Overview of SAP MM Module

Overview of SAP MM Module

What is SAP
SAP is a Enterprise resource planning (ERP) software owned by SAP Germany.
SAP stands for systems Applications and Products in data processing
SAP has various modules like MM, SD, FI, HR, PM, PS, PP, QM which are linked to each other

Overview of SAP MM Module

•       Processes in Procurement

•       Inventory management and physical inventory

•       Pricing in Purchasing

•       Invoice verification

Topic 1: Processes in Procurement

•       Basics of Procurement

•       Master data

•       Procurement of Stock Material

•       Procurement of Consumable material

•       Procurement of External services

•       Contracts and Scheduling agreements

•       Document Release procedure

Topic 2: Inventory management and Physical inventory

•       Goods receipt

•       Stock transfers and Transfer postings

•       Reservations

•       Goods issues

•       Special stocks as below two types

Sub contracting

            Vendor Consignment

•       Material valuation and split valuation

•       Physical inventory and cycle counting

•       Movement types

Topic 3: Pricing in Purchasing

•       Conditions in purchasing

            Access sequence, condition types and Pricing schema (pricing procedure)

•       Price determination

            How is price determined in PO

•       Customizing pricing

            Create condition tables, access sequence, condition types and pricing procedure

Topic 4: Invoice verification

•       Basics of invoice verification

•       Taxes cash discounts and foreign currency

•       Variances and invoice blocking

•       Invoices for POs with Account assignment

•       Delivery costs

•       Invoices without reference to POs

•       Credit memos

•       Invoice parking

•       Automatic settlements

Basics of Procurement

In Basics of Procurement we will study about below sub topics

•       Organizational Structure

•       Types of Purchasing organization

•       Procurement cycle – Creation of purchase order to invoice verification

Organizational Structure in SAP MM

Organizational Structure in SAP MM

•       Client is the organizational unit within the R/3 system with its own data, master records and set of tables. In business perspective client forms a corporate group.

•       Company Code is the central organizational unit of financial accounting. A company has its own balance sheet.

•       Plant is a organizational unit where production, procurement, plant maintenance and material planning is carried out.

•       Storage location  is a organizational unit within a plant that allows differentiation of stocks.

•       Purchasing organization and Purchasing group

A purchasing organization negotiates conditions of purchase with vendors for one or more plants.

            A purchasing group is a buyer or a group of Buyers responsible for certain purchasing activities.

Types of Purchasing Organizations

•       Plant specific purchase organization

            Here the purchasing organization is responsible for procuring materials for one plant only.

•       Cross plant purchasing organization

A cross plant purchasing organization is set up for each company code. This purchasing organization procures materials for all plants assigned to the company code.

•       Cross company code purchasing organization

In a cross company code purchasing organization, we cannot assign a company code to purchasing organization in customizing.

In this case when we create a PO the systems asks to enter the company code for which we have to procure materials.

Plant specific purchasing organization
In plant-specific procurement, a purchasing organization is responsible for procuring materials for one plant only.

Cross plant purchasing organization
A cross plant purchasing organization is set up for each company code. This purchasing organization procures materials for all plants assigned to the company code.

Cross company code purchasing organization
In a cross company code purchasing organization, we cannot assign a company code to purchasing organization in customizing.
In this case when we create a PO the systems asks to enter the company code for which we have to procure materials.

Procurement cycle
Procurement cycle consists of below steps

•       Determination of requirements: The user department creates a PR for a material and passes it to purchasing department. If we have set up a MRP procedure for a material in the material master the R/3 system automatically generates a PR.

•       Determination of source of supply: The buyer determines the sources of supply. If there is a vendor for the material then a PO is raised by Buyer. If there is no source the buyer raises request for quotation (RFQ) and sends to possible sources.

•       Vendor selection: The system compares the prices of various quotations and automatically sends rejection letters (to high price quotations) and selects the vendor with least price.

•       Purchase order processing: When we are entering PO’s the system provides data like material PO text price etc. PO is created and sent to vendor.

•       Purchase order monitoring: The buyer monitors the status of PO at any time and checks if goods or invoice has been received for the PO item/items. If goods are not received system sends reminder letters automatically.

•       Goods Receipt: When the goods are received in stores the system compares the goods receipt qty with PO qty and posts GR.

•       Invoice verification: After goods receipt is done the vendor invoices are checked for accuracy of prices and other contents and invoice is posted.

•       Payment processing: Financial accounting deals with payments. Payment is done to vendor by Finance department.

Purchase Requisition

•       PR’s are created manually by user or automatically by system by MRP procedure.

•       When PR is created for materials with material master record the system captures the data from material master record into the PR. The purchasing dept. converts the PR into RFQ, PO or outline agreement.

RFQ/Quotation

•       The buyer can enter RFQ manually or automatically. The RFQ is sent to suitable vendors whose address is taken from vendor master records.

•       The vendors will send their quotations or rejection letters. The buyer enters the conditions, price & delivery dates of quotations in the system.

•       The system compares the quotations and finds the most favorable vendor.

Purchase order

•       A PO is a request to a vendor to supply certain goods or services under stated conditions.

•       A PO can be created without reference, w.r.t a PR, RFQ or another PO.

•       When we enter PO data the system suggests ordering address, terms of payment and incoterms from vendor master record, material text from material master record and price from purchasing information records. The PO is sent to vendor

Goods receipt

•       The goods receiving dept. will check the quantity & quality of item received w.r.t PO.  When we post goods receipt the system creates a material document (GRS).

•       The system also creates one accounting document  which records the effect of goods movement on value of stock.

•       The PO history is automatically updated in the system.

Invoice processing

•       When we enter a invoice w.r.t a PO the system suggests data from PO and goods receipt for PO. (For data like vendor material, qty, terms of payment etc).

•       If there are discrepancies between PO, goods receipt and invoice the system blocks the invoice for payment.

•       If the invoice is O.K. the system posts the invoice and financial accounting dept makes payment to vendor.

Exercise - Create a Purchase order, Post Goods receipt and Post Invoice

Create Purchase order ME21N

Change Purchase order ME22N

Display Purchase order ME23N

Vendor – 245

Purchasing org – 1111

Purchasing group – 001

Company code – 1111

Material – 3424

Qty – 10

Price – 11

Delivery date - Today

Plant – 1111

Storage loc – 1111

Tax code GX

ME21N

Input the data as shown highlighted in yellow

Press Enter

In the invoice tab page input Tax code GX

Click Check button

We get message “No messages issued during check”

Click Save

Exercise: Post Goods Receipt for Purchase order

Transaction code – MIGO

PO number – previously created PO

Plant – 1111, movement type – 101

Date – Today, Delivery Note – REF-1555

Qty received – 10 Pc

Check Item OK

Click Check and Post

Note down the material document number created

Go to ME23N PO display and in PO history tab page we can see the material document number

MIGO

Select Goods Receipt and Purchase order

Input the previously created PO 4500017808, Plant 1111, GR Goods Receipt 101 movement type

Input Delivery # DEL-17808

Qty in Delivery Note 10 KG

Check Item OK

Click Check button at top

We get message Document is OK

Click Post button at top

Material Document number – 5000000670

Display the material document in PO history

ME23N

Exercise: Post Invoice for the Purchase order

MIRO

Select Invoice

I put Invoice date – Today

Rreference – Our PO number

In PO Reference tab page select Purchase order/Scheduling Agreement

Input PO # 4500017808

Also select Goods/service items + planned delivery costs

Enter

In next screen above we will see Balance as 210 Rs which is equal to PO amount 210 Rs

Input this in Invoice Amount field in Basic Data tab

Enter

The Balance field becomes green which means the invoice amount is correct

Click Simulate button at top

A new pop up window will open and we can see the G/L Accounts to which the amount is posted

Click Back

Save

Invoive no 5105609252 created

Display Invoice in PO history

ME23N

In Purchase Order History tab in Item details, we can see the Invoice document number