Viswakirti projects Pvt ltd

-Business Blue Print for

SAP

MATERIALS MANAGEMENT

Contents

1 Purpose
2 Organizational units...................................................................................................................3
2.1 Company Code...................................................................................................................3
2.2 Plant...................................................................................................................................4
2.3 Valuation level.....................................................................................................................5
2.4 Purchasing Organization.....................................................................................................5
2.5 Purchasing Group...............................................................................................................5
2.6 Storage Location.................................................................................................................5
2.7 Organization Structure........................................................................................................6
3 Master Data Management.........................................................................................................6
3.1 Material Master.....................................................................................................................7
3.2 Vendor Master......................................................................................................................9
3.3 Purchasing Master Data......................................................................................................10
3.3.1 Purchasing Info Record..............................................................................................10
3.3.2 Source List .................................................................................................................11
3.3.3 Quota Arrangement....................................................................................................11
3.4 Service Master Record........................................................................................................12
3.5 Condition Record.................................................................................................................12
3.6 Transaction codes for Master Record..................................................................................12
4 Purchasing Document Types.....................................................................................................13
4.1 Purchase Requisition..........................................................................................................13
4.1.1 Approve requisitions based on approval limits and approval
hierarchies...................15
4.2 Request for Quotation........................................................................................................16
4.2.1 Maintaining Quotation................................................................................................16
4.2.2 Comparing Quotation................................................................................................16
4.3 Rate Contract.................................................................................................................. ..17
4.4 Scheduling Agreement.......................................................................................................18
4.5 Purchase Order..................................................................................................................18
4.5.1 Approve requisitions based on approval limits and approval hierarchies.................19
4.5.2 Version Management (Amendment of PO)..............................................................19
5 Functional Scope Supported Business Processes or Scenarios in Materials Management..20
5.1 General Procurement.........................................................................................................20
Key points...............................................................................................................................21
5.2 Consumable Procurement.................................................................................................21
Key points...............................................................................................................................21
5.3 Project procurement..........................................................................................................21

Page 2 of

5.4 Service Procurement.........................................................................................................21

Key points...............................................................................................................................22
5.5 Subcontracting...................................................................................................................22
Key points................................................................................................................................22
5.6 Release Procedure............................................................................................................23
Key points...............................................................................................................................23
5.7 Pricing Procedure..............................................................................................................23
Key points...............................................................................................................................23
5.8 Vendor Evaluation...............................................................................................................25
Key points................................................................................................................................25
5.9 Goods Receipt....................................................................................................................26
Key points................................................................................................................................26
5.10 Goods Issue......................................................................................................................29
Key points................................................................................................................................29
5.11 Stock Transfer...................................................................................................................29
Key points................................................................................................................................29
5.12 Return to Vendor..............................................................................................................30
Key points................................................................................................................................30
5.13 Stock handling : Scrap and Blocked Stock.......................................................................31
Key points...............................................................................................................................31
5.14 Physical Inventory.............................................................................................................31
Key points...............................................................................................................................31
6 Invoice Verification....................................................................................................................33
Key points...............................................................................................................................33
7 Batch Management...................................................................................................................34
Key points...............................................................................................................................34
8 Serial Number Management.....................................................................................................35
Key points...............................................................................................................................35
9 SAP Reporting.........................................................................................................................36

Page 3 of

Business Blue Print Solution Scope

Purpose
This Solution scope provides an overview pf the processes and functions covered by SAT
Infotech for Viswakirti Projects Pvt Ltd. It describe the functions and explains their business
purposes.

2 Organizational Units:
2.1 Company Code :
its a legal entity and independent accounting unit in SAP. The balance sheets required by law
and profit and loss statement are carried out at company code level.

2.2 Plant :
In logistics a plant is an organizational Logistics unit for dividing an enterprise according to
procurement, production, maintenance & material planning. A place where materials are
produced, or goods and services are provided.
The plant is an operating area or branch within a company. The plant is embedded in the
organizational structure as follows:
The plant is assigned to a single company code. A company code can have several
plants.
Several storage locations in which material stocks are managed can belong to a plant.
A plant can be assigned to several combinations of sales organization and distribution
channel.
A plant can have several shipping points. A shipping point can be assigned to several
plants.
A plant has its own material master data. (Example: one material code created for this
plant can be extended to other plant.)
The plant plays an important role in the following areas:

Material valuation: When the valuation level is plant, the material prices are defined for
each plant. Each plant can have its own account determination.

Inventory Management: The material stocks are managed within a plant.

MRP: Material requirements are planned for each plant. Each plant has its own MRP data.
Analysis for materials planning can be made across plants.

Page 4 of

Production Costing: In costing, valuation prices are defined only within a plant.

Example of Plant: Production facility, branch office.

2.3 Valuation Level:

You define the valuation level by specifying the level at which material stocks are valuated
You can valuate material stocks at following levels :
1)Company code
2)Plant.

2.4 Purchasing Oraganization

Organizational unit within Logistics, subdividing an enterprise according to the requirements of
Purchasing. A purchasing organization procures materials and services, negotiates conditions of
purchase with vendors, and bears responsibility for such transactions.
The form of procurement is specified through the assignment of purchasing organizations to
company codes and plants.

2.5 Purchasing Group

The Purchasing group is organizational unit within logistics and it is

Responsible for procuring a material or a class of materials for internal units

The contact for external suppliers

You define the purchasing group during Customizing (not part of the enterprise structure). You do
not assign purchasing groups directly to purchasing organizations.
You may define purchasing areas to describe in detail the fields of activity of a purchasing group.

2.6 Storage location :

A storage location is a an organizational unit that allows the differentiation of material stocks
within a plant. Storage locations are always created for a plant. A storage location is the place
where stock is physically kept within a plant. This field in SAP is a four-digit code.
The storage locations will have the following attributes.
There may be one or more storage locations within a plant.
A storage location has following attributes :

There may be one or more storage location within a plant

A storage location has a description and at least one address.

It is possible to store material data specific in a storage location.

Stocks are managed only on quantity basis and not on a value basis at a storage
location level.

Physical Inventories are carried out at storage location level.

Organizational
Element

Code

Description

Page 5 of

Plant

0008

Viswakirti Plant 1

Storage location

VSL1

Main stores

SLU1

Storage location UNIT 1

SLU2

Storage location UNIT 2

SLU3

Storage location UNIT 3

0008

VKPO Purchase Organization

Purchasing
Organization

Purchasing Group 01

Projects

02

General

03

Factory sales

2.7 Organization Structure :

3. Master Data Management

The following masters that are important and used in SAP:

Material master

Vendor master

Purchasing master data

Purchasing Info record

Source list

Quota arrangement

Service master record

Condition record

Page 6 of

3.1 Material Master

The material master contains the information of a material which is procured / produced /
stored and sold. It is the company's central source for retrieving material-specific data. This
information is stored in individual material master records.
The material master is used by all agencies in a Logistics System. The integration of all
material data in a single data base object eliminates redundant data storage. In the SAP
Logistics, the data contained in the material master is required in the following:
Procurement of material in Purchasing.
Movement of goods in Inventory Management.
Invoice posting in Invoice Verification.
Processing of Sales order in Sales and Distribution.
Material requirements planning / scheduling in Production Planning and Control.
Material Valuation in the Valuation Area.
Material number is a number which uniquely identifies a material in material master
record.
User can have Internally generated material number through system or can have his
own externally entered number. User will be identifying material with maximum 18 digit
alphanumeric code having description of 40 Characteristics.

Material type

Description

Number Range

ROH

Raw material

100000000000-19999999999

BOT

Bought-out goods

200000000000-29999999999

UNBW

Consumables

300000000000-39999999999

FERT

Finished goods

XXXXXXXXXX-XXXXXXXXX

HALB

Semi-finished

XXXXXXXXXX-XXXXXXXXX

DIEN

Service

XXXXXXXXXX-XXXXXXXXX

VERP

Packaging

XXXXXXXXXX-XXXXXXXXX

ZASS

Assets

XXXXXXXXXX-XXXXXXXXX

Material
Type

Material Group

Material Sub Group

BOT

Motors

AC motors
DC motors

Gear Boxes

Helical GB
Worm GB
Bevel Hel.GB

Geared Motors
Couplings

Geared couplings
Tyre couplings

Page 7 of

Fluid couplings
Pin & Bush couplings
HRC couplings
Jaw couplings
Bearings

Idler bearings
Pulley bearings

Adapter sleeve
Plummer blocks

S-Series
SN-Series
SD-Series
Grease Nipples
Locating rings

Flange Mounted
Brg. Unit
Conveyor belt
V-belt
Safety switches

Zero speed switch

Seals
VFD
Magnetic seperator
Metal Detectors
Crushers
Vibrating screens
Vibro feeders
locating Rings
Bag filters
Pulley/shelves
Blowers
Raw
materials

Shafts
Pipe
Bright Rod
Flat
Angles
Channels
Beam
Square Bar

Page 8 of

T-Angle
MS Rounds
M.S.Square
M.S.Plates
Rod
Paints
Scrap

Scrap

Consuma
bles

Hardware

Lock nut
Fasteners
Lock washer
Pins

3.2 Vendor master

The Vendor master contains information on vendor from whom a company procures material or
services. vendor master records controls how transaction data is posted and processed for a
vendor.
Vendor Account number (Vendor Code) created for a purchasing organization, is a number
uniquely identifying a vendor master record, and thus a vendor. Vendor master contains mainly
three types of data namely General, company code and purchasing.

General data (Relevant for both Material Management and financial accounting)

Company code data (Relevant for financial accounting only)

Purchasing organization data (Relevant for specific purchasing area only)

General data includes address for communication with vendor, contact persons ,telephone
number etc
Company code data includes vendor bank details , account management and payment data.
Purchasing data includes ordering currency, Vendor schema group, person responsible and
some control data which includes Automatic purchase order, ERS settlement, GR based Invoice
verification, Returns agreement.
BUSINESS PARTNER: Vendor can assume different roles in its dealings with Company.
Accordingly, in a procurement transaction, the vendor is first the ordering address, then the
supplier of goods, then the invoicing party, and finally the payee. For this reason, several partner
roles (partner functions) can be assigned to the vendor. The roles a partner function can take are
:

Order receiver

Goods supplier

Invoice presenter

Payment receiver

The following account groups are used :

The following Account Groups are identified for VPPL and shall be as follows:
Account Group

Description

Number Range

Page 9 of

V01

Raw materials

1000000 - 1999999

V02

BOT

2000000 - 2999999

V03

Service vendors

3000000 - 3999999

V04

Freight vendors

4000000 - 4999999

V05

One time vendors

5000000 - 5999999

V06

General vendors

6000000 - 6999999

V07

Sub contractor

7000000 - 7999999

V08

Scrap vendors

8000000 - 8999999

V09

Employees

9000000 - 9099999

V10

Statutory vendor

9100000 9199999

3.3 Purchasing Master Data

It consists of following types:

3.3.1 Purchasing Info record (Vendor pricing information)

Info record is a source of information for procurement of a particular material from a particular
vendor
Purchase info record enables the buyer to determine:

Which materials, a certain vendor has offered or supplied to date.

Which vendors can offer or supply certain material.

A purchasing info record can be valid for all plants covered by a purchasing organization
or for a single plant within a purchasing organization.

Info record can be created manually or automatically during the maintenance of a

quotation, a purchase order or an outline purchase agreement. Ordering data is updated
automatically in info record.

Purchasing Info Record will have fallowing key data :

Info Record Number

Vendor Code

Material Code & Description

Vendor material Number

Purchasing Organization

Plant

Pricing Conditions

Validities

Tax Code

Page 10 of

Planned Delivery Time

Order Unit and its conversation factor in SKU ( Stock Keeping Unit)

3.3.2 Source List (Register & Manage Supplier)

Source list contains a list of available sources of supply (vendors) for a material for a particular
plant, indicating the periods during which the procurement from such sources possible.
The source list let you determine the vendor that is valid (effective) at a certain time and it also
facilitate adherence to purchase agreements and the avoidance of errors in Purchasing where
several vendors exist for a specific material. It also allows certain vendors to be blocked for any
chosen period of time (e.g. in the case of delivery problems).
Before creating a Source list, you require the following information
It specifies the allowed (and disallowed) sources of a material for a certain plant within a
predefined period. Each source is defined by means of a source list record.
By source list we can define a source of supply as "fixed". Such sources count as
preferred sources over a certain period of time.
source list can also defines a source of supply as Blocked.
By using source list we can block external procurement of service.
You can define several validity periods.

3.3.3 Quota Arrangement

Quota Arrangement is a mechanism for determining which portion of the total requirement of a
material over a period is to be procured from a certain source. If quota arrangements exist in the
system, they exert an influence with regard to precisely which source (perhaps from a number of
different possibilities) is assigned to a given purchase requisition.
You establish the quota arrangement for a material over a certain period by entering quotas for
the various sources of supply in a quota arrangement item.
Before creating a quota arrangement, you require the following information
Material Number or the plant to which the quota arrangement applies
Procurement type of the material (that is, whether the material is manufactured in-house
or procured externally)
Vendor number
Quota arrangement validity period
Quota to be assigned to each source of supply

Key Points
The quota specifies which portion of the total requirement should be procured from a
given source.
If a quota arrangement exists for a material, it is taken into account in the source
determination process.

3.4 Service master Record

The service master record counts as part of the master data within External Services
Management and serves as a source of data for you to draw upon when creating service

Page 11 of

specifications. This enables you to save time and reduces the frequency of errors, since you
need only enter the complete service descriptions in the service master record once.
A service master record contains the following principal information for the unique description of
a service:

Service number

Service category

Descriptive texts (short and long text)

Base unit of measure

Material group

Valuation class

3.5 Condition Record

Condition records allow you to store and retrieve pricing data in the system. All the pricing
elements of your daily business - the prices, discounts, and surcharges for freight and taxes that you want to use for automatic pricing must be stored in the system as condition records. You
can define as many condition records as you want for the different pricing elements for any
validity period.
You create condition records for all the pricing elements that the system takes into account
during automatic pricing. During document processing, the system transfers data from the
condition records and determines the amounts for individual pricing elements (prices, discounts
and surcharges)

3.6 Transaction codes for Master Record :

Procedure

Tcode

Input

Output

Create Material
Master

MM01

Material, plant &

storage location

Material number

Create vendor
Master

XK01

Account group,
company code &
purchasing org

Vendor number

Create Purchasing
Info record

ME11

Material number,
vendor number,
purchase
organization &
plant

Info record

Create Source list

ME01

Material and
plant

Source list

Quota
Arrangement

MEQ1

Material and
Plant

Quota arrangement

Create service
master

AC03

Service
description

Service number

Create Condition
Record

MEK1

Condition type

Condition record

Page 12 of

4. Purchasing Document Types

In materials management the following document types are used:

PR

RFQ

contract

Scheduling Agreement

PO

4.1 Purchase Requestion (Indent)

The purchasing department works with the purchasing request, decides on whether the
requirement of products can be covered from stock or needs to be procured externally
considering optimization issues.
The requirements that have been created and released for procurement (for example, demands
for spare parts coming from plant maintenance, demands for raw materials determined in a
planning run, or requests for office supplies entered by an employee) are transferred to
purchasing as purchase requisitions. A purchase requisition can be fulfilled through purchase
orders or longer-term purchase agreements. Release procedures are available to control critical
procurement processes.
Requisitions can be created either Manually or MRP.
Manually means the person responsible in the department enters a purchase requisition
manually. The person creating the requisition determines, what to order, how much to order
and the Delivery date.
MRP means that the purchase requisition is initiated via another component say through MRP.
Trigger to the Process:
Material Requirement (in the form of Purchase Requisition), which is generated either through MRP or
manually, triggers the Procurement Process.
The different types of Purchase requisitions:
The following procurement types exist:

General

Spares

Project

Subcontracting

Service

FLOWCHART : Ways of Generating Indent

Page 13 of

The Purchase Requisition processing consists of the following steps:

Creating a Purchase Requisition directly by user or indirectly by MRP.
Release Purchase Requisition by concerned user
convert into required purchase document.

Document Type

Description

Number Range

NB

General Purchase

41300000-41399999

NS

SPARES

51300000-41399999

NP

Project

81300000-81399999

SB

Subcontracting

61300000-61399999

ZB

Service

71300000-71399999

FLOW CHART:
User
Department

Purchase
Requirement
ME51N

NO

Release
Strategy

Call for
Discussion

Ye
s
Purchase
Department
Follow on
Documents

Page 14 of

4.1.1 Approve requisitions based on approval limits and approval

hierarchies
Two different procedures are available for requisitions:
With classification
With this procedure, requisitions can be released both at item level (i.e. item-by-item)
and in total. The latter approach is also termed "overall release".
Without classification
With this procedure, requisitions can only be released at item level.
The two procedures are mutually exclusive (that is to say, you must decide in favor of one of
them only - you cannot use both).

4.2 Request for Quotation

The request for quotation (RFQ) process starts with a request for material(s) from vendors. The
RFQ process includes a price comparison for the selection of the best source. The buyer
evaluates the vendor responses to determine the best source of supply. The accepted quotation
is converted into a purchase order and a rejection letter is sent to the vendor(s) whose
quotations were rejected.
Material-specific information including vendor pricing and lead-time from the quotation are
captured within ERP master data records.

4.2.1 Maintaining Quotation

A quotation is an offer by a vendor to a purchasing organization regarding the supply of materials
or performance of services subject to specified conditions. A quotation is legally binding on the
vendor for a certain period. The quotation is the vendors response to a request for quotation
issued by a purchasing organization.
A quotation consists of items in which the total quantity and delivery date of an offered material
or service are specified.

4.2.2 Comparing Quotation

You can compare the prices from all quotations received as a result of a competitive bidding
process using the price comparison list.
The comparison list ranks the quotations by item from lowest to highest price.
Features

In Purchasing, the RFQ and the quotation form a single document.

Prices and conditions quoted by vendors are entered in the original RFQ.

If you have issued an RFQ to several vendors, you can have the system of determining
the most favorable quotation submitted and automatically generate letters of rejection to the
unsuccessful bidders.
You can also store the prices and terms of delivery from certain quotations in an info
record for future accessing.

RFQs can be subject to a release procedure.

Page 15 of

The RFQ consists of the following steps:

Request for quotation
Vendor Quotation processing
Comparison, rejection and selection of vendors
RFQ can be followed by Source list generation / purchasing documents

Document Type

Description

Number Range

AN

General Purchase

113

ZN

Projects

213

Process Flow
PR

Sourcelist

RFQ

Quotation
Comparison

PO

vendor
Selection

Followonand
Remainders

4.3 Rate Contract

Contracts are agreements with a vendor to supply materials or services under negotiated
conditions, within a certain period. Contracts are defined as follows:
Rate contracts: An agreement between the Company and Supplier for a material with a
fixed rate and a validity period.
The process to create a contract begins with the need to secure a big number of supplies as well
as reducing procurement costs. The creation of a contract can start if the following issues have
been clarified:
-

Number/amount of material or services

Validity start / validity end

Payment terms

Quantity of each contract material/service,

Page 16 of

Price of each position in the contract

Location to where the goods/services are delivered.

A contract is signed by a purchasing manager or a buyer.

After the creation of a contract, purchase requisitions and purchase orders can be performed
with relation to the contract.
The Contract procurement consists of the following steps:
Creating a basic agreement (Rate contract)
Creating a purchase requisition
Assigning requisition and creating Contract release order
Approval of contract release order
Contract monitoring
Goods receipt with excise invoice
Invoice receipt by line item
Outgoing payment

Key Points
Upon Contract release order creation with reference to a contract, the contract data is
used and purchasing info records are ignored
Reduced procurement costs

Document Type

Description

Number Range

ZK

Rate contracts

312

4.4 Scheduling Agreement

Scheduling Agreement are outline purchase agreement under which materials are procured on
predetermined dates within a certain time period.
Delivery of the total quantity of material specified in a scheduling agreement item is spread over
a certain period in a delivery schedule, consisting of lines indicating the individual quantities with
their corresponding planned delivery dates.
Scheduling agreement releases (comprising a header and the actual delivery schedule) are
issued to the vendor, instructing the latter to effect deliveries of the relevant material on the dates
shown.
A scheduling agreement consists of a number of items, for each of which a procurement type is
defined. The following procurement types exist:
Standard
Subcontracting
Stock transfer

Document Type

Description

LPA

With release

Number Range

Page 17 of

LP

Without release

4.5 Purchase Order Processing

A purchase order is a 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.
The purchase order can be used for variety of procurement purpose such as
The following procurement types exist:
Standard
Spares
Project
Subcontracting
External service
Stock transfer
When a purchase order has been created a number of checks and validations make sure that
the right contract, discount, price and so on is referenced correctly. Purchase Order Processing
also deals with the communication of the purchase order to the supplier.
The Purchase order processing consists of the following steps:

Creating a purchase order with reference to PR / quotation /contract /previous PO

Release Purchase order by concerned user

Follow-up and send remainders if necessary

Document Type

Description

Number Range

NB

General purchase

41300000-41399999

NS

Spares

51300000-41399999

NP

Project

81300000-81399999

SB

Subcontracting

61300000-61399999

ZB

Service

71300000-71399999

Page 18 of

FLOWCHART

4.5.1 Approve Purchase Order based on approval limits and approval

hierarchies
Purchase Order 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 external purchasing document is to be released.
Release Strategy : The release strategy defines the approval process for external purchasing
documents. The strategy specifies the release codes necessary and the sequence in which
releases have to be effected. Release strategy is assigned to purchasing document based on
the release conditions
Release Code: The release code is a two-character ID allowing a person to release external
purchasing document.

4.5.2 Version Management (Amendment of PO)

Page 19 of

In the procurement function, we need to work with internal documents and legal documents like
Purchase Requisition, Purchase order, Invoice etc., Here we need a process to track any
changes done to these documents. Version management plays a significant role in tracking the
changes in purchasing documents. Also this tracking is essential for audit requirements.
Version Management in PO groups a set of changes against version number and provides the
user with an overview of the various changes that may have been made in the course of time.
In the case of procurement transactions extending over a longer period of time (for example, in
the procurement of capital goods), you may need to differentiate between various versions of the
purchasing document. You may also need to refer to one particular version when corresponding
with the vendor.
Version Management enables you to generate and manage versions of purchase requisitions
and external purchasing documents, such as purchase orders. A version groups together the
change documents generated in the course of subsequent processing of the relevant document.
A version thus indicates the revision level of a document (version 0 = original document, versions
1 + = revisions) and provides the user with an overview of the various changes that may have
been made in the course of time.
Process Flow

Enhancement : 1)LC report details against PO

2)PO with both unit of measures
3)PO Processing against LC/Bank guarantee /advance

5. Functional Scope Supported Business

Processes or Scenarios in Materials Management
5.1 General Procurement

Page 20 of

In this procurement process a quotation comparison list enables the purchasing employee to
select the best source of supply by evaluating quotations from vendors.
A purchase requisition is either generated via the Material Requirements Planning (MRP)
process, or manually by a requester. A buyer validates the accuracy of the purchase requisition
and converts the purchase requisition into a purchase order. The purchase order is subject to
approval based on a predefined amount before being issued to a vendor.
This scenario consists of the following steps:
Display and assign purchase requisitions
Convert assigned requisitions to purchase orders or create purchase order manually
Approve purchase order
Print purchase order
Receive goods from vendor
Invoice receipt by line item
Outgoing payment

Key Points
Use of integrative data sets like purchasing info records, source lists, contracts
Automatic assignment of RFQs to purchase orders

5.2 Consumable Procurement

This scenario deals with purchase order creation activities during the procurement process.
Furthermore it describes the additional process steps of a purchase order approval, goods
receipt of consumables and invoice receipts by line item.
Consumable items/goods are entered without material number but rather a short text description
as the main identifiable characteristic. The purchase order is subject to approval based on
predefined parameters prior to being issued to a vendor.
For consumable goods, there is no inventory in the system. By posting a goods receipt the value
of the goods is expensed to a cost center or another cost element.
When the invoices are received from the vendor, they are entered with reference to a purchase
order and item, providing a three way match of purchase order value, goods receipt value and
invoice value. If there are any variances between invoice and purchase order value, the invoice
is blocked and forwarded to the Buyer for approval.
This scenario consists of the following steps:
Purchase order creation for consumable goods
Approval of purchase orders for consumables
Goods receipt of consumables
Invoice receipt by line item

Key Points
Quick, one-time-purchases are possible: material consumption is directly posted, no
posting into storage

5.3 Project procurement

In this procurement is decided based on project systems

Page 21 of

A purchase requisition is created with account assignment category Q (special indicator for
project) via the Material Requirements Planning (MRP) process, or manually by a requester. A
buyer validates the accuracy of the purchase requisition and converts the purchase requisition
into a purchase order. The purchase order is subject to approval based on a predefined amount
before being issued to a vendor.
This scenario consists of the following steps:
Display and assign purchase requisitions
Account assignment category is Q(project make-to-order).
Convert assigned requisitions to purchase orders or create purchase order manually
Approve purchase order
Print purchase order
Receive goods from vendor
Invoice receipt by line item
Outgoing payment

5.4 External procurement of Services

External Services Management provides a basic process for the procurement of externally
performed services.
The service entry is booked to confirm the service performed. The invoice is booked with
reference to the purchase order.
This basic process comprises the following functionality:
Service master records, in which descriptions of all services that may need to be procured
can be stored. In addition, a standard service catalog and model service specifications are
available.
A separate set of service specifications can be created for each concrete procurement project
in the desired document (e.g. MM purchase requisition, RFQ, contract, purchase order, or
service entry sheet).
Service entry sheet :Service entry sheets refer to the total service specifications ordered.
Service entry sheet in external services management is the same as a goods receipt posting
when procuring materials.
This scenario consists of the following steps:
Creating a Service purchase order
Approve the Service Purchase order
Invoice verification
Posting Manual Outgoing payment

Key Points
Service procurement processing
Efficient processing

5.5 Subcontracting
The MM Subcontracting process involves sending raw components to a vendor for specific
manufacturing processes and receiving the value-added finished material back into inventory.

Page 22 of

A Subcontract Purchase Requisition is either generated via the Material Requirements Planning
process or manually by a requester. A Buyer validates the accuracy of the Purchase Requisition
and convert it into a Purchase Order. The purchase order is subject to approval based on
predefined parameters prior to being issued to a vendor.
The consumption of sent components is recorded upon receipt of the value-added finished
material. The vendor sends the invoice for the services provided which is paid during the normal
payment cycle.
This scenario consists of the following steps on goods delivery:
Subcontracting purchase order creation
Subcontracting purchase order approval (if required)
Transferring of Components to Subcontractor
This scenario consists of the following steps on goods receipt:
Receiving Goods from Subcontracting PO
Invoice receipt by line item
Outgoing payment

Key Points
Automatic posting of stocks into corresponding stock types
Subcontracting info record shows added value
ENHANCEMENT :
1) Subcontracting scrap linked to scrap account (FI )
2) Justification note
3) DCR(Design concession Report) with drawing no and proper approval

5.6 Release Procedure

You use this component if you wish to set up approval procedures for purchase requisitions or
other purchasing documents. Under such a procedure, if a purchase requisition or external
purchasing document fulfills certain conditions it has to be approved (by the cost center
manager, for instance) before it can be processed further.
This process of approving (clearing, or giving the "green light" to) a proposed item of expenditure
is replicated in the SAP System by the "release procedure".
Release procedures can be defined for the following documents:
Purchase Requisition
The external purchasing documents purchase order (PO), contract, scheduling
agreement, request for quotation (RFQ), and service entry sheet
Release Procedure for Purchase Requisitions
Two different procedures are available for requisitions:
With classification
With this procedure, requisitions can be released both at item level (i.e. item-by-item)
and in total. The latter approach is also termed "overall release".
Without classification

Page 23 of

With this procedure, requisitions can only be released at item level.

The two procedures are mutually exclusive (that is to say, you must decide in favor of one of
them only - you cannot use both).
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.

5.7 Pricing Procedure

Pricing procedure in MM module is a way to determine prices in purchasing documents. It give
us functionality to assign different calculation types for different needs.
Defining a pricing procedure can be done by creating an access sequence, and assigning it to
condition types. Access sequence tells the system where to look for the condition values. It can
search multiple condition tables based on our settings. Tables have different priority, and different
key fields.
Determination of the pricing procedure is practically assigning the calculation schema to a
combination of vendor schema group and purchasing organization schema group. So, you need
to enter the vendor schema group on vendor master, and assign schema group to purchasing
organization, in order for the system to find the calculation schema to be used in the document.

Condition Technique
The condition technique is used to determine the purchase price by systematic consideration of
all the relevant pricing elements. A feature of the technique is the formulation of rules and
requirements. By applying conditions defined by means of the condition technique, the system
arrives at a suggested price for purchase transactions.

Condition Type
Condition types represent price factors in the system. There are condition types for absolute and
percentage discounts, freight costs, customs duties, or taxes, for example. Via the condition
type, you specify how the price factor is calculated (e.g. percentage or absolute amount).

Access Sequence
An access sequence is a search strategy by means of which the system searches for valid
records in various condition tables. It consists of one or more accesses. The sequence of
accesses controls the priority of the individual condition records among each other. Through the
accesses, the system is told where to look first and where to look next for a valid condition
record in each case.

Calculation Schema
A calculation schema groups together all condition types that play a part in calculating the price.
It sets out the order in which the condition types are taken into account in the calculation. In
addition, the calculation schema specifies the following:
The subtotals
The extent to which manual processing of price determination is possible
The basis upon which the system calculates percentage discounts and surcharges
The prerequisite that have to be fulfilled so that a particular condition type to be taken
into account
we define different calculation schema for example for domestic and import purchasing
The conditions types supplied include the following:

Page 24 of

Condition type

Condition class

Description

PB00

Price

Gross price: Price without taking any

possible discounts and surcharges into
account

RB00

Discount/surcharge

Absolute discount

ZB00

Discount/surcharge

Absolute surcharge

FRB1

Discount/surcharge

Absolute freight amount

ZOA1

Discount/surcharge

Percentage duty amount

SKTO

Discount/surcharge

Cash discount

NAVS

Taxes

Non-deductible input tax

5.8 Vendor Evaluation (Supplier Evaluation)

The Vendor Evaluation component helps you select sources of supply and facilitates the
continual monitoring of existing supply relationships. It provides you with accurate information on
prices, and terms of payment and delivery. By evaluating vendors, you can improve your
enterprise's competitiveness.
On the basis of detailed information, and in collaboration with the relevant vendors, you can
quickly identify and resolve any procurement problems that may crop up from time to time.
The results of vendor evaluation are displayed in the form of analyses. For example, you can
generate ranking lists of the best vendors according to their overall scores or ranking lists for
specific materials.
Changes to evaluations are recorded in logs, and you have the option of printing out evaluation
sheets.
This scenario consists of the following Key points:
you can generate ranking lists of the best vendors according to their overall scores or
ranking lists for specific materials.

check the reliability of the vendors from whom you procure Goods & Services

scoring range from 1 to 100 points, which is used to measure the performance of your
vendors on the basis of the main criteria.
The table below lists the criterion proposed

S.NO

EXISTING CRITERIA

SAP MAIN
CRITERIA

SUBCRITERIA

TYPE

Rate

Price

Price history

Automatic

Quality

Quality

Goods Received

Automatic /
Manual

Quality Audit

Automatic /
Manual

On-time delivery

Automatic

Delivery

Delivery

Page 25 of

conformation date Automatic

quantity reliability Automatic
Compliance with
shipping
instructions
4

Service

Service

Automatic

Quality of Service Semi automatic

Timeliness of
Service

Semi automatic

PROCESS FLOWCHART
START

Carry out Vendor

evaluation (Set Criteria)

Compare Evaluation

Print Evaluation Sheet

Vendor
Evaluation
sheet

Vendor Ranking List

Vendor
Ranking List

END

5.9 Goods Receipt

A goods receipt (GR) is a goods movement with which the receipt of goods from a vendor or
from production is posted. A goods receipt leads to an increase in warehouse stock.

Material Document
Material document
In the Inventory Management system, when a goods movement is posted, a material
document is generated that serves as proof of the movement and as a source of

Page 26 of

information for any applications that follow.

A material document consists of a header and at least one item. The header contains
general data about the movement (for example, its date). Each item describes one
movement.

Accounting Document
If the movement is relevant for Financial Accounting (that is, if it leads to an update of the
G/L accounts), an accounting document is created parallel to the material document.
In some cases, several accounting documents are created for a single material
document. This might be the case, for example, if you have two material document items
with different plants that belong to different company codes.
The G/L accounts involved in a goods movement are updated through an automatic
account assignment.

Reference to a Purchase Order

If a material is delivered for a purchase order, it is important for all of the departments involved
that the goods receipt entry in the system references this purchase order, for the following
reasons:
Goods receiving can check whether the delivery actually corresponds to the order.
The system can propose data from the purchase order during entry of the goods receipt
(for example, the material ordered, its quantity, and so on). This simplifies both data
entry and checking (over-deliveries and under-deliveries).
The delivery is marked in the purchase order history. This allows the Purchasing
department to monitor the purchase order history and initiate reminder procedures in the
event of a late delivery.
The vendor invoice is checked against the ordered quantity and the delivered quantity.
The goods receipt is valuated on the basis of the purchase order price or the invoice
price
A goods receipt posting has the following results:
When you post a goods receipt a material document is generated, which is used as proof of the
movement and as a source of information for any other applications involved.
If the movement is relevant for Financial Accounting, one or more accounting documents
are generated. The accounting document contains the posting lines (for the corresponding
accounts) that are necessary for the movement.
When you enter the goods receipt, you can print the goods receipt/issue slip, If the GR
message indicator has been set in the purchase order, the orderer automatically receives a
message informing him of the delivery.
If the goods are destined for the warehouse, the system increases total valuated stock
and the stock type (for example, the unrestricted-use stock) by the delivered quantity.

Page 27 of

The stock value is updated at the same time.

If the goods are destined for consumption, only the consumption statistics are updated in
the material master record.
If the goods receipt is posted into goods receipt blocked stock The goods are recorded only in
goods receipt blocked stock of the purchase order history.
During goods receipt posting, a purchase order history record is automatically created.
This record contains data essential for Purchasing, such as: the delivered quantity, the
material document number and item, the movement type, and the posting date of the
goods receipt.
vendor evaluation data in Purchasing
Process Flow :
POProcess

Goodsarrival
atstores

GoodsReceipt
TcodeMIGO
WrtPO

Material
Inspection

Ismaterial
OK

Stockupdation
inunrestricted

Invoice
Verification
Movement type

Special indicator

101
101

Description
GR for stock items &
consumables

Q (project stock)

GR of Project stock

5.10 Goods Issue

A goods issue (GI) is a goods movement with which a material withdrawal or material issue, a
material consumption, or a shipment of goods to a customer is posted. A goods issue leads to a
reduction in warehouse stock.

Material Withdrawals for Production Orders

Page 28 of

You enter withdrawals for production as goods issues with reference to the production orders for
which the components are required.

Scrapping/Sampling
If a material is no longer usable, it must be scrapped. Scrapping of a material is entered in the
R/3 System as a goods issue. The withdrawal of samples must also be entered as a goods
issue.
You can enter goods issue with/without reference document
when you enter a goods issue, you can reference
reservation
work order
A goods issue has the following results in the system:

Material document is created

Accounting document is created

Goods receipt/issue slip is created

Stock update

Update of G/L accounts

Consumption update

Reservation update

Order update

Movement type

Special stock Indicator

221

Description
GI for stock item

221

Q (Project stock)

GI for project

Enhancement :
Screen shot to be developed for stock report with both size wise and dimensions wise
(secondary UOM)

Material Name

Weight with sizes

Weight with Dimensions

5.11 Stock Transfer from project to project

The stock transfer process begins with a requirement to transfer material from one project to
another project .This request, in form of a stock transfer requisition, created manually by a buyer.
There are no master data requirements beyond the material master to support the stock transfer
process. The material master must be extended in both the procuring (receiving) storage location
and the providing (issuing) storage location. Stock transfer purchase orders are not subject to
approval like other purchase orders.

Page 29 of

A buyer validates the accuracy of the stock transfer purchase requisition and convert it into a
stock transfer purchase order.
This scenario consists of the following steps:
Creating stock transport order
Post goods issue
Receipt of transferred material in receiving Storage location.

Key Points
Supports all required documents for stock transfers .
Supports all required master data aspects like batch management and serial numbers
Monitors stock in transit

5.12 Return to Vendor

The return to vendor process begins with a requirement to return an item to a vendor. The buyer
then creates a return purchase order in the system. The return purchase order is similar to a
standard purchase order except for the return flag which sets up the return delivery to enable
shipment of the item(s) back to the vendor.
The return purchase order confirmation goes to the vendor and the return Delivery is sent to the
shipping department where the item(s) are picked and shipped back along with a delivery note.
When the shipping department creates the delivery the item(s) are relieved from inventory. A
credit memo is generated which relieves the liability to the vendor.

Results of the Return Delivery Posting

Creating a Material Document
For the return delivery, the system creates a material document, which you can print as a
return delivery slip Since the return delivery is valuated, the system also creates an
accounting document.
Updating Stock and G/L Accounts
In the case of a return delivery, the system reverses all stock and G/L account updates
that occurred during the goods receipt posting.
Updates in the Purchase Order
The system cancels the updates posted as a result of the goods receipt. The open
purchase order quantity is increased by the returned quantity.
This scenario consists of the following steps:
Creating return purchase order
Delivery due list for purchase orders
Picking confirmation
Goods issue
Creating Return Excise Invoice
Credit Memo

Page 30 of

Key Points
Goods can be returned with a return reason captured in the document
All information for follow-on FI functions such as invoice reduction, rejection, and
cancellation is provided
Process Flow:

Enhancement : Justification note in RETURN TO VENDOR

5.13 Stock Handling: Scrap and Blocked Stock

This scenario is triggered by the following different processes:

Rework from production

Other logistic processes and reasons

This scenario consists of the following steps:

Block material stock transfer from unrestricted to blocked
Unblock material stock transfer from blocked to unrestricted
Unblock material stock transfer from blocked to quality inspection stock

Key Points
Scrapping
Transfer posting to blocked stock

Movement type

Special Indicator

Description

343

Q (project stock)

Transfer posting project stock

from Blocked to Unrestricted

Page 31 of

344

Q (project stock)

Transfer posting project stock

from Unrestricted to Blocked

321

Q (project stock)

Transfer posting Project stock

from Quality to Unrestricted

349

Q (project stock)

Transfer posting Project stock

from Blocked to Quality
Inspection

415

Q (project stock)

Transfer posting from Project

to project

5.14 Physical Inventory / Inventory Count and Adjustment

This scenario covers the periodic process making necessary adjustments to stock on hand after
a physical count.
The process begins with the generation of the inventory count sheets. Furthermore, materials
can be blocked here for posting during the physical inventory. Once the inventory sheets are
printed out, the actual physical inventory count occurs for the given materials. Next, the count is
entered in the system and then any discrepancies against the system quantities are reviewed.
The inventory may be recounted until final counts are accepted and inventory differences are
posted.
This scenario consists of the following steps:
Planning phase of physical Inventory
Counting phase of Physical Inventory
Monitoring of Physical Inventory activities
Physical Inventory Procedures
The SAP System supports the following physical inventory procedures:
Periodic inventory
Continuous inventory
Cycle counting
Inventory sampling

5.14.1 Periodic Physical Inventory

In a periodic inventory, all stocks of the company are physically counted on the balance sheet
key date. In this case, every material must be counted. During counting, the entire warehouse
must be blocked for material movements.

5.14.2 Continuous Physical Inventory

In the continuous physical inventory procedure, stocks are counted continuously during the
entire fiscal year. In this case, it is important to ensure that every material is physically counted at
least once during the year.

5.14.3 Cycle Counting

Cycle counting is a method of physical inventory where inventory is counted at regular intervals
within a fiscal year. These intervals (or cycles) depend on the cycle counting indicator set for the
materials.

Page 32 of

The Cycle counting method of physical inventory allows fast-moving items to be counted more
frequently than slow-moving items.

5.14.4 Inventory Sampling

In Inventory sampling randomly selected stocks of the company are physically counted on the
balance sheet key date. If the variances between the result of the count and the book inventory
balance are small enough, it is presumed that the book inventory balances for the other stocks
are correct.
Enhancement: Required approval for posting inventory difference

Process Flow:
Materialanalysis
Report

Classification
ofMaterials

PhysicalInventory
Documentcreation

Blockmaterialfor
Inventoryposting

Count&record
physicalInventories

RecordInventory
Diffifany

Postinvdiff
Ifany

6. Invoice verification

Logistics Invoice Verification is a part of Materials Management (MM).It is situated at the end of
the logistics supply chain that includes Purchasing, Inventory Management, and Invoice
Verification.
It is in Logistics Invoice Verification that incoming invoices are verified in terms of their content,
prices and arithmetic. When the invoice is posted, the invoice data is saved in the system. The
system updates the data saved in the invoice documents in Materials Management and Financial
Accounting.
An invoice can be processed in logistics invoice verification in following ways:

Page 33 of

1. Invoices with purchase order reference

All the items in a purchase order can be settled. With purchase-order-based Invoice Verification,
all the items of a purchase order can be settled together, regardless of whether an item has been
received in several partial deliveries.
2. Invoices with goods receipt reference
Each goods receipt is settled separately.
3. Invoices without purchase order reference
Invoices can be posted directly to G/L accounts or material accounts.
The important data for invoice verification is:
Master data : Master data is permanent data on objects, every is given a unique number
by which it can be identified in the system.
Material data : Material data provides information on materials bought. It
includes material name, material unit of measure, stock data.
Vendor data : Vendor data provides information on vendors. it includes address,
bank data, name of bank head office, terms of payment & terms of delivery.
Accounting data : Accounting data is used to define G/L accounts . it includes
account name, account type, account currency in which account is managed,
information on whether account may be posted directly, and which financial year it is
allocated to.
Transaction data : Transaction data records transactions in the system. whenever we
post a purchase order, scheduling agreement, goods receipt, or invoice, the system
automatically creates a document.
Purchasing data : It contains information such as vendor number, the PO date,
terms of delivery, material number ,& order quantity.
Material document : Material document is created when a goods receipt is
posted. it includes the posting date, quantity delivered, delivery number & PO
number that the goods receipt refers to.
Accounting document : An accounting document is created when a goods
receipt (unless the goods receipt is not valuated) or an invoice is posted. it contains
details of individual postings with account number, posting key, and the amount.

7. Batch Management
If materials were handled in batches it might be necessary to change batch master data or to find
out where a batch was used, for example, to perform a batch recall or report to government.
Batch management fulfills the requirements for managing and tracking batches or production lots
across the whole production process. In various industry sectors, particularly the process
industry, you have to work with homogeneous partial quantities of a material or product
throughout the entire quantity and value chain. In the SAP system, a batch is the quantity or
partial quantity of a particular material or product that is manufactured according to the same
recipe. There are various reasons for this:
Legal requirements, for example, guidelines on good manufacturing practice (GMP), or
regulations on hazardous materials.

Defect tracing, recall activities, and recourse requirement.

Usability differences and the monitoring thereof in materials planning, sales and
distribution, and production.
Production or technical requirements, for example, material quantity calculations on the
basis of different batch specifications.
This scenario consists of the following steps:

Page 34 of

 Maintain batch master record

Batch information cockpit

Key Points
Basic steps for setting up batch management are well documented
Examples of classes and search strategies are simple yet effective
Integration of batch management in all logistics processes
Setting up the batch-where-used-list to find out where a batch was used, for example, to
perform a batch recall or government report
Detailed process steps how to maintain batch master records and how to use the batch
information cockpit

8. Serial Number Management

Using serial numbers, you can track each individual material during goods movement. This
building block includes the configuration settings for serial number management and shows the
serial number handling on finished goods level.
The following functions are provided to support this building block:
Definition of serial number profile and serializing procedures
Equipment categories for serialization
Settings for physical inventory

Key Points
Integration of serial number management in all logistics processes
Integrated use of one serial number profile in logistics.

...........................7.1 9. SAP ERP Reporting

In SAP ERP various reports can be used to monitor and control your company processes. SAP
Material Management focuses on the following reports:

General Analysis: Purchase Orders, Contracts and Quotation.

Analysis of Purchase Order Values

Purchase Order by Material

Purchase Order by Vendor

Purchase Order by Service

Purchase Order by Document Number

Pending PR

Material Evaluation Report

Purchasing Group Analysis

Release Purchasing Documents

Page 35 of

Assign and Process Purchase Requisitions

Stock Requirement List

SC Stock Monitoring for Vendor

Vendor Analysis

Material Document List

Display Warehouse Stocks of Material

Accounting Documents for Material

Material Documents with Reason for Movement

Batch Analysis

Availability Overview

Plant Analysis

Material Analysis

MRP report

Alerts for C forms & Vendor

List of GR/IR balances

Inventory Analysis.

Outline agreements by vendor/material

Fast & slow moving item

Reorder report

Project wise stock transfer report

ABC analysis

Payments from system

List of subcontracting challans

Stock by posting date

Purchase status

Previous Purchase rates

GAP : 1) Purchase budgeting & control is linked to FI module

2)PLA & C forms need to be developed
3)MRP With Project planning.

Page 36 of