SAP MM Presentation

CONTENTS
MM - Overview
MM - Purchasing
MM - Purchase Order
MM - Inventory Management
MM - Invoice Verification
Overview
of
MATERIALS MANAGEMENT
Course Objectives
On conclusion of this course, you should be
able to:
Visualize the MM functionalities
Understand MM related views of Material
Master and Vendor master records

Create other master records or changing
the existing master records
Introduction
Contents
MM overview
Organizational Structure
Material master
Vendor master
Other master records
Exercises
Solutions
MM - Overview
Major components of MM- Module
materials planning and control (MRP)
procurement
inventory management
invoice verification.
Integration with other Modules
Procurement
Logistics Planning
Sales Logistics
Production
Finance / Asset Management
Integrated Business Process Overview
FI
G/L
G/L
Inventory
Inventory//
GRIR
GRIR
G/L
G/LGRIR/
GRIR/
Expense
Expense
AP
APInvoice
Invoice
SD
Requirement
Requirement
for
forGoods
Goods//
Services
Services
Purchase
Purchase
Invoice
Invoice
Order
Order
Verification
Verification
Financial
Financialand
andManagerial
ManagerialReporting
Reportingand
andAnalysis
Analysis
Vendor
Vendor
Payment
Payment
MM Organization Structure
Client
Company code 1
Plant 1
Storage
Storage WH
WH
location
location 11
Company code 2
Plant 2
Storage
Storage WH
WH
location
location 2
Purchasing
Organization
Plant 3
Plant 4
Organizational Elements - Client
Client Characteristics
Highest Hierarchical Level in SAP(e.g. a corporation)
Can be Used to Differentiate between a Development,
Quality Assurance, and Production System within R/3
All Areas of an Organization that are to be Integrated
into the SAP R/3 Production System should be Included
Under one Client
Organizational Elements - MM
Purchasing Organization
Responsible for Procurement for One or More
Plants
Responsible for Negotiating Pricing and Delivery
Terms with Vendors
Purchasing Organization is Assigned to A
Company where Inventory is Legally Tracked or
Costs are Legally Incurred.
Plant
Usually a Manufacturing Facility, Warehouse, or a

Location that Stocks , Manages, and Valuates
Inventory
May be a Physical Site with Multiple
Manufacturing/Production Lines
May be Multiple Manufacturing/Production Lines at
One Physical Site
Can be a Physical Location(cost centers may or
may not be associated to a plant i.e. administrative
Vs. manufacturing cost centers)
SD Availability Checking is Normally Done at the
Plant Level
Plant (Cont.)
Links to Production (PP), Materials Management
(MM), and Sales and Distribution (SD)
A Plant is Assigned to A Company code
Purchasing Organization are Assigned to Plants
Storage Location
A Location within a Plant where Inventory is
Stored
Master data in MM
Material Master
Vendor Master
Service Master
Purchasing info record
Source List
Material master in SAP.

The material master contains information on all the
materials that a company procures, produces, stores,
and sells.
The material master is used by all components in the
SAP Logistics System
Different departments in a company work with the
same material, so data in a material master record is
subdivided in the form of user departments.
Material description and Base unit of measure appear
in all user departments.
Use of material master in SAP logistics system

functions.
In Purchasing for ordering materials.
In Inventory Management for goods movement
postings and physical inventory
In Invoice Verification for posting invoices
In FI for maintaining value of material.
In Production Planning and Control for material
requirements planning, scheduling, and work
scheduling
User departments using same material master
Material Numbers
Definition
Number uniquely identifying a material master record,

and thus a material.
Use
For every material that your company uses, you must

create a material master record in the material master.
This record is uniquely identified by a material number.
Internal and External number assignment.
Industry sector
It determines type of industry .
Eg. mechanical industry,chemical

industry,pharmaceutical etc.
The industry sector you specify determines
Which screens appear and in what sequence
Which industry-specific fields appear on the individual

screens
Material Types
Materials with the same basic attributes are grouped together
and assigned to a material type.
When creating a material master record, you must assign the
material to a material type. The material type determines certain
attributes of the material and has important control functions.
Some of the standard material types are
ROH: Raw materials which are bought from outside and goes into
production.
HALB :Semi-finished material which are bought externally and

manufactured inside. They can be sold individually as well.
FERT:Finished materials are final products of the company
Views relevant to MM
Basic data1/data2
Purchasing
Purchase order text
Storage 1
Storage 2
Accounting
CREATING MATERIAL MASTER IN SAP

From logistics screen click
Logistics Materials Management material master, to bring up

material master screen.
Click material create(general) immediately
Organizational levels.
Plant
Storage location
Material master
In Purchasing screen you can enter
Purchasing group
purchasing value key
Set indicator for automatic PO
Material master
In purchase order text screen,
you can enter the text , which will be defaulted in PO

every time when you create a PO for this material.
In Storage 1 you can enter,
Storage bin
Unit of issue
Shelf life data
Batch management
Concept of vendor master in SAP.

vendor master record is maintained by both Accounting and
Purchasing.
A vendor can be a one time vendor or regular vendor
A vendor master record contains the vendors name and
address, as well as data such as:
the currency used for ordering from the vendor
terms of payment
names of important contact persons (sales staff)
Organization of vendor master records

A vendor master record is subdivided into three
different data areas:
General Data
Company code data
Purchasing organization data
Creating vendor master record.

Menu Path
Logistics -> Material management -> purchasing ->master

data vendor ->purchasing ->create
In the initial screen you can enter,
Vendor number (For External number assignment )
Vendor account group
Purchasing organization
Creating vendor master record.

In general data you can maintain,
Address
Control
Payment transactions
In Purchasing organization data you can maintain,
Purchasing Data
Partner functions
Changing vendor master record

You cannot change Vendor account group (One time
vendor cannot be converted in to a regular vendor)
Blocking a vendor
Flag for deletion
Changing other options
Automatic PO
Vendor schema group
Payment terms
Discount
Service Master Records

Descriptions of all services that may need to be
procured can be stored.
The organizational level at which services are procured
is the purchasing organization.
In addition to a unique description of the service, a
service master record contains further information that
is necessary for procurement purposes (such as texts
or units of measure).
Creating a service master record

In the initial screen you can enter
Service number (if external number assignment)
Service category
In the Basic data screen enter,
Base unit of measure
Description of services
Valuation class (3200 for services)
In the classification screen enter,
The class for classifying the services
Concept of Purchasing info rec in SAP.

An info record represents a material-vendor
relationship.
The info record contains concise information about a
vendor and a material that you already procure from
that vendor.
Info records are created automatically when you order
a material. You can also create, change, and delete info
records.
Purchasing info rec (Contd)

Use of Purchasing info rec in PO creation
Net price for the item will be defaulted in PO
All the pricing conditions will be defaulted
other uses include
Delivery tolerance
Shelf life
Purchase order text
Purchasing info rec (Contd)

Use of info rec in Vendor evaluation
Order price history
Quotation price history
Delivery reliability
Quantity reliability
Concept of source list in SAP

A source list specifies the possible sources of supply for a
material over a given period of time
It shows the time period in which a material may be
ordered from a given vendor
Source list can be created automatically using generate
source list option
Source list can also be maintained manually.
Source List (Contd)

Uses of source list
Fixed vendor
Vendor blocking
Auto PO creation
Source list requirement at plant level
Can be made mandatory
MM - Purchasing
Course Objectives
On conclusion of this course you should
be able to
Understand the concepts in SAP -
Purchasing component
Create or change PRs
Create, change or compare RFQs
Create contracts
Introduction
Contents
Purchasing overview
Purchase requisitions
Request for quotations
Outline agreements
Exercises
Solutions
Purchasing - overview
The Purchasing component has the following tasks:
external procurement of materials and services
determination of possible sources of supply for a requirement

identified by the materials planning and control system
determination of possible sources of supply for a requirement arising

directly within a user department
monitoring of deliveries and payments to vendors
Purchasing - integration with other modules

Integration
Controlling (CO)
Purchase orders for materials intended for direct consumption

They can be directly assigned to a cost center or a production
order.
Financial Accounting (FI)
Vendor master is maintained by both accounting and purchasing

departments.
Through PO account assignment, Purchasing can also specify

which G/L accounts are to be charged in the financial accounting
system.
Purchasing - integration with other modules
Sales and Distribution (SD)
Within the framework of materials planning and control, a

requirement that has arisen in the Sales area can be passed on
to Purchasing.
When a requisition is created, it can be directly assigned to a

sales order.
Process flow in purchasing

Determination of Requirements
Materials requirements are identified either in the user departments

or via materials planning and control.
It includes 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, and forecasting on the basis
of past usage are important aspects of the demand management.
You can enter purchase requisitions yourself, or they can be

generated automatically by the materials planning and control
system.

Source Determination
The Purchasing component helps in identifying potential sources of

supply based on past orders and existing longer-term purchase
agreements.
This speeds the process of creating requests for quotation (RFQs)
Vendor Selection and Comparison of Quotations
The system is capable of simulating pricing scenarios, allowing you

to compare a number of different quotations.
Rejection letters can be sent automatically.

Purchase Order Processing
The Purchasing system adopts information from the requisition and the
quotation to help you create a purchase order.
You can generate Pos yourself or have the system generate them
automatically.
Vendor scheduling agreements and contracts are also supported.
Purchase Order Follow-Up
The system checks the reminder periods you have specified
System automatically prints reminders or expediters at the predefined intervals.
It provides you with an up-to-date status of all purchase requisitions,

quotations, and purchase orders.

Goods Receiving and Inventory Management
Goods Receiving personnel can confirm the receipt of goods simply

by entering the Po number.
By specifying permissible tolerances, buyers can limit over- and

underdeliveries of ordered goods.
Invoice Verification
The system supports the checking and matching of invoices.

Invoice verification can be based on purchase orders or GR
documents or directly to a vendor without any document
reference.
Std. Menu options in Purchasing

Create
Use this option to create a purchasing document .
Enter the required information and save the document .
The document is then stored under a unique number.
Change
Use this option to change a purchasing document .
You need the document number in order to access the document.

Display
Use this option to display a purchasing document .
You cannot change or add any information to the document that is

displayed .
You need the document number in order to access the document.
List displays/reporting
You can use these options to generate reports analyzing purchasing

documents
Example
List of all purchase orders for Vendor ABC

Follow-on functions
This option allows you to perform tasks related to (following on from)

but not included in the purchasing functionality.
Example
Entering a goods receipt or an invoice in the system.

Messages
This option enables you to print or transmit documents in message

form
Example
Transmission via fax, Printouts etc
Purchasing Documents
Definition
A purchasing document is an instrument used by Purchasing to

procure materials or services.
Types of purchasing documents
Request for quotation (RFQ)
Transmits a requirement defined in a requisition for a material or

service to potential vendors .
Quotation
Contains a vendor's prices and conditions

It is the basis for vendor selection.
Purchasing Documents
Purchase order (PO)
The buying entitys request or instruction to a vendor (external

supplier) to supply certain materials or render/perform certain
services/works,
It formalises a purchase transaction .
Contract
In the SAP Purchasing component, a type of "outline agreement", or

longer-term buying arrangement .
The contract is a binding commitment to procure a certain material or

service from a vendor over a certain period of time.
Purchasing documents
Structure
Each purchasing document is subdivided into two main areas:
The header
The header contains information relevant to the whole document .
Example, information about the vendor and the document number is

contained in the document header
The individual items .
The items specify the materials or services to be procured .
Example, The material description and the order quantity are

specified in each item.
The additional data
It provides extra information about the item, and has no direct

connection with the item procurement data.
Example,
account assignment data
PO history for an item, which contains information on already

recorded goods and invoice receipts relating to the item.
Classification of Purchasing Documents
Purchasing documents are differentiated in the SAP system via the

document type .
Example, relevant number range depends on document types
Document types are defined for RFQs, purchase orders, and contracts
Numbering of purchasing documents
Each document is assigned a unique number .
This number can be assigned internally or externally , depending on

the policy .
Internal number assignment means that the system assigns the

number.
External number assignment means that the person creating the

document must supply it.
Alphanumeric assignment is only possible in the latter case.
Definition
A purchase requisition is a request or instruction to Purchasing to procure a

certain quantity of a material so that it is available at a certain point in time.
It is an internal document.
Requisitions can be created in the following ways:
Directly: Someone from the requesting department enters a purchase

requisition manually.
Indirectly: The purchase requisition is created via another SAP component.
Purchase requisitions can be subject to a release procedure.
Purchase requisitions - integration

Requisitions can be created indirectly in the following
ways:
via materials planning and control
The component Consumption-Based Planning suggests

materials that need to be ordered on the basis of past
consumption or usage figures and existing stock levels.
The order quantity and the delivery date are determined

automatically.
Materials planning and control can stipulate that a purchase

requisition is to be resubmitted to the purchasing department if it
has not been processed after a predefined period of time.
Purchase requisitions - integration

Requisitions are generated automatically from
production orders if
They contain an external processing operation (e.g. subcontracting

work)
A precondition is that the control key for the operation allows or

prescribes external processing.
they contain non-stock components
Procurement types
Standard
Subcontracting
Components to be provided can be entered.
Consignment
Stock transfer
External service
Service specifications can be entered
Manual creation of PR
Things to remember
Item category
Account assignment category
Purchasing group
Requirement tracking number
Delivery date
Item with or with out material master record
Order quantity
Creating Request For Quotation

Automatically from PR
Manually
With reference to PR
With out reference to PR
Delivery address
Address of the company asking for quotation, by default it is the address of E+L.
But it can be changed.
vendor address
Just enter the codes of the vendor, System will take other details from vendor
master.
Quotation dead line

Delivery date
RFQ (contd)
Printing RFQ
Send the Printed RFQ to the vendors
Receive the quotation from the vendor
Maintain the RFQ
Enter the net price quoted by the vendor
Enter the pricing conditions
Terms of payment
Update the info record if reqd
Quotations
Compare the quotations
Maintain the collective number in the RFQs
Quotations can be compared based on price
Discounts and delivery costs can be included
Comparison can be based on effective price also
System compares and gives the ranking list
Percentage basis for comparing quotations
Mean value equals 100%
Maximum value equals 100%
Minimum value equals 100%
Outline agreements with the vendor

To Setup longer-term purchasing arrangements with
vendors regarding the supply of materials or the
performance of services.
Outline agreements can be subject to a release (approval or

clearance) procedure.
Agreement types
Quantity contract
Value contract
Outline agreements
Structure
Document header: containing information relating to the entire

agreement. For example, the vendor information and header
conditions are in the document header
Items: containing the information specific to the relevant material or

service.
statistics on ordering activities for the item
quantity or price of the item
conditions, such as quantity discounts and surcharges
Outline agreements
Texts in Outline Agreements
Header texts
Item texts
You can create your own text types
Creating a outline agreement
Outline agreement can be created with reference to a RFQ or without any

reference
Important terms
Purchase group
Outline agreements
Target quantity
Target Value
Pricing conditions
Validity starting and ending date
Vendor address
Delivery address
Remainders
Introduction
Contents
Creating POs
Printing of POs
Printing Remainders
Changing or canceling POs
Purchasing information
Exercises
Solutions
Purchase order
Definition
Formal request or instruction from a purchasing organization to a

vendor or a plant to supply or provide a certain quantity of goods or
services at or by a certain point in time.
Structure
Header
items
Additional data
Creating a Purchase order

Automatically from PR
Set automatic PO indicator for material and vendor
Maintain Purchasing info record
Maintain source list
Fixed vendor
PR from MRP or Manually created PR
Assign manually or automatically
Process the assigned PR to create PO
Create PO - Manually
Manually creating a PO
With reference to PR
Select the PRs

Select the items from PR
Copy the items in to PO
Enter the vendor
Enter the prices and pricing conditions
Update the info record if reqd
Create PO
With reference to RFQ
Select RFQ
Select the items
Copy the selected items in to PO
Enter the Price and pricing conditions
Update the info record if reqd.
Acknowledgement and confirmations
Create PO
With out any reference
In this case you need to enter
Vendor code
Delivery date
Item category
Account assignment category (if reqd)
Order type ( NB For std purchase order)
Plant ( 4000 - default plant )
Storage location
Creating a PO (contd)
Important terms in PO
Vendor
For creating a PO you need to enter vendor code

Vendor master should exist for this purpose
if you dont want to maintain all the details for a vendor you can
create a one time vendor
Item category
Standard
Subcontracting
service
Create PO (Contd)
Account assignment category
Specification of the account assignment objects that are charged in the

case of a purchase order for a material that is intended for direct usage or
consumption.
Examples
Asset
Sales order
Production order
Cost center
Types of account assignment
Single account assignment
Multiple account assignment
Create PO (contd)
Delivery date
Date format
Day format
Week format
Month format
Delivery date entered here is only expected delivery date

You can also specify a statistical delivery date
Create PO (contd)
Units of measure in PO
The order unit
This is the unit you specify in connection with the order quantity.
The order price unit
This is the unit that applies in connection with the net price and which is
taken as the basis for invoice verification.
If the order price unit does not correspond to the order unit, and if no
conversion factor is specified in the system, you must enter a conversion
factor on the item detail screen.
Create PO (Contd)
Example for units of measure in PO
Order quantity
24
Order unit
Box
Gross price per unit
$10
Order price unit (number)
Order price unit (of measure)
kg
Conversion factor 24 boxes
1 kg
Create PO (Contd)
Conditions
This component enables you to store pricing stipulations agreed

with the vendor
Examples are applicable discounts or surcharges, or stipulations

regarding the payment of freight costs in the system.
There are three kinds of price in Purchasing:
Gross price
Price without taking any possible discounts and surcharges into account
Create PO (Contd)
Net price
Effective price
Price taking any applicable discounts and surcharges into account
Net price after deduction of cash discount, with allowance for any
miscellaneous provisions, delivery costs, and non-deductible taxes.
Terms of Payment
Example
Within 14 days 2% discount
Within 30 days due net
Create PO (Contd)
Inco terms
Incoterms are internationally-recognized terms of delivery

reflecting the standards set by the International Chamber of
Commerce (ICC).
Example
FOB - Free On Board. This means that the buyer has to bear all
costs and risks of loss of or damage to the goods from that point.
You can specify Incoterms for an order item that differ from those in
the PO header.
Creating PO from outline agreement

In the initial screen for Create PO,
Select the Outline agreement and items
Copy the items in PO
In the item overview screen
Enter the quantity
If the quantity exceeds the target quantity system gives a warning
Texts in PO
Header texts
Header note
Pricing types
Dead lines
Terms of delivery
Shipping instructions
Terms of payments
warranties
Penalties for breach of contract
Confirmations
Purpose
This component can be used, if you wish to have your vendor provide
you with various kinds of confirmation regarding delivery dates and
quantities
It enables you to base your materials planning and control activities

on more up-to-date data than that contained in purchase orders.
Confirmation control key

Shipping notification
Order acknowledgement
Shipping notification
Shipping Notification
Definition
A vendors confirmation to a purchasing organization of the delivery

date for a certain quantity of ordered materials
It can be for the date of performance of ordered services also.
Structure
A shipping notification consists of several items in which the notified

(confirmed) quantity of the material or service is specified.
Confirmations from the Viewpoint of IM

When you post goods receipts, there are several ways
of finding the associated purchase orders.
Enter the PO number

Enter the shipping notification number
Enter the transport identification code
If you establish a link via the PO number itself, the

relationship is unique
i.e. one goods receipt (GR) against one purchase order
Confirmations from the Viewpoint of IM

If you enter the number of the shipping notification
The system selects all purchase orders containing this number
System suggests the notified quantities for the GR document.
Prerequisites
If you wish to match up GRs against POs via the shipping notification
number ,
shipping notification must exist as a separate document.
Releasing the PO
Release Procedure for External Purchasing Documents
External purchasing documents (i.e. purchasing documents other than

requisitions) are released at header level.
Item-by-item release is not possible.
These documents can only be released using the release procedure

with classification.
Release Conditions
The release conditions determine the release strategy in accordance

with which a PO is to be released.
If a PO does not meet the conditions for a release strategy, it is

automatically released for further processing.
Release procedure
Release Strategy
The release strategy defines the approval process for purchasing

documents.
The strategy specifies the release codes necessary and the

sequence in which releases have to be effected.
A maximum of eight release codes can be defined.
The assignment of the release strategy to a purchasing document is

based on the release conditions.
Release procedure
Release Code
Definition
The release code is a two-character ID allowing a person to

release (clear, or approve) an external purchasing document.
Who may work with which release codes is basically controlled

via a system of authorizations.
Release Prerequisites
The release prerequisites indicate the sequence in which PO must be

approved via the release codes.
Printing a PO
Menu path
Purchase order -> Header -> Messages
Data required
Output type
Medium
Communication method
Select the printer
Further Data
Repeat output
Change output
Printing the remainders

Types of expediting letters
Remainders
A negative number of days means that a reminder is to be issued

to the vendor n days prior to the delivery date
Urging letters
A positive number of days means that a letter or message urging

delivery is to be issued n days after the due date.
Message type - MAHN (Dunning letter)
Changing and blocking POs
If you change a PO after it has been sent to the vendor, a change

document is generated that can be sent to the vendor.
If the goods have already been delivered, then the changes you can
make to the PO are limited.
This tells the vendor what you have changed.
For example, you cannot change the quantity to one that is less
than the quantity delivered.
If the invoice has been received or the goods have been paid for, and
your intended change affects the price, the change will be ineffective.
You can display the PO history for an item to determine whether

deliveries have been received or the item has been invoiced.
MM - Inventory management
Course Objectives
On conclusion of this course, you
should be able to
Do planned and unplanned goods receipts
Do Issue of Goods
Do transfer posting of goods
Manage stocks of the company on both
quantity and value basis
Introduction
Contents
Overview
Integration with other modules
Type of stocks
Concept of material documents
Goods movements
Movement type concept
Inventory management - overview
What is inventory management ?

SAP's Inventory Management system allows you to
manage your stocks on a quantity and value basis
The stocks are managed not only on a quantity basis but also by
value - a prerequisite for cost accounting. With every goods
movement, the following values are updated:
the stock value for inventory management
the account assignment for cost accounting
the corresponding G/L accounts for financial accounting via automatic

account assignment
What is inventory management ?
Planning, Entry, and Proof of Goods Movements
Goods movements include
external movements (goods receipts from external procurement,

goods issues for sales orders)
internal movements (goods receipts from production, withdrawals of

material for internal purposes, stock transfers, and transfer postings).
For each goods movement a document is created which is used by

the system to update quantities and values and serves as proof of
goods movements.

Integration in Materials Management (MM)
As a component of Materials Management, Inventory Management is

directly linked with Material Requirements Planning , Purchasing, and
Invoice Verification.
Inventory Management forms the basis for material requirements

planning, which takes into account not only physical stocks but also
planned movements (requirements, receipts).
Quantities and values from the purchase order and the goods receipt
document are checked to ensure conformity with those in the invoice.

Integration in Production Planning (PP)
Inventory Management is closely linked to the Production Planning

module:
Inventory Management is responsible for staging of the components

required for production orders
Goods issue against production orders
The receipt of the finished products into the warehouse is posted in

Inventory Management.

Integration in Sales & Distribution (SD)
As soon as you enter a sales order, you can initiate a dynamic

availability check of stocks on hand.
When the delivery is created, the quantity to be delivered is marked

as "Scheduled for delivery."It is deducted from the total stock when
the goods issue is posted.
It is also possible to create sales order stocks.
These SD transactions are depicted in the Sales & Distribution

system.

Integration in Quality Management (QM)
In the case of a goods movement, the system determines whether

the material is subject to an inspection operation.
If so, a corresponding activity is initiated for the movement in the

Quality Management system.
Financial Accounting (FI)
Automatic account assignment, a procedure during which the system

determines the accounts relevant for the given goods movements.

Controlling (CO)
The interface to the cost accounting system is activated in the

case of material consumption
For example, when materials are issued for various account

assignment objects such as orders or cost centers.
Cost accounting is also involved when goods receipts are

assigned directly to cost centers or orders.
IM - Material Master
Relevant views
Accounting
Price and accounting information.

Examples:
type of price control

valuation class.
Materials Planning
Information for materials planning.

Examples:
safety stock, reorder level, availability check.
Purchasing
Procurement information for a material.
Examples:
overdelivery and underdelivery tolerances
purchasing order unit of measure (order unit).
Storage
Information for warehousing and storing the material.

Example:
unit of issue
storage conditions, fixed bin location
Quality Management
Information for sampling and inspecting a material.

Examples:
indicator for goods receipt via quality inspection
Work Scheduling
Information for producing the material.

Examples:
production unit
overdelivery and underdelivery tolerances allowed.
IM - Data Required
For Inventory Management, you must maintain the
following data:
Plant data
This data can be maintained via different views (for example, via
Purchasing, Storage, Work scheduling).
You have to maintain at least one view that requires the entry of
the organizational level plant.
Valuation data
Valuation data is required for managing the stock by value.

You maintain this data via the Accounting view.
IM - Data Required
Storage location data
You maintain the storage location data via the Storage view.
If a material is located in a storage location, the storage data for
that storage location must exist in the material master record, so
that the system can manage the stock quantities at storagelocation level.
Storage data can be manually entered when the material master

record is created
It can be automatically created during the first goods movement in

that storage location.
Types of stocks
Total valuated stock
Sum of all valuated stocks of a material.
It consists of all the types of stock your company owns.
Unrestricted-use stock
Company's own stock that is physically located in the warehouse,

valuated, and not subject to any kind of usage restrictions.
quality inspection stock
Company's own stock that is in quality inspection.
Types of stocks
Stock in quality inspection is valuated but does not count as

unrestricted-use stock.
For MRP, it is either available or not available, depending on how the

system is set.
Blocked stock
Company's own stock that should not be used.
It does not count as unrestricted-use stock for Inventory Management
It is usually not available for MRP.
Types of stocks
Restricted-use stock
Valuated stock of a material managed in batches held by a company

(and belonging to that company)
Usage of this stock is subject to certain restrictions. This category of

stock is only used when batch status management is active.
Blocked stock returns
Stock that was returned by the customer and conditionally accepted.
It is neither valuated nor does it count as unrestricted-use stock.
Types of stocks
stock in transfer
Quantity that was already withdrawn from stock at the issuing

location but that has not yet arrived at the receiving location
Stock in transfer is managed in the valuated stock of the receiving

location, but it does not yet count as unrestricted-use stock.
Stock in transit
Stock in transfer that is created in the case of a stock transfer via a

stock transport order.
Types of stocks
Available stock
Dynamic stock that is calculated by MRP taking any receipts, issues,

the current available stocks into account.
Which requirements, receipts, and issues are included in the

availability check is defined in the Customizing system.
Reserved stock
Sum of all quantities of a material that are reserved for withdrawal.
Reserved stock is usually not available from the point of view of MRP
For Inventory Management it still counts as unrestricted-use stock.
Types of stocks
Planned receipts
Sum of all quantities whose receipt has been planned with reservations.
Planned receipts are usually already available from the point of view of
MRP
For Inventory Management they do not yet count as unrestricted-use

stock.
Open PO quantity (total)
Sum of all outstanding PO quantities for a material.
The open PO quantity usually increases available stock in MRP
It does not increase unrestricted-use stock in Inventory Management.
Types of stocks
Open order quantity (total)
Sum of all outstanding order quantities for a material.
The open order quantity usually increases available stock in MRP
It does not increase unrestricted-use stock in Inventory Management
Goods receipt blocked stock
Sum of all quantities of a material that were delivered by vendors for

purchase orders and that have been conditionally accepted.
GR blocked stock is neither valuated nor does it count as

unrestricted-use
Types of stocks
Stock scheduled for delivery
Sum of all current deliveries to customers for which goods issues have
not yet been posted.
Like reserved stock, stock scheduled for delivery is usually not

available from the point of view of MRP
It counts as unrestricted-use stock for Inventory Management.
Negative stocks
Negative stocks are required if, for example, goods issues are entered
before the corresponding goods receipts for organizational reasons
and the material is already physically located in the warehouse.
Goods movements
Definition of Goods Movement
A goods movement is an event that causes a change in stock.
Good receipt
A goods receipt (GR) is a goods movement with which the receipt of

goods from a vendor or from production is posted.
Goods issue
A goods issue (GI) is a goods movement with which a material

consumption, or a shipment of goods to a customer is posted.
Goods movements
Stock Transfer
Transfer of material from one plant to other plant or from one storage
location to other storage location
Transfer Posting
changes in stock type or stock category of a material.
Examples of transfer postings are:
Transfer Postings From Material to Material
Release from quality inspection stock
Transfer of consignment material into company's own stock
The document concept

When posting a goods movement in the SAP System,
the following documents are created:
Material document
Accounting document
a material document is generated that serves as proof of the

movement
If the movement is relevant for Financial Accounting an

accounting document is created
Cost accounting Document
Movement types
Movement Type
When you enter a goods movement in the system, you must enter a
movement type to differentiate between the various goods
movements.
A movement type is a three-digit identification key for a goods

movement.
Examples
Goods receipt for a purchase order 101

Goods issue for a cost center
201
Release from quality inspection stock
321
Movement types
Control Functions of the Movement Type
The movement type has important control functions in Inventory

Management.
For example, the movement type plays an important role in
updating of quantity fields
updating of stock and consumption accounts
determining which fields are displayed during entry of a document in

the system
Material documents
Changing a Material Document
you can not change a document once it has been posted.
If you made a typing error when entering a goods movement you

must reverse the movement with a reversal document
Although you cannot change a posted document, you can use the
function "Change Material Document" to
enter additional information for the document.

print a goods receipt/issue slip for the document
Planning goods receipts

Referencing Document During Entry of Goods
Movement
The documents used to plan goods receipts serve as reference

documents for entering the goods movement
GR for purchase order
Return Deliveries
When you enter the return delivery, you should
reference the purchase order or the material document,
so that the system can
suggest data (for example, the storage location), to simplify data

input
perform certain checks (the returned quantity must not exceed the
delivered quantity)
reduce the quantity delivered to-date
reverse other updates that occurred (for example, for goods receipt
into consumption) when the goods receipt was entered
Shelf Life Expiration Date Check

When you enter a goods receipt, it is possible to check
the shelf life of a material.
Prerequisites
The shelf life is only checked if the following prerequisites are met:
The minimum remaining shelf life is maintained in the material

master record or in the purchase order.
The minimum remaining shelf life is the minimum number of days for
which the material must keep for the goods receipt to be accepted by
the system.
Other goods receipts

initial entry of stock balances
external goods receipts without a purchase order
internal goods receipts without a production order
goods receipts of by-products
deliveries free of charge
returns from the customer
Reservations
Goods issue for an order
Results of a Goods Issue Posting

A goods issue has the following results in the system:
material document is created
accounting document is created
Creation of a Goods Receipt/Issue Slip
Stock Update
Update of G/L Accounts
Consumption Update
Reservation Update
Order Update
Printing documents
MM - INVOICE VERIFICATION
Course Objectives
On conclusion of this course, you should be
able to
Enter and verify vendors invoice
Enter and verify vendors excise invoice
Devalue materials
Carry out physical inventory
Introduction
Contents
Invoice entry and verification

Credit memo
Excise invoice
Material devaluation
Physical inventory
Inventory management information
Exercises
Solutions
MM - invoice verification
Invoice Verification in Materials Management serves
the following purposes:
It completes the materials procurement process
It allows invoices that do not originate in materials procurement (for

example, services, expenses, course costs, etc.) to be processed
It allows credit memos to be processed, either as invoice

cancellations or discounts
Invoice Verification does not handle the payment or the

analysis of invoices.
The information required for these processes is passed
on to A/C department.
Invoice verification
Invoice Verification tasks include:
Entering invoices and credit memos that have been received
Executing the account postings resulting from an invoice
Checking invoices that were blocked because they varied too

greatly from the purchase order
Checking the accuracy of invoices with respect to contents,

prices, and arithmetic
Updating certain data in the SAP system, for example, open

items and material prices
Types of Invoice Verification

As a rule, an invoice refers to a transaction for which
the issuing party requests payment.
Invoice Verification differs depending on the type of
invoice involved:
Invoices based on purchase orders
With purchase-order-based Invoice Verification, all the items of a

purchase order can be settled together,
Invoices based on goods receipt
With goods-receipt-based Invoice Verification, each individual

goods receipt is invoiced separately.
Types of Invoice Verification
Invoices without an order reference
When there is no reference to a purchase order, it is possible to

post the transaction directly to
a material account
a G/L account
or an asset account.
Data required for invoice verification

The key data required for Invoice Verification is
Master data
Transaction data
Material data
Material data is information on the materials bought or produced in

the company
Vendor data
Vendor data provides information on the suppliers a company deals

with.
Data required for invoice verification

Accounting data
Accounting data is used to define G/L accounts
Transaction data
Transaction data records transactions or events in the SAP system.
Purchasing document
Material document
Accounting document
Invoice data
An invoice contains various information, such as:
Who issued the invoice?
Which transaction does the invoice refer to?
How much tax do you have to pay?
If the invoice refers to a particular transaction, the

system will automatically retrieve information
pertaining to the transaction
Terms of payment
Quantities to be invoiced
The amounts the system expects per item
Screens for Invoice Verification

The initial screen
This contains general data such as
company code
currency
invoice reference.
The vendor screen
This contains data on the vendor

The terms of payment
taxes.

The selection screen
This lists the items of the transaction specified on the initial

screen.
The layout of the selection screen depends on whether the

invoice is based on a purchase order or a goods receipt.
Invoice Based on a Purchase Order
All the purchase order items are listed.
The quantity that is still to be billed (i.e. the difference between the
quantity delivered and the quantity invoiced so far) appears as a default
in the Quantity column.

Invoice Based on a Goods Receipt
Goods-receipt-based invoice verification must have been defined in

the purchase order.
If the GR-IV field on the item screen in the purchase order is not
selected, the goods receipt cannot be settled in this way.
There are two ways of finding the correct transaction in goodsreceipt-based Invoice Verification:
You can enter a delivery note number or a GR document number and

the system will list the items for the goods receipts on the selection
screen;
you can enter a purchase order number and the system will list all
the GR documents
Parking the invoice

Preliminary Posting
You can enter an invoice (or a credit memo) without posting it and
simply "park" it.
If you park an invoice or a credit memo the system does not make
any postings.
A parked document can be changed as often as you like.
When data is added or changed, the changes are noted by the

system.
When no further changes are required, you can then post the parked
document.
Parking the invoice

The preliminary posting function can be of great
advantage if:
You are interrupted when entering an invoice. You can park the
document and continue processing it later on. This saves you time
having to enter the data twice.
You wish to clear up some questions before you post an invoice. You
can park the document and continue processing it later on.
You wish to split the Invoice Verification process. One employee can,
for example, park an invoice without checking it, while another carries
out the actual checks and posts the document after making any
necessary corrections.
Data Update When Posting an Invoice

When you post an invoice, the system carries out the
account movements and updates the following
The system generates a Financial Accounting document that displays

the accounts involved in the posting and the amounts posted to these
accounts.
The system creates a purchase order statistic for each item in the
purchase order.
The moving average price is updated in the material master record If

the invoiced price differs from the price in the purchase order for a
material with moving average price control
Blocking the invoice

When an invoice is blocked, Financial Accounting cannot
pay the invoice.
The invoice must first be released in a separate step before
it can be processed.
Variances in an Invoice Item
Quantity variance (M)
Price variance (P)
Variance in order price quantity (G)
Schedule variance (T)
Quality inspection (I)
Credit memos
The term credit memo always refers to a credit memo
from the vendor.
Posting a credit memo always leads to a debit posting
to the vendor account.
Two types of credit memos are possible:
Credit memos that refer to a purchase order or goods receipt

Credit memos that do not refer to a transaction.
Processing of credit memos is same as invoice

verification
Types of Delivery Costs
In the SAP System, there are two types of delivery

costs:
Planned delivery costs
They are entered in the purchase order. Provisions are set up for the
relevant costs at goods receipt. The delivery costs posted at goods
receipt can be referenced at invoice entry.
Unplanned delivery costs
They are only entered when the invoice is entered. No provision is

made at goods receipt.
Physical inventory
Every company must carry out a physical inventory of
its warehouse stocks at least once per fiscal year to
balance its inventory
Stocks that can be inventoried
unrestricted-use stock in the warehouse

quality inspection stock
Blocked stock
Physical Inventory Process

The process of physical inventory can be divided into
three phases:
Physical inventory preparation
Create a physical inventory document.

Block materials for posting.
Print and distribute the physical inventory document.
Physical inventory count
counting stocks
entering the result of the count on the physical inventory
document printout
Physical inventory
Physical inventory analysis
entering the result of the count into the system

initiating a recount, if necessary
posting inventory differences
Processing Steps
Creating a physical inventory document

Entering the Physical Inventory Count
Post inventory differences
Physical inventory
posting the physical inventory count and inventory
differences
If a physical inventory document exists, the following are combined in

this step:
The count is posted.
Any inventory differences are posted.
Posting inventory differences without reference to the

physical inventory document
A physical inventory document is created.
The count is posted.
Any inventory differences are posted.

You can perform the following functions by selecting
Environment from the Inventory Management menu.
List display
The List display function offers reports for documents posted in Inventory
Management.
Example: material documents for a material.
Stock display
Example: Stock overview
Information
The Information function allows you to display data (master data,

transaction/movement data) from other applications.
Example: displaying a purchase order.
Balances display
The Balances display function offers analysis of the stock

accounts and of the GR/IR clearing account.
Consignment
The Consignment option permits analysis of the consignment

stocks from vendors as well as the consignment stocks and the
returnable packaging stocks at the customers site.
Batch where-used list
Batch search strategy

Material analysis
Stock values
Receipts and issues
Inventory turnover
Inventory turnover of the value of valuated stock is calculated as

Value of total consumption / Value of average valuated stock
follows:
Range of coverage
The range of coverage of the value of valuated stock is calculated as follows:

Value of valuated stock / value of average total usage / day

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CONTENTS

Master and Vendor master records

the existing master records

materials planning and control (MRP)

Integration with other Modules

Integrated Business Process Overview

Organizational Elements - Client

Usually a Manufacturing Facility, Warehouse, or a

Material master in SAP.

Use of material master in SAP logistics system

User departments using same material master

Number uniquely identifying a material master record,

For every material that your company uses, you must

Internal and External number assignment.

Eg. mechanical industry,chemical

The industry sector you specify determines

Which screens appear and in what sequence

Which industry-specific fields appear on the individual

HALB :Semi-finished material which are bought externally and

FERT:Finished materials are final products of the company

CREATING MATERIAL MASTER IN SAP

Logistics Materials Management material master, to bring up

purchasing value key

Set indicator for automatic PO

you can enter the text , which will be defaulted in PO

In Storage 1 you can enter,

Shelf life data

Concept of vendor master in SAP.

the currency used for ordering from the vendor

names of important contact persons (sales staff)

Organization of vendor master records

Company code data

Purchasing organization data

Creating vendor master record.

Logistics -> Material management -> purchasing ->master

In the initial screen you can enter,

Vendor number (For External number assignment )

Vendor account group

Creating vendor master record.

In Purchasing organization data you can maintain,

Changing vendor master record

Vendor schema group

Service Master Records

Creating a service master record

Service number (if external number assignment)

In the Basic data screen enter,

Base unit of measure

Valuation class (3200 for services)

In the classification screen enter,

The class for classifying the services

Concept of Purchasing info rec in SAP.

Purchasing info rec (Contd)

Net price for the item will be defaulted in PO

All the pricing conditions will be defaulted

other uses include

Purchasing info rec (Contd)

Order price history

Quotation price history

Concept of source list in SAP

Source List (Contd)

Source list requirement at plant level

Can be made mandatory

external procurement of materials and services