Materials management

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  • Basics
    • Management of the Supply Chain
    • Supply chain business processes
    • Mapping Business Functions of a Company in the SAP System
    • Procurement Process Area
  • Operational Procurement
    • Receiving and processing of quotations from vendors in response to an RFQ
    • Creating and processing purchase requisitions 
    • Creating and processing purchase orders
    • Reference 
    • Blocking a Purchase Order Line Item
    • Automatically Create POs from Purchase Requisitions
    • Progress Tracking
  • Contracts Management
    • Outline Purchase Agreements
  • External Services Management
  • Special Procurement Types
    • Direct Procurement (51)
    • Stock Transfers (Interplant Transfers; 40)
    • Withdrawals from an Alternative Plant (70)
    • Subcontracting (30)
    • Consignment (10)
    • Returnable Transport Packaging
    • Pipeline Material
    • Managed special stocks
      • Sales Order Stock
      • Project Stock
  • Simplified Sourcing
  • Material Requirements Planning
  • Forecasting
  • Inventory Management
  • Physical Inventory
  • Invoice and Payables Management
  • Inventory Valuation and Account Assignment
  • Early Warning System
  • Reporting and Analytics
  • Serial Numbers in Purchasing
    • Supplier Management
    • Blanket (Framework) Purchase Orders

Basics

Management of the Supply Chain

  • Material flow: The material flow describes the movement of materials from the supplier to the company and then on to the customer (and, potentially, returns from the customer).
  • Information flow: EDI, file transfer.
  • Financial flow: The financial flow includes the financial documents created at each material movement.

Supply chain business processes

  • Procure-to-pay processes
  • Plan-to-product processes: products are produced in-house
  • Order-to-cash processes
  • Maintenance management: the spare parts and consumables required to maintain a
    plant’s machinery or assets are either procured
  • Project management: the materials required for a project

Mapping Business Functions of a Company in the SAP System

  • Client: a corporate group or individual company
  • Company code: an org. unit with an independent accounting department within external accounting
  • Company: a company can contain one or more company codes, they must use the same chart of accounts and the same fiscal year.
  • Plant: a manufacturing facility/ sales office/ factory/ virtual location (seaport)
    • Factory calendar/ Country & Region key
  • Storage location: a physical or virtual location to store material. By the way, the system can create storage locations automatically, when an inward goods movement  (not special stock) is conducted (ref. T-code OMB3).
  • Purchasing organization
    • Plant-Specific Purchasing Organization
    • Cross-Plant Purchasing Organization
    • Cross-Company Code/Corporate Group-Wide Purchasing Organization: no company code assignment
    • Reference Purchasing Organization: conditions sharing to lower-level purchasing organizations: get access to the supplier master data, to the PIRs, conditions, allow to create a release order using the customizing.
    • Standard Purchasing Organization: the system gets the plant code and then it determines the standard (by default) purchasing organization
  • Purchasing group: a group of buyers
  • Valuation level: Stock materials can be managed in inventory on the basis of quantity, value, or both, depending on the material type ( at the level of a company code or at a plant).
  • A single business area is assigned to a plant and to a division.

Procurement Process Area

  • Collaborative Sourcing and Contract Management: Request for quote, purchase, information process, source selection via bidding or single source, and contract definition
  • Operational Purchasing: Transactional procurement, core Purchase Order, Goods/Service Receipt, Invoice(PO-GR/SES-IV)
  • Invoice and Payables Management: Invoice submission by supplier, verification, and payment by accounts payable
  • Supplier Management
  • Procurement Analytics

Operational Procurement

Receiving and processing of quotations from vendors in response to an RFQ

  1. Create an RFQ using Transaction ME41:
    • We can create an RFQ with reference to a purchase requisition/an outline agreement/existing RFQ;
    • Document type configuration: Materials Management> Purchasing> RFQ/Quotation> Define Document Types;
    • Important fields: 
      • 'Quotation Deadline' field is the date by which the suppliers must reply to the RFQ with a quotation;
      • 'Request for Quotation Document Number' is for the external assignment;
      • 'Requirement tracking number' can be traced back to the original requisition;
      • The collective number is used to collectively identify the many RFQs (use Transaction ME4S to search quotations for this number);
      • Validity Start/Validity End;
      • 'Apply By' date field is different from the quotation deadline date.
        Reason for Order.
  2. Change a Request for Quotation using Transaction ME41;
  3. Release a Request for Quotation using Transaction ME45;
  4. Issue a Request for Quotation to a Vendor using Transaction ME9A;
  5. Maintain Quotations using Transaction ME47:
    • The price quotation can be entered as a single figure in the Net Price field or If discounts, taxes.. are offered, these conditions should be added using the Conditions screen.
  6. Compare Quotations using Transaction ME49:
    • By the way, a purchasing department cannot rely on price comparison and will have to develop a procedure for selecting vendors based on RFQs/quotation responses.
  7. Reject Quotations using Transaction ME47 and Print the Quotation Rejection using Transaction ME9A (ABSA message type).

Creating and processing purchase requisitions 

  1. Configuration: Document type, number range, field selection, Allowed item categories, serial number profiles.
  2. Creating a Purchase Requisition with a Material Master Record
    • Item Category: Standard, Consignment, Subcontracting, Third party, Service, Stock transfer.
    • Account Assignment Category: cost centers, cost objects, Production order (F), Sales order (C), SAP General Ledger (SAP G/L) accounts, and assets ( customizing ); A purchasing user can create a new account assignment category and configure its fields.
    • Requirement Tracking Number, Requisitioner
  3. Creating a Purchase Requisition without a Material Master Record
    1. Prerequiste is to have an account assignment to direct costs to a specific account + Material group
  4. Processing a Purchase Requisition
    • To show a list of purchase requisitions, use Transaction ME5A
    • Purchase Requisitions by Tracking Number, use Transaction MELB
    • Release Procedures: Release procedure without classification (plant, value, matgroup, acc.ass.act.) or Release procedure with classification
      • The release indicator specifies the release status of the purchase requisition (Fixed for MRP, Released for quot., Rel. for ordering)
  5. Closing a Purchase Requisition
    • The line item to be flagged for deletionmust be selected
  6. Follow-On Functions
    • Assigning a Source of Supply to Purchase Requisitions: Select a range of purchase requisitions to assign a source, use Transaction ME56
  7. Indirectly Created Requisitions
    • Purchase Requisition Created by Production Order (..when the routing in a production order involves an operation where material needs to be sent out for external processing or when BOM calls for a  nonstock component )
    • Purchase Requisition Created by Plant Maintenance Order (..an operation that requires an external operation be performed by a subcontractor)
    • Purchase Requisition Created by Project System (..network can create PR-s for nonstock materials and external services or creation of PR-s  as soon as the network is released)
    • Purchase Requisition Created by Sales order requirement (?)

Creating and processing purchase orders

POs are used to communicate requests to suppliers and to give suppliers a written confirmation of requests.

Reference 

Reference documents can be purchase requisitions, RFQs, quantity or value contracts (outline agreements), or even other POs.

Blocking a Purchase Order Line Item

A block stops any goods receipts for the relevant line item.
The account assignment category determines what account assignment details are required for the item. After creation, a new account assignment must be made to an item category in the configuration.

Automatically Create POs from Purchase Requisitions

Prerequisites:
  • Select the Auto. PO checkbox in the Purchasing tab of the material master
  • Select the Automatic PO checkbox in the Purchasing organization data of supplier master
  • Maintain a source of supply in the purchase requisition
Process:
  • Call the Transaction ME59N
  • Using a similar process for automatically creating POs from purchase requisitions,
  • we can also create POs Via Assignment Lists by using the Transaction ME58

Progress Tracking

Would you like to track all purchasing activities related to purchase orders in materials management (MM) and network components in the project system (PS)

Then we need to go through the list of steps to configure:
  1. Defining standard events: possible events for the procurement process that
  2. require tracking or monitoring
  3. Defining event scenarios: define event scenarios for the purchase order as well as assign a
  4. factory calendar to event scenarios
  5. Maintaining relationships between events in a scenario: assign an event scenario to all the possible events
  6. Assigning default scenario to the material group or enhance the rule for assignment: a default scenario is assigned to a material group
  7. Maintaining priorities for an event
  8. Defining a progress tracking profile
  9. Define status info types, which are used to analyze whether a
  10. particular purchase document is complete or not.
  11. Maintaining number range status information
  12. Use standard BADIs to enhance the process
Progres tracking evaluation: 
  • To maintain the date-related data in a PO in progress monitoring use Transaction EXPD. 
  • To evaluate the status of purchase orders using the progress tracking feature, use Transaction AXPD.

Contracts Management

Outline Purchase Agreements

An outline purchase agreement is basically a long-term agreement between the purchasing department and a supplier for materials or services for a defined period of time.
  • A contract is an outline purchase agreement against which release orders can be issued for materials/services.
    • It can be copied with reference to purchase requisitions, quotations, and centrally agreed contracts 
    • It can also be created for subcontracting, consignments, and stock transfers. 
  • A scheduling agreement is an outline purchase agreement where the department has arranged to procure materials based on a schedule agreed with the supplier.

External Services Management

See, the link

Special Procurement Types

Prerequisite:
  • Ensure that the relevant special procurement type key has been assigned, either in the MRP 2 tab of the material master or in the view of the component in BOM.

Direct Procurement (51)

#Use: The system automatically creates a purchase requisition (1) or initiates the procurement process (2) at the moment a production order is created.

#Customizing: Transaction OPPB ( requirement coverage by MRP or by order creation ? ).

#Results: MRP Results for Direct Procurement is the Dep.requirement for the req.qty.

Stock Transfers (Interplant Transfers; 40)

#Use: Since a one-to-one relationship exists between a supplying plant and a receiving plant in the interplant transfer business process, we should create individual special procurement keys such combinations.

#Result
  • After the MRP run, the system creates a planned order for an interplant stock transfer.
  • The planned order is converted into a stock transport requisition. 
  • The stock transport requisition is converted into a stock transport order.
Transaction MB5TD to view stock in transit on a key date
Transaction MB5SIT is the same but offers more parameters selection options

Withdrawals from an Alternative Plant (70)

It can be applied, when some components of the BOM or assembly are procured or withdrawn
from another plant that is in close.

When a production order is created for an assembly at one plant, the system automatically
suggests alternative plants for issuance of the component.

Subcontracting (30)

#Use: Acompany hands over components to a subcontractor, who assembles and adds value to the product. Then company receives the goods against the same subcontracting PO from the vendor and pays.

#Prerequsites:
  • The material master of the assembly has the special procurement type key 30;
  • A subcontracting BOM exists in the system;
  • The purchasing view of the material master is maintained;
  • A purchasing information record (info record) is created between the material and vendor;
  • In SAP S/4HANA, a production version also exist:
    • Use a new report called CS_BOM_PRODVER_MIGRATION to create a prod.ver.
    • Define whether a production version is locked for automatic sourcing only (using Transaction C223).
#Process:
  • Subcontracting Purchase Order ( item cat. L, ender an assemby and check components );
  • Stock Monitoring for the Subcontracting Purchase Order using Transaction ME2O;
  • Check the component we need to issue to the vendor against the subcontracting order;
  • Post Goods Issue (mvt. 541);
  • We can view the stock provided to or available with a vendor via Transaction MBLB;
  • Receive the goods against the subcontracting order (mvt 543, O).

Consignment (10)

#Use: A vendor provides you with material that isn’t billed until you remove the material from the consignment store.

#Prerequistes:
  • The special procurement key is assigned in the material master;
  • The purchasing view of the material master is maintained ( Source list checkbox is active);
  • The source list of the material and plant combination is maintained;
  • A purchasing information record is needed.

Returnable Transport Packaging

( to be added )

Pipeline Material

Pipeline material denotes that the material is in a pipeline and is always available. Customers only pay for the pipeline material consumed.

Managed special stocks

Sales Order Stock
( to be added )
Project Stock
( to be added )

Simplified Sourcing

The quota arrangement replaces the source list functionality.
  • If the system finds a quota arrangement, then MRP creates replenishment proposals according to the percentages defined in the quota arrangement.
  • If the system finds a valid scheduling agreement, then a delivery schedule will be created for the vendor assigned to the schedule agreement.
  • If the system finds a valid quantity or value contract, then purchase requisitions will be created with reference to this contract.
  • If the system finds a valid info record, purchase requisitions for the respective vendor are created.


Material Requirements Planning

Master data

We should  evaluate materials for every important factor involved in MRP to analyze how it fits in the planning.

Material Requirements Planning Procedures
  • PD: for the quantities planned in PIRs or quantities planned in incoming sales orders (MTO or MTS), dependent requirements, and stock transfer requirements;
  • VB: Manual Reorder Point Planning: to calculate and set the reorder point and the safety stock manually:
    • Re-order point as the base (estimated consumption within the TRLT) and Safety stock for any additional unplanned consumption
    • Replenishment lead time (RLT): Planned Delivery Time + GR Proc.Time + Purchasing Time fields
    • Use fixed lot-sizing procedures for reorder point-based planning so the system procures a fixed lot size, instead of creating a proposal for the specific deficit quantity;
    • Exception message 96 when Re order point is too low.
VM: Automatic Reorder Point Planning
V1: Manual Reorder Point with External Requirements
V2: Automatic Reorder Point with External Requirements
VV: Forecast-Based Planning
R*: Time-Phased Planning


Lot-Sizing Procedures

Process

  1. Determine the scope of check using the planning file to avoid unnecessary planning;
  2. Net requirements calculation: determine the material shortage quantity;
  3. Calculate the procurement quantity to include lot sizes for planned orders or purchase requisitions;
  4. Schedule basic dates or lead time (for in-house production);
  5. Select the source of supply by determining the procurement proposals;
  6. Determine the required subordinate parts dependent on BOM explosion

Material requirements planning
Complete BOM Explosion
No BOM Explosion
Master Schedule Items
Consumption-Based Planning
Reorder Point Planning
Forecast- Based Planning
Time-Phased Materials Planning


Forecasting


Inventory Management

See the link: Inventory management

Physical Inventory

See the link: Inventory count

Invoice and Payables Management

Inventory Valuation and Account Assignment

Note: depend on countrys pecific tax regulations, state and federal legal requirements, corporate financial practices.

Split valuation

  • Activating a Split Valuation
  • Configuring a Split Valuation ( Transaction OMWC ): Ext. POs, Int. POs, Account cat reference 
  • Creating Global Categories ( batch managed? then Determine val. type Automat.; Default: val.type )
  • Assign a valuation category to the material master record in the Accounting 1 tab (Transaction MM01)
  • USe MMBE for reporting 

*Split valuation is used only with the moving average price control.

Last In First Out Valuation

No value change occurs for older material when new materials are received.

LIFO valuation enables the increased amount of material stock per fiscal year to be valuated separately from the rest of the material stock.

Layer for LIFO valuation is the variance between the opening and closing material balances of a fiscal year.

Steps:
  1. Activate/Deactivate LIFO/FIFO Valuation ( Transaction OMWE )
  2. Activate it for the MvT ( Transaction OMW4 )
  3. Flag materials for LIFO ( Transaction MRL6 )
  4. Base Layers creation ( Transaction MRL8 )
  5. Running valuation
    • Transaction MRL1 for a single material level
    • Transaction MRL2 for the pool level
    • Transaction MRL3 for comparison of lowest values

First In First Out Valuation

Activate/Deactivate LIFO/FIFO Valuation
Movement types should be set up as relevant for FIFO
Select materials ( Transaction MRF4 )
Run FIFO valuation ( Transaction MRF1 )

Early Warning System

EWS  is designed to allow users to define specific alerts to ensure no disruptiont in logistics and supply chain operations.
  1. Create exception: select the infostructure, select a characteristics and set a value for it ( example: material ), set requirements ( key factor, example: total stock ) and a period to be analyzed and the value to be compared; set Follow-up processing
    • Transaction code: MC/1
    • Use the infostructures available in the system 
  2. Setting Up Periodic Analysis: define this variant as applicable for the individual screens
    • Transaction MC/7
  3. Scheduling an Early Warning System
    • Transaction MC/B
  4. Alerting to a responsible person 
  5. Exception analysis
    • Transaction  MCYG

Reporting and Analytics

Serial Numbers in Purchasing

A serial number is assigned to a unique item to identify and record information about the item. And functional use cases are:
  1. We can define serial numbers when creating purchase requisitions and purchase order (POs).
  2. When we create a sales order for third-party processing and assign serial numbers
    to its items, the created purchase requisition will contain the serial numbers.
  3. We can have more than one serial number per schedule line.
Configuration:
  • Determining the Serial Number Profile
  • Defining the Serial Number in Purchasing Document Types
  • Assigning a Serial Number in a Material Master

Supplier Management

Blanket (Framework) Purchase Orders

Purchase low-value services or materials at a minimal cost.
When the material is consumed or services are performed, an invoice is posted in the system with reference to the PO. No GR or service entry sheets are posted in the system.
  • The Document Type is FO
  • The item category in a blanket order is B for a limit order.
An Overall Limit can be entered for all unplanned services on the PO.
A service PO can allow a purchasing user to add one or more purchase Contracts.

To maintain account assignment details in invoice verifications, use Transaction OME9: choose Account Assignment U. In the detailed screen, select the AA Chgable at IR checkbox.

 


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