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MM - Overview MM - Purchasing MM - Purchase Order MM - Inventory Management MM - Invoice Verification
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Overview of MATERIALS MANAGEMENT
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Purchase department Stores department
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Course Objectives On conclusion of this course. you should be able to: Visualize the MM functionalities Maintain MM related views of Material Master and vendor master Create other master records or changing the existing master records © TATA CONSULTANCY SERVIES .
Introduction Contents MM overview Organizational Structure Material master Vendor master Exercises Other master records Solutions © TATA CONSULTANCY SERVIES .
Module materials planning and control purchasing inventory management invoice verification.Overview Major components of MM. © TATA CONSULTANCY SERVIES .MM .
Integration with other Modules © TATA CONSULTANCY SERVIES .
Integrated Business Process Overview G/L Inventory / GRIR G/L GRIR/ Expense AP Invoice Vendor Payment Requirement for Goods / Services Purchase Order Goods Receipt Invoice Verificatio n Financial and Managerial Reporting and Analysis © TATA CONSULTANCY SERVIES .
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g.Organizational Elements . a corporation) Can be Used to Differentiate between a Development. 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 © TATA CONSULTANCY SERVIES . Quality Assurance.Client Highest Hierarchical Level in SAP(e.
MM 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.Organizational Elements . © TATA CONSULTANCY SERVIES .
manufacturing cost centers) © TATA CONSULTANCY SERVIES SD Availability Checking is Normally Done at the Plant Level .e. 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. Warehouse.Organizational Elements . administrative Vs.MM Usually a Manufacturing Facility. or a Location that Stocks . Manages.
Organizational Elements . Materials Management (MM). and Sales and Distribution (SD) A Plant is Assigned to A Company Purchasing Organization are Assigned to Plants © TATA CONSULTANCY SERVIES .MM Links to Production (PP).
Organizational Elements .MM A Location within a Plant where Inventory is Stored © TATA CONSULTANCY SERVIES .
Master data in MM Material Master Vendor Master • Service Master Purchasing info record Source List Vendor Excise Details Material and Chapter ID combination Excise Tax rate © TATA CONSULTANCY SERVIES .
© TATA CONSULTANCY SERVIES . The material master is used by all components in the SAP Logistics System Different departments in a company work with the same material. Material description and Base unit of measure appear in all user departments. produces. The material master contains information on all the materials that a company procures. so data in a material master record is subdivided in the form of user departments. and sells. stores.Material master in SAP.
scheduling.Use of material master in SAP logistics system functions. and work scheduling © TATA CONSULTANCY SERVIES . 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.
User departments using same material master © TATA CONSULTANCY SERVIES .
© TATA CONSULTANCY SERVIES . Internal and External number assignment. This record is uniquely identified by a material number. and thus a material. you must create a material master record in the material master. Use For every material that your company uses.Material Numbers Definition Number uniquely identifying a material master record.
pharmaceutical etc. mechanical industry. The industry sector you specify determines Which screens appear and in what sequence Which industry-specific fields appear on the individual screens © TATA CONSULTANCY SERVIES .Industry sector It determines type of industry . Eg.chemical industry.
you must assign the material to a material type.Material Types Materials with the same basic attributes are grouped together and assigned to a material type. Halb :Semi-finished material which are bought externally and manufactured inside. FERT:Finished materials are final products of the company © TATA CONSULTANCY SERVIES . When creating a material master record. Some of the standard material types are ROH: Raw materials which are bought from outside and goes into production. They can be sold individually as well. The material type determines certain attributes of the material and has important control functions.
Views relevant to MM Basic data1 Purchasing Purchase order text Storage 1 Storage 2 © TATA CONSULTANCY SERVIES .
Click material →create(general) →immediately Organizational levels. to bring up material master screen. Plant Storage location © TATA CONSULTANCY SERVIES .CREATING MATERIAL MASTER IN SAP From logistics screen click Logistics → Materials Management → material master.
In Purchasing screen you can enter
Purchasing group purchasing value key Set indicator for automatic PO
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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
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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 vendor’s 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)
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Organization of vendor master records A vendor master record is subdivided into three different data areas: General Data Company code data Purchasing organization data © TATA CONSULTANCY SERVIES .
Vendor number (For External number assignment ) Vendor account group Purchasing organization © TATA CONSULTANCY SERVIES . Menu Path Logistics -> Material management -> purchasing >master data vendor ->purchasing ->create In the initial screen you can enter.Creating vendor master record.
Purchasing Data Partner functions © TATA CONSULTANCY SERVIES . Address Control Payment transactions In Purchasing organization data you can maintain. In general data you can maintain.Creating vendor master record.
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 © TATA CONSULTANCY SERVIES .
Service Master Records Descriptions of all services that may need to be procured can be stored. a service master record contains further information that is necessary for procurement purposes (such as texts or units of measure). In addition to a unique description of the service. The organizational level at which services are procured is the purchasing organization. © TATA CONSULTANCY SERVIES .
Service master records You can store price information at various levels: for example. $98 as vendor Acme’s price and $105 as vendor Zenith’s price for service A.g. © TATA CONSULTANCY SERVIES . trades or activities). The individual service master records can be grouped into different service types (e. $100 per hour as the "market" or "own estimated" price.
Base unit of measure Description of services Valuation class (3200 for services) In the classification screen enter.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. The class for classifying the services © TATA CONSULTANCY SERVIES .
Info records are created automatically when you order a material. 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. You can also create. and delete info records.Concept of Purchasing info rec in SAP. © TATA CONSULTANCY SERVIES . change.
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 Remainders Delivery tolerance Shelf life Purchase order text © TATA CONSULTANCY SERVIES .
Purchasing info rec (Contd…) Use of info rec in Vendor evaluation Order price history Quotation price history Delivery reliability Quantity reliability © TATA CONSULTANCY SERVIES .
© TATA CONSULTANCY SERVIES .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 © TATA CONSULTANCY SERVIES .
Iron and Steel Angles. shapes and sections Material and Chapter ID combination Material assessable value Net dealer price Material assessable value © TATA CONSULTANCY SERVIES .Master Data for India Version Chapter ID Excise Law Chapters. Headings and subheadings Example 7216.10 72 16 .
.) MODVAT Determination Input material MODVAT output material MODVAT Vendor Excise details SSI Rates Excise Tax rates © TATA CONSULTANCY SERVIES .Tables for excise purpose (contd.
MM .Purchasing © TATA CONSULTANCY SERVIES .
Target Group Purchase department © TATA CONSULTANCY SERVIES .
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 © TATA CONSULTANCY SERVIES .
Introduction Contents Purchasing overview Purchase requisitions Request for quotations Outline agreements Exercises Solutions © TATA CONSULTANCY SERVIES .
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 • • © TATA CONSULTANCY SERVIES .Purchasing .
Purchasing can also specify which G/L accounts are to be charged in the financial accounting system. Through PO account assignment. © TATA CONSULTANCY SERVIES .Purchasing . Financial Accounting (FI) Vendor master is maintained by both accounting and purchasing departments.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.
a requirement that has arisen in the Sales area can be passed on to Purchasing. When a requisition is created.Purchasing . it can be directly assigned to a sales order.integration with other modules Sales and Distribution (SD) Within the framework of materials planning and control. © TATA CONSULTANCY SERVIES .
You can enter purchase requisitions yourself. and forecasting on the basis of past usage are important aspects of the demand management. or they can be generated automatically by the materials planning and control system. 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. © TATA CONSULTANCY SERVIES .Process flow in purchasing Determination of Requirements Materials requirements are identified either in the user departments or via materials planning and control.
Process flow in purchasing Source Determination The Purchasing component helps in identifying potential sources of supply based on past orders and existing longer-term purchase agreements. Rejection letters can be sent automatically. allowing you to compare a number of different quotations. © TATA CONSULTANCY SERVIES . This speeds the process of creating requests for quotation (RFQs) Vendor Selection and Comparison of Quotations The system is capable of simulating pricing scenarios.
and purchase orders.Process flow in purchasing 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. quotations. Vendor scheduling agreements and contracts are also supported. It provides you with an up-to-date status of all purchase requisitions. © TATA CONSULTANCY SERVIES . Purchase Order Follow-Up The system checks the reminder periods you have specified System automatically prints reminders or expediters at the predefined intervals.
Invoice Verification The system supports the checking and matching of invoices. © TATA CONSULTANCY SERVIES . Invoice verification can be based on purchase orders or GR documents or directly to a vendor without any document reference.and underdeliveries of ordered goods.Process flow in purchasing 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.
© TATA CONSULTANCY SERVIES . Change Use this option to change a purchasing document . The document is then stored under a unique number.Std. Menu options in Purchasing Create Use this option to create a purchasing document . Enter the required information and save the document . You need the document number in order to access the document.
Menu options in Purchasing Display Use this option to display a purchasing document . 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 © TATA CONSULTANCY SERVIES . You cannot change or add any information to the document that is displayed .Std.
Std. Example Entering a goods receipt or an invoice in the system. Printouts etc © TATA CONSULTANCY SERVIES . Messages This option enables you to print or transmit documents in message form Example Transmission via fax. Menu options in Purchasing Follow-on functions This option allows you to perform tasks related to (following on from) but not included in the purchasing functionality.
Purchasing Documents Definition A purchasing document is an instrument used by Purchasing to procure materials or services. Quotation Contains a vendor's prices and conditions It is the basis for vendor selection. Types of purchasing documents Request for quotation (RFQ) Transmits a requirement defined in a requisition for a material or service to potential vendors . © TATA CONSULTANCY SERVIES .
or longer-term buying arrangement . © TATA CONSULTANCY SERVIES .Purchasing Documents 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. It formalises a purchase transaction . a type of "outline agreement". The contract is a binding commitment to procure a certain material or service from a vendor over a certain period of time. Contract In the SAP Purchasing component.
© TATA CONSULTANCY SERVIES . Example. The material description and the order quantity are specified in each item. The individual items . information about the vendor and the document number is contained in the document header The items specify the materials or services to be procured .Purchasing documents Structure Each purchasing document is subdivided into two main areas: The header The header contains information relevant to the whole document . Example.
relevant number range depends on document types © TATA CONSULTANCY SERVIES .Purchasing documents The additional data It provides extra information about the item. Example. Example. Classification of Purchasing Documents Purchasing documents are differentiated in the SAP system via the document type . account assignment data PO history for an item. which contains information on already recorded goods and invoice receipts relating to the item. and has no direct connection with the item procurement data.
External number assignment means that the person creating the document must supply it. depending on the policy .Purchasing documents Document types are defined for RFQs. Internal number assignment means that the system assigns the number. This number can be assigned internally or externally . purchase orders. © TATA CONSULTANCY SERVIES . Alphanumeric assignment is only possible in the latter case. and contracts Numbering of purchasing documents Each document is assigned a unique number .
Purchase requisitions 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. © TATA CONSULTANCY SERVIES . Indirectly: The purchase requisition is created via another SAP component. It is an internal document. Purchase requisitions can be subject to a release procedure. Requisitions can be created in the following ways: Directly: Someone from the requesting department enters a purchase requisition manually.
Purchase requisitions . © TATA CONSULTANCY SERVIES .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.
g. subcontracting work) A precondition is that the control key for the operation allows or prescribes external processing. they contain non-stock components © TATA CONSULTANCY SERVIES .Purchase requisitions .integration Requisitions are generated automatically from production orders if They contain an external processing operation (e.
Consignment Stock transfer External service Service specifications can be entered © TATA CONSULTANCY SERVIES .Purchase requisitions Procurement types Standard Subcontracting Components to be provided can be entered.
Manual creation of PR Things to remember Item category Account assignment category Purchasing organization Purchasing group Requirement tracking number Delivery date Item with or with out material master record Order quantity © TATA CONSULTANCY SERVIES .
But it can be changed.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. Just enter the codes of the vendor. by default it is the address of E+L. System will take other details from vendor master. vendor address Quotation dead line Delivery date © TATA CONSULTANCY SERVIES .
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 © TATA CONSULTANCY SERVIES .
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% © TATA CONSULTANCY SERVIES .
Outline agreements with the vendor To Setup longer-term purchasing arrangements with vendors regarding the supply of materials or the performance of services. Agreement types Quantity contract Value contract © TATA CONSULTANCY SERVIES . Outline agreements can be subject to a release (approval or clearance) procedure.
such as quantity discounts and surcharges © TATA CONSULTANCY SERVIES . For example.Outline agreements Structure Document header: containing information relating to the entire agreement. 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.
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 Purchasing organization Purchase group © TATA CONSULTANCY SERVIES .
Outline agreements Target quantity Target Value Pricing conditions Validity starting and ending date Vendor address Delivery address Remainders © TATA CONSULTANCY SERVIES .
MM .PURCHASING © TATA CONSULTANCY SERVIES .
Target Group Purchase department © TATA CONSULTANCY SERVIES .
you should be able to Create a new PO Make changes to existing PO Print PO Navigate through purchasing information system © TATA CONSULTANCY SERVIES .Course Objectives On conclusion of this course.
Introduction Contents Creating POs Printing of POs Printing Remainders Changing or canceling POs Purchasing information Exercises Solutions © TATA CONSULTANCY SERVIES .
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 © TATA CONSULTANCY SERVIES .
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 © TATA CONSULTANCY SERVIES .
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 Requirement tracking number Update the info record if reqd © TATA CONSULTANCY SERVIES .Create PO .
Acknowledgement and confirmations © TATA CONSULTANCY SERVIES .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.
default plant ) Storage location © TATA CONSULTANCY SERVIES .Create PO With out any reference In this case you need to enter Vendor code Delivery date Item category Account assignment category (if reqd) Requirement tracking number Order type ( NB For std purchase order) Plant ( 4000 .
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 don’t want to maintain all the details for a vendor you can create a one time vendor Item category Standard Subcontracting service © TATA CONSULTANCY SERVIES .
Examples Asset Sales order Production order Cost center Single account assignment Multiple account assignment Types of account assignment © TATA CONSULTANCY SERVIES .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.
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 © TATA CONSULTANCY SERVIES .
If the order price unit does not correspond to the order unit. © TATA CONSULTANCY SERVIES . you must enter a conversion factor on the item detail screen. 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.Create PO (contd…) Units of measure in PO The order unit This is the unit you specify in connection with the order quantity. and if no conversion factor is specified in the system.
Create PO (Contd…) Example for units of measure in PO Order quantity Order unit Gross price per unit Order price unit (number) Order price unit (of measure) Conversion factor 24 boxes $10 1 kg 24 Box 1 kg © TATA CONSULTANCY SERVIES .
or stipulations regarding the payment of freight costs in the system.Create PO (Contd…) Conditions This component enables you to store pricing stipulations agreed with the vendor Examples are applicable discounts or surcharges. There are three kinds of price in Purchasing: Gross price Price without taking any possible discounts and surcharges into account © TATA CONSULTANCY SERVIES .
with allowance for any miscellaneous provisions. and non-deductible taxes.Create PO (Contd…) Net price Price taking any applicable discounts and surcharges into account Effective price Net price after deduction of cash discount. delivery costs. Terms of Payment Example Within 14 days 2% discount Within 30 days due net © TATA CONSULTANCY SERVIES .
Create PO (Contd…)
Incoterms are internationally-recognized terms of delivery reflecting
the standards set by the International Chamber of Commerce (ICC).
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.
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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
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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
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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 © TATA CONSULTANCY SERVIES .Confirmations Purpose This component can be used.
© TATA CONSULTANCY SERVIES .Shipping notification Shipping Notification Definition A vendor’s 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.
there are several ways of finding the associated purchase orders. one goods receipt (GR) against one purchase order © TATA CONSULTANCY SERVIES .e. the relationship is unique i. Enter the PO number Enter the shipping notification number Enter the transport identification code If you establish a link via the PO number itself.Confirmations from the Viewpoint of IM When you post goods receipts.
shipping notification must exist as a separate document. Prerequisites If you wish to match up GRs against POs via the shipping notification number . © TATA CONSULTANCY SERVIES .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.
Releasing the PO Release Procedure for External Purchasing Documents External purchasing documents (i.e. purchasing documents other than requisitions) are released at header level. © TATA CONSULTANCY SERVIES . These documents can only be released using the release procedure with classification. it is automatically released for further processing. Item-by-item release is not possible. 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.
Release procedure Release Strategy The release strategy defines the approval process for purchasing documents. © TATA CONSULTANCY SERVIES . 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. The strategy specifies the release codes necessary and the sequence in which releases have to be effected.
© TATA CONSULTANCY SERVIES . 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. or approve) an external purchasing document.Release procedure Release Code Definition The release code is a two-character ID allowing a person to release (clear.
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 © TATA CONSULTANCY SERVIES .
MAHN (Dunning letter) © TATA CONSULTANCY SERVIES . Message type .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.
a change document is generated that can be sent to the vendor. then the changes you can make to the PO are limited. You can display the PO history for an item to determine whether deliveries have been received or the item has been invoiced. If the goods have already been delivered. and your intended change affects the price. If the invoice has been received or the goods have been paid for. © TATA CONSULTANCY SERVIES . the change will be ineffective. you cannot change the quantity to one that is less than the quantity delivered.Changing and blocking POs If you change a PO after it has been sent to the vendor. For example. This tells the vendor what you have changed.
List of POs for a material or for a range of materials List of POs for a account assignment List of POs for a requirement tracking number Reporting General analyses Order value analyses Subcontracting stocks per vendor © TATA CONSULTANCY SERVIES . still to be invoiced etc.Purchasing information List displays List of POs for a vendor or for a range of vendors This gives the details of the purchase order like still to be delivered.
Purchasing information Material Purchasing values Purchasing quantities On time delivery Qty reliability Frequencies Vendor Material group Purchasing group © TATA CONSULTANCY SERVIES .
MM .Inventory management © TATA CONSULTANCY SERVIES .
Target Group Purchase department Stores department © TATA CONSULTANCY SERVIES .
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 © TATA CONSULTANCY SERVIES .Course Objectives On conclusion of this course.
Introduction Contents Overview Integration with other modules Type of stocks Concept of material documents Goods movements Movement type concept © TATA CONSULTANCY SERVIES .
Inventory management .overview © TATA CONSULTANCY SERVIES .
a prerequisite for cost accounting.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 . 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 © TATA CONSULTANCY SERVIES .
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.What is inventory management ? Planning. © TATA CONSULTANCY SERVIES . goods issues for sales orders) internal movements (goods receipts from production. Entry. stock transfers. withdrawals of material for internal purposes. and transfer postings). and Proof of Goods Movements Goods movements include external movements (goods receipts from external procurement.
Inventory Management is directly linked with Material Requirements Planning . Inventory Management forms the basis for material requirements planning. Purchasing. and Invoice Verification. which takes into account not only physical stocks but also planned movements (requirements. © TATA CONSULTANCY SERVIES . Quantities and values from the purchase order and the goods receipt document are checked to ensure conformity with those in the invoice. receipts).Integration with other modules Integration in Materials Management (MM) As a component of Materials Management.
Integration with other modules 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. © TATA CONSULTANCY SERVIES .
It is also possible to create sales order stocks. the quantity to be delivered is marked as "Scheduled for delivery."It is deducted from the total stock when the goods issue is posted. you can initiate a dynamic availability check of stocks on hand. When the delivery is created. © TATA CONSULTANCY SERVIES .Integration with other modules Integration in Sales & Distribution (SD) As soon as you enter a sales order. These SD transactions are depicted in the Sales & Distribution system.
a corresponding activity is initiated for the movement in the Quality Management system. a procedure during which the system determines the accounts relevant for the given goods movements.Integration with other modules Integration in Quality Management (QM) In the case of a goods movement. Financial Accounting (FI) Automatic account assignment. the system determines whether the material is subject to an inspection operation. If so. © TATA CONSULTANCY SERVIES .
Cost accounting is also involved when goods receipts are assigned directly to cost centers or orders. when materials are issued for various account assignment objects such as orders or cost centers. © TATA CONSULTANCY SERVIES .Integration with other modules Controlling (CO) The interface to the cost accounting system is activated in the case of material consumption For example.
Material Master Relevant views Accounting Price and accounting information. © TATA CONSULTANCY SERVIES .IM . reorder level. Materials Planning Information for materials planning. Examples: safety stock. availability check. Examples: type of price control valuation class.
Example: unit of issue storage conditions. Storage Information for warehousing and storing the material. fixed bin location © TATA CONSULTANCY SERVIES . Examples: overdelivery and underdelivery tolerances purchasing order unit of measure (order unit).IM .Material Master Purchasing Procurement information for a material.
Material Master Quality Management Information for sampling and inspecting a material. Examples: indicator for goods receipt via quality inspection Work Scheduling Information for producing the material.IM . © TATA CONSULTANCY SERVIES . Examples: production unit overdelivery and underdelivery tolerances allowed.
via Purchasing. You maintain this data via the Accounting view. Valuation data Valuation data is required for managing the stock by value.IM . you must maintain the following data: Plant data This data can be maintained via different views (for example. You have to maintain at least one view that requires the entry of the organizational level plant. Storage. Work scheduling).Data Required For Inventory Management. © TATA CONSULTANCY SERVIES .
so that the system can manage the stock quantities at storage-location level. © TATA CONSULTANCY SERVIES . If a material is located in a storage location.IM . 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. the storage data for that storage location must exist in the material master record.Data Required Storage location data You maintain the storage location data via the Storage view.
It consists of all the types of stock your company owns. quality inspection stock Company's own stock that is in quality inspection.Types of stocks Total valuated stock Sum of all valuated stocks of a material. Unrestricted-use stock Company's own stock that is physically located in the warehouse. valuated. © TATA CONSULTANCY SERVIES . and not subject to any kind of usage restrictions.
Types of stocks Stock in quality inspection is valuated but does not count as unrestricteduse stock. Blocked stock Company's own stock that should not be used. depending on how the system is set. it is either available or not available. It does not count as unrestricted-use stock for Inventory Management It is usually not available for MRP. For MRP. © TATA CONSULTANCY SERVIES .
Types of stocks
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.
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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.
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Types of stocks
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.
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.
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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.Types of stocks Planned receipts Sum of all quantities whose receipt has been planned with reservations. The open PO quantity usually increases available stock in MRP It does not increase unrestricted-use stock in Inventory Management. Open PO quantity (total) Sum of all outstanding PO quantities for a material. © TATA CONSULTANCY SERVIES .
GR blocked stock is neither valuated nor does it count as unrestricted-use © TATA CONSULTANCY SERVIES .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.
Like reserved stock.Types of stocks Stock scheduled for delivery Sum of all current deliveries to customers for which goods issues have not yet been posted. goods issues are entered before the corresponding goods receipts for organizational reasons and the material is already physically located in the warehouse. 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. © TATA CONSULTANCY SERVIES .
Batch management With batch handling. you must first specify in the material master record that the material is to be managed in batches for the specified plant. but also production lots from vendors as separate entities. To do this. Before you can manage batches of a material in stock. you can manage not only production lots from in-house production. you must set the batch management requirement indicator in the material master record At the time of goods receipt system will allocate the batch number © TATA CONSULTANCY SERVIES .
Goods issue A goods issue (GI) is a goods movement with which a material consumption. © TATA CONSULTANCY SERVIES .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. 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 © TATA CONSULTANCY SERVIES .
The document concept When posting a goods movement in the SAP System. the following documents are created: Material document a material document is generated that serves as proof of the movement Accounting document If the movement is relevant for Financial Accounting an accounting document is created Cost accounting Document © TATA CONSULTANCY SERVIES .
Examples Goods receipt for a purchase order Goods issue for a cost center Release from quality inspection stock 101 201 321 © TATA CONSULTANCY SERVIES . A movement type is a three-digit identification key for a goods movement. you must enter a movement type to differentiate between the various goods movements.Movement types Movement Type When you enter a goods movement in the system.
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
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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
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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
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GR for purchase order © TATA CONSULTANCY SERVIES .
you should reference the purchase order or the material document. 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. the storage location). so that the system can suggest data (for example.Return Deliveries When you enter the return delivery. for goods receipt into consumption) when the goods receipt was entered © TATA CONSULTANCY SERVIES .
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. © TATA CONSULTANCY SERVIES . .
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 © TATA CONSULTANCY SERVIES .
Reservations © TATA CONSULTANCY SERVIES .
Goods issue for an order © TATA CONSULTANCY SERVIES .
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 © TATA CONSULTANCY SERVIES .
Printing documents © TATA CONSULTANCY SERVIES .
INVOICE VERIFICATION © TATA CONSULTANCY SERVIES .MM .
Target Group Purchase department Stores department Finance department © TATA CONSULTANCY SERVIES .
you should be able to Enter and verify vendors invoice Enter and verify vendor’s excise invoice Devalue materials Carry out physical inventory © TATA CONSULTANCY SERVIES .Course Objectives On conclusion of this course.
Introduction Contents Invoice entry and verification Credit memo Excise invoice Material devaluation Physical inventory Inventory Exercises management information Solutions © TATA CONSULTANCY SERVIES .
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. © TATA CONSULTANCY SERVIES . expenses. etc. The information required for these processes is passed on to A/C department.) to be processed It allows credit memos to be processed.MM . course costs. either as invoice cancellations or discounts Invoice Verification does not handle the payment or the analysis of invoices. services.
and arithmetic Executing the account postings resulting from an invoice Updating certain data in the SAP system. prices.Invoice verification Invoice Verification tasks include: Entering invoices and credit memos that have been received Checking the accuracy of invoices with respect to contents. for example. open items and material prices Checking invoices that were blocked because they varied too greatly from the purchase order © TATA CONSULTANCY SERVIES .
Types of Invoice Verification As a rule. Invoices based on goods receipt With goods-receipt-based Invoice Verification. © TATA CONSULTANCY SERVIES . all the items of a purchase order can be settled together. Invoice Verification differs depending on the type of invoice involved: Invoices based on purchase orders With purchase-order-based Invoice Verification. an invoice refers to a transaction for which the issuing party requests payment. each individual goods receipt is invoiced separately.
© TATA CONSULTANCY SERVIES . it is possible to post the transaction directly to a material account a G/L account or an asset account.Types of Invoice Verification Invoices without an order reference When there is no reference to a purchase order.
© TATA CONSULTANCY SERVIES .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.
Purchasing document Material document Accounting document © TATA CONSULTANCY SERVIES .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.
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.Invoice data An invoice contains various information. the system will automatically retrieve information pertaining to the transaction Terms of payment Quantities to be invoiced The amounts the system expects per item © TATA CONSULTANCY SERVIES .
Screens for Invoice Verification The initial screen This contains general data such as company code currency invoice reference. © TATA CONSULTANCY SERVIES . The vendor screen This contains data on the vendor The terms of payment taxes.
Screens for Invoice Verification The selection screen This lists the items of the transaction specified on the initial screen. © TATA CONSULTANCY SERVIES .e. the difference between the quantity delivered and the quantity invoiced so far) appears as a default in the Quantity column. The quantity that is still to be billed (i. 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.
you can enter a purchase order number and the system will list all the GR documents © TATA CONSULTANCY SERVIES .Screens for Invoice Verification 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.
When data is added or changed. A parked document can be changed as often as you like. When no further changes are required. If you park an invoice or a credit memo the system does not make any postings. the changes are noted by the system. you can then post the parked document.Parking the invoice Preliminary Posting You can enter an invoice (or a credit memo) without posting it and simply "park" it. © TATA CONSULTANCY SERVIES .
You can park the document and continue processing it later on.Parking the invoice The preliminary posting function can be of great advantage if: You are interrupted when entering an invoice. park an invoice without checking it. while another carries out the actual checks and posts the document after making any necessary corrections. © TATA CONSULTANCY SERVIES . You wish to split the Invoice Verification process. You can park the document and continue processing it later on. You wish to clear up some questions before you post an invoice. One employee can. This saves you time having to enter the data twice. for example.
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 © TATA CONSULTANCY SERVIES .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.
Variances in an Invoice Item Quantity variance (M) Price variance (P) Variance in order price quantity (G) Schedule variance (T) Quality inspection (I) © TATA CONSULTANCY SERVIES .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.
Posting a credit memo always leads to a debit posting to the vendor account.Credit memos The term credit memo always refers to a credit memo from the vendor. 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 © TATA CONSULTANCY SERVIES .
Provisions are set up for the relevant costs at goods receipt. Unplanned delivery costs © TATA CONSULTANCY SERVIES . there are two types of delivery costs: Planned delivery costs They are entered in the purchase order.Types of Delivery Costs In the SAP System. They are only entered when the invoice is entered. The delivery costs posted at goods receipt can be referenced at invoice entry. No provision is made at goods receipt.
Creating a excise invoice Transaction J1IA Required entries Purchase order number Excise group Vendor’s Excise invoice number Excise invoice date In the details screen you can change Description Quantity Excise duty © TATA CONSULTANCY SERVIES .
Lowest value determination The Lowest Value Principle The lowest value principle is a method of valuating material stocks for balance sheet purposes. The aim of this method is to valuate stocks as accurately as possible according to the recognition-of-loss principle. Expected losses are included in the balance sheet. © TATA CONSULTANCY SERVIES . Profits that exist solely on the books as a result of changes in market prices are to be avoided.Valuation .
Lowest value determination Methods In the SAP System there are various methods of determining tax or commercial prices: lowest value determination based on current market prices system searches for the lowest price from among the various prices stored for each material. lowest value determination based on rate of movement lowest value determination based on range of coverage Range of coverage = average stock : average consumption © TATA CONSULTANCY SERVIES .
Lowest value determination Calculating the Movement Rate Movement rate = Total quantity of receipts/issues : Material stock x 100 If the percentage of receipts/issues is smaller than Movement rate. the material is slow or non-moving Devaluation percentage Devaluation indicator Updating prices in the material master record © TATA CONSULTANCY SERVIES .
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 © TATA CONSULTANCY SERVIES .
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 © TATA CONSULTANCY SERVIES .Physical Inventory Process The process of physical inventory can be divided into three phases: Physical inventory preparation Create a physical inventory document.
if necessary posting inventory differences Processing Steps Creating a physical inventory document Entering the Physical Inventory Count Post inventory differences © TATA CONSULTANCY SERVIES .Physical inventory Physical inventory analysis entering the result of the count into the system initiating a recount.
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. the following are combined in this step: The count is posted.Physical inventory posting the physical inventory count and inventory differences If a physical inventory document exists. Any inventory differences are posted. © TATA CONSULTANCY SERVIES .
document header © TATA CONSULTANCY SERVIES . the fields Count status. In the document header. each physical inventory document records the inventory steps which have been carried out. This information can be found in an item or document header.Physical inventory Physical Inventory Status To monitor physical inventory processing. or deleted. physical inventory history for an item In an inventory history you can determine which steps have been carried out for the item. Adjustment status and Delete status provide information on whether some or all of the items have been counted. posted (inventory differences).
List display The List display function offers reports for documents posted in Inventory Management. transaction/movement data) from other applications. Example: displaying a purchase order. Stock display Example: Stock overview Information The Information function allows you to display data (master data. © TATA CONSULTANCY SERVIES .Inventory management information You can perform the following functions by selecting Environment from the Inventory Management menu. Example: material documents for a material.
Inventory management information 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 customer’s site. Batch where-used list Batch search strategy © TATA CONSULTANCY SERVIES .
Inventory management information Material analysis Stock values Receipts and issues Inventory turnover Inventory turnover of the value of valuated stock is calculated as follows: Value of total consumption / Value of average valuated stock 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 © TATA CONSULTANCY SERVIES .
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