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As Is Business Process and Business Requirement from Kajaria To Be Business Process for Kajaria
Management
3. Materials Management
Implementation of mySAP ERP by SEAL InfoTech (P) Ltd. for Kajaria Ceramics Ltd
Business Blue Print – Materials Management – Mr. ‘P.N.Pareek’, Mr.Prem Kumar- Kajaria, Mr. ‘Rajesh Mahajan’ – SEAL Page 1 of 73
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Introduction
This Business Blue Print Document describes the following:
• Suggestions by SEAL consultants wherever mySAP features are found to be useful to Kajaria’ s business functionality
• To-Be Process on mySAP system suggested by SEAL Consultants
• Comments whether the requirement can be realized on the mySAP system or not.
• Gaps which are at different stages of exploration
The following codes are given to each module that is within the scope of the agreement:
Module ID Module
1 Financial Accounting
2 Controlling
4 Materials Management
6 Plant Maintenance
7 Quality Management
8 Payroll
Further processes, sub-process and activities in each module are denoted by, say. 1.1, 1.1.1, 1.2.1 etc.
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A Business Blueprint document is prepared for each module and reference shall be made wherever required to other modules, whenever there is an
overlap of business processes across modules or a business process requires to be completed in more than one module. The reference to the business
process shall be made using the process numbers as described above;
For e.g.:
As per the above notation, all processes in Sales and Distribution start with 3.*… So if a reference has to be made to process in Accounts Receivable of
Financial Accounting, then the reference is made using the notation say, 1.2.*… where ‘1’ refers to Financial Accounting and 1.2 refers to Accounts
Receivable and then further numbers denote the sub-processes and activities in the module.
Step 1:
The Module Owner shall identify various existing business processes at a broad level and make a list of them as described under section 1 of this
document
Step 2:
Depending upon the various business processes thus identified in Step 1, various business scenario are described in the following way:
As Is Business Processes: The current way of executing the business process shall be explained in detail with data/information flow along with the IT
systems / Manual Systems being used in the whole cycle.
Business Requirement: Under this head, the module owner shall describe the requirements of the company vis-à-vis this business scenario, if necessary
with examples. Following situations can arise:
(a) The current provisions in the system are sufficient enough and additional configuration efforts are not required.
(b) The current provisions are not sufficient and satisfactory and additional features need to be incorporated in the system
(c) There is no current provision to handle this transaction at all.
The module owner shall identify each business scenario with the above classification.
Step 3:
Based on the Business Requirement, SEAL consultant shall do a detailed Suggested Business Process and based on the analysis, shall propose the best
fit business process on the mySAP Business Suite system.
It may not be possible to decide the realization possibility of all Business requirements on the mySAP Business Suite immediately and hence the
following legend is being followed for describing the statuses:
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B-Possible with workaround Can be implemented on mySAP ERP 2005 through indirect means
C-Possible with ABAP Can be implemented on mySAP ERP 2005 through ABAP/4 development
D-Possible with ABAP (But Can be implemented on mySAP ERP 2005 through ABAP/4 development but system performance may be
performance issue) effected
Cannot be implemented because it is not part of the scope defined in the “Software Services Agreement”
H-Not in Scope
between SEAL and Kajaria Ceramics Ltd.
Scope of services described in the Software Services Agreement signed by Kajaria Ceramics and SEAL
Scope of functionality described in the Software Services Agreement mentioned above.
Capabilities and Limitations of mySAP ERP 2005
As-Is Business Knowledge Transfer from Kajaria Ceramics Project Team members
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Kajaria Ceramics shall indemnify SEAL from all responsibilities for any other business consequences during the framing of the To-Be Business processes,
or at any time during or after the realization / implementation of these processes on mySAP ERP 2005 or while using the system.
Methodology to be adopted for preparing Business Blue Print:
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Contents
Page Numbers
# Topic
Start End
2 Enterprise Structure 10 13
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Process
Process Description
Id
4.1 Master Data Maintenance
4.1.1 Material Master Maintenance
4.1.2 Shipping Instructions
4.1.3 Purchasing Value Keys
4.1.4 Service Master Maintenance
4.1.5 Vendor Master Maintenance
4.1.6 Purchasing Info Records
4.1.7 Source List Maintenance
4.1.8 Maintaining Vendor Evaluation Criteria
4.1.9 Maintaining Conditions
4.1.10 Payment Terms
4.2 Material Requirement Planning
4.3 Procurement Process
4.3.1 Purchase Requisition
4.3.2 Approval of Purchase Requisition
4.3.3 Request for Quotation
4.3.4 Quotation
4.3.5 Purchase Order Creation
4.3.6 Purchase Order Approval
4.3.7 Purchase Order Follow-Up
4.4 Gate Pass for Entry & Exit of Goods
4.5 Goods Receipt
4.5.1 Tolerance limits for goods receipt
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2. Enterprise Structure
Current New
Justification / Purpose of the Organizational Unit
Code Description Code Description
Kajaria’s Floor Tiles Manufacturing facility at
Sikanderabad Plant 1100 Kajaria Sikanderabad Plant Sikanderabad
Gailpur Plant 1200 Kajaria Gailpur Plant Kajaria’s wall Tiles Manufacturing facility at Gailpur
Kajaria’s Delhi Depot 2100 Kajaria’s Delhi Depot Kajaria’s Delhi Depot
Kajaria’s Jaipur Depot 2200 Kajaria’s Jaipur Depot Kajaria’s Jaipur Depot
Kajaria’s Mumbai Depot 2300 Kajaria’s Mumbai Depot Kajaria’s Mumbai Depot
Kajaria’s Kolkata Depot 2400 Kajaria’s Kolkata Depot Kajaria’s Kolkata Depot
Kajaria’s Cochin Depot 2500 Kajaria’s Cochin Depot Kajaria’s Cochin Depot
Kajaria’s Chennai Depot 2600 Kajaria’s Delhi Depot Kajaria’s Chennai Depot
Kajaria’s Bangalore Depot 2700 Kajaria’s Bangalore Depot Kajaria’s Bangalore Depot
Kajaria’s Ahmedabad
Kajaria’s Ahmedabad Showroom 3100 Kajaria’s Ahmedabad Showroom
Showroom
Kajaria’s Gurgaon Showroom 3200 Kajaria’s Gurgaon Showroom Kajaria’s Gurgaon Showroom
Kajaria’s Mumbai Showroom 3300 Kajaria’s Mumbai Showroom Kajaria’s Mumbai Showroom
Kajaria’s Bangalore Showroom 3400 Kajaria’s Bangalore Showroom Kajaria’s Bangalore Showroom
Note: - The Depots and Showrooms will be treated as Plant location. The exact details of upcoming depots to be given by Kajaria Team.
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Storage Locations
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Current New
Justification / Purpose of the Organizational Unit
Code Description Code Description
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Packing Materials PM01 Pack Mat (Plant) Storage location of packing materials
LPG BULK LPG2 LPG Storage Location (bullet) Storage of LPG (In bullet)
Engineering & Spares ES01 Engg/Spares Storage Storage of engg and spares
Note: Codification for the storage locations, yet to be given for C&F and head office by the Key User
Purchasing Organization
Purchase Department 1000 Kajaria Purchasing Organization Centralised Purchasing Organisation for Kajaria
Note: KCL will decide whether the purchase group is required at depot and showroom level. The decision to have number of Purchase Group required
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in KCL is to be finalised.
Purchase Group
Head Office operations, New Delhi Head Office, New Delhi Head Office Operations, New Delhi
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3. To - Be Business Processes
4. Services
5. Vendor evaluation Gaps:
A
Material Master: is maintained in legacy system. Following Kajaria Ceramics shall maintain material master data in Standard
information is maintained in the system: SAP System. In mySAP ERP the material master contains
information on all the materials that a company procures or
1 material description produces, stores, and sells. It is the company's central source for
retrieving material-specific data. This information is stored in
2.unit of measure individual material master records.
The material master is used by all components in the SAP Logistics
3. Sub-Ledger account description System. The integration of all material data in a single database
object eliminates redundant data storage.
4. Cost Centre
In the SAP Logistics System, the data contained in the material
Whenever there is a new material, material code is opened by master is required, for example, for the following functions:
Stores in the system with above mentioned details.
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Walls and floor tiles meant for trading are classified like finished • Service (DIEN)
goods. (See 4.) The material type also decides -
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Requirement to have external number range. • What procurement type the material has, that is, whether it is
manufactured in-house or procured externally, or both (for
Manufacturer Part Number (MPN), which is different from Kajaria’ Semi-finish)
s material number, to be added while creating PO, for certain
trading materials as and when required. Material master creation includes Material Basic data, Purchasing,
MRP, Accounting Views, information like description of the material,
base unit of measure, order unit, valuation class, Price control etc.
Requirement is to make Fuel as a new material type are given while creating the material master.
(statutory requirement) Material coding for all material types will be provided as per the
requirement.
Material Group
Key that you use to group together several materials or services
with the same attributes, and to assign them to a particular
material group.
Material groups are maintained in order to meet the analysis &
reporting requirements as well for searching material master
records.
Material will be grouped according to their characteristics
maintained and a 4 digit materials groups provided as required.
Material Master (Excise Data)
The part of the material master record that contains information
relating to Indian excise duty. In conjunction with other data, this
data is used to calculate excise duty on various transactions.
The excise part of the material master is divided into the following
screens:
Chapter IDs
On this screen, you define the chapter IDs and corresponding
descriptions as described in the excise tariff structure. This
information is used when you create excise invoices and is also
shown in the various excise registers
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CENVAT Determination
On this screen, you specify which raw materials are used to
produce which finished (or semi finished) goods. The system uses
this information to determine whether it you can claim a CENVAT
credit for a material.
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of excise duty that might apply, so you must take into consideration
each permutation of plant and customer; and each combination of
plant and vendor.
You can maintain the basic excise rates in the following forms:
• Ad valorem
• Specific
• As a combination of both
For each rate, specify until which date it applies.
You can also maintain the additional excise duty and special excise
duty in ad valorem form, should any apply. If you need to give
these rates as a fixed sum, use the Quantity Based AED and SED
screen. Additional Excise Rate
On this screen, maintain any cess applicable.
Gaps: A.
Material groups for Kajaria will be finalised by the Key Users.
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"underage")
Order acknowledgment requirements for PO items
Shipping/packaging instructions
This data appears as default data in purchasing documents and is
taken from the material master record (unless a purchasing info
record exists, in which case it is taken from the latter source).
Gaps:
A
4.1.4 Sub Process Scope: Service Master Maintenance
AS-IS Business Process Suggested Business Process
At Kajaria Ceramics, services are used for General, Engineering, Service masters shall be maintained for various Services with
Housekeeping, Security, Forklifts, Maintenance of AC’s, Network Description, Category and Unit of Measure using the ‘Master Data
and photocopier. Also Kajaria has also got some services on Maintenance’ in ‘External Services management’ of Materials
AMC’s with some vendors. No service master is maintained in the management Module.
legacy system.
Following critical information shall be maintained in the service
TDS and service Tax, works Tax, etc are charged by master record:
vendor/service provider.
1. Service Number, which gives a unique identification to the
Business Requirements service. This shall be internally generated by the system.
Services are required as per the SAP standard system, as part of 2. Service Category, which describes whether a service is an
service contracts negotiated with predetermined terms and internal service or a service to be procured externally. In
conditions with approved vendors for performing the services of conjunction with the organizational (maintenance) status of the
engineering, production, general, house keeping, network, service master, the maintenance views can be controlled i.e.
maintenance of AC’s, security and photocopier. whether a service master can have – a basic data view,
Services shall always be made available through the SAP system controlling view, sales & distribution view. Based on the type of
to obtain the services with the vendors whenever the service, the service category shall be maintained.
requirement comes
3. Description which describes the service in brief
Examples of Services for which Master records shall be created:
1. Annual Maintenance Contracts
2. Repairs in KCL premises
3. Repairs outside
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Gaps: A
4.1.5 Sub Process Scope: Maintenance of Vendor Master
AS-IS Business Process Suggested Business Process
At Kajaria Ceramics, the vendor master is maintained in the Vendor Master Data shall be maintained at the following levels:
legacy system like their names, addresses, telephone numbers, • General data
CST/LST NO, PAN NO. Payment terms and terms and conditions.
But the complete information is not maintained. • Company Code Data
Vendor Master is maintained in legacy system separately for • Purchase Organisation Data
each manufacturing plant. Following information is maintained General Data:
in the system:
The general data includes such information as the vendor's address
1. Address details, telephone, Fax, CST, and LST no. and telephone number, the language of communication with the
2. credit days vendor, email address, etc.
Company Code Data:
Material Master: is maintained in legacy system. Following Accounting information shall be maintained at company code level.
information is maintained in the system: This data includes, for example, payment transaction data and the
number of the relevant control account. Only one control account
1 material description, can be assigned to each vendor. And we can maintain vendor
2.unit of measure customer relation and vendor bank details in vendor master.
4. Cost Centre Purchasing data like contact persons, terms of delivery, etc. shall
be maintained at purchasing organization level. Vendor’s excise
details can be maintained using the CIN functionality of R/3.
Business Requirements
Vendor Schema Group
Unique vendor master data is required to maintain for each
The schema group mentioned in the vendor master is useful in
vendor, by giving account numbers, as per SAP standard system.
determination of pricing procedures.
The vendor master data shall be integrated in the system and
Vendor Account Group:
should be accessed during procurement of materials and the
liabilities, for each vendor, to be accounted automatically as and Vendor account Group mentioned in the vendor master is useful to
when a transactions takes place group the vendor e.g.:
The payment status shall be tracked through the system online, 1. Domestic Vendors
vendor-wise and total vendors 2. Import Vendors
3. Service vendors
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4. Employee vendors
Terms Of Payment
Details of Terms of payments has to be provided by KCL
Terms of payment could be used on different options available in
the SAP standard system.
Vendor Master (Excise Data)
The part of the vendor master record that contains information
relating to excise duty.
In conjunction with other data, this data is used to calculate excise
duty on various transactions.
The excise part of the vendor master is divided into the following
screens:
Vendor Excise Details
On this screen, you enter your vendors' tax numbers, which are
used for various forms of correspondence and reports:
• Excise registration number (and the range, division, and collector
ate in which this is located)
• Central sales tax (CST) number
• Local sales tax (LST) registration number
• Permanent account number (PAN)
In order for the system to be able to calculate which rate of excise
duty to apply on purchases from the vendor, you must also:
• Assign it a vendor excise duty status
• Specify what type the vendor is, for example, a manufacturer,
first-stage dealer, or importer for 57AE returns
• If the vendor qualifies as a small-scale industry(SSI), you must
also specify:
− What its SSI status is (which you must first have defined under
SSI rates,
− Whether or not it is participating in the CENVAT scheme SSI
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Rates
On this screen, you define the excise rates that apply to purchases
from vendors that qualify as SSIs.
You define one status for each band (or "slab") of sales volume
provided for by the law, and for each SSI status, the rates of
excise duty that applies to that slab under the two schemes
Excise Indicator for Plant and Vendor
On this screen, you define the final excise duty indicator
Gaps:
A:
4.1.6 Purchase Info Records
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Gaps:
A
4.1.8 Maintain Vendor Evaluation Criteria
AS-IS Business Process Suggested Business Process
At Kajaria Ceramics, vendor evaluation assessment is carried, Vendor evaluation is to be done to analyze and assess the
manually, once in a year, to carry out the total performance performance of external suppliers of materials & services
results of each vendor with respect to delivery on time,
Vendors shall be awarded scores for a number of different criteria.
competitive price, satisfied quality and committed service. This is
Vendor’s overall scores shall be used to determine whether they
also calculated based on no of rejections and delayed deliveries
are retained in or eliminated from Kajaria’s vendor base.
and services
Vendor evaluation shall be done on the basis of the following main
criteria:
Business Requirements
Price
Vendor evaluation criteria is required, for desired vendors, as per
Quality
the SAP standard system to facilitate and give scoring system for
individual vendors Delivery and
Service.
Under the main criterion, again further sub-criterion can be defined
like Price level, Price History, Goods Receipt, Quality Audit,
Complaints / Rejection level, On-time delivery performance,
Quantity reliability, Compliance with shipping instructions,
Confirmation Date etc.
KCL shall define a scoring range i.e. a common scale on which the
vendors can be rated. The scale shall be between 1-100 points. For
every main criteria, a weightage can be assigned The overall score
shall be calculated from the scores of the main criteria taking the
weighing factors for each main criterion into account. All the values
shall be decided at the time of configuration.
Gaps:
A
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4.1.9.2 Discounts
AS-IS Business Process Suggested Business Process
At Kajaria Ceramics, the discounts are maintained in the legacy The Discount condition records shall be maintained with conditions
system for applicable vendors along with vendor information and values associated with conditions. While processing a
data, terms and conditions. transaction, the system will search for valid record and as soon as
it finds the record matching the condition of sale it should return a
Qty discounts, Qty Scale discounts both on percentage basis as
discount value. Some of the discounts can be maintained at the
well as on value basis are offered by vendors. Like in the case of
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Business Requirements
Shall be maintained as per SAP standard system
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• Freight charges are paid to the goods carrier at the time of For uncertain freights, approximate/minimal freight shall be
entered in the PO, for the internal system purpose and final PO for
GR.
vendor shall be sent without mentioning the freight. And when the
• KCL has hired the services of Goods carrier/Transporters in actual freight comes to be known, during invoice entry, the correct
the form of an agreement to transport the goods from freight amount can be entered. The freight invoice will be booked
vendor to the plant on the behalf of KCL. as soon as the material is received in the stores and the value will
be updated in the stocks.
Gaps: A
Business Requirements
Shall be maintained as per SAP standard system.
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3. Partly advance, balance against delivery The total quantity shall be received, but the entire payment can
not be released based on the deviation of quality parameters.
4. partly advance+ partly against delivery,+ partly against
certain credit days and remaining after retention period
5. Payment after certain credit days. Gaps: A
The payment shall be blocked under deviation of material quality.
Percentage in payment terms varies from vendors to vendor and The total quantity shall be received, but the entire payment can
material to material. not be released based on the deviation of quality parameters.
Business Requirements
Shall be maintained as per SAP standard system.
The system should be able to allow LC payment for local and
import vendors.
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Against the PO, the materials will be supplied by the vendor and requisitions manually, or they can be generated
GR will be prepared against vendor’s delivery challan /invoice, automatically by the materials planning and control system.
after inspection of the materials as per the inspection criteria / • Source Determination
parameters given for the raw material and packaging materials
The Purchasing component helps you identify potential
and then it is finally sent to the stores department. Any materials
sources of supply based on past orders and existing longer-
being found defect or rejected, it’s then sent back to the vendor
term purchase agreements.
with return note and gate pass
Based on the GR and inspection reports, the invoice of the
• Vendor Selection and Comparison of Quotations
vendor, will be processed by purchasing dept and forwarded to
the finance dept for the payment release The system is capable of simulating pricing scenarios,
allowing you to compare a number of different quotations.
Rejection letters can be sent.
Business Requirements • Purchase Order Processing
The procurement process shall be managed as per SAP standard The Purchasing system adopts information from the
system. requisition and the quotation to help you create a purchase
order. As with purchase requisitions, you can generate Pos
The Purchase requisition should be the basis for starting the
yourself or have the system generate them automatically.
procurement process
Vendor scheduling agreements and contracts (in the SAP
The Request for quotation shall be processed based on purchase System, types of longer-term purchase agreement) are also
requisition approval only and the RFQs shall be obtained from supported.
several vendors and the rates and conditions shall be entered in
• Purchase Order Follow-Up
the system in order to prepare a comparison statement on a
The system checks the reminder periods you have specified
mean / minimum criteria
and - if necessary - automatically prints reminders or
During the purchase order creation, for the given materials with expediters at the predefined intervals. It also provides you
respective vendors, the predefined prices, conditions and with an up-to-date status of all purchase requisitions,
payment terms should be taken automatically, from the master quotations, and purchase orders.
data that are maintained in the SAP system
• Goods Receipt and Inventory Management
The approval process shall be applicable for Purchase Goods Receiving personnel can confirm the receipt of goods
Requisitions, Request for Quotations, Purchase Orders and simply by entering the Po number. By specifying permissible
Contracts, on document type basis. The approvers shall include tolerances, buyers can limit over- and under deliveries of
User Deptt Head, Purchase Deptt Head, Plant Head, Account ‘s ordered goods.
Deptt Head, GMD and CMD. It is based on the PO value.
• Invoice Verification
The purchasing order documents shall be converted in to The system supports the checking and matching of invoices.
word/text format, so as to facilitate for sending them to vendors, The accounts payable clerk is notified of quantity and price
through e-mail. variances because the system has access to PO and goods
Purchasing groups that are defined for Head Office should be receipt data. This speeds the process of auditing and clearing
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flexible while placing orders for Sikanderabad, Gailpur, depots invoices for payment.
and showrooms. Either of the groups shall be used through either
locations Procurement for Stock Versus Procurement for Direct
Consumption
In the MM System, you procure either for stock or for direct
consumption. You can determine the purpose for which ordered
materials are being procured in the purchase order, for example.
This section describes the differences between procuring for stock
and procuring for direct consumption in the MM System.
Procurement for Stock
A stock material is a material that is kept in stock. Such materials
are placed in storage following a goods receipt. When goods are
received by or issued from stores or the warehouse, the stock on
hand is increased or reduced by the amount of the quantity
received or issued.
When you order a material for stock, the system does not require
an account assignment. This is because the posting to the
appropriate stock and consumption accounts occurs automatically
after each goods movement (for example, after a material is
received by the stores or issued from stores) . Furthermore, the
value and the quantity of the stocked material are updated in the
material master record.
To order a material for stock, the material must have a master
record
Procurement for Direct Consumption
When you procure for direct consumption, you specify the
consumption purpose by entering an account assignment (for
example, a cost center) . On goods receipt, the material or service
counts as having been consumed.
If a material is procured for direct consumption, the consumption
accounts in Financial Accounting are posted when the goods receipt
is entered. The total quantity and value of existing stocks of the
material are not affected.
Material Account Assignment
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Gaps:
Business Requirements
A
The purchase requisition should undergo the approval process as
per the SAP system for all the purchase.
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You can compare the quotations within the list with a sample
quotation. The system displays the percentage deviation between
each quotation in the list and the sample quotation.
Mean/minimum value quotation
The price comparison list can also display a "fictitious" quotation
reflecting the average or minimum value of all quotations. Select
either the Mean or Minimum value quotation field to choose the
type of fictitious quotation.
Percentage basis
The price comparison list displays the percentage of each item in
relation to the maximum, minimum, or average price. To determine
the display type, enter one of the following:
– “+” Highest value for each item is the 100% value
– “-“ Lowest value for each item is the 100% value
– +"_" Mean value for each item is the 100% value
Price Computations
Select the appropriate field to specify which of the following should
be taken into account in determining the comparison price:
– Cash discount
– Delivery costs
– Effective price
Gaps:
A
The existing RPO document will not be brought into SAP system.
The Purchase Order document will be used as direct document.
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At Kajaria Ceramics, purchase orders are prepared for materials A purchase order is a formal request or instruction from a
and services with reference to purchase requisitions 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
Purchase orders are prepared some times for imported raw
time.
materials as and when they find attractive pricing terms vendors
and it’s been negotiated by head office for pricing terms and A purchase order (PO) consists of a document header and a
conditions and the plant shall then place orders based on the number of items.
production requirements.
The information shown in the header relates to the entire PO. For
Also sends some materials for job work through purchase orders example, the terms of payment and the delivery terms are defined
to sub-contractors for making final product. The sub-contractor in the header.
shall perform his services and return the final products back to
A procurement type is defined for each of the document items. The
Kajaria. Thus the sub-contractor is liable for his service charges
following procurement types exist:
only.
• Standard
• Subcontracting
Business Requirements
• Stock transfer
The purchase order shall be created as per SAP standard system
and every PO must have purchase requisition reference. • External service
The payment and delivery terms and conditions, which are fed in Delivery of the total quantity of material (or performance of the
the master data, should be accessible while creating purchase total volume of services) specified in a purchase order item can be
order spread over a certain period in a delivery schedule, consisting of
lines indicating the individual quantities with their corresponding
Import PO should display figures in foreign currency, while
planned delivery dates.
indigenous PO should display in INR.
For PO items to be supplied by subcontractors, you can specify the
The history of PO should be available in the system
necessary input materials or components that are to be provided to
the subcontractor for assembly or processing in respect of each
Shipping notification is required for import goods. delivery date stipulated.
An item of the procurement type "external service" contains a set
of service specifications. The latter can be hierarchically structured.
The summary view of such a hierarchical structure is referred to as
an outline. The outline comprises a number of levels, each
representing a level of the service hierarchy. The order quantities
are set out in service lines, representing individual jobs or
activities. Value limits are specified instead of service lines for
services or work that initially cannot be specified precisely.
If services covered by an already existing contract are released
(ordered, or called off against the contract), the PO item can
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2. For PO value above Rs25000/- up to Rs 5 Lacs is approved by There will be no RPO and the PO will be directly approved in the
user dept Head, Purchase Dept Head, Plant Head and Account’s SAP system
Head and GMD.
3. For PO value above Rs5 Lacs is approved by user dept Head,
Purchase Dept Head, Plant Head and Account’s Head and GMD
and CMD.
Business Requirements
Purchase order document shall be replaced with RPO document
and processed as per the SAP standard system.
The purchasing document shall be authorised by GM (Production)
and/or GM (Maintenance), GM (Commercial & Logistics) and by
the Managing Director
The approval process for the purchase order shall be routed
through SAP standards.
4.3.7 Sub-Process Scope: Purchase Order Follow Up
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Business Requirements
Gaps:
Follow up of purchase orders with respective vendors should be
routed through the SAP standard system A
5. Insurance cover note is obtained by KCL, it is an open The system handles CVD using a condition type for planned
cover note. delivery costs.
6. Dispatch schedule is send by the oversee seller.
CVD Clearing Account
7. KCL decides the manner of dispatch like sea or air.
8. KCL will decide the shipping lines/route or airline. When CVD is posted to a CENVAT account the system debits the
9. KCL tracks the dispatch CVD to the BED account and credits it to a CVD clearing account
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10. When the goods have arrived at the port, KCL files the 1. A purchase order is created for the required goods and is sent
papers to custom deptt. to the vendor.
11. Custom Clearance is done. For each material that CVD has to be paid when it comes
12. Then the goods are transported to different plants/ through customs, the CVD will be entered as a pricing
warehouses. condition.
2. The vendor ships the goods. When the goods arrive in India,
they go through customs. The customs officers issue a bill of
Import Documentation
entry for the goods, which is in effect an invoice for the CVD
• Commercial Invoice on the goods. Once custom office has inspected the goods,
they send them on to KCL.
• Packing List
• Certificate of origin 3. The goods arrive at Gailpur plant, together with the bill of
entry. In order to record the bill of entry in the system:
• Bangkok Agreement
• Bill of Lading/Copy of AWB a. enter an invoice for the bill of entry
• Insurance cover note In Accounts Payable (FI-AP), the system creates a new
vendor item for the CVD at the customs office. The item
is offset to the CVD clearing account.
LC- 90, 120, 150, 180, 360, 365 days
b. captures an excise invoice for the bill of entry
DA -90, 120, 150, 180 (document against acceptance)
DP- document against payment 4. The stores posts the goods receipt.
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Roller Ceramic In particular, the Incoterms regulate the division of costs, and
Packaging Material –shrink-wrap the transfer of risks.
CMC- carbolic, raw material Standard settings
Screen printing material- Zirconium, STP (sodium triple The standard SAP R/3 system includes the following Incoterms:
phosphate) • CFR - Cost and Freight
• CIF - Cost, Insurance and Freight
Duty Paid Goods • CIP - Carriage and Insurance Paid To
Capital Goods and spares, furniture like tile display, lab • CPT - Carriage Paid To
equipment.
• DAF - Delivered At Frontier
Traded Goods- Vitrified Tiles, ceramic tiles, furniture, porcelain
• DDP - Delivered Duty Paid
• DDU - Delivered Duty Unpaid
SAD- special additional duty is also modvit able on
manufacturing goods. • DEQ - Delivered Ex Quay (Duty Paid)
• DES - Delivered Ex Ship
There are contracts for machinery, all type of services like certain Quantity or Value of contract.
security, office maintenance, DG Sets, EDP, etc.
Gaps:
The contract details are covered in PO.
F
Business Requirements
Contract will be routed through the SAP standard system.
Contracts will be subject to Approval process.
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Numbers quantities that are entered in units other than the base unit of
measure are converted to the base unit by the system
Litres
automatically. If KCL uses units that are not contained in the
Kilolitres standard table, KCL will state the factor for converting the
Metre alternative unit of measure to the base unit of measure in the
material master record.
SCM- Standard Cubic Metre
Base unit of measure: This is the unit of measure in which the
MMBTU- Million BTU ( British Thermal Unit)
stocks of a material are managed. The system converts all
Boxes quantities entered in other units to the base unit of measure.
Pieces Order unit: Allows a material to be ordered in a unit differing
from the base unit of measure. The order unit is proposed
Business Requirements
automatically in purchasing functions, where it can be changed.
The unit of measure will be maintained in SAP along with
Sales unit: Allows a material to be sold in a unit differing from the
alternative unit of measure.
base unit of measure. The sales unit is proposed automatically in
the sales order, where it can be changed.
Unit of issue: Unit of measure in which the material is issued
from the stores. It allows consumption, stock transfers, transfer
postings, and physical inventories to be recorded in a unit differing
from the base unit of measure and from the stock keeping unit.
Gaps:
A
4.4 Gate Pass for Entry & Exit of Goods
AS-IS Business Process Suggested Business Process
At Kajaria Ceramics, gate entry is a must for any sort of incoming Gate entry system is not part of SAP
materials into KCL premises. A register is maintained manually at
Outbound delivery shall be used for exit of goods
the security gate for making entry on the movements.
Gaps:
The materials that are leaving the premises are also maintained
in the register. The material that will be again returned back, C
RPG- returnable gate pass is prepared and the one that will not Gate entry details cannot be captured at the time of Goods
be coming back Gate pass will be prepared. Receipts.
New ABAP Development
Business Requirements
Gate Entry to be made compulsory for each & every item coming
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In case of price variance, store dept intimate the purchase dept. each tolerance key, tolerance limits can be set per company code.
Purchase dept then coordinate with the vendor to finalise/resolve
The following variances are checked in Inventory Management:
the variances.
Business Requirements
• Variance in the Purchase Order Price Quantity
As per SAP standard and business requirements. For this variance, two tolerance keys are provided:
Tolerance key B1 (error message)
Tolerance key B1 is used to define the maximum percentage
variance. If the variance is greater than the maximum variance,
the system creates an error message. The user cannot post the
goods receipt.
Tolerance key B2 (warning message)
• Variance for the moving average price of the
material
Tolerance key VP is used to define the percentage variance from
which a warning message is issued. This warning message
indicates a price change.
Gaps:
A
4.5.2 Sub-Process Scope: Goods Receipt against Stock Transfer Orders
AS-IS Business Process Suggested Business Process
At Kajaria Ceramics whenever the requirement is given from A Purchase order is created by the receiving plant to supplying
different depot locations and showrooms, the finished products plant for required materials. Materials are issued by the supplying
will be dispatched to the respective locations along with delivery plant with respect to purchase order to receiving plant. This
challans material will be posted to stock in transit till goods receipt is done
at receiving plant. The direct goods receipt posting is also possible
Business Requirements
while issuing the materials from issuing plant.
Provision should be provided for transfer of finished products
When MRN is made at the receiving plant the receipt is made with
form plant to plant or depot. Excise duties will be added and sent
reference to the Goods Issue or Outbound Delivery document
along with the materials. There will be no sale tax
prepared at the issuing plant. Excise invoice accompanies the
Goods Issue. A Performa Invoice can also be generated with
reference to the Goods Issue at the Issuing plant.
Gaps:
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A
4.5.3 Sub-Process Scope: Goods Receipt against Service Orders
AS-IS Business Process Suggested Business Process
Services are performed and delivered by the respective vendors Purchase orders shall be created for services and Service entry
with reference to the service purchase orders. sheets shall be created for the quantity of Service received. Part
service of the total quantity of service mentioned in the PO can be
received and Invoice verification shall be done for the invoice
Business Requirements raised by the service vendor based on the service entry sheet
Provision for receipt of services procured should be done in created.
system. Gaps:
Returnable gate pass procedure shall be applied for service A
materials that are going out physically for repair or services and
track of the sent out materials shall also be facilitated.
4.5.4 Sub-Process Scope: Goods Receipt against Job Work / Subcontracting Orders
Gaps:
Business Requirements
A
The subcontracting process shall be operated through the SAP
standard system.
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Gaps:
Business Requirements
A
The returns of materials to vendor should be routed through the
SAP standard system and the tracking of the details like date of
return, qty, material number, document number and reason for
rejection should be able to see in the system.
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The GR process for the import materials shall be similar to that of Imports
domestic GR process. Here the relevant CVD details and excise In case of Imports, the CVD that is claimed back is processed
details if applicable shall be entered into the excise registers. differently from the normal procurement process. In this case, the
Invoice verification for CVD is done first and then part1 is taken,
GR is done and then part 2 is posted. This now creates the CENVAT
Business Requirements postings.
During the GR entry process, the applicable excise duties with Cancellation of Incoming Excise Invoice:
respect to vendor and materials to be calculated and net value
for excise payable, to be provided by the system in order to The cancellation of excise invoice can be done in case the entries
maintain them in the excise registers are done wrong or incorrect excise invoice has been issued by the
vendor. The cancellation can be done with a rejection code, which
can be used for knowing the reason for cancellation of the invoice.
KCL shall provide the different reasons for such cancellations,
which will be used in the configuration.
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4.6.4 Sub Process Scope: Goods Issue against Job Work Purchase orders
AS-IS Business Process Suggested Business Process
At Kajaria Ceramics, Jobwork or subcontracting process is The material to be produced by the vendor can be ordered as a
undertaken. Semi finished or Raw materials are sent to the subcontract item in a purchase requisition, purchase order or
subcontractor, for the process of final product and the same shall scheduling agreement. Each subcontract item has one or more
be received from the subcontracting vendor. And the service sub-items which contain the individual components the vendor
charges, pertaining to the job work, shall be liable for payment needs to perform the subcontract work or value-added service.
The components that are provided to the subcontractor are
managed as stock provided to vendor. Components in a
Business Requirements
subcontract order that are consumed can only be debited from the
The system should be able to send the semi finished or finished stock of the material provided to the particular vendor.
goods to the subcontracting vendor, for performing the services
ME2O transaction can be used for monitoring the stocks with
for converting them into final product and the same has to be
subcontractor.
received and accounted appropriately for its’ consumption
quantity and stock account quantity
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Gaps:
Business Requirements
A
And all the scrap, which is accumulated on a daily basis, on
random qty, will be sent to the reprocessing unit, for converting
the same into raw materials and send to the bin again. And this
should be carried out on continuous and on-going process which
needs to be brought into the system
No scrap sale is required to be added in the system as there is no
scrap is generated from the production process and if any scrap
sale is done, for miscellaneous scrap, that can be done on
manual financial documents
4.8 Logistics Invoice Verification
AS-IS Business Process Suggested Business Process
At Kajaria Ceramics, after receipt of material or services, the Logistics Invoice Verification checks incoming invoices for accuracy
store dept. user’s dept (only Quality Check) checks the vendor’s with regards to content, price, and accounting.
invoice for the correct prices, taxes, surcharges, value as per the
The main task of Logistics Invoice Verification is to complete the
purchase order document, and if it’s found satisfactory then
procedure of materials procurement by posting the vendor invoice
forwards the vendors’ invoices, along with GR copy to accounts
and to pass on information concerning the invoice to Financial
department for payment release.
Accounting and subsequent applications.
Business Requirements
For each incoming invoice, Logistics Invoice Verification creates an
The process of vendors’ invoice verification and payment release MM invoice document and an FI invoice document.
should be routed through the SAP standard system.
The invoice documents update data in:
The invoice entry shall me made with reference purchase order • Materials Management
document and the PO document is always available for cross-
• Financial Accounting
checking its terms and conditions.
The Accounts department does invoice entry after the stores user
The system should also be able to block the invoices for
makes relevant entries & verifies conditions in the PO (e.g. Price,
payments on certain circumstances / reasons and shall be
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released as and when required. Excise duty, freight sales tax and payment terms). If the conditions
in the PO are satisfied then the Invoice forwarded to finance
The list of open invoices and released invoices shall be available
department.
in the system
The Invoice Verification involves the following processes:
1. Invoice
2. Credit Memo
3. Subsequent Debit
4. Subsequent Credit
Invoice option is used when the payment is to be made to the
vendor.
Credit memo is used for materials returned back to the vendor.
During invoice verification the system shall display the materials
returned back to the vendor for which deductions will be made.
Subsequent debit shall be used for transactions where the Original
invoice has already been cleared and a subsequent invoice has
been raised by the vendor for materials already sent. Example:
Rate change with retrospective effect.
Subsequent Credit shall be used when any deduction is to be levied
on the vendor.
There are 3 options that can be used for Invoice Verification.
1. Goods / Service Item
2. Delivery Costs
3. Goods/Service Item + Delivery costs
Based on the Goods/Service and delivery vendors, the option shall
be selected. For Advance payments – expenses are to be booked
as Prepaid Expenses in FICO & then payment has to made time to
time after intimation by Purchase
Local Vendor
Local vendor invoice shall be entered with reference to Purchase
Order. More than one purchase order can also be processed at one
time for one vendor. If required the vendor can be changed from
the original vendor to whom the payment is to be done. If any
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Invoice verification has been done for any GR for a PO, the
quantity for this GR will not appear in the list. In case where the
freight vendor is different, only those entries related to the delivery
costs will be chosen for the payments to this vendor. It is also
possible to raise credit memo against the goods returned to the
vendor. In case of Subsequent debit/credit to be made to the
vendor account, (reasons can be change of rates for previous
supplies made, etc), the entries are made using the Invoice
Verification.
Adjustments to other accounts like Insurance claims Account, etc.
can be entered with invoice verification.
Unplanned delivery costs are costs which are not known at the
time of creation of purchase orders and these are charged in the
invoice sent by the vendor can also be entered during invoice
verification.
In these adjustments wherever the invoice involves the CENVAT,
based on the Tax code maintained, vendor and material tax details
CENVAT clearing account is prompted and will be updated on
saving. Simulation facility is available for checking the accounting
effect.
Import Vendor
Imports invoice verification is slightly different from the normal
invoice verification. In this case the CVD applicable is taken into
RG23 Registers. In Import PO the CVD and other conditions are
maintained as delivery condition types hence the Invoice
verification for the CVD part is to be done first before the GR is
done. Then RG part1 entries are done then GR is done and then RG
part2 entries are posted. Invoice verification is done for the
Purchase Order. In this case No GR based Invoice verification is
possible (This is specific to Imports only).
The other functions as mentioned under Local Vendor Invoice
verification are also applicable for Import Vendor.
4.8.1 Sub-Process Scope: Invoice Variance and Vendor Invoice Block
AS-IS Business Process Suggested Business Process
Variance and invoice Block
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There is no provision currently to block the invoice for payment. If there are variances between the expected invoice values and the
Business Requirements values in the vendor invoice, the system can automatically block
invoices with variances for payment. Invoices can be reduced by a
This functionality is required.
specific difference amount, or can be accepted for small variances
based on totals. Before a blocked invoice can be paid, it must be
released in a separate step.
Variances can be due to, for example, that one of the vendors
sometimes sends an invoice for a higher amount than that agreed
upon in the purchase order. Sometimes, the vendor might include
the entire quantity on the invoice; although all the goods have not
yet been received The invoice blocking functionality ensures that
the vendor is not paid until these differences have been corrected.
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S No Tolerance Limit
Key
1 AN Amount for item without order
reference
2 AP Amount for item with order
reference
3 BD Form small differences
automatically
4 BR Percentage OPUn variance (IR
before GR)
5 BW Percentage OPUn variance (GR
before IR)
6 DQ Exceed amount: quantity variance
7 DW Quantity variance when GR qty =
zero
8 KW Var. from condition value
9 PP Price Variance
10 ST Date Variance
11 VP Moving Average Price Variance
Gaps:
A
4.8.2 Sub-Process Scope: Releasing Blocked Invoices
AS-IS Business Process Suggested Business Process
There is no provision in legacy system to automatically block If an invoice is blocked for payment, it must be released in a
invoices. The payment is blocked for vendors, if and when separate step. The invoice cannot be paid before it is released. The
required. release can be performed manually or automatically.
Most blocked invoices are automatically released for payment
when the balance of the goods is received or the purchase order
Business Requirements
price is adjusted.
The functionality will be incorporated as per SAP standard
If the variances are justified, the department can release the
process.
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As Is Business Process and Business Requirement from Kajaria To Be Business Process for Kajaria
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Gaps:
A
4.8.4 Sub-Process Scope: Delivery cost- Planned/Unplanned Delivery Cost
AS-IS Business Process Suggested Business Process
Unplanned delivery costs are covered in Freight section. See
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details Freight charges can be planned in the purchase order. More often,
they are not known in detail when the purchase order is created
Business Requirements
and are entered only in Invoice Verification on the basis of the
The process will be handled in SAP. invoice.
In the SAP system, delivery costs are divided into:
• Planned delivery costs
• Unplanned delivery costs
Planned delivery costs are entered when the purchase order is
created.
Unplanned delivery costs are not known at the time of the
purchase order, and are first entered at invoice receipt.
Delivery costs can be settled together with goods items, or an
invoice containing only delivery costs can be entered.
Planned delivery costs are delivery costs that were agreed with the
vendor, a freight forwarding agent, or a customs authority before
the purchase order was made, and that are therefore entered
when you enter the purchase order. It is entered item-by-item in
the purchase order. They are assigned accordingly at invoice
receipt.
The advantage of planned delivery costs is that the delivery costs
become a part of the valuation of a material at goods receipt, or -
for a purchase order with account assignment - are debited to the
account assignment object.
Planned delivery costs are not binding to one specific vendor. When
planning the delivery costs in the purchase order, you can enter a
specific vendor for the delivery costs (such as a freight vendor or a
customs authority). However, in Invoice Verification, these delivery
costs can also be posted to a different invoicing party if you enter
the different vendor on the Detail tab page.
Planned delivery costs can be divided into:
• Freight costs
• Customs
Delivery costs can be invoiced in one of three ways:
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Gaps:
A
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d) Service Vendor Evaluation also uses data from the Quality Management
component, such as the results of incoming inspections or quality
audits.
Business Requirements
Scores and Criteria
Vendor evaluation shall be maintained through SAP standard
SAP System offers a scoring range from 1 to 100 points, which is
system, for desired vendors, based the scoring, rating, scales
used to measure the performance of your vendors on the basis of
and criteria analysis for a specified period and this is based on
five main criteria.
the Price, Quality, Delivery and Service.
You can determine and compare the performance of your vendors
by reference to their overall scores.
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