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Materials Management Functional Overview
MM ORGANIZATIONAL STRUCTURE
Highest-level grouping of legal, organizational, business .
Represents legally independent accounting unit within a client.
Plant in the true sense (a manufacturing plant), or branch office or site within a company code.
(buyer groups) . • – Purchasing group which are responsible for day-to-day buying activities.Vision Materials Management ORGANIZATIONAL STRUCTURE • – Purchasing organization Responsible for procuring materials and/or services for one or more plants and for negotiating prices and terms of delivery with the vendor.
.Vision Materials Management FUNCTIONAL OVERVIEW • The Main Functional Areas covered by the Materials Management (MM) module in the SAP R/3 System are : – – – – – – – Material Master Purchasing Inventory Management Invoice Verification Material Valuation Physical Inventory Consumption Based Planning (MRP) • MM is also supported by the Logistics Information System is used analyzing MM data and making strategic decision.
Vision BASIC DATA Material Special stock Batch Materials Management MM Functional Overview PURCHASING Purchase requisition SD PP PM QM FI AM CO PS Third-party order Requirements Vendor/one-time customer Purchasing info record Service specifications Workflow Optical archive Texts Mail Communication Classification Documents Conditions RFQ/Quotation Purchasing information system Vendor evaluation MRP Direct requisition Release procedures Material/service Price comparisons Price comparison list Purchase orders Outline agreements Scheduling agreements Service / spare parts Inspection lot G/L accounts Cash management and forecast Fixed assets Cost center / Budget Project Purchasing INVENTORY MANAGEMENT Goods receipt/issue Transfer posting Quantities and values Physical inventory Storage bins INVOICE VERIFICATION Check and post Price update .
Vision Material Master Materials Management .
Vision Material Master Material types and its relationship with industry sector Materials Management .
Vision Materials Management Views Defined in a Material master and their significance .
purchasing. • The tasks of the MM Purchasing component are as follows: • External procurement of materials and services • Determination of possible sources of supply for a requirement identified by the materials planning and control system or arising directly within a user department • Monitoring of deliveries from and payments to vendors . It supports all the phases of materials management: materials planning and control.Vision Purchasing Materials Management • Purchasing is a component of Materials Management (MM). goods receiving. The Materials Management (MM) module is fully integrated with the other modules of the SAP System. and invoice verification. inventory management.
Overview .Vision Materials Management Purchasing .
Vendor selection 5. Vendor payment 1.Vision Purchasing Process Flow 8. Goods receipt and Inventory Mgmt 3. Order follow-up 4. Invoice Verification Basic Procurement Process 2. Source determination 6. Purchase Order processing Purchase Order 10 20 . Materials Management Requisition Requirements determination Invoice 10 20 7.
. and forecasting on the basis of past usage are important aspects of the latter. or they can be generated automatically by the materials planning and control system.) You can enter purchase requisitions yourself. (This can cover both MRP proper and the demand-based approach to inventory control. The regular checking of stock levels of materials defined by master records. use of the order-point method.Vision Various steps involved in the purchase process flow: Requirements Determination Materials Management • Materials requirements are identified either in the user departments or via materials planning and control.
Rejection letters can be sent automatically. allowing you to compare a number of different quotations. • Purchase order processing • The Purchasing system adopts information from the requisition and the quotation to help you create a purchase order. • Vendor Selection The system is capable of simulating pricing scenarios. which can be sent to vendors electronically via SAP EDI. As with purchase requisitions. types of longer-term purchase agreement) are also supported. This speeds the process of creating requests for quotation (RFQs). . Vendor scheduling agreements and contracts (in the SAP System. you can generate Pos yourself or have the system generate them automatically. if desired.Vision Source determination Materials Management • The Purchasing component helps you identify potential sources of supply based on past orders and existing longer-term purchase agreements.
This speeds the process of auditing and clearing invoices for payment . • Invoice Verification The system supports the checking and matching of invoices. The accounts payable clerk is notified of quantity and price variances because the system has access to PO and goods receipt data. buyers can limit over. and purchase orders. It also provides you with an up-to-date status of all purchase requisitions. quotations. • Goods Receiving and Inventory Management Goods Receiving personnel can confirm the receipt of goods simply by entering the Po number. By specifying permissible tolerances.if necessary .automatically prints reminders or expediters at the predefined intervals.and underdeliveries of ordered goods.Vision •Order Follow-up Materials Management – The system checks the reminder periods you have specified and .
Vision • • • • Materials Management Purchase Document • • A purchasing document is an instrument used by Purchasing to procure materials or services. The contract is a binding commitment to procure a certain material or service from a vendor over a certain period of time. or longer-term buying arrangement. Quotation Contains a vendor's prices and conditions and is the basis for vendor selection (here price is quoted by vendor). Request for quotation (RFQ) Transmits a requirement defined in a requisition for a material or service to potential vendors. Contract In the SAP Purchasing component. Scheduling agreements provide for the creation of delivery schedules specifying purchase quantities. or longerterm buying arrangement. Scheduling agreement Another type of "outline agreement". Purchase order (PO) The buying entity’s request or instruction to a vendor (external supplier) to supply certain materials or render/perform certain services/works. delivery dates. and possibly also precise times of delivery over a predefined period. a type of "outline agreement". formalizing a purchase transaction. .
Vision Vendor –Its Role Materials Management .
Vision Materials Management Vendor Master Data .
Process Flow .Vision Materials Management External Service Management.
Vision Materials Management Inventory Management Overview .
Inventory Management accesses both master data (such as material master data) and transaction data (such as purchasing documents) shared by all Logistics components. The material is stored (and managed under Inventory Management) until it is delivered to customers (Sales & Distribution). for production).Vision Materials Management • Material is procured from external or internal sources on the basis of the requirements determined by Material Requirements Planning. The delivery is entered in Inventory Management as a goods receipt. . • During all transactions. or is used for internal purposes (for example.
Vision Materials Management Process Flow Inventory Management .
Cost center.g. project Return to vendor .Vision GOODS ISSUE Materials Management Goods Issue : Triggers Deliveries to customers Sampling Production Against Production Orders Scrapping Consump For Consumption e. asset.
however.Vision Materials Management STOCK TRANSFER Plant 1 Step 1 Unrestricted Stock Stock in Transit Plant 2 Step 2 Step 1 : Removal from storage at Plant 1 The material is now managed as Stock in Transit at Plant 2 . Step 2 : Placement into storage at Plant 2 Unrestricted Stock . It is. not yet a part of unrestricted use stock at Plant 2.
Vision Definition Materials Management Invoice Verification Document from an invoicing party containing the payments to be made based on business transactions performed in Purchasing and Inventory Management. An incoming invoice can be an invoice or a credit memo Information Contained In an Invoice: •Who issued the invoice? •Which transaction does the invoice refer to? •How much tax to be paid .
Vision Materials Management Invoice Verification Purpose: •Agreed terms of payment •Quantities to be invoiced •Amounts expected for each item .
Vision Materials Management Features of An Invoice .
Vision Materials Management Material Valuation Overview Material Valuation represents a link between Materials Management and Financial Accounting Material Valuation Tasks : • To determine and record the stock value of a material Stock Value = Stock Quantity * Material Price • Adjusting material prices to market prices • Performing revaluation • Carrying out physical inventories • Carrying out valuation of stocks for balance sheet purposes .
Vision Materials Management Control of Material Valuation Material master records – Should a particular material be valuated at all? – Should different sub-stocks of a material be valuated differently? – Should the stock of a material be valuated at a standard price or moving average price? – In which G/L account should the stock value of a material be managed? .
30 / pc : Goods receipt for this purchase order : 100 pcs Invoice : 100 pcs a $ 1.Vision Material with a Standard Price Material with standard price $ 1. Invoice 120 +1 130 -2 130 +2 124 -5 6 -4 Material master record Standard price 1.20 / pc Stock : 100 pcs Purchase order :100 pcs a $ 1. GR / IR account Vendor account Expenses from price diff. Income from price diff.20 1.20 10 +3 Stock Value 100 200 200 120 240 240 .24 / pc = $ 124.20 1.00 Materials Management Goods receipt Balance sheet acct.
40 / pc = $140.00 Goods receipt 130 +1 Balance sheet acct.25 1.30 / pc : Materials Management Material with a Moving Average Price Goods receipt for this purchase order : pcs 100 Goods withdrawal: 120 pcs Invoice : 100 pcs a $ 1. 130 -2 GR/IR account Vendor account Expenses from price diff.20 1.20 / pc Stock : 100 pcs Purchase order100 pcs a $ 1. Income from price diff.25 1. 150 -7 150 +8 Cost center Invoice 8 130 140 2 +4 +2 -3 +5 Material master record Stock 100 200 80 80 Value 120 250 100 108 MAP 1.35 . +100 pcs with value of $130.00 -120 pcs with value of Goods $150.Vision Material with MAP of $ 1.00 withdrawal Balance sheet acct.
The stock can be divided into stock types.Vision Purpose Materials Management Physical Inventory This component allows to carry out a physical inventory of company’s warehouse stocks for balance sheet purposes. Physical inventory can be carried out both for •company’s own stock • special stock. Following stock types it can be divided into: •Unrestricted-use stock in the warehouse •Quality inspection stock •Blocked stock .
Vision Physical Inventory Materials Management Physical inventory takes place at storage location level. storage location level. they are displayed both on a quantity and on a value basis. Physical Inventory Procedures : •Periodic inventory •Continuous inventory •Cycle counting •Inventory sampling Physical Inventory connected to the Logistics Information System (LIS). plant level. A separate physical inventory document is created for every storage location. When inventory differences are updated in the LIS. The physical inventory items are aggregated at inventory number level. and material level .
Vision Materials Management Material Requirements Planning Role of MRP: •monitor stocks •create procurement proposals (Purchase Requisition) for purchasing •create planned order for in-house produced material .
If a purchase requisition is created. • The advantage of creating a planned order is that the MRP controller has more control over the procurement proposals.Vision Materials Management Creation of procurement proposals • The type of procurement proposal to be created automatically in the planning run depends on the procurement type of the material. the MRP controller can choose between a planned order and a purchase requisition. it then has to be converted into a purchase requisition in a separate step so that it is made available to Purchasing. For external procurement. which then takes over the responsibility for material availability and warehouse stocks. For inhouse production. it is immediately available to the purchasing department. If the MRP controller chooses a planned order. . the system always creates a planned order. The purchasing department cannot order the material until the MRP controller has checked and converted the order proposal.
That is. Instead.Vision Materials Management Consumption-based planning . net requirements calculation is not triggered either by planned independent requirements or dependent requirement. it is triggered when stock levels fall below a predefined reorder point or by forecast requirements calculated using past consumption values. Two aspects of planning: Re-order point planning Forecast based planning . • The procedures in consumption-based planning do not refer to the master production schedule.An overview •Based on past consumption values •Uses the forecast or other statistical procedures to determine future requirements.
• The reorder point should cover the average material requirements expected during the replenishment lead time. • The safety stock exists to cover both excess material consumption within the replenishment lead time and any additional requirements that may occur due to delivery delays. Therefore. procurement is triggered when the sum of plant stock and firmed receipts falls below the reorder point. the safety stock is included in the reorder level. .Vision Materials Management Re-order Point Planning • In reorder point planning.
these values then form the basis of the planning run. Like reorder point planning.Vision Materials Management Forecast-Based Planning • Forecast-based planning is also based on material consumption. . forecastbased planning operates using historical values and forecast values and future requirements are determined via the integrated forecasting program. However. The forecast values therefore have a direct effect in MRP as forecast requirements. in contrast to reorder point planning.
The forecast requirement is reduced by the material withdrawal so that the forecast requirement quantity that has already been produced is not included in the planning run again. which calculates future requirements using historical data. This offers the advantage that requirements. are continually adapted to suit current consumption needs.Vision Materials Management The forecast. is carried out at regular intervals. . which are automatically determined.
. 4. if necessary. the rounding up or down values into account. If the requirement quantity is not covered. Here. Planning Processes Materials Management 2.Vision • 1. 3. the system carries out the following partial processes: The system checks the planning file entries. the system creates a procurement proposal. The system carries out scheduling to calculate the start and finish dates of the procurement proposals. the system checks to see whether the requirement quantity is covered by available warehouse stock and fixed receipts from Purchasing or production. Here. In the planning run. the system checks to see whether a material has been changed in some way relevant to MRP and should therefore be included in the planning run The system carries out a net requirements calculation for every material. Then the system carries out the lot-sizing calculation. Here. the system takes the lot-sizing procedure and.
If you have maintained the necessary specifications for procurement quota arrangements. Depending on the settings. For this purpose. the system creates exception messages and carries out a rescheduling check . Planning Processes Materials Management The system determines the type of procurement proposals. • . purchase requisitions or schedule lines for a material .Vision 5. the system creates either planned orders. It also calculates the actual days’ supply and the receipt days’ supply 6. The system recognizes critical situations which the planner has to processes manually in the planning results. the system determines the source of supply which it assigns to the procurement proposal .
.Vision Materials Management Thank You.