SAP MM /WM - Overview

Dilip Sadh

Procurement Cycle Workshop - Objectives

Describe the basic business process of Procuring Materials
and Services in the SAP R/3 System.
Discuss the integration points in procurement to Financial
Accounting and Inventory management.
Discuss the reporting and analysis tools used in the
procurement cycle.
Discuss the Companys procurement process.

Communicate scope expectations.

SAP modules
SD : Sales & Distribution
MM: Material Management
WM : Warehouse Management

Finance

PP : Production Planning

FI : Financial Accounting
FI-AM : Assets Management
CO : Controlling
PS : Project System

SD

FI

CO

MM

AM

PP

SAP

Logistics
QM

PS

WF

PM
IS
QM : Quality Management
PM : Plant Maintenance

Modules in PROJECT
MM module

Global tools

HR
WF : Workflow
IS : Industry Solutions
Human
Resources

SD
MM
PP
QM
PM

FI

SAP

CO
AM
PS
WF

IS
HR

MM Materials Management

MM is a component of Logistics in SAP that focuses on

inventory management, warehouse management, vendors and
purchases.

MM overview
Material planning
Purchasing

Production

External procurement

Internal procurement

Invoice
verification

Storage areas
management

Goods receipts
Inventory management

Invoice entry

Goods issue
Stock transfers

Financial accounting

Sales

MM
MASTER
DATA
Materials
Batches
Vendors
Purchasing
info record
Source list

Procurement Cycle Workshop

Agenda
Attendees:
Business Managers, Process Owners

Topics:
Master Data
Procurement Process Overview
Reporting

Procurement

Organizational and Master Data

Business Process for
Procurement

Reporting and Analysis

Procurement

The primary SAP R/3

application modules that
support the Procurement
process include:
Materials Management

Purchasing

Goods Receipts

Invoice verification

Financial Accounting

Payment processing

Materials Valuation

SD

FI

Sales &
Distribution

Financial
Accounting

MM

CO

Materials
ManagePP ment
Production
Planning

QM

Controlling

AM

R/3

Fixed Assets
Management

Client / Server
ABAP/4

PS

Quality
Management PM
Plant Maintenance

Project
System

WF
Workflow

HR

IS

Human
Resources

Industry
Solutions

Organizational Elements

The SAP R/3 Procurement business process uses

the following R/3 organizational elements:

COMPANY CODE

Company Code

Purchasing Organization

Plant

Storage Location

Purchasing Group

Master Data

The following master data is used in the Procurement cycle:

Material Master

Vendor Master

Master Data: Material Master

The material master record contains all data required to

define and manage material. It integrates data from
manufacturing, sales and distribution, purchasing,
accounting and other departments.
The material master is used as a source of data for purchase
order processing throughout the procurement cycle.

Material Master Primary Views

Engineering/
Design

Purchasing

MRP

Sales

Stocks in plant/
storage location

Work
scheduling

St

A
B

Accounting

Storage

Material
Master

Material Master Organizational Levels

General
Generaldata
data

Client

Material number
Description
Units of measure

Plant

Plant-specific data
Planning data
Manufacturing data
Purchasing data
Valuation data

Storage Location
locationspecific
data
specific
data
Storage Location

Stock
Stockquantities
quantities

Master Data: Vendor Master

The vendor master includes all data necessary for processing

business transactions and corresponding with vendors.
Information is shared between the accounting and purchasing
departments.
Data is grouped into three categories.

General data
Accounting data
Purchasing data

Procurement

Organizational and Master Data

Business Process for
Procurement

Reporting and Analysis

Procurement Environment

1. Requirements
Purchase Order

Vendor
invoice

8.

Payment

Determination

7.

2.

Source
Determination
RUHR
TRUCKING

Invoice Verification

3. Vendor

6.

Goods Receipt and

Inventory Management

5. Order Follow-up

Selection

4. Order Processing

The Procurement Process

Purchase
Requisition
for Goods/
Services

Purchase
Order

Goods
Receipt

Invoice
Processing
Vendor
invoice

Purchase
Requisition

Purchase
Order

10

10

20

20

30

30

Planning, Reporting, and Analysis

Purchase Requisition

Purchase
Requisition
for Goods/
Services

Purchase
Order

Goods
Receipt

Invoice
Processing
Vendor
invoice

Purchase
Requisition

Purchase
Order

10

10

20

20

30

30

Planning, Reporting, and Analysis

Purchase Requisitions:

Request or instruction to the purchasing department to procure a

certain quantity of a material or service on or by a certain date.

Are created directly by a requesting department or automatically via

material requirements planning (MRP).

Are internal documents not used outside the company.

Purchase Requisition Processing

MRP

Direct Entry
Purchase
Order

Purchase requisition

Determine source of supply

Release strategy

Purchase Order
The Procurement Process
Purchase
Requisition
for Goods/
Services

Purchase
Order

Goods
Receipt

Invoice
Processing
Vendor
invoice

Purchase
Requisition

Purchase
Order

10

10

20

20

30

30

Planning, Reporting, and Analysis

Purchase orders:

Represent the formal approval of a purchasing transaction with a vendor.

Identify the following items such as:

Vendor

Material and quantity ordered

Price and terms
Delivery date and location

Purchase Order Processing

Purchase
Order
Standard

Statistics Order
History

Direct Entry
or Purchase
Requisition
Purchase
Requisition

Stock Material

Consumable Material
Service

Account Assignment
(cost center, asset,
internal order)

Processing Purchase Orders

Purchase
requisition

Vendor

Reference
document

Purchase
order
10
20

One-time vendor

30

Contract

Goods Receipt
The Procurement Process
Purchase
Requisition
for Goods/
Services

Purchase
Order

Goods
Receipt

Invoice
Processing
Vendor
invoice

Purchase
Requisition

Purchase
Order

10

10

20

20

30

30

Planning, Reporting, and Analysis

Goods receipts record the inward movement of goods or materials by:

Verifying the receipt against the order.

Valuating material at purchase order price.

Creating material and accounting documents to record the event.

Updating the purchase order history.

Providing basis for invoice verification (2nd part of 3-way match).

Goods Receipt for Stock Material

Purchasing
Documents

Goods
Receipt

Items
1.
2.
3.
RUHR
RUHR
TRUCKING
TRUCKING

Vendor

Warehouse/Stores

Entering the goods receipt increases the inventory

level of a material that is procured for stock.

Results of a Goods Receipt Posting

G/L Accounts:

Accounting Document
Stock Account
Consumption Account
GR/IR Account

Goods
Receipt
Posting

Material
Document

Goods Receipt
Slip

Stock Quantity
Consumption Statistics

Point of Consumption
Cost center
Order

Purchasing Data:
Order item
Order history

Material Movements Through IM and WM

Material Movements Flow:

Transfer Requirement (TR)

Transfer Order (TO)

Confirm Transfer Order

Invoice Processing (1)

The Procurement Process
Purchase
Requisition
for Goods/
Services

Purchase
Order

Goods
Receipt

Invoice
Processing
Vendor
invoice

Purchase
Requisition

Purchase
Order

10

10

20

20

30

30

Planning, Reporting, and Analysis

Invoice verification:

Matches the vendors invoice to the purchase order and the

goods received (3rd part of 3-way match).

Matches price, and quantity.

Updates the purchase order and its history.

Updates accounting information.

Invoice Verification Environment

G/L
accounts:
G/L
Accounts
Vendor
Invoice

Purchase
Order

Assets

Invoice
Verification
Vendor
Invoice

Cost Centers
Projects

Goods Receipt
Orders

Material Master
Vendor Master

Conditions

Posting an invoice in the SAP System

updates purchasing and accounting data

Invoice verification accesses data from purchasing, inventory

management, material master, and vendor master files.

Invoice Processing (2)

The Procurement Process
Purchase
Requisition
for Goods/
Services

Purchase
Order

Goods
Receipt

Invoice
Processing
Vendor
invoice

Purchase
Requisition

Purchase
Order

10

10

20

20

30

30

Planning, Reporting, and Analysis

Invoice Payment:

Selects invoices for payment based on the payment terms in

the vendor master or purchase order.

Generates payment for released invoices.

Updates accounting information.

Vendor Payment

Vendor

Financial
Accounting

1000

Bank

Payment
program

Motor Sports International

Released
invoice

1000

Procurement Integration
PP
Purchase
requisition

Purchase Requisitions

Goods Receipt

Released
invoice

Invoice Verification

FI

FI

Procurement

Organizational and Master Data

Business Process for
Procurement

Reporting and Analysis

Reporting and Analysis

Standard Reporting provides List Displays by:

Vendor

Material

Account assignment

Material Group

Purchase order number

General Analysis
Order Value Analysis
Inventory Transaction Analyses

Logistics Information System

Logistics Information Library

Sales
Information
System

R/3

Purchasing
Information
System

Inventory
Controlling

Logistics
Information
Systems

Shop Floor
Information
System

Sales and
Materials
Production
Distribution Management
Planning
(SD)
(MM)
(PP)

Logistics
Processing
Systems

Thank you for your kind attention!

Dilip Sadh