MM - Sourcing & Procurement

Sourcing & Procurement
Overview
Manish Chauhan, SAP
January 18, 2019
PUBLIC
Agenda
General Module Overview

▪ 45 minutes
Material Master
▪ 30 minutes
Service Procurement
▪ 75 minutes
Materials Procurement
▪ 45 minutes
© 2018 SAP SE or an SAP affiliate company. All rights reserved. ǀ PUBLIC 2

Enterprise Structure
Enterprise structure
• Legal entity responsible for reporting
Company Code
▪ Organizational unit produc- ▪ Procures good/services

ing & selling goods/services from vendors
Assignments
Plant Purchasing Organization
▪Differentiation of stock ▪ Buyer/group of buyers

within a plant responsible for purchasing
Storage Location Purchasing Group

Enterprise structure

Purchase Organisation

Master Data
Master Data
Material
Master
Vendor MM Master Purchasing

Master Data Info Records
Source List

Vendor master
Vendor Master record created for each account that you
require.
The master record controls how business transactions
are recorded and processed by the system.
Maintained centrally .
 Master data creation is a one time activity
Vendor Master Views

Purchasing details and
Name , address partner functions
information and Financial Information like
maintained here
bank details reconciliation account ,
maintained payment terms , payment
methods maintained
Purchasing Details
General Data Financial Details

Vendor master

Vendor master

One time vendor

Partner functions

Material master
All the information required to maintain

for a particular material maintained in
the material master record .
The material master record stores

certain descriptive data like name etc
and also data which are input to several
other functions .Eg MRP Type
SAP specifies materials as per different

Industry and material types
Master data can be seen from number

of views and each view corresponds to
a module

Material master

Material master

Material master

Purchasing Inforecord

Purchasing inforecord
▪ Serves as a source of information for Purchasing.
▪ The purchasing info record (also referred to in abbreviated form as the “info
record”) contains information on a specific material and a vendor supplying the
material. For example, the vendor's current pricing is stored in the info record.
▪ The info record allows buyers to quickly determine:
▪ Which materials have been previously offered or supplied by a specific vendor
▪ Which vendors have offered or supplied a specific material
Lead
Time Price
Vendor Information

19
Purchasing Info Records can be created at two levels :

 Purchasing organization
 Plant
Procurement Types in Info Records
 Standard
A standard info record contains information for standard purchase orders.
 Subcontracting
A subcontractor info record contains ordering information for subcontract orders.
 Pipeline
A pipeline info record contains information on a vendor’s commodity that is supplied
through a pipeline or pipes (for example, oil or water)
 Consignment
A consignment info record contains information on a material that vendors keep available
at their own cost on the orderer’s premises.


Source list
The source list is used in the administration of sources of supply.
It specifies the allowed (and disallowed) sources of a material for a certain plant within a predefined
period
Maintaining the Source List
The source list can be maintained in following manner
•Manual maintenance
This method is used if changes to or new entries in, the source list.
•Maintenance from within an info record

With this procedure, you can enter a vendor in the source list when creating or changing a
purchasing info record.
•Automatic maintenance
You can have a source list for a material created automatically. The system creates a source list
record for each info record that has been defined for the material or for each outline agreement
Item in which the material is specified.

Materials Management Overview
Overview
Requirements
determination
Payment
Vendor
Purchase Order Source
invoice determination
?
Invoice verification
Vendor selection
Goods receipt and Order Processing
inventory management
Order24follow-up
Requirement Determination
The Requirement generation is the initiation point of the PTP cycle . It can be generated in two
ways
MRP Purchase
Requisition
The Material Requirement Planning is a The Purchase Requisition can also be

automatic run which can generate created manually by the user department
requirement for material whenever a need arises . This can also be
generated via MRP or Sales Orders

Purchase requisition

Request for quotation

Quotation processing

Purchase order
 After the finalization of source of material , the Purchase Order is created in the name of the
selected vendor
 The Purchase Order can be created in reference to
Purchase Requisition
Request For Quotation
Contract
Manually
 The Purchase Orders can be subjected to a release strategy based on the approval levels in an
organization

Purchase order

Purchase order

Item category

Procurement of consumables

Account assignment category

Stock material vs consumable materials

Blanket purchase order

Procurement of external services

Stock procurement vs external services procurement
Stock Material versus External Services
Purchase order # 12345 27 Jan. Purchase order # 12345 27 Jan.
Item 10 Material : Steel - 01 Item 10 Repair printing press

Order qty. : 250 pc - Precise description of service ?
- Order quantity ?
- Account assignment ?
LV
Specs.
Cost control through
imposition of limits !
Service entry sheet 3 Feb.

Item 10
Oil filter replaced
M Cost center 123
3 Feb. Limit adhered to ?
Goods Receipt 12345, item 10 Release procedure Acceptance
 SAP AG 1999

Release strategy
• A release strategy defines the approval levels through which a purchase document should be released
•The release conditions defined determine whether the release strategy is applicable for a PR or a PO
•The release code determines who is authorized to release the document
• Release Prerequisites for a particular specify the release perquisites which should have been met

Release strategy example
Conditions Releases Strategies Defined
Strategy Release Codes
PO Value < 10000, approval by Team Lead S1 Team Lead
S2 Team Lead
PO Value > 10000, approval by Team Lead
Project Manager
Release Strategy Applicable
Purchase Order
Value = 4050

Purchasing documents in SAP
•Purchase Requisition
Requirements of materials or services can be reported to Purchasing by means of PR.
•Request For Quotations

Transmits a requirement defined in a requisition for a material or service to potential vendors.
•Quotation
Contains a vendor's prices and conditions and is the basis for vendor selection.
•Purchase order
The buying entity’s request or instruction to a vendor (external supplier) to supply certain materials or render/perform certain
services/works, formalizing 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.

Inventory Management
Stock overview

Inventory management
Inventory Management Process flow

▪ Goods movement is the movement of material in inventory management.
Vendor In-House Production
Goods
Receipt
Store1 Transfer Posting Store 2
Goods
Issue
Scrapping Consumption

Goods Receipt
Movement Type: Indicates the type of goods movement to occur.
Material Document: Provides proof of material movements and acts as a source of

information.
Goods Receipt: Materials entered into the system and physically placed in inventory.
Plant: A place where value can be added by the production of materials or by providing
goods and services

Goods Receipt
Storage Location: Storage location provides a means of separating the various stocks of a
material in a plant.
Stock Type: Stock type is used to differentiate storage location stock or special stock.
Stock Overview: The overview of a material across all organizational levels.
Valuated Stock: Stock which is included in inventory value.
Non-Valuated Stock: Stock which is not included in inventory value.

Stock types
Warehouse stock can be kept in several different stock types.

▪ Unrestricted: The valuated stock of a material held and owned by a company that is not subject to usage
restrictions.
▪ Quality: That part of total valuated stock that is in quality inspection.
▪ Blocked: The valuated stock of a material that cannot be used and cannot be classed as "unrestricted."
▪ GR Blocked
Unrestricted, quality, and blocked stock are all valuated stocks, whereas GR blocked stock is
non-valuated and is received using a different movement type.

Inventory reports
Stock Overview Report

▪ Provides current information on the stock of a particular material.
Materials Documents List

▪ Shows material documents by criteria such as plant, material, vendor, date,
and movement type.

Movement types
Movement Type: Indicates the type of goods movement to occur.

▪ A three-digit code identifying the movement.
▪ Movement types differentiate among the following stock transactions:
– Goods Receipt
– Goods Issue
– Stock Transfer
▪ Movement type determines which:

– Quantity fields are updated
– Stock types are updated
– General ledger stock or consumption accounts are updated
– Fields are displayed during document entry

Goods receipt ref
▪ The following references are available when creating a goods receipt:
– With reference to purchase order
– With reference to a delivery
– With reference to production order
– Without reference to purchase order
– Initial entry of stock balances
•Purchase •Production
•Order 101/103 •Order 521/101
•Without Reference 501

•Goods
•Receipt MIGO
•Inventory Management
Stock types
At goods receipt, material can be posted to consumption or to the

warehouse.
Unrestricted-Use Stock MVT 101

Stock in Quality Inspection MVT 101(X)
Blocked Stock(valuated) MVT 101(S)
Non-Stock Material
•Cost Center
•Asset
•Project
•Other
Stock Consumption
Conditional
Vendor Acceptance GR Blocked Stock MVT 103

Goods movement
 Goods Movement is Transaction resulting in a change in stock

 Main Movement Activities in SAP
 Goods Receipt - MIGO
 Goods Issue - MIGO
 Stock Transfer - MB1B
 Transfer Posting - MB1B

Material & accounting document
A material document and an accounting document are typically both

generated when movements are performed.
Material documents provide information as to the material, quantity and

location of the movement, while the accounting document records the
financial implications of the movement.
Material Movement
Material Document Accounting Document
Header Header
Material Document 4900xx.. Accounting Document 5100xx..
Line Items Line Items
QTY MAT PLANT ACCT DESC $
001 10 ea paint 3000 001 300000 Inventory 175
002 191000 GR/IR 175-

Valuation of goods receipt

Goods issue
Goods Issue: A reduction in inventory which results from withdrawal of stock.
Reservation: A request to keep material on hand to be used in the future.
Production Order: An internal order used to produce materials.
Consumption: Indicates how much material is withdrawn from the warehouse and consumed or
used.

Goods issue types
Types of goods issues
▪ To scrap, sampling, consumption, production order
▪ Without reference
▪ With reference
– to reservation
– to production order
From Warehouse
From Consignment Store
Goods Issue From Pipeline
Consumption Issue
Cost Center Sampling

Asset
Scrap
Project

Goods issue stock types
Stock Types and Issuing

▪ Can issue for any movement out of unrestricted
▪ From blocked or quality, can only issue to scrap or sampling
GR
Unrestricted-Use Quality
Stock Inspection Blocked Stock
Stock
GI
Scrapping/Inspection Sample
Consumption

Transfers terminology
Transfer Posting: The physical transfer of stock and changes that affect book records.
One-Step Transfer: The transfer of a material from one plant to another using one movement.
Two-Step Transfer: The transfer of a material from one plant to another with the material being
held in-transit before being delivered to the second plant. The stock can be monitored during
transit.
Stock Transport Order: A purchase order used to transport a material from one plant to another.

Stock transfer/transfer posting

Transfer posting

Transfer postings
Transfer postings involve a change in status, batch number, or material number.
Unlike stock transfers, transfer postings do not typically involve physical goods movement.
Quality Unrestricted-
Inspection Use Stock Batch 0001 Batch 0002
Stock
Material A Material B

Stock transfer options
Stock transfers can occur at three different levels:

•001 •001
•0001 •0002 •0001 •0002
•Company code IN10 •Company code IN11
•Plant N204 •Plant N207
•Stor. JP01 •Stor.JP07

Methods of stock transfer
Methods of stock transfer are:

▪ One-Step
▪ Two-Step
▪ Stock Transport Order
The One-Step procedure allows you transfer material using a single

transaction in the system.
The Two-Step procedure requires two movements and allows you to

monitor stocks in transit.
A Stock Transport Order is a PO used to transport stock from one plant

to another.

One step method
Storage Location 0001 Storage Location 0002
Transfer
Unrestricted-Use
Stock Unrestricted-Use
Stock

Two step method
Plant 1000 Plant 2000
In Stock Transfer
Unrestricted-Use
Stock
Unrestricted-Use Stock

Stock transport order
Plant 1000 Plant 2000
Purchase
Order
Goods Receipt for PO
Unrestricted- Stock-In- Goods Issue Unrestricted-Use

Use Stock Transit Stock

Physical inventory

Physical inventory process

Invoice Verification
Invoice verification
Invoice verification is performed when an invoice is entered.
Typically, a 3-way match is performed automatically in the system when the invoice is entered,
which compares the purchase order, goods receipt, and invoice to ensure that any differences
between them fall into acceptable tolerances.
If the acceptable tolerances are exceeded, the invoice is saved but is blocked for payment. Only
after the invoice is released can payment to the vendor be made.
Purchase
Order
Invoice
3-Way Match
Goods
Receipt

Thank you.
Contact information:
Manish Chauhan
Business Process Senior Consultant
Follow us
www.sap.com/contactsap
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Sourcing & Procurement

General Module Overview

© 2018 SAP SE or an SAP affiliate company. All rights reserved. ǀ PUBLIC 2

▪ Organizational unit produc- ▪ Procures good/services

Plant Purchasing Organization

▪Differentiation of stock ▪ Buyer/group of buyers

Storage Location Purchasing Group

© 2018 SAP SE or an SAP affiliate company. All rights reserved. ǀ PUBLIC 4

© 2018 SAP SE or an SAP affiliate company. All rights reserved. ǀ PUBLIC 5

© 2018 SAP SE or an SAP affiliate company. All rights reserved. ǀ PUBLIC 6

Vendor MM Master Purchasing

© 2018 SAP SE or an SAP affiliate company. All rights reserved. ǀ PUBLIC 8

Vendor Master Views

© 2018 SAP SE or an SAP affiliate company. All rights reserved. ǀ PUBLIC 9

© 2018 SAP SE or an SAP affiliate company. All rights reserved. ǀ PUBLIC 10

© 2018 SAP SE or an SAP affiliate company. All rights reserved. ǀ PUBLIC 11

© 2018 SAP SE or an SAP affiliate company. All rights reserved. ǀ PUBLIC 12

© 2018 SAP SE or an SAP affiliate company. All rights reserved. ǀ PUBLIC 13

All the information required to maintain

The material master record stores

SAP specifies materials as per different

Master data can be seen from number

© 2018 SAP SE or an SAP affiliate company. All rights reserved. ǀ PUBLIC 14

© 2018 SAP SE or an SAP affiliate company. All rights reserved. ǀ PUBLIC 15

© 2018 SAP SE or an SAP affiliate company. All rights reserved. ǀ PUBLIC 16

© 2018 SAP SE or an SAP affiliate company. All rights reserved. ǀ PUBLIC 17

© 2018 SAP SE or an SAP affiliate company. All rights reserved. ǀ PUBLIC 18

© 2018 SAP SE or an SAP affiliate company. All rights reserved. ǀ PUBLIC 19

Purchasing Info Records can be created at two levels :

Procurement Types in Info Records

© 2018 SAP SE or an SAP affiliate company. All rights reserved. ǀ PUBLIC 20

© 2018 SAP SE or an SAP affiliate company. All rights reserved. ǀ PUBLIC 21

The source list is used in the administration of sources of supply.

The source list can be maintained in following manner

•Maintenance from within an info record

© 2018 SAP SE or an SAP affiliate company. All rights reserved. ǀ PUBLIC 22

The Material Requirement Planning is a The Purchase Requisition can also be

© 2018 SAP SE or an SAP affiliate company. All rights reserved. ǀ PUBLIC 25

© 2018 SAP SE or an SAP affiliate company. All rights reserved. ǀ PUBLIC 26

© 2018 SAP SE or an SAP affiliate company. All rights reserved. ǀ PUBLIC 27

© 2018 SAP SE or an SAP affiliate company. All rights reserved. ǀ PUBLIC 28

© 2018 SAP SE or an SAP affiliate company. All rights reserved. ǀ PUBLIC 29

© 2018 SAP SE or an SAP affiliate company. All rights reserved. ǀ PUBLIC 30

© 2018 SAP SE or an SAP affiliate company. All rights reserved. ǀ PUBLIC 31

© 2018 SAP SE or an SAP affiliate company. All rights reserved. ǀ PUBLIC 32

© 2018 SAP SE or an SAP affiliate company. All rights reserved. ǀ PUBLIC 33

© 2018 SAP SE or an SAP affiliate company. All rights reserved. ǀ PUBLIC 34

© 2018 SAP SE or an SAP affiliate company. All rights reserved. ǀ PUBLIC 35

© 2018 SAP SE or an SAP affiliate company. All rights reserved. ǀ PUBLIC 36

© 2018 SAP SE or an SAP affiliate company. All rights reserved. ǀ PUBLIC 37

Purchase order # 12345 27 Jan. Purchase order # 12345 27 Jan.

Item 10 Material : Steel - 01 Item 10 Repair printing press

Service entry sheet 3 Feb.

© 2018 SAP SE or an SAP affiliate company. All rights reserved. ǀ PUBLIC 38

•The release code determines who is authorized to release the document

© 2018 SAP SE or an SAP affiliate company. All rights reserved. ǀ PUBLIC 39

Conditions Releases Strategies Defined

Strategy Release Codes

PO Value < 10000, approval by Team Lead S1 Team Lead

Release Strategy Applicable

© 2018 SAP SE or an SAP affiliate company. All rights reserved. ǀ PUBLIC 40

•Request For Quotations

© 2018 SAP SE or an SAP affiliate company. All rights reserved. ǀ PUBLIC 41