Sap MM Complete

CONTENTS
MM - Overview
MM - Purchasing
MM - Purchase Order
MM - Inventory Management
MM - Invoice Verification
TATA CONSULTANCY SERVIES

Overview
of
MATERIALS MANAGEMENT

Target Group
Purchase department
Stores department

Course Objectives
On conclusion of this course, you should be

able to:
Visualize the MM functionalities
Maintain MM related views of Material

Master and vendor master
Create other master records or changing
the existing master records

Introduction
Contents
MM overview
Organizational Structure
Material master
Vendor master
Other master records
Exercises
Solutions

MM - Overview
Major components of MM- Module

materials planning and control
purchasing
inventory management
invoice verification.

Integration with other Modules
Procurement
Logistics Planning
Sales Logistics
Production
Finance / Asset Management

Integrated Business Process Overview
FI
G/L G/L GRIR/ Vendor
Inventory / Expense
GRIR AP Invoice Payment
SD
Requirement Purchase Goods Invoice
for Goods /
Services Order Receipt Verification
Financial and Managerial Reporting and Analysis

Organizational Elements - Client
Client Characteristics
Highest Hierarchical Level in SAP(e.g. a corporation)

Can be Used to Differentiate between a Development,
Quality Assurance, and Production System within R/3
All Areas of an Organization that are to be Integrated
into the SAP R/3 Production System should be Included
Under one Client

Organizational Elements - MM
Purchasing Organization
Responsible for Procurement for One or More

Plants
Responsible for Negotiating Pricing and Delivery
Terms with Vendors
Purchasing Organization is Assigned to A
Company where Inventory is Legally Tracked or
Costs are Legally Incurred.

Plant
Usually a Manufacturing Facility, Warehouse, or a
Location that Stocks , Manages, and Valuates
Inventory
May be a Physical Site with Multiple
Manufacturing/Production Lines
May be Multiple Manufacturing/Production Lines
at One Physical Site
Can be a Physical Location(cost centers may or
may not be associated to a plant i.e.
administrative Vs. manufacturing cost centers)
SD Availability Checking is Normally Done at the
Plant Level
Plant (Cont.)
Links to Production (PP), Materials Management

(MM), and Sales and Distribution (SD)
A Plant is Assigned to A Company
Purchasing Organization are Assigned to Plants

Storage Location
A Location within a Plant where Inventory is

Stored

Master data in MM
Material Master
Vendor Master

Service Master
Purchasing info record
Source List
Vendor Excise Details
Material and Chapter ID combination
Excise Tax rate

Material master in SAP.
The material master contains information on all the

materials that a company procures, produces, stores,
and sells.
The material master is used by all components in the
SAP Logistics System
Different departments in a company work with the
same material, so data in a material master record is
subdivided in the form of user departments.
Material description and Base unit of measure appear
in all user departments.

Use of material master in SAP logistics system
functions.
In Purchasing for ordering materials.

In Inventory Management for goods movement
postings and physical inventory
In Invoice Verification for posting invoices
In FI for maintaining value of material.
In Production Planning and Control for material
requirements planning, scheduling, and work
scheduling

User departments using same material master

Material Numbers
Definition
Number uniquely identifying a material master record,
and thus a material.
Use
For every material that your company uses, you must
create a material master record in the material master.
This record is uniquely identified by a material number.
Internal and External number assignment.

Industry sector
It determines type of industry .

Eg. mechanical industry,chemical
industry,pharmaceutical etc.
The industry sector you specify determines
Which screens appear and in what sequence
Which industry-specific fields appear on the individual
screens

Material Types
Materials with the same basic attributes are grouped

together and assigned to a material type.
When creating a material master record, you must
assign the material to a material type. The material type
determines certain attributes of the material and has
important control functions.
Some of the standard material types are
ROH: Raw materials which are bought from outside and goes
into production.
Halb :Semi-finished material which are bought externally and
manufactured inside. They can be sold individually as well.
FERT:Finished materials are final products of the company

Views relevant to MM
Basic data1
Purchasing
Purchase order text
Storage 1
Storage 2

CREATING MATERIAL MASTER IN SAP
From logistics screen click

Logistics Materials Management material master, to
bring up material master screen.
Click material create(general) immediately
Organizational levels.
Plant
Storage location

Material master
In Purchasing screen you can enter

Purchasing group
purchasing value key
Set indicator for automatic PO

Material master
In purchase order text screen,

you can enter the text , which will be defaulted in PO
every time when you create a PO for this material.
In Storage 1 you can enter,
Storage bin
Unit of issue
Shelf life data
Batch management

Concept of vendor master in SAP.
vendor master record is maintained by both Accounting and

Purchasing.
A vendor can be a one time vendor or regular vendor
A vendor master record contains the vendors name and

address, as well as data such as:
the currency used for ordering from the vendor
terms of payment
names of important contact persons (sales staff)

Organization of vendor master records
A vendor master record is subdivided into three

different data areas:
General Data
Company code data
Purchasing organization data

Creating vendor master record.
Menu Path
Logistics -> Material management -> purchasing ->master
data vendor ->purchasing ->create
In the initial screen you can enter,

Vendor number (For External number assignment )
Vendor account group
Purchasing organization

Creating vendor master record.
In general data you can maintain,

Address
Control
Payment transactions
In Purchasing organization data you can maintain,

Purchasing Data
Partner functions

Changing vendor master record
You cannot change Vendor account group (One time

vendor cannot be converted in to a regular vendor)
Blocking a vendor
Flag for deletion
Changing other options
Automatic PO
Vendor schema group
Payment terms
Discount

Service Master Records
Descriptions of all services that may need to be

procured can be stored.
The organizational level at which services are procured
is the purchasing organization.
In addition to a unique description of the service, a

service master record contains further information that
is necessary for procurement purposes (such as texts
or units of measure).

Service master records
You can store price information at various levels: for

example, $100 per hour as the "market" or "own
estimated" price, $98 as vendor Acmes price and $105
as vendor Zeniths price for service A.
The individual service master records can be grouped

into different service types (e.g. trades or activities).

Creating a service master record
In the initial screen you can enter

Service number (if external number assignment)
Service category
In the Basic data screen enter,
Base unit of measure
Description of services
Valuation class (3200 for services)
In the classification screen enter,
The class for classifying the services

Concept of Purchasing info rec in SAP.
An info record represents a material-vendor

relationship.
The info record contains concise information about a

vendor and a material that you already procure from
that vendor.
Info records are created automatically when you order

a material. You can also create, change, and delete info
records.

Purchasing info rec (Contd)
Use of Purchasing info rec in PO creation

Net price for the item will be defaulted in PO
All the pricing conditions will be defaulted
other uses include

Remainders
Delivery tolerance
Shelf life
Purchase order text

Purchasing info rec (Contd)
Use of info rec in Vendor evaluation
Order price history

Quotation price history
Delivery reliability
Quantity reliability

Concept of source list in SAP
A source list specifies the possible sources of supply

for a material over a given period of time
It shows the time period in which a material may be

ordered from a given vendor
Source list can be created automatically using

generate source list option
Source list can also be maintained manually.

Source List (Contd)
Uses of source list

Fixed vendor
Vendor blocking
Auto PO creation
Source list requirement at plant level

Can be made mandatory

Master Data for India Version
Chapter ID
Excise Law
Chapters, Headings and subheadings
Example 7216.10
72 - Iron and Steel
16 - Angles, shapes and sections
Material and Chapter ID combination

Material assessable value
Net dealer price
Material assessable value

Tables for excise purpose (contd..)
MODVAT Determination
Input material MODVAT
output material MODVAT
Vendor Excise details
SSI Rates
Excise Tax rates

MM - Purchasing

Target Group
Purchase department

Course Objectives
On conclusion of this course you should

be able to
Understand the concepts in SAP -

Purchasing component
Create or change PRs
Create, change or compare RFQs
Create contracts

Introduction
Contents
Purchasing overview
Purchase requisitions
Request for quotations
Outline agreements
Exercises
Solutions

Purchasing - overview
The Purchasing component has the following tasks:

external procurement of materials and services
determination of possible sources of supply for a requirement
identified by the materials planning and control system
determination of possible sources of supply for a requirement arising
directly within a user department
monitoring of deliveries and payments to vendors

Purchasing - integration with other modules
Integration
Controlling (CO)
Purchase orders for materials intended for direct consumption
They can be directly assigned to a cost center or a production
order.
Financial Accounting (FI)
Vendor master is maintained by both accounting and purchasing
departments.
Through PO account assignment, Purchasing can also specify
which G/L accounts are to be charged in the financial accounting
system.

Purchasing - integration with other modules
Sales and Distribution (SD)

Within the framework of materials planning and control, a
requirement that has arisen in the Sales area can be passed on
to Purchasing.
When a requisition is created, it can be directly assigned to a
sales order.

Process flow in purchasing
Determination of Requirements
Materials requirements are identified either in the user departments
or via materials planning and control.
It includes both MRP proper and the demand-based approach to
inventory control.
The regular checking of stock levels of materials defined by master
records, use of the order-point method, and forecasting on the basis
of past usage are important aspects of the demand management.
You can enter purchase requisitions yourself, or they can be
generated automatically by the materials planning and control
system.

Source Determination
The Purchasing component helps in identifying potential sources of
supply based on past orders and existing longer-term purchase
agreements.
This speeds the process of creating requests for quotation (RFQs)
Vendor Selection and Comparison of Quotations

The system is capable of simulating pricing scenarios, allowing you
to compare a number of different quotations.
Rejection letters can be sent automatically.

Purchase Order Processing

The Purchasing system adopts information from the requisition and
the quotation to help you create a purchase order.
You can generate Pos yourself or have the system generate them
automatically.
Vendor scheduling agreements and contracts are also supported.
Purchase Order Follow-Up

The system checks the reminder periods you have specified
System automatically prints reminders or expediters at the
predefined intervals.
It provides you with an up-to-date status of all purchase requisitions,
quotations, and purchase orders.

Goods Receiving and Inventory Management

Goods Receiving personnel can confirm the receipt of goods simply
by entering the Po number.
By specifying permissible tolerances, buyers can limit over- and
underdeliveries of ordered goods.
Invoice Verification
The system supports the checking and matching of invoices.
Invoice verification can be based on purchase orders or GR
documents or directly to a vendor without any document
reference.

Std. Menu options in Purchasing
Create
Use this option to create a purchasing document .
Enter the required information and save the document .
The document is then stored under a unique number.
Change
Use this option to change a purchasing document .
You need the document number in order to access the document.

Display
Use this option to display a purchasing document .
You cannot change or add any information to the document that is
displayed .
You need the document number in order to access the document.
List displays/reporting
You can use these options to generate reports analyzing purchasing
documents
Example
List of all purchase orders for Vendor ABC

Follow-on functions
This option allows you to perform tasks related to (following on from)
but not included in the purchasing functionality.
Example
Entering a goods receipt or an invoice in the system.
Messages
This option enables you to print or transmit documents in message
form
Example
Transmission via fax, Printouts etc

Purchasing Documents
Definition
A purchasing document is an instrument used by Purchasing to
procure materials or services.
Types of purchasing documents

Request for quotation (RFQ)
Transmits a requirement defined in a requisition for a material or
service to potential vendors .
Quotation
Contains a vendor's prices and conditions
It is the basis for vendor selection.

Purchasing Documents
Purchase order (PO)

The buying entitys request or instruction to a vendor (external
supplier) to supply certain materials or render/perform certain
services/works,
It formalises 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.

Purchasing documents
Structure
Each purchasing document is subdivided into two main areas:
The header
The header contains information relevant to the whole document .
Example, information about the vendor and the document number is
contained in the document header
The individual items .
The items specify the materials or services to be procured .
Example, The material description and the order quantity are
specified in each item.

The additional data

It provides extra information about the item, and has no direct
connection with the item procurement data.
Example,
account assignment data
PO history for an item, which contains information on already
recorded goods and invoice receipts relating to the item.
Classification of Purchasing Documents

Purchasing documents are differentiated in the SAP system via the
document type .
Example, relevant number range depends on document types

Document types are defined for RFQs, purchase orders, and

contracts
Numbering of purchasing documents

Each document is assigned a unique number .
This number can be assigned internally or externally , depending on
the policy .
Internal number assignment means that the system assigns the
number.
External number assignment means that the person creating the
document must supply it.
Alphanumeric assignment is only possible in the latter case.

Definition
A purchase requisition is a request or instruction to Purchasing to
procure a certain quantity of a material so that it is available at a
certain point in time.
It is an internal document.
Requisitions can be created in the following ways:

Directly: Someone from the requesting department enters a purchase
requisition manually.
Indirectly: The purchase requisition is created via another SAP
component.
Purchase requisitions can be subject to a release

procedure.

Purchase requisitions - integration
Requisitions can be created indirectly in the following

ways:
via materials planning and control
The component Consumption-Based Planning suggests
materials that need to be ordered on the basis of past
consumption or usage figures and existing stock levels.
The order quantity and the delivery date are determined
automatically.
Materials planning and control can stipulate that a purchase
requisition is to be resubmitted to the purchasing department if it
has not been processed after a predefined period of time.

Purchase requisitions - integration
Requisitions are generated automatically from

production orders if
They contain an external processing operation (e.g. subcontracting
work)
A precondition is that the control key for the operation allows or
prescribes external processing.
they contain non-stock components

Procurement types
Standard
Subcontracting
Components to be provided can be entered.
Consignment
Stock transfer
External service
Service specifications can be entered

Manual creation of PR
Things to remember
Item category
Account assignment category
Purchasing group
Requirement tracking number
Delivery date
Item with or with out material master record
Order quantity

Creating Request For Quotation
Automatically from PR
Manually
With reference to PR
With out reference to PR
Delivery address
Address of the company asking for quotation, by default it is the
address of E+L. But it can be changed.
vendor address
Just enter the codes of the vendor, System will take other details
from vendor master.
Quotation dead line
Delivery date

RFQ (contd)
Printing RFQ
Send the Printed RFQ to the vendors
Receive the quotation from the vendor
Maintain the RFQ
Enter the net price quoted by the vendor
Enter the pricing conditions
Terms of payment
Update the info record if reqd

Quotations
Compare the quotations

Maintain the collective number in the RFQs
Quotations can be compared based on price
Discounts and delivery costs can be included
Comparison can be based on effective price also
System compares and gives the ranking list
Percentage basis for comparing quotations

Mean value equals 100%
Maximum value equals 100%
Minimum value equals 100%

Outline agreements with the vendor
To Setup longer-term purchasing arrangements with

vendors regarding the supply of materials or the
performance of services.
Outline agreements can be subject to a release

(approval or clearance) procedure.
Agreement types
Quantity contract
Value contract

Outline agreements
Structure
Document header: containing information relating to the entire
agreement. For example, the vendor information and header
conditions are in the document header
Items: containing the information specific to the relevant material or
service.
statistics on ordering activities for the item
quantity or price of the item
conditions, such as quantity discounts and surcharges

Outline agreements
Texts in Outline Agreements

Header texts
Item texts
You can create your own text types
Creating a outline agreement

Outline agreement can be created with reference to a RFQ or without
any reference
Important terms
Purchase group

Outline agreements
Target quantity
Target Value
Pricing conditions
Validity starting and ending date
Vendor address
Delivery address
Remainders

MM - PURCHASING

Target Group
Purchase department

Course Objectives

able to
Create a new PO
Make changes to existing PO

Print PO
Navigate through purchasing information
system

Introduction
Contents
Creating POs
Printing of POs
Printing Remainders
Changing or canceling POs
Purchasing information
Exercises
Solutions

Purchase order
Definition
Formal request or instruction from a purchasing organization to a
vendor or a plant to supply or provide a certain quantity of goods or
services at or by a certain point in time.
Structure
Header
items
Additional data

Creating a Purchase order
Automatically from PR
Set automatic PO indicator for material and vendor
Maintain Purchasing info record
Maintain source list
Fixed vendor
PR from MRP or Manually created PR
Assign manually or automatically
Process the assigned PR to create PO

Create PO - Manually
Manually creating a PO
With reference to PR
Select the PRs
Select the items from PR
Copy the items in to PO
Enter the vendor
Enter the prices and pricing conditions
Update the info record if reqd

Create PO
With reference to RFQ

Select RFQ
Select the items
Copy the selected items in to PO
Enter the Price and pricing conditions
Update the info record if reqd.
Acknowledgement and confirmations

Create PO
With out any reference

In this case you need to enter
Vendor code
Delivery date
Item category
Account assignment category (if reqd)
Order type ( NB For std purchase order)
Plant ( 4000 - default plant )
Storage location

Creating a PO (contd)
Important terms in PO
Vendor
For creating a PO you need to enter vendor code
Vendor master should exist for this purpose
if you dont want to maintain all the details for a vendor you can
create a one time vendor
Item category
Standard
Subcontracting
service

Create PO (Contd)
Account assignment category

Specification of the account assignment objects that are charged
in the case of a purchase order for a material that is intended for
direct usage or consumption.
Examples
Asset
Sales order
Production order
Cost center
Types of account assignment
Single account assignment
Multiple account assignment

Create PO (contd)
Delivery date
Date format
Day format
Week format
Month format
Delivery date entered here is only expected delivery date
You can also specify a statistical delivery date

Create PO (contd)
Units of measure in PO
The order unit
This is the unit you specify in connection with the order quantity.
The order price unit
This is the unit that applies in connection with the net price and which is
taken as the basis for invoice verification.
If the order price unit does not correspond to the order unit, and if no
conversion factor is specified in the system, you must enter a conversion
factor on the item detail screen.

Create PO (Contd)
Example for units of measure in PO

Order quantity 24
Order unit Box
Gross price per unit $10
Order price unit (number) 1
Order price unit (of measure) kg
Conversion factor 24 boxes 1 kg

Create PO (Contd)
Conditions
This component enables you to store pricing stipulations agreed
with the vendor
Examples are applicable discounts or surcharges, or stipulations
regarding the payment of freight costs in the system.
There are three kinds of price in Purchasing:
Gross price
Price without taking any possible discounts and surcharges into account

Create PO (Contd)
Net price
Price taking any applicable discounts and surcharges into account
Effective price
Net price after deduction of cash discount, with allowance for any
miscellaneous provisions, delivery costs, and non-deductible taxes.
Terms of Payment
Example
Within 14 days 2% discount
Within 30 days due net

Create PO (Contd)
Inco terms
Incoterms are internationally-recognized terms of delivery
reflecting the standards set by the International Chamber of
Commerce (ICC).
Example
FOB - Free On Board. This means that the buyer has to bear all
costs and risks of loss of or damage to the goods from that point.
You can specify Incoterms for an order item that differ from those in
the PO header.

Creating PO from outline agreement
In the initial screen for Create PO,

Select the Outline agreement and items
Copy the items in PO
In the item overview screen

Enter the quantity
If the quantity exceeds the target quantity system gives a warning

Texts in PO
Header texts
Header note
Pricing types
Dead lines
Terms of delivery
Shipping instructions
Terms of payments
warranties
Penalties for breach of contract

Confirmations
Purpose
This component can be used, if you wish to have your vendor
provide you with various kinds of confirmation regarding delivery
dates and quantities
It enables you to base your materials planning and control activities
on more up-to-date data than that contained in purchase orders.
Confirmation control key

Shipping notification
Order acknowledgement

Shipping notification
Shipping Notification
Definition
A vendors confirmation to a purchasing organization of the delivery
date for a certain quantity of ordered materials
It can be for the date of performance of ordered services also.
Structure
A shipping notification consists of several items in which the notified
(confirmed) quantity of the material or service is specified.

Confirmations from the Viewpoint of IM
When you post goods receipts, there are several ways

of finding the associated purchase orders.
Enter the PO number
Enter the shipping notification number
Enter the transport identification code
If you establish a link via the PO number itself, the

relationship is unique
i.e. one goods receipt (GR) against one purchase order

Confirmations from the Viewpoint of IM
If you enter the number of the shipping notification

The system selects all purchase orders containing this number
System suggests the notified quantities for the GR document.
Prerequisites
If you wish to match up GRs against POs via the shipping notification
number ,
shipping notification must exist as a separate document.

Releasing the PO
Release Procedure for External Purchasing Documents

External purchasing documents (i.e. purchasing documents other
than requisitions) are released at header level.
Item-by-item release is not possible.
These documents can only be released using the release procedure
with classification.
Release Conditions
The release conditions determine the release strategy in accordance
with which a PO is to be released.
If a PO does not meet the conditions for a release strategy, it is
automatically released for further processing.

Release procedure
Release Strategy
The release strategy defines the approval process for purchasing
documents.
The strategy specifies the release codes necessary and the
sequence in which releases have to be effected.
A maximum of eight release codes can be defined.
The assignment of the release strategy to a purchasing document is
based on the release conditions.

Release procedure
Release Code
Definition
The release code is a two-character ID allowing a person to
release (clear, or approve) an external purchasing document.
Who may work with which release codes is basically controlled
via a system of authorizations.
Release Prerequisites
The release prerequisites indicate the sequence in which PO must
be approved via the release codes.

Printing a PO
Menu path
Purchase order -> Header -> Messages
Data required
Output type
Medium
Communication method
Select the printer
Further Data
Repeat output
Change output

Printing the remainders
Types of expediting letters

Remainders
A negative number of days means that a reminder is to be issued
to the vendor n days prior to the delivery date
Urging letters
A positive number of days means that a letter or message urging
delivery is to be issued n days after the due date.
Message type - MAHN (Dunning letter)

Changing and blocking POs
If you change a PO after it has been sent to the vendor, a change

document is generated that can be sent to the vendor.
This tells the vendor what you have changed.
If the goods have already been delivered, then the changes you can
make to the PO are limited.
For example, you cannot change the quantity to one that is less
than the quantity delivered.
If the invoice has been received or the goods have been paid for, and
your intended change affects the price, the change will be ineffective.
You can display the PO history for an item to determine whether
deliveries have been received or the item has been invoiced.

List displays
List of POs for a vendor or for a range of vendors
This gives the details of the purchase order like still to be
delivered, still to be invoiced etc.
List of POs for a material or for a range of materials
List of POs for a account assignment
List of POs for a requirement tracking number
Reporting
General analyses
Order value analyses
Subcontracting stocks per vendor

Material
Purchasing values
Purchasing quantities
On time delivery
Qty reliability
Frequencies
Vendor
Material group
Purchasing group

MM - Inventory management

Target Group
Purchase department
Stores department

Course Objectives
On conclusion of this course, you

should be able to
Do planned and unplanned goods receipts

Do Issue of Goods
Do transfer posting of goods

Manage stocks of the company on both
quantity and value basis

Introduction
Contents
Overview
Integration with other modules
Type of stocks
Concept of material documents
Goods movements
Movement type concept

Inventory management - overview

What is inventory management ?
SAP's Inventory Management system allows you to

manage your stocks on a quantity and value basis
The stocks are managed not only on a quantity basis but also by
value - a prerequisite for cost accounting. With every goods
movement, the following values are updated:
the stock value for inventory management
the account assignment for cost accounting
the corresponding G/L accounts for financial accounting via automatic
account assignment

What is inventory management ?
Planning, Entry, and Proof of Goods Movements

Goods movements include
external movements (goods receipts from external procurement,
goods issues for sales orders)
internal movements (goods receipts from production, withdrawals of
material for internal purposes, stock transfers, and transfer postings).
For each goods movement a document is created which is used by
the system to update quantities and values and serves as proof of
goods movements.

Integration in Materials Management (MM)

As a component of Materials Management, Inventory Management is
directly linked with Material Requirements Planning , Purchasing, and
Invoice Verification.
Inventory Management forms the basis for material requirements
planning, which takes into account not only physical stocks but also
planned movements (requirements, receipts).
Quantities and values from the purchase order and the goods receipt
document are checked to ensure conformity with those in the invoice.

Integration in Production Planning (PP)

Inventory Management is closely linked to the Production Planning
module:
Inventory Management is responsible for staging of the components
required for production orders
Goods issue against production orders
The receipt of the finished products into the warehouse is posted in

Inventory Management.

Integration in Sales & Distribution (SD)

As soon as you enter a sales order, you can initiate a dynamic
availability check of stocks on hand.
When the delivery is created, the quantity to be delivered is marked
as "Scheduled for delivery."It is deducted from the total stock when
the goods issue is posted.
It is also possible to create sales order stocks.
These SD transactions are depicted in the Sales & Distribution
system.

Integration in Quality Management (QM)

In the case of a goods movement, the system determines whether
the material is subject to an inspection operation.
If so, a corresponding activity is initiated for the movement in the
Quality Management system.
Financial Accounting (FI)

Automatic account assignment, a procedure during which the system
determines the accounts relevant for the given goods movements.

Controlling (CO)
The interface to the cost accounting system is activated in the
case of material consumption
For example, when materials are issued for various account
assignment objects such as orders or cost centers.
Cost accounting is also involved when goods receipts are
assigned directly to cost centers or orders.

IM - Material Master
Relevant views
Accounting
Price and accounting information.
Examples:
type of price control
valuation class.
Materials Planning
Information for materials planning.
Examples:
safety stock, reorder level, availability check.

Purchasing
Procurement information for a material.
Examples:
overdelivery and underdelivery tolerances
purchasing order unit of measure (order unit).
Storage
Information for warehousing and storing the material.
Example:
unit of issue
storage conditions, fixed bin location

Quality Management
Information for sampling and inspecting a material.
Examples:
indicator for goods receipt via quality inspection
Work Scheduling
Information for producing the material.
Examples:
production unit
overdelivery and underdelivery tolerances allowed.

IM - Data Required
For Inventory Management, you must maintain the

following data:
Plant data
This data can be maintained via different views (for example, via
Purchasing, Storage, Work scheduling).
You have to maintain at least one view that requires the entry of
the organizational level plant.
Valuation data
Valuation data is required for managing the stock by value.
You maintain this data via the Accounting view.

IM - Data Required
Storage location data

You maintain the storage location data via the Storage view.
If a material is located in a storage location, the storage data for
that storage location must exist in the material master record, so
that the system can manage the stock quantities at storage-
location level.
Storage data can be manually entered when the material master
record is created
It can be automatically created during the first goods movement in
that storage location.

Types of stocks
Total valuated stock

Sum of all valuated stocks of a material.
It consists of all the types of stock your company owns.
Unrestricted-use stock
Company's own stock that is physically located in the warehouse,
valuated, and not subject to any kind of usage restrictions.
quality inspection stock

Company's own stock that is in quality inspection.

Types of stocks
Stock in quality inspection is valuated but does not count as

unrestricted-use stock.
For MRP, it is either available or not available, depending on how the
system is set.
Blocked stock
Company's own stock that should not be used.
It does not count as unrestricted-use stock for Inventory
Management
It is usually not available for MRP.

Types of stocks
Restricted-use stock
Valuated stock of a material managed in batches held by a company
(and belonging to that company)
Usage of this stock is subject to certain restrictions. This category of
stock is only used when batch status management is active.
Blocked stock returns

Stock that was returned by the customer and conditionally accepted.
It is neither valuated nor does it count as unrestricted-use stock.

Types of stocks
stock in transfer
Quantity that was already withdrawn from stock at the issuing
location but that has not yet arrived at the receiving location
Stock in transfer is managed in the valuated stock of the receiving
location, but it does not yet count as unrestricted-use stock.
Stock in transit
Stock in transfer that is created in the case of a stock transfer via a
stock transport order.

Types of stocks
Available stock
Dynamic stock that is calculated by MRP taking any receipts, issues,
the current available stocks into account.
Which requirements, receipts, and issues are included in the
availability check is defined in the Customizing system.
Reserved stock
Sum of all quantities of a material that are reserved for withdrawal.
Reserved stock is usually not available from the point of view of MRP
For Inventory Management it still counts as unrestricted-use stock.

Types of stocks
Planned receipts
Sum of all quantities whose receipt has been planned with
reservations.
Planned receipts are usually already available from the point of view
of MRP
For Inventory Management they do not yet count as unrestricted-use
stock.
Open PO quantity (total)

Sum of all outstanding PO quantities for a material.
The open PO quantity usually increases available stock in MRP
It does not increase unrestricted-use stock in Inventory Management.

Types of stocks
Open order quantity (total)

Sum of all outstanding order quantities for a material.
The open order quantity usually increases available stock in MRP
It does not increase unrestricted-use stock in Inventory Management
Goods receipt blocked stock

Sum of all quantities of a material that were delivered by vendors for
purchase orders and that have been conditionally accepted.
GR blocked stock is neither valuated nor does it count as
unrestricted-use

Types of stocks
Stock scheduled for delivery

Sum of all current deliveries to customers for which goods issues
have not yet been posted.
Like reserved stock, stock scheduled for delivery is usually not
available from the point of view of MRP
It counts as unrestricted-use stock for Inventory Management.
Negative stocks
Negative stocks are required if, for example, goods issues are
entered before the corresponding goods receipts for organizational
reasons and the material is already physically located in the
warehouse.

Batch management
With batch handling, you can manage not only

production lots from in-house production, but also
production lots from vendors as separate entities.
Before you can manage batches of a material in stock,
you must first specify in the material master record
that the material is to be managed in batches for the
specified plant.
To do this, you must set the batch management
requirement indicator in the material master record
At the time of goods receipt system will allocate the
batch number

Goods movements
Definition of Goods Movement

A goods movement is an event that causes a change in stock.
Good receipt
A goods receipt (GR) is a goods movement with which the receipt of
goods from a vendor or from production is posted.
Goods issue
A goods issue (GI) is a goods movement with which a material
consumption, or a shipment of goods to a customer is posted.

Goods movements
Stock Transfer
Transfer of material from one plant to other plant or from one storage
location to other storage location
Transfer Posting
changes in stock type or stock category of a material.
Examples of transfer postings are:
Transfer Postings From Material to Material
Release from quality inspection stock
Transfer of consignment material into company's own stock

The document concept
When posting a goods movement in the SAP System,

the following documents are created:
Material document
a material document is generated that serves as proof of the
movement
Accounting document
If the movement is relevant for Financial Accounting an
accounting document is created
Cost accounting Document

Movement types
Movement Type
When you enter a goods movement in the system, you must enter a
movement type to differentiate between the various goods
movements.
A movement type is a three-digit identification key for a goods
movement.
Examples
Goods receipt for a purchase order 101
Goods issue for a cost center 201
Release from quality inspection stock 321

Movement types
Control Functions of the Movement Type

The movement type has important control functions in Inventory
Management.
For example, the movement type plays an important role in
updating of quantity fields
updating of stock and consumption accounts
determining which fields are displayed during entry of a document in
the system

Material documents
Changing a Material Document

you can not change a document once it has been posted.
If you made a typing error when entering a goods movement you
must reverse the movement with a reversal document
Although you cannot change a posted document, you can use the
function "Change Material Document" to
enter additional information for the document.
print a goods receipt/issue slip for the document

Planning goods receipts
Referencing Document During Entry of Goods

Movement
The documents used to plan goods receipts serve as reference
documents for entering the goods movement

GR for purchase order

Return Deliveries
When you enter the return delivery, you should

reference the purchase order or the material document,
so that the system can
suggest data (for example, the storage location), to simplify data
input
perform certain checks (the returned quantity must not exceed the
delivered quantity)
reduce the quantity delivered to-date
reverse other updates that occurred (for example, for goods receipt
into consumption) when the goods receipt was entered

Shelf Life Expiration Date Check
When you enter a goods receipt, it is possible to check

the shelf life of a material.
Prerequisites
The shelf life is only checked if the following prerequisites are met:
The minimum remaining shelf life is maintained in the material
master record or in the purchase order.
The minimum remaining shelf life is the minimum number of days for
which the material must keep for the goods receipt to be accepted by
the system.
.

Other goods receipts
initial entry of stock balances

external goods receipts without a purchase order
internal goods receipts without a production order
goods receipts of by-products
deliveries free of charge
returns from the customer

Reservations

Goods issue for an order

Results of a Goods Issue Posting
A goods issue has the following results in the system:

material document is created
accounting document is created
Creation of a Goods Receipt/Issue Slip
Stock Update
Update of G/L Accounts
Consumption Update
Reservation Update
Order Update

Printing documents

MM - INVOICE VERIFICATION

Target Group
Purchase department
Stores department
Finance department

Course Objectives

able to
Enter and verify vendors invoice

Enter and verify vendors excise invoice
Devalue materials
Carry out physical inventory

Introduction
Contents
Invoice entry and verification
Credit memo
Excise invoice
Material devaluation
Physical inventory
Inventory management information
Exercises
Solutions

MM - invoice verification
Invoice Verification in Materials Management serves

the following purposes:
It completes the materials procurement process
It allows invoices that do not originate in materials procurement (for
example, services, expenses, course costs, etc.) to be processed
It allows credit memos to be processed, either as invoice
cancellations or discounts
Invoice Verification does not handle the payment or the

analysis of invoices.
The information required for these processes is passed
on to A/C department.

Invoice verification
Invoice Verification tasks include:

Entering invoices and credit memos that have been received
Checking the accuracy of invoices with respect to contents,
prices, and arithmetic
Executing the account postings resulting from an invoice
Updating certain data in the SAP system, for example, open
items and material prices
Checking invoices that were blocked because they varied too
greatly from the purchase order

Types of Invoice Verification
As a rule, an invoice refers to a transaction for which

the issuing party requests payment.
Invoice Verification differs depending on the type of
invoice involved:
Invoices based on purchase orders
With purchase-order-based Invoice Verification, all the items of a
purchase order can be settled together,
Invoices based on goods receipt
With goods-receipt-based Invoice Verification, each individual
goods receipt is invoiced separately.

Types of Invoice Verification
Invoices without an order reference

When there is no reference to a purchase order, it is possible to
post the transaction directly to
a material account
a G/L account
or an asset account.

Data required for invoice verification
The key data required for Invoice Verification is

Master data
Transaction data
Material data
Material data is information on the materials bought or produced in
the company
Vendor data
Vendor data provides information on the suppliers a company deals
with.

Data required for invoice verification
Accounting data
Accounting data is used to define G/L accounts
Transaction data
Transaction data records transactions or events in the SAP system.
Purchasing document
Material document
Accounting document

Invoice data
An invoice contains various information, such as:

Who issued the invoice?
Which transaction does the invoice refer to?
How much tax do you have to pay?
If the invoice refers to a particular transaction, the

system will automatically retrieve information
pertaining to the transaction
Terms of payment
Quantities to be invoiced
The amounts the system expects per item

Screens for Invoice Verification
The initial screen

This contains general data such as
company code
currency
invoice reference.
The vendor screen

This contains data on the vendor
The terms of payment
taxes.

The selection screen

This lists the items of the transaction specified on the initial
screen.
The layout of the selection screen depends on whether the
invoice is based on a purchase order or a goods receipt.
Invoice Based on a Purchase Order
All the purchase order items are listed.
The quantity that is still to be billed (i.e. the difference between the
quantity delivered and the quantity invoiced so far) appears as a default
in the Quantity column.

Invoice Based on a Goods Receipt

Goods-receipt-based invoice verification must have been defined in
the purchase order.
If the GR-IV field on the item screen in the purchase order is not
selected, the goods receipt cannot be settled in this way.
There are two ways of finding the correct transaction in goods-
receipt-based Invoice Verification:
You can enter a delivery note number or a GR document number and
the system will list the items for the goods receipts on the selection
screen;
you can enter a purchase order number and the system will list all
the GR documents

Parking the invoice
Preliminary Posting
You can enter an invoice (or a credit memo) without posting it and
simply "park" it.
If you park an invoice or a credit memo the system does not make
any postings.
A parked document can be changed as often as you like.
When data is added or changed, the changes are noted by the
system.
When no further changes are required, you can then post the parked
document.

Parking the invoice
The preliminary posting function can be of great

advantage if:
You are interrupted when entering an invoice. You can park the
document and continue processing it later on. This saves you time
having to enter the data twice.
You wish to clear up some questions before you post an invoice. You
can park the document and continue processing it later on.
You wish to split the Invoice Verification process. One employee can,
for example, park an invoice without checking it, while another
carries out the actual checks and posts the document after making
any necessary corrections.

Data Update When Posting an Invoice
When you post an invoice, the system carries out the

account movements and updates the following
The system generates a Financial Accounting document that displays
the accounts involved in the posting and the amounts posted to these
accounts.
The system creates a purchase order statistic for each item in the
purchase order.
The moving average price is updated in the material master record If
the invoiced price differs from the price in the purchase order for a
material with moving average price control

Blocking the invoice
When an invoice is blocked, Financial Accounting

cannot pay the invoice.
The invoice must first be released in a separate step
before it can be processed.
Variances in an Invoice Item
Quantity variance (M)
Price variance (P)
Variance in order price quantity (G)
Schedule variance (T)
Quality inspection (I)

Credit memos
The term credit memo always refers to a credit memo

from the vendor.
Posting a credit memo always leads to a debit posting
to the vendor account.
Two types of credit memos are possible:
Credit memos that refer to a purchase order or goods receipt
Credit memos that do not refer to a transaction.
Processing of credit memos is same as invoice

verification

Types of Delivery Costs
In the SAP System, there are two types of delivery

costs:
Planned delivery costs
They are entered in the purchase order. Provisions are set up for the
relevant costs at goods receipt. The delivery costs posted at goods
receipt can be referenced at invoice entry.
Unplanned delivery costs
They are only entered when the invoice is entered. No provision is
made at goods receipt.

Creating a excise invoice
Transaction J1IA
Required entries
Purchase order number
Excise group
Vendors Excise invoice number
Excise invoice date
In the details screen you can change

Description
Quantity
Excise duty

Valuation - Lowest value determination
The Lowest Value Principle

The lowest value principle is a method of valuating material stocks
for balance sheet purposes.
The aim of this method is to valuate stocks as accurately as possible
according to the recognition-of-loss principle.
Profits that exist solely on the books as a result of changes in market
prices are to be avoided.
Expected losses are included in the balance sheet.

Lowest value determination
Methods
In the SAP System there are various methods of determining tax or
commercial prices:
lowest value determination based on current market prices
system searches for the lowest price from among the various prices
stored for each material.
lowest value determination based on rate of movement
lowest value determination based on range of coverage
Range of coverage = average stock : average consumption

Lowest value determination
Calculating the Movement Rate

Movement rate = Total quantity of receipts/issues : Material stock x
100
If the percentage of receipts/issues is smaller than Movement rate,
the material is slow or non-moving
Devaluation percentage
Devaluation indicator
Updating prices in the material master record

Physical inventory
Every company must carry out a physical inventory of

its warehouse stocks at least once per fiscal year to
balance its inventory
Stocks that can be inventoried
unrestricted-use stock in the warehouse
quality inspection stock
Blocked stock

Physical Inventory Process
The process of physical inventory can be divided into

three phases:
Physical inventory preparation
Create a physical inventory document.
Block materials for posting.
Print and distribute the physical inventory document.
Physical inventory count
counting stocks
entering the result of the count on the physical inventory
document printout

Physical inventory
Physical inventory analysis

entering the result of the count into the system
initiating a recount, if necessary
posting inventory differences
Processing Steps
Creating a physical inventory document
Entering the Physical Inventory Count
Post inventory differences

Physical inventory
posting the physical inventory count and inventory

differences
If a physical inventory document exists, the following are combined in
this step:
The count is posted.
Any inventory differences are posted.
Posting inventory differences without reference to the

physical inventory document
A physical inventory document is created.
The count is posted.
Any inventory differences are posted.

Physical inventory
Physical Inventory Status

To monitor physical inventory processing, each physical inventory
document records the inventory steps which have been carried out.
This information can be found in an item or document header.
physical inventory history for an item
In an inventory history you can determine which steps have been
carried out for the item.
document header
In the document header, the fields Count status, Adjustment status
and Delete status provide information on whether some or all of the
items have been counted, posted (inventory differences), or deleted.

You can perform the following functions by selecting

Environment from the Inventory Management menu.
List display
The List display function offers reports for documents posted in
Inventory Management.
Example: material documents for a material.
Stock display
Example: Stock overview
Information
The Information function allows you to display data (master data,
transaction/movement data) from other applications.
Example: displaying a purchase order.

Balances display
The Balances display function offers analysis of the stock
accounts and of the GR/IR clearing account.
Consignment
The Consignment option permits analysis of the consignment
stocks from vendors as well as the consignment stocks and the
returnable packaging stocks at the customers site.
Batch where-used list
Batch search strategy

Material analysis
Stock values
Receipts and issues
Inventory turnover
Inventory turnover of the value of valuated stock is calculated as
follows:
Value of total consumption / Value of average valuated stock
Range of coverage
The range of coverage of the value of valuated stock is
calculated as follows:
Value of valuated stock / value of average total usage / day

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CONTENTS

TATA CONSULTANCY SERVIES

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On conclusion of this course, you should be

Maintain MM related views of Material

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Major components of MM- Module

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Finance / Asset Management

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Financial and Managerial Reporting and Analysis

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Highest Hierarchical Level in SAP(e.g. a corporation)

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Responsible for Procurement for One or More

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Links to Production (PP), Materials Management

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A Location within a Plant where Inventory is

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The material master contains information on all the

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In Purchasing for ordering materials.

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It determines type of industry .

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Materials with the same basic attributes are grouped

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From logistics screen click

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In Purchasing screen you can enter

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In purchase order text screen,

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vendor master record is maintained by both Accounting and

A vendor can be a one time vendor or regular vendor

A vendor master record contains the vendors name and

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A vendor master record is subdivided into three

Company code data

Purchasing organization data

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In the initial screen you can enter,

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In general data you can maintain,

In Purchasing organization data you can maintain,

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You cannot change Vendor account group (One time

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Descriptions of all services that may need to be

In addition to a unique description of the service, a

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You can store price information at various levels: for

The individual service master records can be grouped

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In the initial screen you can enter

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