MATERIAL MANAGEMENT
SAP MM is a function module in SAP that deals with procurement handling and material management. The MM contains master data, system configuration and transactions to complete the procure to pay process.
Essential Components in MM :
Advantages :
- SAP MM is the backbone of the logistics area, which has modules like sales and distribution, Project system, Plant maintenance, Production Planning .
- MM module supports all sorts of material management like control, planning etc..
- MM module assists in managing the procurement activity of a company from procurement.
Procurement Life Cycle :
1. Check about the requirements: The procurement process starts with gathering information about the goods and their quantity. Once gathered all the information, the necessary steps are taken to find out the suppliers to satisfy the requirements.
2. Contact Suppliers: After gathering all the information, the next will be to look for suppliers to get the requirements. then, quotation requests are sent to suppliers to get the best rates.
3. Review about the background: Once we get known about the suppliers, necessary steps are taken to investigate the suppliers like warranties, maintenance services, etc. that he can offer along with supply.
4. Negotiation : After reviewing the background, negotiation is done by the buyer. Whatever negotiation is made, it is finalized by an agreement along with other information like delivery date, the quantity of material, etc.
5. Fulfilment of Order : Finally, the Order becomes delivered to the supplier accordingly ordered.
6. Consumption, Maintenance and Disposal : Lastly, necessary steps are initiated to consume, maintained and dispose of the material.
Types of Stocks :
Special Stock Available in MM :
Consignment Stock :
Consignment Stocks mean those materials that are still available in the store premises, but it belongs to the owner or seller. When the buyer uses the consignment stocks, he has to pay for it.
Special Procurement :
Special Procurement on SAP MM means those stocks that do not belong to a company. These are kept at different locations.
Common Assignment Types in MM :
Important Fields in Purchasing View :
Importance of the Batch Record :
Linking a Document to a Vendor Master Record :
or
SAP Manu-->Logistics-->Material Management--->Purchasing--->Master Data--->Vendor--->Central--->XK01-Create.
Major Purchasing Tables with Transaction Codes :
Information Record Contained Following Data :
The Information Record contains data related to the units of measurement, such as
Products
Vendor price
Materials used by specific Vendors, etc.
It also contains information on the tolerance limit of the under delivery of data, Vendor Evaluation data, Planned Delivery time, Availability status for Goods.
Info Record Types :
Purchase Order :
Purchase Order is sent a buyer to his sender to final confirm the requirements. Purchase order has name , Quantity of materials, valuable information like details of purchasing company with company code, name of material along with the corresponding plant and date for delivery of material.
Internal Procurement :
In Large Organization, there are different separate businesses. With an internal procurement process, the requirements of material and services are gathered from an identical company. However, each of identical company has to maintain a complete book keeping system along with separate Profit and Loss statements, Balance Sheets.
External Procurement :
When the procurement of products or services is done from external vendors, it is known as external procurement. It has three primary forms, such as :
One Time Orders : This term is used for those goods that are needed irregularly.
Longer-term contracts: This term is used for those materials that are ordered regularly in large quantities.
Long-term Scheduling agreements : This term is used for that material, which is ordered regularly and also in large quantities.
Material Requirement Planning (MRP) :
Material Requirement Planning or MRP is a module is SAP ERP. It is a sort of planning tool to assist procurement and production planners in establishing realstic and possible plans which help to initiate procurement and production procedures swiftly.
Consumption Based Planning (CBP) :
Consumption based planning or CBP is depended upon past consumption values. It is used to forecast to find out future requirements. These processes in CBP do not rely on the master production schedule. It is activated either when the stock level comes below a particular reorder point or when forecast needs calculating with past consumption values.
Production Order :
It decides which material needs to be prepared at which time and location and also concern about the quantity required. It also determines about components and sequence of operations that need to be involved. Moreover, it also concerns about the order costs need to be resolved.
Purchase Order :
It is issued by a vendor or a factory to supply a certain quantity of products and services at a particular time and location.
Process Order :
When thorough planning and execution of process manufacturing is determined, it is known as process orders. It identifies the production of materials in a production run.
Difference between MRP and CBP :
The primary difference between CBP and MRP is that when we plan material, we use MRP to predict the requirements of materials based on SOP(Sales and Operations Planning). Moreover, in CBP, we have to forecast the MM depended upon the historical demand for materials.
Master Production Schedule(MSP) :
MSP is used to plan for individual commodities that need to produce in each time, such as production, inventory, staffing, etc. It is linked to manufacturing, where the plan shows how much and when each product will be demanded.
Procurement for Stock :
It means the storage of material in stock. In It, the material gets stored once it received from the seller. The quantity of stock material depends upon the demand for the material. To record all information about the stock, we maintain the master record in the system.
Procurement for Direct Consumption :
When the storage of material is used or consumed once it received, it is known as procurement for direct consumption. Before ordering material for consumption, a master record is maintained within the system.
MIRO :
MIRO means Movement In Receipt Out. It deals with invoice verification activities in terms of bills that raised from the vendor's end.
Invoice Processing :
It is used by a company's account payable to manage supplier invoices. Invoice processing is initiated when an invoice is accepted and ends when it becomes clear, and it becomes shown in the general ledger.
MIGO :
MIGO means Movement In Goods Out. It is used for those goods that are moving out like from plant to plant transfer, goods receipt, storage location to storage location transfer, etc.. The term MIGO is used by the logistics department.
RFI :
RFI means a Request For Information. It is used for the business process that assembles written information about the competencies of sellers.
RFP :
RFP means Request For Proposal. It is a document where a proposal is sent by a company or agency for the acquisition of some goods and services to any potential seller to send business proposals.
RFQ Process:
1. First enter the t-code a ME41, then enter RFQ type as "AN"
2. Write down the location ie.. the late date when the seller submits the quotation. Enter the purchasing group, delivery date and other information and press on the click button.
3. you are able to see a new screen wherein you have to fill the item codes. Now enter the item codes and also the vendor's details.
Moreover, more requesta can be made as per vendor's details.
Creation Of Purchase Requisition :
With the help of T-code ME51N, a purchase requision is created with the help of below steps.
First execution of ME51N transaction.
Then, arrange purchase requisition document type: NB
Now source determination : OFF or ON
Now enter header note, material number, UoM, Quantity and Storage location. then the Vendor is automatically decided with source determination.
Now add the tracking number, valuation prices and final save the transaction data.
Goods Receipt and Post Goods Receipt :
When the physical inbound transfer of material and goods are made into the warehouse is known as Goods receipt. It includes the transfer of those goods that have received from in-plant production or external vendors. Issuing of goods receipt always results in a hike in stock in the ware house.
When the receipt of goods are posted with reference to the purchase order with which products or goods were ordered are known as a post goods receipt. When the material is sent with reference to a purchase order, then all departments must make an entry in the system reference.
Outline Agreement :
Outline agreement is a purchase agreement that is made for a long term basis. It is made with the seller having terms and conditions about the goods or material that is needed to send by the seller. This agreement is valid for a particular time, and it covers a specific predefined quantity or value.
Material Master :
Material master has information regarding different sorts of material such as raw material, finished product. It is used to identify a product, goods issue, goods receipt, purchase material, production confirmation and MRP.
Contract in MM :
In SAP MM, the contract is a long term agreement that is made between the seller and ordering party for predefined material for a specific framework. Basically, there are two types of contracts.
Quantity Contract: In quantity contract, the entire value is mentioned in terms of quantity needed to be supplied by the seller.
Value Contract: In Value contract, the entire amount that is needed to be paid by the vendor.
Significance of the Batch Record:
A batch is used to get about the quality of a particular product that is needed to process or produced simultaneously. It should be noted that the material that is produced in such a batch must have the same attributes and values. Moreover, the batch record ensures information about a specific batch product. It also assists in letting know whether the product has gone through Good Manufacturing Process(GMP) or not.
Movement Types :
101: It is used for Goods Receipt against the Purchase Order.
102: It is used as a reverse of the material document that was created in 101 movement type.
122: It is used to return goods to the seller.
123: It is used to cancel movement 122 documents.
161: It is used to return products to the seller against a purchase order for
162: It is used to cancel the movement 161 documents.
201: It is used to process Goods issue against the cost center.
202: It is used to cancel the 201 movement document.
221: It is used to process Goods issue against projects.
222: It is used to cancel the 221 movement document.
261: It is used to process Goods issue against the order.
262: It is used to cancel the 261 movement document.
311: It is used when there is a need to transfer posting between storage locations.
312: It is used to cancel the 311 movement document.
321: It is used to transfer goods or products from quality to unrestricted stock.
322: It is used in case of a reverse of 321 movement type.
343: It is used to transfer goods or products from unblocked to unrestricted stock.
344: It is used in case of a reverse of 343 movement type.
349: It is used to transfer goods or products from blocked to quality stock.
350: It is used in case of a reverse of 349 movement type.
411: It is used to transfer their own stock or goods to own.
412: It is used in case of a reverse of 411 movement type.
501: It is used to issue Goods Receipt without any purchase order.
502: It is used in case of a reverse of 502 movement type.
511: It is used to issue free of charge goods receipt.
512: It is used in case of a reverse of the 511 movement type.
551: It is used to process Goods Issue for scrapping.
552: It is used in case of a reverse of 551 movement type.
561: It is used to show the initial entry of stock.
562: It is used in case of a reverse of 561 movement type.
601: It is used to issue Good’s Issue against delivery.
602: It is used in case of a reverse of the 601 movement type.
641: It is used to transfer or send goods to stock in transit.
642: It is used in case of a reverse of 641 movement type.
651: It is used in case of return delivery of goods.
652: It is used in case of a reverse of 651 movement type.
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