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Materials Management

FUNCTIONAL OVERVIEW

Integrated solutions

SD
Sales & Distribution

FI
Financial Accounting

Comprehensive functionality

MM

PP Open systems

Materials Mgmt.

CO
Controlling

Production Planning

AM

R/3
Client / Server ABAP/4
HR IS
Industry Solutions

Fixed Assets Mgmt.

QM
Client / server architecture
Quality Mgmt.

PS
Project System

PM

Designed for all types of business

Plant Maintenance

WF
Workflow

Human Resources

Enterprise data model

Multinational

Presentation Agenda
Presentation Contents: .The Integrated Supply Chain
.Organization Structures .Master data Structures - Configuration .MM-MRP Planning . Release Strategy for Purchase Requisition .MM-Purchasing Process .Source List , Info record, Quota arrangement .RFQ, Maintain Quote .Purchase order .Scheduling Agreements .Inventory Management .Physical inventory .Invoice Verification .Warehouse Management .Other issues repair processing, hard allocation, shelf life, project stores, vendor consignment processing .Valuation .Reporting , Information system

Material Management

MM SD

Material Management . . . . . . .
SAP R/3

The Integrated Supply Chain

long-term

short-term

Capital resources
Logistic processes procurement production sales

vendor

client

Material resources

Capacity resources

Organizational Levels : Logistics

Group

001

Company Code

001

002

Valuation level

001

002

003

Purchasing Organization

3000

4000

Sales Organization

001

001

Plants 0001 Warehouses special stocks 0001 LVS 0002 0003

0002

Organizational Structure
Company Code
A legally independent unit within a client that prepares its own balance sheet Is the central organizational unit in financial accounting

Purchasing Organization
A organizational unit that procures materials or services, and negotiates general purchasing conditions with vendors Responsible for procuring materials and services for the plants to which it has been assigned Uniquely allocated to one company code

Purchasing Group
A purchasing organization is divided into purchasing groups (groups of buyers) that are responsible for operational tasks

Organizational Structure...
Plant
An operating unit concerned with production and planning
or Simply a combination of locations with material stocks, known as storage locations

Is a central organization unit in materials management

Storage Location
The total of all storage bins in a plant that are managed together

MM - Organizational Units

Group

001

Company code

0001

0002

Purch.Org.

1000

2000

3000

Plant

Plants

0001

0002

0003

0004

0005

Storage Location

0001

0002

WM 0088

Overview
MRP

Purchasing

Master data
Material Batches Vendors Customers :

Goods receipt

Invoice receipt

Warehouse management
system

Inventory Management Material Valuation


Goods issue Transfer posting

Invoice verification

Accounting

Organizational Structure & Master Data


MRP
Organisation Structures

Procurement

MM Master Data

Inventory Management

Materials Vendors Information Records

Purchasing View
Client AAAA Company code BBBB Company code XXXX Company code YYYY

Purch.Org CCCC

Plant 111

Plant 222

Purch.

Materials View
Client AAAA Company code BBBB Company code XXXX Company code YYYY

Plant 111

Plant 222

Storage Loc 555 Warehouse 999 Storage Type Bin 1 Bin 2

Storage Loc 666

Storage Loc 777

Master data structures configuration

Master Data - Material


Configuration Issues
Material Number structure Material type Material groups Classification Price control Split valuation Material description / texts Screen sequence / control Field selection Define match codes Batch management Shelf life management MRP / Forecast profile Engineering change management Changing critical fields - Unit of measure, valuation class, material type Deletion / archiving material Authorization for views

Material Type - Design Considerations

Material Type Stock Material, Direct Material, Project Material, Trading Goods etc.
Attributes of Material Type Field Selection , Material Number range Views of Master data - engineering, Procurement, MRP, Accounting etc Qty / Value basis Internal / External procurement allowed Accounting assignments - Account categories - Valuation classes Price control - Moving average, standard price

Material Type - Design Considerations

Restrict number of material types Use material groups to classify materials as far as possible Difficult to change the material type later on Example of Material type - ZSTK, ZDM, ZPRO Configuration specifics - Field reference , material number, account assignments

Materials Master Data -

How Data is Organized


Material Type
General Data
Materials number Description Units of measure Technical Data

Plant
MRP type Planned Delv type Purchasing group Batch indicator

Valuation
Valuation type Valuation price Valuation procedure Valuated quantity

Warehouse
Unit of measure Palletization instructions

Raw Material Op-Supplies Trading Goods Spare part Finished goods Etc. Purchasing
Purchase group Purchase value key

Sales texts

Storage loc.
Storage period Stock fields

Forecast data
Forecast model params Consumption data

Vary by material type

Materials Master Data - How Data is Viewed


Engineering Data Accounting

Material Type

Sales Data

MRP Data

Purchasing Data

Storage

Warehouse Management

Material Match codes and Classification

Material match codes and classification are two different methodologies used to search for and select materials

Material Class (Classification)...


Logical
Pumps Butterfly Pump Metal Pump
Butterfly Pump

SAP Classes

Butterfly Pump Butterfly Pump one two

Characteristics: WEIGHT VOLUME PRESSURE

Material Master Record

Material 100001 Butterfly Pump, one,110bs Values Weight 40kg Volume 20cm Pressure 110 lb

Material 100005 Butterfly Pump, two,120lbs Values Weight 50kg Volume 25cm Pressure 120 lb

REAL CLASS

Material Match codes

Material

Description Old Matl No Matl Group (Class)

Material Material Material ... ...

Description Description Description ... ...

SAP Transaction Screen

List of Selected Materials Material Matchcode

Advantages and Disadvantages


Matchcodes
Advantages Quick to use Easy to setup Disadvantages Not Structured

Classification
Advantages Easy to use Follows specific Standards Uses Hierarchies Disadvantages Requires continuous maintenance Slower to use, more screens to enter Not integrated into standard reports

Depends on following naming Does not require conventions and on-going standards maintenance Integrated into standard reports

Vendors - Complex Structures


Central vendor master - Material, contract, Finance Vendor Number structure Match codes - vendor number, search term, vendor name Account group which controls field layout / data retention level Partner functions Critical fields
GR Based invoice verification Acknowledgement required Order currency Subsequent settlement Business volume comparison Terms of payment

Maintenance Procedure / Authorization control Blocking Vendor

Vendors - Complex Structures


Vendor Partner Functions introduced with v3.0 Allows you to link separate vendor address records together in a family Can assign roles to each type of vendor address records Also referred to as business partners in the SAP documentation Configuration sits under Logistics not Material Management

Vendors - Complex Structures...


Example
Vendor Record # 100001 Manufacturer A

Vendor Record # 100010 Order From Address A

Vendor Record # 100080 Supplier Primary Vendor Pay To Address

Vendor Record # 100002 Manufacturer B

Vendor Record # 100002 Order from Address B

Vendor Types
Vendor Type Controlled by account group Controls field selection Partner Determination Procedure (role) assigned for each type (1:1) Number range assigned for each vendor type Data retention at sub range / plant level

MM MRP Planning

MM Business Activities

MRP

Procurement

MM Master Data

Inventory Management

Purchase Requisitions RFQs Contracts Purchase Orders

Receiving Disbursement Physical Inventory (Raw, Crib, Finished Goods) Warehouse Management

Materials Requirement Planning


Configuration issues - Plant level
MRP Types - V1, V2, VB, PD, VV MRP groups MRP Controllers Planning horizon Available stock PR or Planned order Blocked stock or Disposal store

Materials Requirement Planning

MRP determines the quantity of material required and creates the purchase order proposal based upon:
Reorder point planning (Consumption based MRP) Forecast based planning (Deterministic MRP)

MRP General Parameters


MRP Parameters are set up at plant level MRP group The MRP group, groups together materials from the planning point of view for allocating special control parameters for the planning run. MRP controller In this field, you must enter a key for a single MRP controller or for a group of MRP controllers who/which is responsible for the planning of a material. In the future, you can process the MRP results according to the MRP controller.

MRP General Parameters


MRP parameters are set up at plant level

Purchasing group In this field, you must enter a key for a buyer or for a group of buyers who/which is responsible for purchasing the material. As a result, during a planning run, order proposals for externally procured materials can immediately be allocated to the appropriate purchasing group. Safety stock The safety stock is used to prevent material shortfalls during the stocking-up period which may occur if consumption is unexpectedly high or if delivery dates are not kept. You have the choice between manually determining the safety stock or letting the system automatically.

MRP Planning - Automatic processes


1. 2. 3. 4. Automatic creation of Purchase Requisitions Automatic assignment of Buyer or Purchasing group Automatic source selection for Sole supplier materials Automatic assignment of MRP controller for review of plan results Automatic cancellation of Purchase requests no longer required Printing of MRP Replenishment List by MRP controller Automatic creation of schedule line for blanket order outline agreements

5.
6. 7.

MRP Planning - Include/ Exclude


1. Selective store can be excluded for MRP Eg. Disposal store Items under Blocked Status are excluded from MRP

2.

3.

Material in Blocked Stock area can be excluded from MRP Eg. Rejected material after inspection lying in the blocked stock area
Material with Planning type - ND are not planned in MRP run

4.

Actions by MRP controller


1. Schedule the MRP planning run Automatic scheduling as per the frequency determined by MRP controller Review and process the MRP List

2.

3.

Review the proposed Purchase Requisition Amend PR quantity or Cancel PR if necessary


Release PR for further processing by Procurement Review exception messages from MRP list for any necessary action Eg. Cancel Purchase order if requirements no longer exist

4. 5.

Purchase Requisition Processing


MRP Direct entry

Purchase requisition

Obtain Quotes

Evaluate Quotations

RFQ

Price Comparison

Quotation

Quotation

? vs

?
Allocate and process

RFQ

Quotation

Purchase order

Release strategy For Purchase Requisitions

Purchase Requisitions Types


Store Stock(ZSTK) Direct Materials(ZDM) Work Order PR(F) Cost Center PR(K) Project PR(Q)

Purchase Requisition Release Strategy:


A. Store Stock:
According to Company Standard Level of Authorization Policy.

B. DIRECT MATERIALS:
Work Order (F): Purchase Requisitions can be approved on line.

MM Purchasing Process

Purchasing documents
Purchase requisition Req. f. quot.

Purchase requisition

Request for quotation

?
Purchase order

Quot.

Quot.

Quotation

?
Contract

Purchase order

Contract/ Release order

Scheduling agreement

The Procurement Cycle


Purchase Order Invoice

=
Determination of material requirements

Requirements planning

Invoice verification

MM
Goods receipt and inventory management

Vendor
Outline agmt. Determination of source of supply

Materials Management

Purchase order monitoring

Vendor selection

Purchase order processing

Processing of RFQs
Stock material
Purchase requisition Request for quot.

Consumable material

Quotation

?
Vendor A

Quotation
Vendor A

!
Vendor A
M K H X G E B P C

Quotation processing
Vendor Vendor Vendor

A
Quotation for RFQ 1

B
Quotation for RFQ 2

C
Quotation for RFQ 3

Price comparison list


Certificate Purchase order unit

Texts Reminder
Purchase order statistics

Rejection

Conditions

Purchase order

Purchase Orders
Allocate Vendor (incl. RFQ process)
PURCHASE ORDER

No. 890
Vendor No. 1304 Item No. 27

Create Requisition

Approve PR Direct source or subcontract requisition


SUBSTITUTE ITEM

Create P.O.

Purchase order processing


Purchase requisition

RFQ

Quotation

Contract

History Purchase order

Items/item category
For external purchase order
Stock material Consumable mat. optional Single/ multiple Acc. assignment n n n n n Cost center Project Sales Document Order Asset

o o o

Standard item Consignment Text

mandatory

Methods of Creating POs on SAP


PO with reference to a purchase requisition

PO with reference to a contract (Release Order)


PO with reference to a RFQ PO with reference to another PO PO without reference

How is the source of supply determined?


Quota arrangements?

80%

20%

Purchase requisition

Source lists?

Source List

n Outline agreement item n Fixed vendor

Outline agreement

Purchase requisition

Outline agreement?

n Outline agreement item

Piece Info record?

%
Conditions

Purchase requisition

n Fixed vendor/ vendor vendor item information

Outline agreements

Contract
Quality contract Value contract Consignment contract Supplement Release orders

Scheduling agreement
Delivery schedule

Supplement

Source list

Maintain manually

Maintain from outline agreement

Maintain from purchasing info record

Generate from info record or outline agreement

Validity period Fixed vendor

Source List

Fixed outline agreement

Default source of supply in requisition via source determination Check in purchase requisition and purchase order for reliability

MM Inventory Management

SAP Inventory Management Structure


Plant
Crib Storage Location Finished Goods Storage Location Raw Material Storage Location

IM

Warehouse
Storage Section Storage Type
Pick Bulk Interim Mixed

WM
for Finished Goods

Storage Bin

Storage Bin

Storage Bin

Inventory Management Functions


Inventory Management in SAP supports the following tasks:

Receiving Management of material stocks by quantity and value Planning, data entry and documentation of all goods movements Warehouse Management Physical Inventory/ Cycle Counting

What is the result of a Goods Receipt ?


A material document (goods receipt) is created An accounting document is generated (unless consignment stock) Stock quantities are updated Inventory values are updated The PO is updated or closed

Invoice Verification

Invoice Verification Overview


Order

Vendor Invoice

Invoic e

Invoic e Invoice Verification

Goods receipt

Vendor Open items

Invoice Verification Process

Purchase order

G/L accounts

Delivery costs Invoice verification

Assets

Invoice verification

Conditions

Invoice Document

Cost centers

Material

Projects *

Vendor master

Orders

* From 2.0

GR-Based Invoice Verification


Purchase Order 100 piece GR-based inv. verif.

Goods receipt 50 pcs

Goods receipt 40 pcs

Goods receipt 10 pcs

GR document 50000099 Delivery slip ABC

GR document 50000100 Delivery slip 4711

GR document 50000099 Delivery slip 08-15

Invoice

n GR-based invoice verification indicator defaulted from vendor master/info record n Invoice receipt only after goods receipt

Entry via purchase order, delivery slip or GR document

Selection screen
Purchase order X 45000012 01 X 45000012 01 X 45000012 01 Delivery note ABC 4511 08-15 Quantity 50 40 10

Invoice Receipt Posting Schema


Cost account from order item GR/IR clearing account Stock account derived from table material master record

IR document
Item 1 Item 2 Consumable material Stock material

Price difference account derived from table

Material master record

A/P account Carry forward to profit and loss Balance Sheet G/L account payable

Inventory Control Methods


SAP Inventory Management has two methods of inventory control:

Physical Inventory Cycle Counting

MM Warehouse Management

Warehouse Management

WAREHOUSE MANAGEMENT

Warehouse Management

General Purpose of warehouse management * Define/manage storage areas and bins in the warehouse * Monitor stock movements * Take inventory at storage bin level * Ensure MM and warehouse stock posting is the same * Integrate MM,PP and SD

Structuring the warehouse / basic data


Storage location Storage type Warehouse Number

Storage type

Storage type

Storage bin

Storage bin

Storage bin

Storage bin

Quant

Quant

Quant

Quant

Quant

Physical Warehouse Structure

Goods Receipt HSR1 GR Area Goods Issue Transfer Requirement Transfer Order Blocked Stock Transfer Order Picking Lists

GI Area
Picking Area

Strategies for Placing Goods


None Block storage Open storage Fixed bin storage Addition to existing stock Next Empty storage bin Storage unit type Cross line searching Capacity checking

Strategies for Removing Goods

Partial Quantities first then standard quantities FIFO LIFO According to quantity Stringent FIFO for all storage types

MM Other Issues

Other Issues :
- Repair Processing - Hard Allocation - Shelf Life Items - Project items - Vendor Consignment Processing - Valuation

MM Information System
EIS
SD PP PI

LIS

PS

QM

PM

Purchasing information system


Planning Flexible analysis according to - Purchasing group - Vendor - Material group - Material ABC analysis Plan / actual comparison etc.
MM

Inventory controlling
ABC analysis Range of coverage Stock value Slow-moving item Inventory turnover Total analysis Ranking lists Dual classification etc.

50 45 40 35 30 25 20 15 10 5 0

The End