial number profile controls
whether:

The serial number must be entered for every goods movement

The serial number cannot be entered for any goods movement
 As long as no serial numbers exist for the material you are
able to cancel or change the serial number profile.
 You can no longer delete the serial number profile in the
material master record. Instead of this, you create a serial
number profile without serialization procedures in
Customizing and enter this in the material master record.
 As soon as serial numbers exist for the material and you
want to change or delete the serial number profile, you must
note the following:
 The previously assigned serial numbers are no longer suited to the current serial
number profile.
 The indicator for the stock check may have changed. If this is the case.
However, you should only start this program once the changes have been
updated in the material master record.
 Materials Management
Serialization

 Serialization in Inventory Management.

 A serial number profile with the procedure MMSL must be entered in the
material master record
 The serial number usage for the procedure must be 03.
 The stock check must be 2


Serialization in Goods Movement.
 If assignment of serial numbers is mandatory and you enter a goods
movement, a dialog box will appear where you either enter your own serial
number for each serialized material or have the system assign the numbers
 If assignment of serial numbers is not mandatory, you can select Goto ®
Serial number from the detail screen for an item to maintain the serial
numbers.

 Serialization in Stock Transfers

 A stock transfer (plant to plant) of materials with serial number
management is only possible if the same profile is assigned to the material
in both plants.
 Materials Management
Serialization

 For goods movements for stock transport orders with no involvement of the
Shipping component, you must enter the serial numbers manually.
 When goods movements for stock transport orders involve Shipping
 When a goods issue is posted for a delivery, the serial numbers are taken
from the delivery.
 When a goods receipt is posted for a delivery, the serial numbers are also
taken from the delivery. If you enter the goods receipt referencing the
purchase order and not the delivery, however, you must enter the serial
numbers manually.
 Serialization in Physical Inventory
 When carrying out a physical inventory for materials that have serial
numbers, you can enter the serial numbers while you are entering the
results of the physical inventory count.
 Materials Management
Serialization

 Serialization for Configurable material

 Configurable materials are either created in a material type that allows the
configuration (the material type KMAT)
 Configurable materials have a bill of material that contains all components
that are used in at least one variant
 Material whose configuration is already define in material master record is
call Variant.
 Before configuring the serial number variant (bill of materail)
 Materials Management
Serialization (Config)


Use OIS2 to configure
serial number profile
under plant maintenance.

If ExistReq field is
checked then serial nbr
must be created first in
master record, else it gets
created during business
txn.

 The stck check is performed during

serial nbr assignment.
 Materials Management
Serialization (Config)


EqR field determines
whether or not an
equipment master
should be created for
each number when
assigning serial
numbers.
Materials Management

BATCH
MANAGEMENT
Materials Management
Batch Manangement
 Materials Management
Batch Manangement

 Batch Level selelction and Activating Batch Management

Materials Management
Batch Manangement
Materials Management
Batch Manangement
 Materials Management
Batch Manangement

 Batch Determination and Check


Access Sequence
 Materials Management
Batch Manangement


Stratergy Type

 Sort Rules
Materials Management
Batch Manangement
Materials Management
Batch Manangement
Materials Management

MATERIAL
VALUATION
Materials Management
Material Valuation
Materials Management
Material Valuation
Materials Management

SPLIT
VALUATION
Materials Management
Split Valuation
Materials Management
Inventory Manangement
Materials Management
Inventory Manangement
Inventory Management

PHYSICAL
INVENTORY
 Materials Management
Physical Inventory in IM

Types of Physical Inventory

Periodic Physical Inventory – In a periodic inventory, all stocks of the company are
physically counted on the balance sheet key date. In this case, every material must
be counted. During counting, the entire warehouse must be blocked for material
movements.
Continuous Physical Inventory – In the continuous physical inventory procedure,
stocks are counted continuously during the entire fiscal year. In this case, it is
important to ensure that every material is physically counted at least once during
the year.
Cycle Counting – Method of physical inventory in which materials are counted at
regular intervals during a fiscal year. These intervals (or cycles) depend on the
cycle counting indicator set for the relevant material.
Inventory Sampling – In inventory sampling, randomly selected stocks of the
company are physically counted on the balance sheet key date. If the variances
between the result of the count and the book inventory balance are small enough, it
is presumed that the book inventory balances for the other stocks are correct.
Annual Inventory – Physical stock taking of all the stocks in the warehouse on a
fixed date (usually at the end of the fiscal year). As a rule, the entire warehouse is
blocked for transfers during this time.
 Materials Management
Physical Inventory in IM

Glossary
Physical Inventory Document – A physical inventory document contains, among
other things, the following data:
the plant and storage location in which the count is to take place
when the count is to take place
which materials are to be counted
for material handled in batches: which batches are to be counted
in the case of split valuation: which sub-stocks are to be counted
which stock types are to be counted
Recount – Recounts can be initiated if the counted quantity appears unrealistic and
creates a separate physical inventory document.
Difference Posting – Once the results of the count has been reviewed and
approved, the differences will be posted updating the inventory quantities and
values to reflect the count.
Zero Stock Check – Check or inventory procedure used to increase the level of
accuracy in stock figures. If a storage bin becomes empty after a goods
movement, the bin is checked as to whether it is really empty or not. The result of
the check is communicated to the system during the confirmation of the transfer
order.
 Materials Management
Physical Inventory (Config)

De fault Values for Physical Inve ntory

Materials Management
Physical Inventory (Config)
Materials Management
Physical Inventory (Config)
 Materials Management
Physical Inventory in IM

 Cycle Counting – Cycle counting is a method of physical inventory

where inventory is counted at regular intervals within a fiscal year.
These intervals (or cycles) depend on the cycle counting indicator set for
the materials
 Can be set automatically by past consumption for a specific period
 Can be set automatically by planned future demand for a specific
period
 Materials Management
Physical Inventory in IM

 Cycle Counting Config

 Materials Management
Physical Inventory in IM

 Cycle Counting – Cycle counting is a method of physical inventory

where inventory is counted at regular intervals within a fiscal year.
These intervals (or cycles) depend on the cycle counting indicator set for
the materials
 Can be set automatically by past consumption for a specific period
 Can be set automatically by planned future demand for a specific
period
Materials Management
Physical Inventory in IM
 Materials Management
Physical Inventory in WM

 WM inventory is carried out at the BIN level.


WM inventory must be carried out once a fiscal year for every bin
to be regarded as complete
 Compare the material stocks that are physically present in each
bin with data managed in the Warehouse Management System
(WM)
 Enter the inventory differences recorded in the results of the
physical inventory, review the differences, and update the IM
quantity and value.
 In the warehouse, we specify the appropriate inventory procedure
for each storage type.
 WM is best suited for one of the various forms of continuous
inventory procedures. It naturally ensures continuous
updates of the storage bins and stock movements
 Materials Management
Physical Inventory in WM


Annual Inventory - The stock taking of all stock in a warehouse on
a fixed date (usually at the end of the fiscal year)

There are no movements in the warehouse during this stock
taking process

The annual inventory is used when a continuous inventory is not
possible
 This type of inventory may be used for storage bins in
warehouses that have actually planned a continuous inventory,
but no stock movements have taken place within the current fiscal
year
 Physical Inventory documents can only be created for storage
bins that do not have any open transfer orders (TOs). This means
that all open TOs must be confirmed prior to the annual inventory
commencement.
 Select and block affected storage types or individual storage bins
for which inventory is to be performed.
 Materials Management
Physical Inventory in WM

 The system will create an exception list of all selected storage bins with
open TOs.
 Create, activate and print a physical inventory list.
 Carry out the physical inventory in the warehouse for the selected
storage bins.

Enter the inventory count results in WM.

Process the inventory differences in WM. Post variances to the “Interim
storage area for differences”. In the standard system, storage type 999
is set up as the “Interim storage area for differences”.
 The system removes the storage bin block, so that the bins are
available again for stock movements after the inventory is complete.
 Review and post (clear) inventory differences to Inventory Management.

After the physical inventory is complete for the fiscal year, quants must
be reset to be eligible for the next annual inventory.
 Materials Management
Physical Inventory in WM

 Continous Inventory – Distributes the physical inventory for all storage

storage bins over the course of the fiscal year, and can carry out
inventories at different times as required.

Continuous Inventory may not touch every bin each year, and may
require partial Annual Inventory on any untouched bins.

Benefits - The effort and costs for the inventory is not concentrated on a
certain day or days but is distributed over the entire year. The
Warehouse Manager can better plan the workforce in the warehouse.
It is possible to carry out the inventory at idle times in the warehouse.
Because of the lower inventory efforts at the end of the fiscal year,
user
can concentrate on creating year-end closing reports.
Improves inventory accuracy.
Materials Management
Physical Inventory in WM
 Materials Management
Physical Inventory in WM

 Cycle Counting Inventory per bin - Stock is physically inventoried at

regular intervals within a fiscal year.
 By dividing materials into various classes (i.e. A, B, C, D), you specify
for those materials at which intervals or cycles the inventory is to be
performed.
 This allows you to inventory fast-moving materials in your warehouse
more often than slow-moving materials
Materials Management
Physical Inventory in WM
Materials Management
Physical Inventory in WM
 MM Integrates FI

AUTOMATIC
ACCOUNT
DETERMINATION
 MM Integrates FI
Account Determination

 All the MM transactions that involve valuated materials

(also GR for PO for non valuated.)
 Transactions impacting accounting documents are
 Goods Receipt
 Initial Entry for Stock balance (561)
 Purchase Order (101)
 w/o PO (501)

Goods Issue
To cost center (201)
To sales order (231)
To asset (241)
To Production order (261)
To Scrap (551)
 Invoice Receipt (MIRO, MIR6, MIR7)
 MM Integrates FI
Account Determination


Transfer Posting from one material to other if both
materials have different valuation classes.
 GR subcontract PO
 GR semi finished or finished (101)
 GI of Raw materials (543)

Physical Inventory difference posting
 GR for gain on inventory (701)
 GI of loss of inventory (702)
 MM Integrates FI
Account Determination

Valuation Area - Can be a company code or plant,

Represents a group of plants or company codes that have
same account determination.
Valuation Grouping Code - Collection of valuation
areas that have the same account determination.
If using valuation grouping code, then “group together
valuation areas” and assign your company codes or
plant a code (any code). Give the code to FI.
If you dont use valuation grouping code, then have to set
up account determination for each plant or company
code in SAP.
 MM Integrates FI
Account Determination (Config)
Activating Valuation Group & Grouping of valuation areas
 MM Integrates FI
Account Determination


Account Category Reference - An artificial code which
allows flexibility in linking material types with valuation
classes. The valuation class is linked to an account
category reference.
MM Integrates FI
Account Determination
MM Integrates FI
Account Determination
MM Integrates FI
Account Determination
MM Integrates FI
Account Determination
MM Integrates FI
Account Determination
 MM Integrates FI
Account Determination

 Transaction/Event keys – keys to differentiate a/c

determination by business txn. Ex GL a/c posted
by GR must be differentiated by invoice receipt
txn. This is FI step.
Materials Management

LOGISTIC
INVOICE
VERIFICATION
 Materials Management
Logistic Invoice Verification

 LIV is a procedure thru which vendors are paid

for the material or service provided.
 3-way match – PO, GR, Invoice
 2-way match – PO, GR (ERS - Evaluated Receipt
Settlement).
 When ever an invoice is entered, the system
verifies the qty and price and then blocks the
invoice accordingly.
 The Variance or Tolerance Limits needs to be
configured per tolerance key.
 Tolerance key already exist need to a set for the
Company code.
 Materials Management
Logistic Invoice Verification

 Invoices are entered using MIRO transaction.

 Ways an Invoice can be blocked
Manual block
Stochastic block (or Random block)
Block due to Amt of Invoice Item
Block due to Variance of Invoice Item
 Variance on one line item will block the complete
Invoice.
 Materials Management
Logistic Invoice Verification (Config)

 Types of Variances in Invoices

 Qty Variance, Price Variance, Qty and Price,
Order Price Qty Var (price per unit in PO is
difference from price per unit in Invoice).
 Materials Management
Logistic Invoice Verification (Config)


Activate Stochastic block at company code level
and set the threshold value.


Any Invoice > 3000 will have 50% blocking chances, and
if invoice is 1500 then 25% blocking chances.
 Materials Management
Logistic Invoice Verification (Config)

 Block due to Amt of Invoice Item- If an invoice

need to be blocked if the amount on the invoice
item greater than specific amount.
 Materials Management
Logistic Invoice Verification

 Releasing the Blocked Invoices - MRBR

Materials Management
Logistic Invoice Verification
 Materials Management
Logistic Invoice Verification (ERS)

 ERS is 2-way match PO and GR, No invoice

from Vendor.
 The settlement is done after the GR
automatically or periodically.
 ERS also generates credit memos for returns.
 The ERS process posts the invoice documents
automatically for the open GR docs.

Using transaction MRRL the invoices can be
posted.
 May also schedule b/g job RMMR1MRS
 Accounting team will pay the vendor using
transaction F110 or SCMA for schedule
processing.
Materials Management
Logistic Invoice Verification (ERS)
 Materials Management
Logistic Invoice Verification (ERS)

 For Consignment and Pipeline use transaction

MRKO
Materials Management

EXTERNAL
SERVICE
MANAGEMENT
Materials Management
External Services Management (Config)
Materials Management
External Services Management
 Materials Management
External Services Management


ESM is the procurement of services.
 With External Services, you have a PO for
services with Goods Receipt taking place. The
Goods Receipt is called Service Entries.
 In contrast with goods (stock or non stock)
where receiving is typically done by the
inventory management group, the Service
Entries are done by business themselves.
 The logic is that the business generated the
request for the service, that is where it was
done, it will be best if they do confirmation that
service took place.
 Materials Management
External Services Management (Item Cat D)


SAP purchasing cycle vs SAP purchasing cycle
for External Services.
 Materials Management
External Services Management

PR is converted to PO manually or automatically using ME59.

Material Group is required in the selection criteria of ME59 screen
 Materials Management
External Services Management

 Goods Receipt = Service Entry Sheet + Accept Service Entry Sheet

Materials Management
External Services Management
 Materials Management
External Services Management

 Acceptance of Service Entry Sheet

This is the equivalent of a Goods Receipt. The result of accepting a
SES will be a material document with movement type 101 (GR
against PO). Depending of process the SES can be created and
Accepted by different people. Typically the acceptance is done by
a more senior person.

Release procedure and SES

Release procedures are possible in Service Entry Sheets.
Materials Management

CONSUMPTION
BASED
PLANNING
Materials Management
Consumption Based Planning
 Materials Management
Consumption Based Planning

 The CBP is used to determine when future

purchases are need to be made to replenish the
material stock based on past replenishment.
 The consumption values are found in the material
master.
 Method of CBP used is MRP.
 The data in material master is updated by txn data
from IM.
Materials Management
Consumption Based Planning
 Materials Management
Consumption Based Planning

 a.Introduction to MRP,MRP procedures CBP

procedures including Reorder Point Planning,
Forecast Based Planning and Time Phased
Planning ,Lot sizing procedures
b.MRP list, Stock/Requirement lists and
Comparison
c.Configuration settings limited to CBP, Creation
of Material with planning views and execution of
planning Run
Materials Management

VENDOR
EVALUATION
 Materials Management
Vendor Evaluation

 The vendor evaluation component allows you to

optimize procurement procedures for both
materials and services.
 The system proposes a grading scale from 1 to
100 points, used to measure vendor performances
according to five main criteria.
 Price
 Quality
 Delivery
 Service and Support
 External Services
 Materials Management
Vendor Evaluation (Config)

 Within the main criteria there are

smalled elements called sub criteria.
 There can be max 20 sub criteria for
each main criteria.
 Combined scores for subcriteria gives
the overall score for the main criteria.
 Sub criterial for price are price level,
price history.
 Sub criterial for Quality are GR, quality
audits, complaints.

Sub criterial for delivery are ontime
delivery, qty, Confirmation date.
 May add new subcriteria.
Materials Management
Vendor Evaluation (Config)
Materials Management
Vendor Evaluation (Config)
 Materials Management
Vendor Evaluation

 Search for non-evaluated vendors (ME6C)

Materials Management
Vendor Evaluation
Materials Management
Vendor Evaluation
 Materials Management
Vendor Evaluation

 Vendor Comparision ME65

 Materials Management
Vendor Evaluation

 MARKET PRICE - In SAP Vendor Evaluation, the Automatic calculation of

points for price based sub criteria compare the Market Price with Actual price in
Purchase Order. In standard SAP, Market price is per Purchase Org + Info Rec
Category + Material.