Intro slides

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

Overview
of
MATERIALS MANAGEMENT

Target Group
 Purchase department
 Stores department

Course Objectives
 Visualize the MM functionalities
 Maintain MM related views of Material
Master and vendor master
 Create other master records or changing
the existing master records
On conclusion of this course, you should be
able to:

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
Finance / Asset ManagementFinance / Asset Management
ProcurementProcurement
Logistics PlanningLogistics Planning
Sales LogisticsSales Logistics
ProductionProduction

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

Organizational Elements - Client
 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
Client CharacteristicsClient Characteristics

Organizational Elements - MM
 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.
Purchasing OrganizationPurchasing Organization

 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
PlantPlant

 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
Plant (Cont.)Plant (Cont.)

 A Location within a Plant where Inventory is
Stored
Storage LocationStorage Location

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 vendor’s 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 Acme’s price and $105
as vendor Zenith’s 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

Course Objectives
 Understand the concepts in SAP -
Purchasing component
 Create or change PRs
 Create, change or compare RFQs
 Create contracts
On conclusion of this course you should
be able to

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 entity’s 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.

Purchase requisitions
 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

Purchase requisitions
 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 organization
 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
 Purchasing organization
 Purchase group

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

MM - PURCHASING

Course Objectives
 Create a new PO
 Make changes to existing PO
 Print PO
 Navigate through purchasing information
system
able to

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
 Requirement tracking number
 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)
 Requirement tracking number
 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 don’t 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.

 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

 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

 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

 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 vendor’s 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.

Purchasing information
 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

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

MM - Inventory management

Course Objectives
 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
On conclusion of this course, you
should be able to

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 with other modules
 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
 Stores department
 Finance department

Course Objectives
 Enter and verify vendors invoice
 Enter and verify vendor’s excise invoice
 Devalue materials
 Carry out physical inventory
able to

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
 Vendor’s 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.

Inventory management information
 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 customer’s 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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