Special Procurement Cycles:

Special Procurement cycles, means the procurement cycle with some variation from the normal.

In MM, we have following special procurement cycles.

Based on Account Assignment Category in PO
• Procurement for Stock
• Procurement for consumption
Based on Item Categories
• Subcontracting
• Consignment
• Service Procurement
• Pipeline
• Stock transfer
Procurement for Stock:
This is the most standard form of procurement type without any deviation from the standard procurement process.
Specialty of this cycle

Procurement for stock in simple terms means the material procured goes into stock

Material Master is must as the stock is to be updated for a particular material

No account assignment mentioned in the PO i.e. Account Assignment is Blank i.e. Standard (Account
assignment category Standard is denoted by blank in SAP)

After GR, Material Stock and value is updated. This can be seen in the Material Master Accounting View or
stock overview transaction (MMBE)
Step 1 – Crate PO
Create PO with account assignment category blank. (Transaction Code – ME21N)

Note: in PO, before the material code there are two columns Account Assignment Category and Item
Category. For the procurement for stock, account assignment category is taken as blank i.e. standard
Give the details and save the PO.
Step 2 – Goods Receipt for Purchase Order

To check the qty and value update in Material master, we can record the initial status in Material Master

Material Master accounting view has the details of material stock quantity and value (Transaction Code
MM03)

Also the stock status can be seen in MMBE Transaction

Post the Goods receipt (Transaction Code- MIGO) and compare the sock and value status in Material

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Material Master Display (MM03) – Accounting View

Stock Overview Transaction – MMBE

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Goods Receipt for Purchase Order – Transaction MIGO

Stock Value and Quantity is updated in the material master record.

Stock is updated in Stock Overview transaction MMBE

Thus through Procurement for stock, stock quantity and value is updated.

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Procurement for Consumption:

Material Master is optional

Account assignment is mandatory

Stock is not updated in material master or stock overview transaction
Step 1 – Create PO

Create PO with account assignment category

In the account assignment column we mention account assignment category and in account assignment tab, we
mention the details of account assignment like cost center no. etc

These are the account assignment categories available

Step 2 – Goods Receipt against Purchase Order

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Goods receipt is done against Purchase Order in Transaction code MIGO.

Post the Goods Receipt

Check the stock status in Material Master and MMBE transaction. After this GR, stock and value is not updated and
thus posted direct to consumption

Material Master accounting view

Procurement cycles based on Item Categories

Subcontracting Cycle:

Subcontracting is a process where we provide raw material to vendor for processing on labor charges and
vendor will give the finished goods after processing

Raw material supplied to vendor is a special stock type “O”.

This is a material owned by us lying in vendor’s premises

This material is still valuated in our inventory and can be seen in the plant stock

For the subcontracting finished goods must have BOM (Bill of Material) in system

If some other material is generated along with finished good, then it called as Byproduct ex. scrap

By products are entered as negative items in BOM.

BOM is mainly in PP module and transaction codes for BOM are CS01 – Create, CS02 – Change, CS03 –
Display

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Material BOM

In the above example, Material 100-114 is a by product and entered as negative qty

Info record with category subcontracting will be used in the PO Subcontracting cycle.

Step 1: PO Creation:

In the PO Item category is taken as L i.e. Subcontracting

PO is created for the Finished goods that vendor will supply

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In Material Details Tab of item details section, we can see the button components & explode BOM

Click on the components list to see the list of raw materials required to be given to vendor

It is also possible to procure a raw material from another vendor and ship it directly to the subcontracting
vendor instead of taking it in our company and then sending it to subcontracting vendor

For this create a normal PO (Item Category – Blank) to the supplier vendor and in delivery address tab of item
details section of PO, give the vendor code to which the material is to be sent. If the material is to be sent as
raw material as subcontracting, then check the SC Vendor as shown below

After the Goods Receipt of this PO, material will be added to the subcontracting stock provided to vendor
Step 2: Issue Raw Material to Vendor

After the PO is crated, we will issue raw material to the sub contractor

This is done by transaction ME2O

In this transaction we can give either raw material list or finished goods list for selection

We can provide material in excess quantity than the BOM quantity

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In the above example, for component 100-112, actual requirement as per PO qty and BOM Calculation is 20
Pcs. But 90 quantity is already issued to vendor and hence system is showing as 70 quantity in excess in green
color. This is possible when we have issued excess raw material to vendor earlier

For the second item, there is no sub contracting stock with vendor i.e. 0 Qty. Actual BOM requirement is 30
PCs and hence system is showing 30 qty as red

Select the items and click on post goods issue button in the application toolbar

Following dialog box will appear for raw material issue

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Material is issued to the vendor by movement type 541.

Enter the quantity to be issued and click on continue

After goods issue, system will display a message as below

System will generate a material document in the background for the goods issue

Stock of components supplied to vendors is a special stock referred by type “O”

This stock can be seen in stock overview transaction MMBE as shown below

To see the details of the vendor to whom the material is supplied, double click on the line

System will display a vendor wise stock of subcontracting stock

Step 3: Receive Finished Goods

After processing, vendor will supply the finished goods against the PO

Do the Goods Receipt against PO in MIGO transaction

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In the above screen we can see that the finished goods are inwarded by movement type 101. Raw material is
consumed by movement type 543. By products, which were mentioned as negative qty in PO are generated by
movement type 545

Post the goods receipt.

There is no difference in invoice processing is same as normal cycle in MIRO

This will complete the subcontracting procurement cycle

Consignment Cycle:

Consignment is a stock owned by vendor but lying in our premises.

This stock is not valuated in our inventory. Only when we transfer the material from consignment to own
stock for use, then only it is valuated in our inventory and payment liability is generated

Consignment stock is a special stock in SAP indicated by “K”
Step 1: Info Record

For the consignment process, Info record of the category must exist for standard purchasing organization
assigned to plant

All the rate and tax information (tax code) must be available in info record purchasing dat

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Step 2: Create PO

Create a PO with Item category as “K” – Consignment

In the consignment PO, net price is zero and there will not be any conditions tab. Because, the material is not
valuated in our stock after GR for the PO

Step 3: Goods Receipt against PO

Do the goods receipt against this PO in transaction MIGO

In the GR, special stock indicator K is updated. This will post the quantity to consignment stock

This special stock can be seen in MMBE transaction

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To see the details of consignment stock, double click on the line. It will display the vendor wise stock of the
consignment material

At the time of goods receipt, material is not valuated in our inventory i.e. stock value does not increases. No
payment liability generated and no accounting document generated
Step 4: Transfer posting consignment to own

When we require the material, we do transfer posting from consignment to own stock in MIGO transaction by
material movement type 411 as shown below

In the MIGO transaction Select transfer posting  Others as shown in above figure

Movement type is 411 and special stock is K

We also enter the vendor whose material we are transferring

Post the documents

This time the material transferred is valuated in our inventory and liability is generated. Accounting document
is generated and stock value increases
Step 5: Consignment Settlement

In the consignment, vendor does not send individual invoice for each transfer posting, but we post an
accounting document for transfer postings

This is done by transaction MRKO

Both consignment & pipeline deliveries are settled by this transaction. We select the appropriate option i.e.
consignment or pipeline or both

There are two modes to run the transaction display and settle. Display will just display if any error is there or
not. Settle will actually post the accounting document

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Display Mode

Run the transaction again in settle mode and check the accounting document posted.

Accounting document generated for vendor payment.

This will complete the consignment cycle

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Pipeline Cycle

Pipeline is a material which directly flows into process

Materials of this type has material type PIPE

There is no PO, No Goods Receipt, No stock for these materials

Example for understanding can be taken of electricity or Corporation water line. In this we need not create a
PO or keep the material in stock. We only record the consumption and pay accordingly.

We only record the consumption. In MIGO transaction, special stock type is “P”

All the rate and tax info is stored in info records. Info record category for this is Pipeline
Step 1: Info Record

Info record category Pipeline must be created

All rate and tax information must exist in info record or else it will give error in settlement

Purchasing organization for this is standard Purchasing organization assigned to plant in enterprise structure

Tax information is recorded in info record

Step 2: Record consumption in MIGO

There is no PO or stock for the pipeline material

We can issue / consume material even when it is not there in stock. This is the characteristic of pipeline
material

Consumption of pipeline material is recorded in MIGO. Special stock type is P

For the example given in the below screen, it is issue to cost center and special stock type is P

Enter the material, quantity, plant, vendor, cost center etc and post the document

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Post the goods issue
Step 3: Pipeline settlement

Pipeline deliveries are settled with the transaction MRKO. Same as consignment material

In this transaction select pipeline and give other selection criteria and post the document

This will complete the pipeline procurement cycle

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Service Procurement:

Service procurement is the procurement of services.

Service procurement in SAP happens in following steps
Step 1: Create PO

In PO there will always be account assignment category because service can not be stored physically and it is
always consumption. Hence account assignment category in PO is always present.

Item category used in PO is “D” i.e. services

For the example given below, we have taken account assignment category as K i.e. cost center and item
category as D i.e. services

At the item level we mention only one item.

Detailed services are mentioned in Services tab in the item details section of the PO

After maintaining the service lines, pop up window will appear to maintain the account assignment details for
each service lines

Maintain the account assignment

There is auto repeat account assignment button, which can copy the same account assignment to all items

Enter the details and save the PO
Step 2: Create Service Entry Sheet

Transaction code to create the service entry sheet is ML81N

After entering in the transaction, it will show the last PO or SES (Service Entry Sheet) created.

Click on Other Purchase Order button in application toolbar and enter the PO no. as
shown in screen below.
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Click on continue from this window.

To create a new SES for this PO, click on the New Button in application toolbar

This will create a new entry sheet for the PO.

Enter the other details required in the SES as shown below

After entering the header level details, we need to select services from PO. For this click on the service
selection button at the bottom of the screen.

A pop up will appear selecting the PO no. Click on continue.

Next screen will show the services available in PO. Select the services and click on copy services
button in the application toolbar.

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After copying the required services in SES, we can change the quantity of the individual services and then
save the SES

Step 3: Release SES (Service Entry Sheet)

SES created needs the approval or release. Then only the account posting happens and the liability is
generated.

For releasing / approving the SES, click on change button . The status of the PO now is
which can be seen the SES after SES number

Click on release flag. . Status of the PO will become, i.e. it will be released after
saving. Save the SES.

Now the SES is approved and the status becomes i.e. released.

Invoice Verification is same as normal Goods receipts i.e. through transaction MIRO. It can be done with
reference to PO or SES

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SES Created is also updated in Purchased Order History Tab in PO

Invoice posting will complete the Service procurement cycle.

Stock Transfer Order (STO Process)

STO (Stock Transport Order) is a process of material transfer from one plant to another of same or different
company codes

Stock transfer can be done, purely in inventory management in transaction MIGO. For single step, the
movement type is 301 and for two step transfer the movement type is 311 & 313

Stock transfer can also be done with PO process called as STO
Step 1: Create STO

SAP Standard PO document type for STO is UB

Instead of vendor, in the PO, we mention supplying plant.

STO is raised by receiving plant on sending plant

Item category in this PO is U i.e. stock transfer
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Other fields in PO are as normal PO. Create and Save the PO
Step 2: Goods Issue against the STO

There are two methods to do the goods issue

One is through MIGO and another is by creating delivery

For MIGO goods issue, select Goods Issue  Purchase Order as shown below

Movement type for this is 351.

Post the goods issue.

This goods issue will remove the stock from the sending plant and update it in the in transit stock of the
receiving plant.

Accounting happens at the time of goods issue only and accounting document is generated.

This in transit stock of the receiving plant can be seen in transaction MB5T

Other method of goods issue is by creating delivery.

This is by shipping and has some Sales Distribution module involvement also.

Outbound Delivery is created against PO in transaction VL10B and then Goods Issue posted against this
delivery. This movement type is 641

With this movement also goods are removed from sending plant and posted in the in transit location of
receiving plant. Accounting document generated while material issue.
Ste 3: Receive Goods against STO

This is a normal goods receipt against PO in transaction MIGO. Movement type is 101

No accounting document generated at this step.

This will remove the stock from in transit location to storage
Advantages of STO:

Delivery costs can be accommodated by applying pricing procedure and appropriate conditions

For the in transit damages either reverse the goods issue, scrap the damaged good in sending plant and then
send the OK material or receive complete qty in receiving plant and then scrap the damaged qty

Excise invoice can be generated

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