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SAP Materials Management
FUNDAMENTAL PROCUREMENT PROCESSES..................................................................................3 MATERIAL MASTER..................................................................................................................................5 VENDOR MASTER.......................................................................................................................................5 PURCHASING MASTER.............................................................................................................................6 PURCHASING DOCUMENTS....................................................................................................................7 NOTES ON PURCHASING DOCUMENTS...............................................................................................9 PURCHASING PROCESSING..................................................................................................................10 GOODS RECEIPT.......................................................................................................................................11 INVOICE PROCESSING............................................................................................................................12 VENDOR PAYMENT..................................................................................................................................13 PURCHASING INTERGRATION.............................................................................................................15 MATERIALS PLANNING AND CONTROL...........................................................................................16 QUOTATIONS.............................................................................................................................................19 PURCHASE ORDER...................................................................................................................................20 OUTLINE AGREEMENT...........................................................................................................................23 CONTRACT ................................................................................................................................................24 SCHEDULING AGREEMENT..................................................................................................................24 PURCHASING INFO RECORDS..............................................................................................................25 SOURCES OF SUPPLY..............................................................................................................................27 MASTER CONDITIONS............................................................................................................................28 EXTERNAL SERVICES MANAGEMENT..............................................................................................31 VENDOR EVALUATION...........................................................................................................................35
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SAP Materials Management
Materials Management covers all tasks within the supply chain, including consumptionbased planning, purchasing, vendor evaluation, and invoice verification. It also includes inventory and warehouse management to manage stock until usage dictates the cycle should begin again. The purpose of the MM-Materials Management module is to provide detailed support for the day-to-day activities of every type of business that entails the consumption of material. The Materials Management module of SAP R/3 consists of the following components: • • • • • • • • Purchasing. External Services Management. Vendor Evaluation. Inventory Management. Invoice Verification. Warehouse Management. Consumption Based Planning. Material Ledger
FUNDAMENTAL PROCUREMENT PROCESSES
Requirements Determination -- Basically, how do we know we need something? The request for goods or services usually comes in the form of a purchase requisition. Purchase requisitions can be created manually or automatically by MRP (Material Requirements Planning). MRP is part of the Manufacturing Planning and Execution process introduced above. Simply put MRP determines the material needs based on current and future sales figures and automatically triggers the requirements when necessary. Source Determination -- The source of supply is determined for the needed item by the purchasing department or the system Vendor selection -- The requisition is assigned to a vendor Order processing -- A purchase order is requested with reference to the requisition Order follow-ups -- The system provides automated expediting and follows up reminders to ensure prompt delivery of the order Goods receipt and inventory management -- The goods are received into the warehouse via purchase order goods receipt Invoice verification -- The invoice is validated by comparing it to the original purchase order price and quantity received Payment -- Payment will be made based on payment terms and conditions defined
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i.e. Note that a plant can be a manufacturing facility or a warehouse distribution center. Source Determination and Vendor Selection. 24/Feb/2009 4 of 39 . Invoice Verification and Payment.Includes step six of the inventory process. Requirements Determination. i. Company code The company code represents an independent accounting unit within a client. i.e.Includes the steps four and five of the procurement process. and Order Follow-Up Goods Receipt Posting -. renders services. Plant A plant is an organizational unit within a company. Goods Receipt and Inventory Management Invoice Processing -. namely the day-to-day buying. It represents the corporate group level of an organization. required by law. Purchase Orders -.SAP Materials Management Four Main Documents and Transactions in the Procurement Processes Purchase Requisitions -. Please note that a purchasing group can perform this function for several purchasing organizations. A plant produces goods.e. Purchasing group The purchasing group is a special subdivision within a purchasing organization that handles certain specific purchasing activities. Purchasing organization A purchasing organization is an organizational unit responsible for procuring materials and services for one or more plants and for negotiating prices and terms of delivery with the vendor. or makes goods available for distribution. i.Steps seven and eight of the procurement process. where the material stocks are located. Order processing. i. Organizational Elements Client The client represents the highest level of the organizational hierarchy.Includes the first three steps of the procurement process. Storage location A storage location is the actual physical location. a business unit for which balance sheets and profit and loss statements.e. within a plant. are compiled.e.
goods supplier. such as the base unit (stock keeping unit). etc. Vendor master records comprise information for both the accounting and purchasing function as well as general vendor data. General functions • • • • Terms of payment One time vendor Blocking vendors Maintaining business partners – vendor. such as the valuation class. and in the Purchasing view the purchasing agent has access to the general data and the purchasing data. It includes such information as address. Because Accounting and Purchasing have different information needs. phone number. each is presented with a different view of the vendor master file. General data is data that applies to all company codes within the client. Accounting data includes accounting specific information such as payment transactions and reconciliation control account information. the accountant has access to the general and accounting data. payee 24/Feb/2009 5 of 39 . order recipient. invoicing party. currency used for the vendor. and the order unit The purchasing group (buyer group) responsible for the material Accounting data. and standard or moving average price VENDOR MASTER Vendor Master Records include general information such as name and address. and the language spoken by the vendor. price control. terms of payment.SAP Materials Management MATERIAL MASTER Organizational levels for inventory management General data Plant data Storage location data Valuation data Material master views – primary views for procurement Purchasing view Engineering view Accounting view Steps to create a material master • • • • The material type and industry sector The units of measure. terms of delivery. Purchasing data includes items such as contact persons. etc. In the Accounting view. contact information.
24/Feb/2009 6 of 39 . change. An info record thus represents a material-vendor relationship. The info record also allows buyers to quickly determine: • • Which materials have been previously offered or supplied by a specific vendor Which vendors have offered or supplied a specific material The info record contains data such as: • • • • • • • • Current prices and pricing conditions The number of the last purchase order Tolerance limits for over deliveries and under deliveries The planned delivery time (lead time required by the vendor to deliver the material) Vendor evaluation data An indicator as to whether the vendor counts as the regular vendor for the material The vendor sub-range to which the material belongs The availability period during which the vendor can supply the material There are two types of info record: • Info records with a material master record (e. the info record indicates the units of measure in which materials are ordered from the vendor. It also shows price changes made by the vendor for the material. It contains information on a specific material and a vendor supplying the material. The purchasing info record (also referred to in abbreviated form as the "info record") is a source of information for purchasing. You can also create. and the applicable reminder levels.SAP Materials Management PURCHASING MASTER In addition to vendor and material master data. for stock material). the vendor's current pricing is stored in the info record. This information can be useful in the process of evaluating quotations to determine the successful bidder. and delete info records. For example.g. Info records are created automatically when you order a material. This type of info record represents the relationship between a material or service (for which a master record exists) and a vendor. For example. Purchasing is supported in its everyday work by the following additional types of master data: • • • • • Purchasing info record Source list Quota arrangement Conditions Vendor evaluation Purchasing info record Info record is short for Information record. The info record contains concise information about a vendor and a material that you already procure from that vendor.
The source list helps you determine which vendors or internal suppliers supply a material at a given point in time. Organizational data such as prices and pricing conditions that you can store for the relevant purchasing organization or plant. and the order unit). It is also used in the automatic selection of vendors for a material. Setting quotas allows you to automatically apportion the total requirement of a material over a period among a number of different sources of supply. Source list A source list specifies the possible sources of supply for a material over a given period of time. origin data.g. It also constitutes a basis for vendor selection. Master conditions Master conditions are conditions that are defined centrally and which determine the value of purchase orders. It shows the time period in which a material may be ordered from a given vendor or under a long-term agreement. for consumable materials). reminder levels. An info record contains general data and organizational data: • • General data that is valid for each purchasing organization or each plant (for example. Vendors' overall scores can be used to determine whether they are retained in or eliminated from your vendor base. It enables you to determine the valid source for the procurement of the material listed in a purchase requisition at any given time. Vendors are awarded scores for a number of different criteria. Vendor evaluation Vendor evaluation is the process of analyzing and assessing the performance of your suppliers. PURCHASING DOCUMENTS The main documents and transactions in the procurement process are: • • • • Purchase Requisitions Purchase Orders Goods Receipt posting . Quota arrangement A quota arrangement is a mechanism for determining the source of supply to which to assign a material requirement on the basis of quotas.updates both stock and financial records Vendor Invoice posting 24/Feb/2009 7 of 39 . They are used as the basis for calculating the effective price. This type of info record represents the relationship between a material or service for which no master record exists and a vendor.SAP Materials Management • Info records without a material master record (e.
As in the case of the purchase requisition. or pre-qualification date. the purchase order determines whether the ordered material is placed in stock or consumed directly upon goods receipt.O) The purchase order represents the formal and final approval of a purchasing transaction with the vendor. It authorizes the purchasing department to purchase materials in specified quantities within a specified time. his price) for the supply of a material or the provision of a service by submitting a quotation. Purchase Order (P. Additional items can include: 24/Feb/2009 8 of 39 . It identifies: • • • • • • The vendor The material or service to be ordered The quantity The price The delivery date and terms of delivery The terms of payment In addition. Then you can: • • • Use the price comparison list to help you determine the best quotation Send rejection letters to the appropriate vendors Store the pricing and terms of delivery for certain quotations in the info record for future reference. RFQ (request for quotation) A request for quotation (RFQ) is an invitation to a vendor to indicate his terms and conditions (in particular. It has the following characteristics: • • • It is the primary instrument for identifying materials or services that must be procured outside the company. In addition. You enter the vendor's pricing and conditions in the original RFQ. the RFQ identifies the material. In MM Purchasing. It is an internal document: it is not used outside the company. Quotation A quotation contains the vendor's pricing and conditions for providing the material or service stated in the RFQ. quantity. the vendor's name and address) and important dates for the RFQ (such as the closing date for applications. and bid submission deadlines). and delivery date. the RFQ contains information about the vendor to whom the RFQ is sent (for example.SAP Materials Management Purchase Requisitions A purchase requisition defines a need for a material or service. the RFQ and quotation are the same document.
However.as here. NOTES ON PURCHASING DOCUMENTS Purchasing documents are differentiated in the SAP system via the document type. you create a scheduling agreement item. vendors receive a scheduling agreement release (comprising a header and a rolling delivery schedule made up of individual schedule lines) rather than discrete purchase or release orders. and may contain data on previous goods receipts. For each scheduling agreement item. and the price. purchase orders. Each document is assigned a unique number. the terms "release" and "releasing" may also be applied to an internal purchasing document approval or clearance process. for example. Alphanumeric assignment is only possible in the latter case. For example. The standard SAP system includes certain document types. The contract does not contain specific delivery dates or the individual delivery quantities. (Note that in addition to standing for a method of ordering materials or services .SAP Materials Management • • • Quantity and/or Value Contracts Quota Arrangements Scheduling Agreements Contract A contract is a longer-term agreement with a vendor (one of the two forms of "outline agreement" in the SAP system) to supply a material or provide a service for a certain period of time. "systems contract" and "period contract". A delivery schedule may contain firm. A number of different terms may be used for this concept in purchasing literature. Each document will contain a header and can contain several items. (Note that the "number" may also be an alphanumeric code: see below). These are specified subsequently in release orders issued against the contract. The header contains information relevant to the whole document. and contracts. The relevant document type appears as a default value when you create a purchasing document. for example. including "blanket order". Internal number assignment means that the system assigns the number. and possibly also delivery time-spots.) The delivery schedule specifies the quantities to be delivered. In vendor scheduling. External number assignment means that the person creating the document must supply it. The items specify the materials or services to be procured. depending on the policy of your enterprise. This number can be assigned internally or externally. For each material to be procured. This determines. you subsequently set up a rolling delivery schedule by creating a number of individual schedule lines. Document types are defined for RFQs. or planned (forecast) delivery dates. your enterprise can also define its own. in the SAP System. "blanket contract". Scheduling agreement The scheduling agreement has similarities with a quantity contract: it states the target quantity of a material to be ordered from a vendor over a period of time. information about the vendor is contained in the 24/Feb/2009 9 of 39 . Each purchasing document is subdivided into two main areas: the header and individual items. semi-firm. which the relevant number range is and which fields are offered for maintenance purposes. the delivery dates.
the SAP component Consumption-Based Planning suggests materials that need to be ordered on the basis of past consumption or usage figures and existing stock levels. How are requisitions created? In the SAP System. The additional data includes additional information about the item. for example. and the purchase requisitions may call off quantity releases against the contract. PURCHASING PROCESSING Requisitions may be entered directly or as a result of Materials Requirement Planning (MRP). a quota arrangement may be drawn up that splits the purchase orders into predefined ratios. Once the source of supply is determined.SAP Materials Management document header. account assignment data (such as cost center and G/L account) and the PO history for an item. ordering and monitoring) occur on an item-specific basis. For example: Your packing materials are purchased in large quantities on a regular basis from a single supplier. If you wish to spread your purchasing across a number of suppliers. Materials Planning can stipulate that a requisition be resubmitted to Purchasing if it is not processed within a predetermined period. The creation indicator in the requisition shows whether the requisition was created manually or through Materials Planning. Before a requisition is created. requisitions can be created in the following ways: Indirectly: • • • Via materials planning and control . This strategy requires specific authorization before a purchase order can be created. Each item in a purchasing document represents a specific planned procurement. 24/Feb/2009 10 of 39 . the requisition may have a release strategy assigned to it. the source of supply must be determined. In this case a long-term contract may have been agreed with this supplier. the data from the requisition is copied into a purchase order with the details from the purchase information record. Via networks from the SAP component PS Via plant maintenance orders from the SAP component PM Directly: Someone from the requesting department enters a purchase requisition manually. It is displayed in analyses of requisitions and in the statistics data of a requisition item. Additional data includes. Purchasing transactions (involving requisitioning. The person creating the requisition determines what and how much to order. and the material description and quantity to order is specified in each item. and has no direct connection with the procurement data of the item. When the requisition is released. The component also automatically determines the order quantity and the delivery date. and the delivery date. which contains information on already recorded goods and invoice receipts relating to the item. This may be via a number of different strategies depending on the type of product and industry concerned.
different account assignments can be made for the items. and source lists). a goods receipt is a recorded. POs can be generated from these requisitions automatically.and underdeliveries of ordered goods. if you have two material document items with different plants that belong to different company codes. GOODS RECEIPT When a company receives material from a vendor. You can create a PO in three different ways: 1. if it leads to an update of the G/L accounts). Vendor unknown Use this procedure if you want the system to select possible vendors.) Like purchase requisitions. 2. Accounting documents If the movement is relevant for Financial Accounting (that is. buyers can limit over. 24/Feb/2009 11 of 39 . or info record as a procurement option). As a result of the order type. (Note: the term "source" covers outline purchase agreements. A goods receipt (GR) is a goods movement with which the receipt of goods from a vendor or from production is posted. It is possible to apportion the costs across several cost centers or projects when the order is created. There are different types of purchase orders designed to handle various business situations. info records. for example. A goods receipt leads to an increase in warehouse stock. delivery date. Assigned requisitions Use this procedure to list the requisitions for your purchasing group that have already been assigned to a vendor (that is. etc. These suggestions are then made on the basis of sources of supply that have been predefined in the system. etc. Vendor known Use this procedure if you know which vendor is to receive the order. outline agreement. 3. This might be the case. projects. price. charging the items to cost centers. several accounting documents are created for a single material document. assets.SAP Materials Management Purchase Order Processing • • • • A purchase order is a formal request to a vendor to provide certain materials or services under specific conditions (quantity. In some cases. The G/L accounts involved in a goods movement are updated through an automatic account assignment. This procedure is described later in this section. By specifying permissible tolerances. purchase orders may be entered directly. those requisitions containing a vendor. Goods receiving personnel can confirm the receipt of goods simply by entering the PO number. an accounting document is created parallel to the material document.
The system supports the checking and matching of invoices. Which stocks are updated in the material master record depends on the destination of the goods: Goods receipt into the warehouse. Goods receipt into consumption. GR/IR accounts. the system increases total valuated stock and the stock type (for example. The header contains general data about the movement (for example. its date). and the open purchase order quantity is set to zero. Other Documents generated during Goods receipt posting • A material document is generated that serves as proof of the movement and as a source of information for any applications that follow. etc. the material document number and item. the order item is considered closed. If you book goods into a storage location. Each item describes one movement. the storage location data will automatically be created in the material master record when the goods receipt is posted. If the goods are destined for the warehouse. the unrestricted-use stock) by the delivered quantity.SAP Materials Management G/L accounts: Stock. The vendor evaluation is also updated which allows you to see if vendors are adhering to the requested delivery dates. After a purchase order has 24/Feb/2009 12 of 39 . A material document consists of a header and at least one item. and the posting date of the goods receipt. • • • • • Stock Update. which does not yet exist for this material. This also updates the purchase order history and creates a financial accounting document. such as: the delivered quantity. The stock value is updated at the same time. the stock remains unchanged. This speeds the process of auditing and clearing invoices for payment. The accounts payable clerk is notified of quantity and price variances because the system has access to PO and goods receipt data. the integration with FI (Financial Accounting) updates the General Ledger to reflect the increase in the stock value. If the goods are destined for consumption. Order item. a purchase order history record is automatically created. If the goods receipt is posted into goods receipt blocked stock (see the section Goods Receipts Into Goods Receipt Blocked Stock). At goods receipt. The goods are recorded only in goods receipt blocked stock of the purchase order history. the movement type. Transfer Order document Point of Consumption Cost Center Order document Stock Quantity Consumption statistics • • • • • INVOICE PROCESSING Invoice verification validates the invoice by matching the purchase order price and purchase order receipt quantity to the invoice. Purchase order history. During goods receipt posting. This record contains data essential for Purchasing. If the "delivery completed" indicator is set in the material document. Consumption. only the consumption statistics are updated in the material master record. Goods receipt into a new storage location. Goods receipt into goods receipt blocked stock.
so you can carry out both incoming and outgoing payments. 2. The system notes the document number of the invoice in the line item of the down payment. with which it is to be cleared. Checks issued by hand need to be dealt with separately in order to create a link between the check number and the payment document. a good receipt made. the corresponding amount is no longer displayed in the vendor account and in the General Ledger as a "down payment made". You have received the closing invoice for a down payment and can no longer clear it with the payment program. Transfer Immediately after receiving the closing invoice.SAP Materials Management been filed. which are paid at different times. This payment made is taken into account when the invoice is paid. 24/Feb/2009 13 of 39 . 3. You want to allocate a down payment to a specific invoice. a down payment is cleared with several invoices. You want to prepare your year-end closing. You must clear each down payment amount manually. you clear the down payment with the closing invoice manually. The payment program subtracts the down payment only when the corresponding invoice is paid. either manually or automatically. The standard payment methods include: Check You can post the check payment manually or via the payment program. It is advisable to reserve a separate number range for manually created checks in order to keep the use and management of such checks separate from that of automatically created checks. You must carry out a transfer posting of down payments manually in the following cases: 1. but rather as a "payment made" in the payables account. This transaction also supports the transfer posting of partial amounts. In this case. That is. You want to clear a down payment partially. Each method has been defined separately for each country. and a vendor invoice created. After this transfer posting. since you will not run the payment program until after you next prepare the balance sheet. The payment program has been developed for international transactions with vendors and customers. you can carry out a transfer posting of the clearable down payments. the invoice must be verified before the invoice is posted to the following areas: • • • • • G/L accounts Assets Cost Centers Projects Order VENDOR PAYMENT SAP's standard system contains the most common forms of payments.
5. In the latter example. The system suggests the required data. Enter the header data and select the clearing procedure Outgoing payment. 3. you enter these two line items first. Select ENTER. Terms of payment represent stipulations concerning the time of payment of amounts due. enter the posting key for posting a bill payable (39 in the standard system). You specify the terms of payment in the vendor master record. Due date Enter the due date of the bill of exchange. To do this. Post the document: The system clears the open payables and posts a bill payable to the vendor account and the special G/L account. To post a bill of exchange payment manually. Once the invoices are posted. the discount is deducted from the invoice amount if payment is made within the specified period. or "discount of 2% if payment is made within 10 days). This accesses the screen for entering data on the bill of exchange. 4. and the company code. All further steps for clearing open items are described in Clearing Open Items.SAP Materials Management Bill of exchange You can make payments to your vendor by bill of exchange using the payment program. When you place an order 24/Feb/2009 14 of 39 . Drawee The address data of the company code is suggested. proceed as follows: 1. You reach the selection screen for open items. You can then change to the screen for processing open items to clear the bill payable. You can further limit the items to be processed by specifying selection criteria. This information can be changed manually on the invoice. and the special G/L indicator for the bill posting (B in the standard system). You then change to the screen for processing open items. On the bottom line. Accounts Payable reads and pays all invoices that are due and are not blocked for payment. The most important fields are: • • • Drawer The address data of the vendor is suggested. such as the vendor account number. including the specification of any discounts granted for prompt payment. Select Process -> Choose open items. If you want to post the bill liability to the bank sub-account and the corresponding clearing account. you must make the corresponding G/L account posting on the bottom line of the screen. The payments are based on information (payment terms) that is specified in either the purchase order or in the vendor master file. Select Document entry -> Bill of exchange ->Payment. the account type. Your bank pays the bill of exchange on this date. You can also post the bill of exchange payment manually. 2. the clause "payable in 30 days net". 6. the number of the vendor account. together with the discount-qualifying periods (for example. The system shows the screen for entering header data and for selecting a clearing procedure.
This is because they can be assigned to a cost center directly. and invoice verification. they automatically appear as default values. An invoice can be blocked for payment due to one of the following reasons: • • • • Variances in an Invoice Item Amount of an Invoice Item Stochastic Block Manual Block Cash discount and blocked invoices: When an invoice is blocked. inventory management. goods receiving. For example. Information on each vendor is stored in a vendor master record. Purchasing communicates with other modules in the R/ 3 System to ensure a constant flow of information. Through PO account assignment. the period in which the vendor grants a cash discount may end before the invoice is released. To avoid this. Financial Accounting cannot pay the invoice. you can change them as needed. These are then the ones used by the payment program. Purchasing is a component of the Materials Management (MM) module. PURCHASING INTERGRATION The R/3 System consists of various modules that are completely integrated with one another. since the payment program cannot deduct the cash discount. 24/Feb/2009 15 of 39 . blocking the invoice would be a disadvantage. The MM module is fully integrated with other modules in the R/3 System. which contains both accounting and purchasing information. Terms of payment can also be entered in the vendor's invoice. purchasing. The invoice must first be released in a separate step before it can be processed. Purchasing can also specify which G/L accounts are to be charged in the financial accounting system. It supports all phases of materials management: materials planning and control. In this case. Good communication between all participants in the procurement process is necessary for Purchasing to function smoothly. you can update the baseline date for payment when you release the invoice.SAP Materials Management with the vendor. so that the cash discount periods can be shifted forwards. Blocking Invoices When an invoice is blocked. however. This integration allows various departments in a company to share and maintain the same information. Financial Accounting (FI) Purchasing and Accounting both maintain information on vendors. The vendor master record represents the vendor account in financial accounting. it works side by side the following modules: Controlling (CO) Orders for materials and services consumed directly illustrate the interface to the cost accounting system (Controlling).
you can assign it to a sales order. This form of materials planning is a component of the SAP application Production Planning (PP). is needed and when. component. or MRP) determines requirements on the basis of bills of material and outside demand. Note that in the SAP system both of the above may collectively be referred to as "MRP". This procedure involves the development of a production plan directly from bills of material. MATERIALS PLANNING AND CONTROL This section provides an overview of materials planning and control and shows how the latter affects purchasing activities in the SAP system. when creating a requisition. The section discusses how the component Consumption-Based Planning: • • • Identifies which materials to order Determines the quantity to order Sets the delivery date What is materials planning and control? Materials planning and control determines how much of which material. In addition. Types of materials planning and control There are two forms of materials planning and control: Deterministic Deterministic materials planning (material requirements planning.SAP Materials Management Sales and Distribution (SD) Within the framework of material requirements planning (MRP). customer requirements from Sales can be passed on to Purchasing. It determines requirements on the basis of past consumption data. goods etc. Consumption-based planning The SAP component Consumption-Based Planning helps the responsible materials planner (or materials or inventory controller) to determine the following: • • • Which materials to order The quantity required When materials must be delivered to meet current and future requirements 24/Feb/2009 16 of 39 . This activity is the responsibility of the materials planner or controller. Consumption-based Consumption-based planning forms part of the SAP application Materials Management (MM).
It discusses how the release (approval) of purchase requisitions is controlled. Identifying materials to order The Consumption-Based Planning module identifies material shortages using one of the following methods: • • By reference to the reorder level (reorder point) Using a forecasting model Whether requirements for a given material are determined by reference to the reorder level or using a forecasting model is defined in the material master record. and dates for accuracy and ensure the correctness of the specified account assignment and source of supply. (Note that in this context.reserved stock Releasing Requisitions This section describes the release procedure for requisitions in Purchasing. 24/Feb/2009 17 of 39 .SAP Materials Management It bases its decisions on what to order on past consumption. The system compares the material's reorder level with the sum of the available stock. quantity. These can be assigned to a purchasing group (buyer group) or a materials planner/controller. there are two procedures for releasing purchase requisitions: • • Release procedure 1 (without classification) Release procedure 2 (with classification) Release procedure 1 This procedure serves as a correction and approval procedure for purchase requisitions. The system can generate requisitions automatically. which may also be referred to as "releasing" (US) or "calling off" (UK)). "release" means giving approval. how you can determine who must release (approve) a purchase requisition. An order proposal is then generated during the next MRP run. Within Purchasing. the system flags the material for MRP. If the available stock is less than the reorder level. to go ahead with the procurement of the materials or services set out in the requisition. The available stock is determined using the following formula: Available stock = (stock in hand in the warehouse + current orders) . The materials planner/controller or buyer can then convert the requisition into a standard purchase order or a release order issued against a contract. and should not be confused with the issuing of orders against longer-term purchase agreements. Reorder level Consumption-Based Planning can suggest orders based by reference to the reorder level of a material. Purchase requisitions are released on an item by item basis. and how a purchase requisition is actually released (approved). Its aim is to check the data on material. or clearance.
the system passes on the field contents from MM Purchasing to MM Classification in a communication structure.000 dollars. Examples of forecasting models: Constant Demand values are scattered around an average value.000 pieces of Steel 1 for plant 2.SAP Materials Management Release procedure 2 The aim of this procedure is to replace manual written authorization procedures using signatures by an electronic one. As soon as the item has been entered. If the reorder level is too high or too low. Release on an item-by-item basis is only possible in the case of requisitions. Automatically The system regularly compares the reorder level with future requirements. Manually The planner/controller enters the reorder level in the material master record manually. Classification first selects the relevant characteristics and then checks the characteristic values. The person responsible processes the relevant document in the system. The daily requirements are determined using forecasting models. Their purpose is to identify how much of a material is required at a given future date based on this pattern. thereby marking it with an "electronic signature" which can give the document legal force. The material belongs to the material class Metal 05. not in the case of the other purchasing documents. Seasonal Demand peaks at regular time intervals. These and other forecasting procedures are 24/Feb/2009 18 of 39 . Trend Demand either rises or falls steadily over a period of time. This procedure is available not only for purchase requisitions but for all other purchasing documents as well. The item has a value of 15. A purchase order contains an item relating to 1. The reorder level can either be set manually by the materials planner/controller or automatically by the system. it can be corrected using the formula: Reorder Level = safety stock + daily requirements * replenishment lead time where the replenishment lead time is in days. Forecasting Model Forecasting models identify a pattern of demand for a given material. while maintaining the dual control principle.
Determining the delivery date For materials procured externally.either from the material master record or from the purchasing info record · GR processing time (in workdays) defined in the material master record · purchasing department processing time (in workdays). limit the purchase order quantity to a certain range.SAP Materials Management described in more detail in the MM Consumption-Based Planning Guide. the system suggests delivery dates based on: • • The release date of the requisition Certain tolerances in the material master record Release date The release date of a purchase requisition is the date on which it is activated by the materials planner/controller. Determining the order quantity The actual order quantity takes the following data in the material master record into account: • • The lot-sizing procedure Tolerances. such as the minimum and maximum lot size Lot sizing procedure The lot sizing procedure is used to calculate the order quantity on the basis of the lot size. The minimum lot size and the maximum lot size. the rounding value is used to round off the order quantity to the packaging unit size. which is defined for a given plant QUOTATIONS 24/Feb/2009 19 of 39 . Factors determining the delivery date The following factors influence the determination of the delivery date: · planned delivery time (in calendar days) . for example. Tolerances Certain tolerances in the material master record also affect the order quantity. The materials planner/controller defines the lot-sizing procedure used for a given material in the material master record. If the material has to be ordered in fixed packaging units.
One main difference between RFQs and other purchasing document types is the fact that you cannot enter account assignments for RFQ items. You can monitor the status of the RFQ and quotation as it is further processed (that is. In addition. following creation of a contract or purchase order). Then you can: · use the price comparison list to help you determine the best quotation · send rejection letters to the appropriate vendors · store the pricing and terms of delivery for certain quotations in the info record for future reference Processing of RFQs and Quotations You do the following when processing RFQs and quotations: 1. such as the vendor address. You enter the vendor's pricing and conditions in the original RFQ. the vendor's name and address) and important dates for the RFQ (such as the closing date for applications. the RFQ contains information about the vendor to whom the RFQ is sent (for example. Structure of an RFQ The RFQ is organized as other purchasing documents. his price) for the supply of a material or the provision of a service by submitting a quotation.SAP Materials Management This section provides general information on how requests for quotation and quotations are used in MM Purchasing. quantity. PURCHASE ORDER 24/Feb/2009 20 of 39 . the RFQ and quotation are the same document. and bid submission deadlines). You enter the prices and conditions from the vendor's quotation into the RFQ. the RFQ identifies the material. and delivery date. 3. What is a quotation? A quotation contains the vendor's pricing and conditions for providing the material or service stated in the RFQ. Each item identifies the individual materials for which a price is required from the vendor. 2. You specify which vendors will receive the RFQ. 4. RFQs can be subject to a release procedure. A separate document is created for each addressee. What is a request for quotation? A request for quotation (RFQ) is an invitation to a vendor to indicate his terms and conditions (in particular. As in the case of the purchase requisition. The header contains general information about the RFQ. You create an RFQ manually or by referencing a requisition. In MM Purchasing. or pre-qualification date.
· Items It contains information specific to the material or service. The PO history menu enables you to monitor deliveries and invoices received with regard to the item. It identifies • • • • • • The vendor The material or service to be ordered The quantity The price The delivery date and terms of delivery The terms of payment In addition.Quantity . you can enter additional information such as time-spot schedule lines and item-specific texts.Price For each item. the terms of payment and the delivery terms are in the header. Structure of a purchase order As in the case of other purchasing documents. Item category The item category defines whether purchase order item: • • • • Requires a material number Requires an account assignment Will be placed in stock Requires a goods receipt (GR) and/or an invoice receipt (IR) The following are the item categories defined in the standard system: Standard items categories in POs Standard 24/Feb/2009 21 of 39 .SAP Materials Management This section provides general information about purchase orders and how they are processed with MM Purchasing. For example: . For example.Material number or short description ("short text") . Purchase orders can be subject to a release procedure. What is a purchase order? The purchase order represents the formal and final approval of a purchasing transaction with the vendor. the PO consists of: · Header It contains information specific to the entire PO. the purchase order determines whether the ordered material is placed in stock or consumed directly upon goods receipt.
" Stock transport order (inter-plant stock transfer order) The stock transport order is a mechanism facilitating the transfer of stock from one plant to another (that is. Consignment Items with the item category "Consignment" are items relating to goods procured on a consignment basis.GR and IR allowed Standard Items with the item category "Standard" are orders for goods that are to be procured externally. Third-party order Part of a triangular business deal.IR necessary Stock transfer . Account assignments cannot be made for material ordered on consignment.Kept in stock . for example. In this case.Material number required . A third-party order is an order placed with a vendor instructing the latter to supply goods to or perform a service for a third party (for example.GR necessary . Item category and account assignment 24/Feb/2009 22 of 39 . a transfer involving transport over a longer distance).No IR Third-party . Subcontracting Order items with the item category Subcontracting are used to order finished assemblies from a subcontractor.IR not necessary Subcontracting .Account assignment required . goods and invoice receipt are possible. one of your customers). Consignment stocks are managed separately and are not valuated. Any components the subcontractor requires to assemble the final product are entered as "material to be provided. The stock transport order is one of the special order types in Purchasing.Material number required.no account assignments .GR allowed . The third-party order is specified in the item category field of a requisition or purchase order. The third-party order is one of the special order types in Purchasing.GR necessary .SAP Materials Management Provides for normal goods and invoice receipt Consignment .
an account assignment is possible.applies to the entire document Item text . In the case of stock material. OUTLINE AGREEMENT What is an outline agreement? This section provides general background information on the "outline agreements" (Which. materials that are not taken into stock). PO texts You can enter text in a purchase order directly or change texts that are suggested by system. framework or umbrella agreements) that are used in the MM Purchasing component. Items: Contain the information specific to the material or service. may also be referred to as blanket.applies to an individual item You define which texts appear in which order on printouts in Customizing.The vendor information and header conditions are in the document header. an outline agreement consists of the following elements: Document header: Contain the information specific to the entire agreement. outside the SAP System.Pricing conditions. which you can identify by your own codes. master. but not mandatory. Structure of an outline agreement As in the case of other purchasing documents. such agreements are subdivided into Contracts and Scheduling agreements Outline agreements may be subject to a release (approval or clearance) procedure.SAP Materials Management The item category requires an account assignment for materials that are consumed directly (that is. There are two kinds of text: • • Header text . An outline agreement is a longer-term arrangement with a vendor regarding the supply of materials or the performance of services according to predetermined terms and conditions. You can enter several header or item texts.Statistics on ordering activities for the item . For example: . In MM Purchasing.Quantity or price of the item . For example: . such as quantity discounts and surcharges Texts in outline agreements You can create your own texts from scratch in an agreement or change a text that has 24/Feb/2009 23 of 39 .
you create a scheduling agreement item. Quantity The contract is regarded as fulfilled when release orders totaling a given quantity have been issued. you can choose between the following contract types: Value The contract is regarded as fulfilled when release orders totaling a given value have been issued. The text type determines the print sequence on the document printout. and the price. for example. Contract types When creating a contract. There are two kinds of agreement text: header text and item text. shipping and delivery instructions. The texts are further subdivided into text types. For each scheduling agreement item. "blanket contract". SCHEDULING AGREEMENT The scheduling agreement has similarities with a quantity contract: it states the target quantity of a material to be ordered from a vendor over a period of time. "systems contract" and "period contract". The contract does not contain specific delivery dates or the individual delivery quantities. For each material to be procured. A number of different terms may be used for this concept in purchasing literature. Use this contract type when the total quantity to order over the duration of the contract is known. Use this contract type when the total value of all release orders should not exceed a certain amount. you subsequently set up a rolling delivery schedule by 24/Feb/2009 24 of 39 .SAP Materials Management been suggested by the system. ·Using the referencing technique: You can create a contract by referencing -Purchase requisitions -RFQs/quotations -Other contracts ·You can also mix the two methods: you can create a contract by referencing an existing one and then change or enter some items manually. CONTRACT A contract is a longer-term agreement with a vendor (one of the two forms of "outline agreement" in the SAP system) to supply a material or provide a service for a certain period of time. These are specified subsequently in release orders issued against the contract. Ways of creating contracts You can create a contract in one of the following ways: ·Manually: You enter all the contract data manually. including "blanket order".
you can specify the exact time to deliver. the current schedule is automatically outputted via the message (output) control program. and may contain data on previous goods receipts. It contains information on a specific material and a 24/Feb/2009 25 of 39 .because the delivery schedule extends into the future. (Note that in addition to standing for a method of ordering materials or services . and possibly also delivery time-spots. A delivery schedule may contain firm.as here. allowing for minimum stock levels and just-in-time (JIT) deliveries. · Automatic generation of delivery schedule lines via the MRP system (a precondition for this is that Purchasing must assign a scheduling agreement as a unique source of supply using the quota arrangement and source list mechanisms) PURCHASING INFO RECORDS What is a purchasing info record? The purchasing info record (also referred to in abbreviated form as the "info record") is a source of information for purchasing. the delivery dates.) The delivery schedule specifies the quantities to be delivered. · Promotes low inventories . internally you can make as many changes to the individual schedule lines as you wish. If you work with scheduling agreements with release documentation. As soon as the schedule lines for a certain item have been finalized and the schedule is ready to be transmitted to the vendor. Working with such documentation affords the advantage that you can display the valid scheduling agreement releases transmitted to a vendor over a certain period whenever necessary. If you work with scheduling agreements without release documentation. in the SAP System.one delivery schedule can replace many purchase orders or contract release orders. or planned (forecast) delivery dates. semi-firm. The information is recorded in the system. Advantages of vendor scheduling Procurement via scheduling agreements has several significant advantages: · Streamlines paperwork. the terms "release" and "releasing" may also be applied to an internal purchasing document approval or clearance process. thus reducing the lead time for a delivery. the vendor has less need to backlog orders. This triggers the transmission of the relevant data to the vendor. In vendor scheduling. you generate a scheduling agreement release. · Shorter vendor lead times .SAP Materials Management creating a number of individual schedule lines. shortens processing times . If you are using scheduling agreements. allowing you to verify at any time exactly when you sent which data to which vendor. vendors receive a scheduling agreement release (comprising a header and a rolling delivery schedule made up of individual schedule lines) rather than discrete purchase or release orders. you can work with or without release documentation.
The data in the info record (for example. in order to be able to copy them into Pos. You can also maintain the vendor's conditions directly in the info record. for stock material) this type of info record represents the relationship between a material or service (for which a master record exists) and a vendor.g. For example.g. fixed costs etc. you can store the current and future quotation conditions (discounts.SAP Materials Management vendor supplying the material. Info records without a material master record (e. if you subcontract the assembly of a component. Pipeline info record A pipeline info record contains information on a vendor's commodity that is supplied through a pipeline (for example. For example. the subcontractor info record would include the vendor's (subcontractor's) price for assembling the component. Subcontractor info record A subcontractor info record contains ordering information for subcontract orders. 24/Feb/2009 26 of 39 . The info record also allows buyers to quickly determine: • • which materials have been previously offered or supplied by a specific vendor which vendors have offered or supplied a specific material Contents of an info record The info record contains data such as: • • • • • • • • current prices and pricing conditions the number of the last purchase order tolerance limits for over-deliveries and under-deliveries the planned delivery time (lead time required by the vendor to deliver the material) vendor evaluation data an indicator as to whether the vendor counts as the regular vendor for the material the vendor sub-range to which the material belongs the availability period during which the vendor can supply the material The info record contains quotation and ordering data. the vendor's current pricing is stored in the info record. Types of info record There are two types of info record: • • Info records with a material master record (e. prices) is also used as default data for purchase orders. for consumable materials) this type of info record represents the relationship between a material or service for which no master record exists and a vendor. oil or water) or via similar means (for example. For example.) in the info record.
text is not set. origin data. the short text (short description) is copied directly from the material master record into the PO or the outline purchase agreement. and the order unit). Both texts are displayed and printed if the indicator No m. Structure of an info record An info record contains general data and organizational data: • General data Data that is valid for each purchasing organization or each plant (for example. You can store withdrawal/usage prices for different validity periods. For an info record linked to a material master record. • Organizational data Data such as prices and pricing conditions that you can store for the relevant purchasing organization or plant Texts in the info record The info record contains the following text types: Info record memo. Short text For material that has a material master record. text in the purchasing organization data of the info record).SAP Materials Management electricity through the mains). you can specify for each purchasing organization whether • Only the info record PO text is to be displayed and printed in purchasing documents. SOURCES OF SUPPLY 24/Feb/2009 27 of 39 . The info record memo is not printed out PO text in info record This text serves to describe the order item and corresponds to the PO text in the material master record. reminder levels. Or • Both the info record PO text and the material master record PO text are to be displayed and printed in purchasing documents. an internal note that is adopted in the PO item. The info record contains the vendor's price for the consumption of such commodities by the buyer ("pipeline withdrawals"). It is adopted in the PO item and included in the printout. (To do so. set the indicator No m.
They serve as a central repository of pricing for purchase orders. Conditions in contracts . Such sources count as preferred sources over a certain period of time. Definition of a source of supply as "blocked". One way to use extended conditions would be to define a 10% discount on all orders placed with a specific vendor that are created by a certain purchasing organization. those sources that represent the preferred sources at a certain point in time). The former are used to define the preferred or allowed sources of a material. Conditions in info records . the vendor number and purchasing organization are the two criteria a PO must meet before the price in the PO can be calculated. The source list offers you the following options: • • • Definition of a source of supply as "fixed".Conditions in a contract apply to all release orders issued against the contract. Extended conditions . What is a source list? A source list specifies the allowed (and disallowed) sources of supply for a material within a plant.SAP Materials Management In MM Purchasing. or if it meets certain criteria defined in the extended conditions. 3. Source determination is the process of assigning a particular source of supply to a purchase requisition (or vice versa). MASTER CONDITIONS Master conditions are conditions that determine the effective price in the purchase order. Quota arrangements are used to determine which portion of the total requirement of a material to procure from a given source. Extended conditions are master conditions that are included in the price calculation in a purchase order only if the PO meets certain criteria. 2.These are a flexible way of setting vendor pricing. In this case. It also indicates the period for which the source is valid. Each source is defined in the source list by means of a source list record. 24/Feb/2009 28 of 39 . Aims of sourcing administration Source list records and quota arrangements are used in determining the effective source of a material. Determination of the effective sources (that is. Extended conditions are more flexible than master conditions in info records or contracts because you can define which criteria they must meet before they are applied to a purchase order.Conditions in the info record apply to orders that specify the material and vendor contained in the info record. You can manage sources of supply using source lists and quota arrangements. There are three types of master condition: 1. They are automatically included in the price calculation in the purchase order if the PO references a contract or an info record. a source of supply may be a vendor or an outline agreement.
For example. Master conditions are simply conditions defined with the conditions technique. it does provide useful background information on the mechanism for determining pricing in Purchasing. it is used in the SD (Sales & Distribution) module as well as in the MM module. The actual pricing information . Condition types exist for discounts. Basic elements of the conditions technique The conditions technique consists of four main elements: • • • • Condition types Condition tables Access sequences Calculation schema (pricing procedure) These concepts are important for understanding how the system determines pricing in master conditions. you will learn how to specify conditions that apply to the pricing of all orders for any material with a vendor. the key of the condition table includes the vendor number and the material number. Access sequence 24/Feb/2009 29 of 39 . and freight costs. when you enter a vendor's pricing in a purchasing info record with reference to a material master record. The system stores the condition data you enter in the form of a condition record. for example. for example.is stored in a condition record under this key. You learned how to specify condition types when entering pricing in quotations and purchase orders. For example. You use condition types to enter pricing in purchasing documents. influence the calculation of the effective price in the purchase order. In this chapter. not only for a specific material or material group as is the case with outline agreements and info records. The goal of the conditions technique is to calculate the effective price in a purchase order. surcharges. Condition table A condition table defines the combination of fields (the key) that identifies an individual condition record. Condition type A condition type is a representation of a pricing element. Conditions technique The conditions technique is used to define pricing across applications.such as the gross price and any discounts .SAP Materials Management The documentation on outline agreements and purchasing info records shows how the conditions specified in outline agreements and purchasing info records. respectively. While this section is not essential to your understanding of master conditions in purchase orders.
you can list or maintain the conditions that determine the net price in a single info record or contract. The access sequence determines the sequence in which the system searches condition records for a valid price. You can maintain conditions in the following ways: Prices With this method. The calculation schema ensures that the 10% discount is deducted from the gross price instead of the net price during the price calculation process. suppose that you have just created an info record that specifies a 10% discount from the gross price. but the same mechanism can also be used to calculate tax amounts. you can define master conditions that use these pricing elements. Price calculation schema (pricing procedure) A calculation schema (also known as a pricing procedure. and condition tables.SAP Materials Management An access sequence is a search strategy that the system uses to find condition records for a particular condition type. 24/Feb/2009 30 of 39 . Which condition types are used in the search are defined in the calculation schema. With MM Customizing. or costs. The system searches for pricing data in condition records. in a specified sequence. access sequences. The calculation schema also determines that the condition types for discounts are calculated in the effective price automatically. period-end rebates. For example. The sequence of the search depends on the access sequence specified for the condition type. When the material is ordered from the vendor in a PO. the calculation schema determines which condition types apply to the gross price. It enables the system to determine that a particular set of condition types. Price changes You can change pricing by a fixed amount globally. Discounts and surcharges With this method. defined in a particular sequence. For example. This condition is then stored in a condition record under the vendor and material number. you can define price calculation schemas for specific vendors and/or purchasing organizations. the system searches for the discount using the access sequence. for example) is a group of condition types. The criteria it uses in the search depend on the keys in the condition table. you can enter discounts or surcharges that apply to all info records or contract meeting your purchasing criteria Other condition types If your company has defined its own condition types. apply in given circumstances. You can enter the going market price for a material.
• • When creating such specifications. the data is simply copied from the master data. in which the descriptions of all services that are to be procured can be stored. award of contract. Prices and quantities are stipulated in both cases. There are two ways of entering services: o as planned services o as unplanned services Planned Services By "planned services". At the time they are requested. Sets of service specifications may include both items with services and items with materials. Such initially undefined services. A separate set of service specifications can be created for each concrete procurement project or proposed procurement in the purchasing document. 24/Feb/2009 31 of 39 . The MM External Services Management documentation • • • • affords a general introduction to the procurement of externally performed services indicates the organizational levels. or set out in service specifications as short or long texts. They are entered in the form of money value limits. and acceptance of services. and documents of the application describes the available functionality and how it works explains the procedures for creating documents in the system ESM Functionality The program offers the following functionality: • • A service master database. Use of this referencing technique means that data only has to be entered once. thus have no descriptions. we mean services whose precise nature and intended scope is already known at the beginning of a procurement project.SAP Materials Management EXTERNAL SERVICES MANAGEMENT MM External Services Management (MM SRV) is a program within the Materials Management (MM) module. Instead. the user does not have to list individual services manually. master data. the construction of an office building). which are termed "unplanned services". The manual entry effort is reduced to a minimum. Unplanned Services A procurement project may constitute or include a number of individual services which you initially cannot or do not wish to specify in detail (for example. they are either entered with the aid of a service master record. It supports the complete cycle of bid invitation.
Organizational Levels The organizational level at which services are procured is the purchasing organization. Master Data This section discusses the master data utilized by MM External Services Management: • • Service master data Vendor master data Service master The service master database (comprising all the individual service master records) is used to store the descriptions of all services that have to be procured on an ongoing basis.SAP Materials Management Services may be performed up to a value not exceeding these limits. SAP supplies a user exit enabling you. standardized sets of service specifications (known as standard service catalogs) such as the one for the construction industry. units of measure. each of which procures the particular services that have been assigned to it. to check whether the service number entered corresponds to the number in the standard service catalog.000 dollars for electrical installations). You can set a value limit at the uppermost level (for example. each with its own responsibilities. In addition to the description of the service. 5 million dollars for the construction of the aforementioned office building). a service master record contains information necessary for its procurement (for example. 200. The system checks adherence to both these sub-limits and the overall limit. The individual purchasing organizations can be subdivided into various purchasing groups (groups of buyers).000 dollars for masonry works and 250. by sector or trade). texts. an individual vendor master record contains data on 24/Feb/2009 32 of 39 . This allows you to exercise a degree of cost control in such situations. The accepted service entry sheet constitutes the basis for subsequent invoice verification in the case of services. The individual service master records can be grouped according to different service types (for example. prices). you can set limits for individual contracts within the project (for example. they are recorded in entry sheets and then accepted. The service master serves as a source of default data provided by the system during the subsequent creation of service specifications (in connection with a bid invitation procedure. Vendor master The vendor master database (comprising all the individual vendor master records) contains information on service providers. In addition to the name and address of the service provider. When the services have been performed. a purchasing organization can assume responsibility for all procurement (central purchasing) or the purchasing function can be split up among several purchasing organizations. for example. In addition. Here you can also maintain services from general. for example). Depending on the size of the enterprise and the way Purchasing is set up.
the vendor master record also contains accounting data such as the control account. and names of contact persons As the vendor is also regarded as a creditor in Accounting. The vendor master record is therefore maintained by both Purchasing and Accounting. terms of payment. 24/Feb/2009 33 of 39 .SAP Materials Management • • • the currency for transactions with this vendor.
24/Feb/2009 34 of 39 . through the submission of a quotation (bid). Requisitions originate outside the Purchasing Department. You will find more information on the individual purchasing documents in the MM Purchasing documentation. The purchase requisition is a document that is designed for internal use only. Quotation The quotation (bid) contains a vendor's prices and conditions for the supply or performance of the materials or services specified in the RFQ. the invoice verification document is also relevant to services. Purchase order (PO) The PO is a binding request to a vendor to supply certain materials or perform certain services in accordance with specified terms and conditions. there is a document for the entry of services actually performed by vendors or subcontractors. In addition to the documents for the standard materials purchasing function. They represent a request to Purchasing to procure the specified quantities of the materials or services on or by the desired date. Service specifications are entered in the contract (in exactly the same way as in the PO) at document item or sub-item level. A purchasing document is an instrument used by Purchasing to procure materials or services. his prices and conditions (amongst other information) for supplying a material or performing a service. Purchase requisition The purchase requisition defines the requirement of a material or a service. and in the Project System. Fulfillment is on the basis of individual release orders issued by the buying entity according to need over the duration of the contract. that is to say. the term "contract" denotes a form of longer-term. Contract In the SAP MM System. volume purchasing agreement with a vendor covering the supply of a material or the performance of services. Request for quotation (RFQ) The RFQ is an invitation to a vendor to stipulate. within Plant Maintenance. Furthermore. in the user departments.SAP Materials Management Purchasing Documents This section introduces the documents used in the procurement of services and discusses the structure of these documents in the SAP System.
prices. It also accesses basic data in Materials Management. and quantities can be taken from purchase orders. 24/Feb/2009 35 of 39 .SAP Materials Management Service entry sheet The service entry sheet is used to record services as they are actually performed by the vendor or subcontractor. In the case of planned services. such as the results of incoming inspections or quality audits. Steps in procurement of services The procurement of services may involve the following phases: • • • • • • • • • Creation of purchase requisition Determination of possible sources Invitation to potential service providers to submit bids (creation of RFQ) Entry of quotations (bids) Analysis and evaluation of quotations Award of contract (order placement) Entry of services actually performed Acceptance of services performed Checking and approving invoices submitted by vendors for services performed VENDOR EVALUATION The Vendor Evaluation component has been completely integrated into MM Purchasing. the services actually performed are recorded in the entry sheet with reference to the specifications already entered in the PO. Information such as delivery dates. Procurement of Materials The system helps you select sources of supply and facilitate the continual monitoring of existing supply relationships. the service entry sheet constitutes the document in which precise specifications are entered into the system for the first time. such as goods receipt data from Inventory Management. In the case of unplanned services (defined only in the form of money limits in the PO). you can improve your enterprise's competitiveness. You can quickly determine and resolve any procurement problems that may arise on the basis of detailed information and in collaboration with the relevant vendors. It provides you with accurate information on prices. By evaluating vendors. What is Vendor Evaluation? The Vendor Evaluation System supports you in the optimization of your procurement processes in the case of both materials and services. and terms of payment and delivery. and data from the Logistics Information System (LIS). Vendor Evaluation also uses data from Quality Management.
subjective impressions and judgments can be largely avoided. and you have the option of printing out evaluation sheets. Automatic Scores are calculated by the system on the basis of existing data. or for the quality and timeliness of a service performed yourself. each main criterion can be divided into several sub criteria. To create a detailed evaluation. The Vendor Evaluation System ensures that evaluation of vendors is objective. You can determine whether the vendors perform the services within the specified timeframes and appraise the quality of the work carried out. as required. since all vendors are assessed according to uniform criteria and the scores are computed automatically. The vendor's overall score is computed taking into account the weighted scores awarded for each of the main criteria. You can also define other or further main criteria. The standard system provides you with certain sub criteria. The system then calculates the higher-level score from these. Changes to evaluations are recorded in logs.SAP Materials Management Procurement of Services You can check the reliability of the vendors from which you procure services on a plantby-plant basis. Semi-automatic You enter individual scores for important materials. In this way. which is used to measure the performance of your vendors on the basis of five main criteria. For example. Manual You enter a blanket score for a sub criterion per vendor. You can assign different weights to the individual criteria. 24/Feb/2009 36 of 39 . but you can also define your own additional sub criteria. Analyses The results of vendor evaluation are displayed in the form of analyses. The main criteria available in the standard system are: ·Price ·Quality ·Delivery ·General service/support These four main criteria serve as a basis for the evaluation of vendors from whom you procure materials. The scores for the sub criteria are calculated in three different ways. which suffice as a basis for evaluation. Scores and Criteria The SAP Standard System offers you a scoring range from 1 to 100 points. You can determine and compare the performance of your vendors by reference to their overall scores. you can generate ranking lists of the best vendors according to overall score or ranking lists for specific materials.
SAP Materials Management Organizational Level for Vendor Evaluation The organizational level for Vendor Evaluation is the purchasing organization: Each purchasing organization evaluates the vendors that have been assigned to it. The system calculates the overall score for a vendor from the main criteria scores. The system does not support a comparison of Vendor Evaluations at the higher company code level. The system calculates a score for the higher-level main criterion based on the scores a vendor receives for the various subcriteria. It is a combination of the scores the vendor has achieved for all the main criteria. Vendor Evaluation uses the following master data: • • • Vendor master record Material master record Purchasing info record This section describes the most important elements of Vendor Evaluation: Overall Score Main Criteria Sub criteria Scoring Range Weighting of Scores Overall Score The overall score represents the complete evaluation of a vendor. Subcriteria Subcriteria are the smallest units to which scores can be assigned in Vendor Evaluation. Main criteria The main criteria form the basis for assessing the performance of a vendor. You can evaluate vendors according to several main criteria. You can compare different vendors on the basis of their overall scores without generating a detailed analysis of their evaluations. The individual scoring methods fulfill different purposes and involve different kinds of maintenance. which you consider important. There are three types of subcriteria: • • • Manual Semi-automatic Automatic They are named after the different methods of scoring. 24/Feb/2009 37 of 39 . The scores for the main criteria are a more accurate representation of the performance of a vendor than the overall score.
The 80 points for Price are then worth three times more than the 80 points for Service when the overall score is calculated. it is necessary to establish a range (or scale) of possible scores.SAP Materials Management Scoring Range To compare the performance of one vendor with another. when was the last evaluation? Below are the steps you must carry out to evaluate a vendor: 24/Feb/2009 38 of 39 . The scoring range is defined when the system is configured. You can define your own scoring range from the worst. Suppose a vendor receives 80 points for the criterion Price and 80 points for the criterion Service. you can save this combination under a weighting key. Weighting of Scores The scores a vendor is awarded for main criteria can be weighted differently to reflect differences in the significance of the criteria. This scale provides you with a good overview and also permits quite a finely differentiated rating of individual vendors. you assign the criterion Price a weighting factor of 3 and the criterion Service a factor of 1. Weighting Factor By using weighting factors. If you know that you will want to carry out an evaluation repeatedly with certain main criteria and certain weighting factors. Since the price of the material is more important to you than the service the vendor provides. you must consider the following: • • • • • • Have you maintained the system settings? Do you have the required authorizations? Which vendor do you want to evaluate? (vendor key) Which purchasing organization is to evaluate the vendor (purchasing organization key)? Is this the first time the vendor has been evaluated? If not. Before you begin. just enter the relevant weighting key instead of entering a weighting factor for each individual criterion. The examples in this documentation are based on a scoring range of 1 to 100 points. The system then automatically sets all the weighting factors.to the best-possible achievable score. you can increase or reduce the importance of certain criteria when a score is calculated at the next highest level. Weighting Keys A weighting key is an identifier under which the weighting factors for a number of main criteria can be grouped together and saved. When you carry out the next vendor evaluation. Evaluating Vendors The evaluation of vendors is subject to certain preconditions.
SAP Materials Management • • • • Enter vendor information Enter weighting key Enter scores for manual sub criteria Evaluate all main criteria 24/Feb/2009 39 of 39 .