MM-Procurement Process Business Process PDF

AAPL
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SAP S4HANA IMPLEMENTATION

PROJECT
Business Blueprint Document
MATERIALS MANAGEMENT BLUE PRINT DOCUMENT

MATERIALS MANAGEMENT – ANKIT AEROSPACE PRIVATE LIMITED
PROJECT IDENTIFICATION
Project Name
PROJECT AERO HANA
Customer Name
ANKIT AEROSPACE PRIVATE LIMITED
SAP Project Manager Customer Project Manager
Mr. Girija Shankar Mr. Syed Khadar
Author Document Location (repository/path/name)

R Girija Shankar
Version Status Date (YYYY-MM-DD) Document Classification
1.1 Draft 22.12.2017
REVISION HISTORY
Version Date Description
1.0 22.12.2017 Initial Version

1.1 02.01.2018 Updated for list of processes
1.2 03.01.2018 Updated matrix for list of Business Processes
1.3 17.01.2018 Addendum: PO/PR Release changes, Document Types, ECN
SAP S4HANA BLUEPRINT FOR MM MODULE AYAN TECH SOLUTIONS PAGE 1 OF 62

REVIEW AND APPROVAL
Natarajan / Syed Khadar

23 January 201823| January 2018
13:05 IST 23|January
13:46 IST
2018
Name Date (DD-MM-YYYY)

Customer Project Manager
23 January 2018 | 19:07 IST

Girija Shankar

SAP Project Manager

Key Stake Holders

Key Stake Holders
SAP S4 HANA Blueprint for MM module Ayan Tech Solutions Page 2 of 62

Table of Contents
1. SCOPE AND PURPOSE OF DOCUMENT ....................................................................................5
1.1 INTENDED AUDIENCE ..................................................................................................................5
1.2 SCOPE OF REQUIREMENT ...........................................................................................................5
2. BUSINESS BLUEPRINT ................................................................................................................7
2.1 SAP MM ORGANIZATION UNITS ..................................................................................................7
2.1.1 Company Code ...................................................................................................................7
2.1.2 Purchasing Organization ....................................................................................................8
2.1.3 Plant ....................................................................................................................................8
2.1.4 Storage Location .................................................................................................................8
2.1.5 Purchasing Group ...............................................................................................................9
3. VENDOR & BUSINESS PARTNER ............................................................................................ 10
3.1 BUSINESS PARTNER ................................................................................................................ 10
3.2 VENDOR GST DETAILS ............................................................................................................ 10
3.3 VENDOR MASTER DATA ........................................................................................................... 10
3.3.1 Vendor Partner Functions ................................................................................................ 11
3.3.2 Terms of Payment ........................................................................................................... 12
3.3.3 Incoterms ......................................................................................................................... 12
3.4 VENDOR ACCOUNT GROUP ...................................................................................................... 13
4. MATERIAL MASTER ................................................................................................................... 14
4.1 BUSINESS REQUIREMENT......................................................................................................... 14
4.2 BUSINESS BLUEPRINT .............................................................................................................. 14
4.2.1 Material Data at different organizational levels ............................................................... 14
4.2.2 Material Master Views ..................................................................................................... 15
4.2.3 Functions of Material Master in SAP ............................................................................... 16
4.2.4 Material Master Codification ............................................................................................ 16
4.2.5 Material Type ................................................................................................................... 16
4.2.6 Unit of Measurement ....................................................................................................... 18
4.2.7 Material Group ................................................................................................................. 18
4.2.8 Valuation Price Control .................................................................................................... 20
4.2.9 Material Master Impact in GST ........................................................................................ 21
4.2.10 Automatic Account Determination ............................................................................... 21
4.2.11 Consumption based planning for Material ................................................................... 23
5. BATCH MANAGEMENT .............................................................................................................. 24
6. SERVICE MASTER ..................................................................................................................... 25
7. PURCHASING INFO RECORD ................................................................................................... 26
8. SOURCE LIST ............................................................................................................................. 27
9. GST TAX PAYABLE (INBOUND) ............................................................................................... 28
10. PROCUREMENT PROCESS ................................................................................................... 29
10.1 PURCHASING ................................................................................................................. 29
10.1.1 Purchase Requisition ................................................................................................... 32
10.1.2 RFQ & Quotation ......................................................................................................... 33
10.1.3 Purchase Order ........................................................................................................... 33
10.1.4 Outline Agreements ..................................................................................................... 35
10.1.5 Vendor Consignment ................................................................................................... 39
10.1.6 Pricing in Purchase Order............................................................................................ 39
10.1.7 Purchase Order Release Procedure ........................................................................... 41
10.2 INVENTORY MANAGEMENT ......................................................................................... 43
10.2.1 Goods Movement ........................................................................................................ 43
10.2.2 Integration with logistics............................................................................................... 45
10.2.3 Return delivery ............................................................................................................. 48
10.2.4 Physical Inventory ........................................................................................................ 48

10.3 INVOICE VERIFICATION ................................................................................................ 50

10.3.1 Invoices with purchase order reference ....................................................................... 51
10.3.2 Invoices with goods receipt reference ......................................................................... 51
10.4 PROCESS FLOW DIAGRAMS ................................................................................................ 52
10.4.1 Raw Materials Purchase .............................................................................................. 52
10.4.2 Consumable Material / Tools / Capital Goods Purchase ............................................. 53
10.4.3 Sub-Contract Purchase ............................................................................................... 54
10.4.4 Service Purchase ......................................................................................................... 55
10.4.5 Imports Purchase ......................................................................................................... 56
10.4.6 Stock Transport (Plant to Plant) .................................................................................. 57
11. LIST OF BUSINESS PROCESSES ......................................................................................... 57
12. REPORTS AND FORMS.......................................................................................................... 58
12.1 FORMS .............................................................................................................................. 59
12.2 STANDARD SAP REPORTS ................................................................................................. 59
12.3 CUSTOMIZED SAP REPORTS .............................................................................................. 60
13. PENDING FOR SCOPE CHANGE .......................................................................................... 60
14. ADDENDUM ............................................................................................................................. 61
14.1 PURCHASE ORDER RELEASE .............................................................................................. 61
14.2 PO DOCUMENT TYPE CHANGES .......................................................................................... 62
14.3 MATERIAL TYPES ............................................................................................................... 62
14.4 ENGINEERING CHANGE MANAGEMENT ................................................................................ 62

1. Scope and Purpose of Document

The primary purpose of this document is to capture the functional requirements of the Ankit
Aerospace S4HANA SAP Project. It represents the project deliverable to the users. The
requirements documented here are the results of the requirements gathering phase. It
represents the project deliverable to the users and also states the assumptions used in the
design and development of the system by Ayan Tech Solutions.
1.1 INTENDED AUDIENCE
This document is intended for review by departments within Ankit Aerospace with vested
interests in this Project. These departments should check the validity of business assumptions,
the accuracy of the business functions, outputs and the flow of processing logic described in the
document. When accepted, it will form the basis for detailed design and development of the
system. This document is also meant for Ayan Tech Solutions in the design, development and
testing phases of the system.
1.2 SCOPE OF REQUIREMENT

Ankit Aerospace Private Limited (AAPL) located at Jigani Industrial Area in Bengaluru, Karnataka,
is involved in the manufacture of Precision Aerospace components for the aviation industry.
This document summarizes the findings of the Ayan Tech Solutions team, which conducted
requirement analysis of AAPL’s Procurement process flows for the SAP system. The information
was gathered through interviews conducted at the AAPL plant with the managers, key users and
personnel from Information Systems, as well as through reviews of business processes, business
procedures, and documentation.
The immediate purpose of the analysis is to begin the implementation of Ankit Aerospace
Standard SAP S4 HANA best practices system. At the conclusion of the blueprint, the Ayan
consultants will determine the SAP functionality based on AAPL’s business requirement.
Ayan will accommodate standard SAP changes required by Ankit Aerospace based on existing
business process requirement which will form part and parcel of the scope of this project and
blue print. If any requirement(s) cannot be met with standard SAP solutions, and require(s)
customization and/or enhancement they shall be handled with Change Request (CR) after
approval of Ankit Aerospace Management.
The body of this document describes the organizational structure, enterprise area, and SAP
functional process flows to be implemented at Ankit Aerospace. Generally, requirements that
can be met using standard SAP functionality through routine configuration tasks are not explicitly
documented. However, certain key requirements are explicitly identified and summarized to
highlight their importance to Ankit Aerospace and to document the approach proposed to meet
the requirement.

One section of the report summarizes identified gaps. The project team should discuss this list
with agreement on the approach going forward. Acceptable approaches may require:
 Additional programming or technical effort

 Recognition and acceptance of procedural changes ("Workarounds") using standard SAP
Additional resource commitment
 The deferral of a feature to a later phase
 Simply the recognition and acceptance of a limitation.
The Blueprint reiterates the SAP organizational structures that have been identified and will
serve as the basis for the initial configuration activities. The Ayan team believes that SAP can
accurately model AAPL organizational requirements.
The information gathered and documented in the Blueprint is sufficient for the team to go
forward into the Realization phase. However, it is critical that both the Ayan Tech Solutions and
AAPL agree on the scope of the project as presented in this document. Acceptance - by both
teams - is required to move the project into the next phase.
This document for Phase -1 describes the entities in AAPL that will be configured in the system
along with the organizational units that are relevant to its operations
The following entities will to be configured:
 Ankit Aerospace Private Limited
ABBREVIATIONS
ABAP Advanced Business Application Programming
BOM Bill of Material
CC Cost Center
CO SAP Module Controlling
CoA Chart of Accounts
CoAr Controlling Area
CO-CCA SAP Controlling Sub module Cost Center Accounting
CoCd Company Code
CO-OPASAP Controlling Sub module Order and Project Accounting
COS Cost of sales.
DC Distribution Channel
FI SAP Module Finance
GI Goods Issue
GR Goods Receipt
LIV Logistics Invoice Verification
MM SAP Module Materials Management
MRP Material Requirements Planning
PC Profit Center
PR Purchase Requisition
PO Purchase Order
PP SAP Production Planning Module
RFQ Request for Quotation
SA Scheduling Agreement

SAP Systems, Applications, Products (company name)

SD SAP Module Sales & Distribution
SO Sales Order
SOP Sales and Operations Plan
2. Business Blueprint
2.1 SAP MM ORGANIZATION UNITS
Materials Management, also known as “Procurement Logistics” in SAP terminology, has a full range
of integrated functions that help optimise such functional areas as purchasing and inventory
management. For example, each time an inventory item is received into or issued from inventory,
the system automatically updates stock quantities and values, which simplifies inventory control.
The high level of SAP procurement logistics simplifies such time-consuming tasks as determining the
optimum source of supply, analysing and comparing vendor pricing, issuing purchase orders,
managing the authorisation process of purchase requisitions, and processing invoices for payment.
Moreover, the high level of integration with inventory management and accounts payable
ensures an equally high degree of accuracy in Order Processing and facilitates the smooth flow of
material necessary for internal consumption or sales and distribution to customer.
2.1.1 Company Code

The company code is the organizational unit that structures enterprise from a financial
accounting perspective. In the MM module of SAP system, these organizational entities are
important in that these entities form a platform for the creation of master data, transaction data
and MM reporting. In SAP one company code will represent AAPL.
Company Code Description

1000 Ankit Aerospace Pvt Ltd

2.1.2 Purchasing Organization

Purchasing organization in SAP refers to an organizational unit, responsible for procuring
materials & services, negotiates the purchasing terms & conditions with vendors and assumes
legal responsibilities for these activities. It is a basic requirement and pre-requisite for the
creations of master data and for the execution of business transactions in the MM module.
In AAPL one purchasing organizations will be configured as mentioned below:
Purchasing Organization Description

1000 AAPL Purchasing Organisation
A purchasing organization can only be linked to one company code, but can be linked to multiple
plants.
2.1.3 Plant
A plant is an organizational logistics unit that structures the enterprise from the perspective of
production, procurement, plant maintenance, materials planning and warehousing.
In AAPL, three Plants (1100, 1200 and 1300) shall be configured for Materials management.
Plant Description
1100 AAPL Manufacturing Plant, Jigani
1200 AAPL Trading Plant, Mysuru Road
1300 AAPL GE Warehouse, Pune
Plant 1100 is the Manufacturing unit for AAPL. The entire procurement, planning, production
and customer delivery of products happens from this unit.
Plant 1200 is the unit that will be used primarily for Trading Activities. Components will be
bought out and sold from this unit. Also AAPL products can be moved to this unit and sold.
Plant 1300 will be an AAPL Customer managed unit located at GE, Pune. AAPL products will be
moved to this unit for GE’s consumption.
The planning plant and production plant are used in case of the cross plant planning. Through
demand management we can plan across the plants. For each material there is a planning plant
and production plant. The planning plant procures and stores the materials independently. So
when the demand is generated in production plant through SOP the MRP will run in the planning
plant and fulfill the requirement of the production plant.
2.1.4 Storage Location
In SAP, storage location is a location of physical storage of stocks within a plant. A storage
location is used in goods receipt, goods issues and returns receipt.

The following storage locations will be configured for AAPL plants –
Storage Location Description

RM01 Raw Materials
CN01 Consumables
TL01 Tools
SP01 Scrap
PR01 Production
VR01 Vendor Returns
CR01 Customer Returns
RW01 Rework
FG01 Finished Goods
FG02 Finished Goods Non-Valuated
UT01 Used Tools (Non-Valuated)
QT01 Quarantine
IT01 Imports In-Transit
2.1.5 Purchasing Group

A purchasing group is the key for a buyer or group of buyers responsible for certain purchasing
activities. The purchasing group code to be used in AAPL is as follows:
Purchasing Group Description

001 AAPL Purchasing
002 AAPL General
003 AAPL Engineering
004 AAPL Production
005 AAPL Finance
006 AAPL Stores
Final list of Purchasing Groups to be provided by AAPL. (Production Cells to be treated as

individual PGrp)
During Purchase Order creation, it is mandatory to enter the Purchasing Group code to
specify, which department is responsible for that Purchase Order. The Purchasing Group also
decides the process flow for PO Approvals.
Subsequent new purchasing groups could be maintained by an authorised user.
Management can analyse the order value and the number of Purchase Order documents by each
Purchase Group in the Purchasing Information System.

3. Vendor & Business partner
3.1 BUSINESS PARTNER

All AAPL Suppliers’ information is stored as Business Partner in S4 HANA. Vendor is a type of
Business Partner in SAP HANA. This Master Data facilitates PR, Contract and PO creation.
Business Partner is now capable of centrally managing master data for business partners,
customers, and vendors. With SAP S4 HANA, BP is the single point of entry to create, edit, and
display master data for business partners, customers, and vendors.
A legal entity is represented with one Business Partner – One unique Business Partner for
different roles e.g. Customer, Supplier, Contact etc.
 Different Business Partner Categories – Organization, Person, Group

 Maximal data sharing and reuse of data which leads to an easier data consolidation
 General Data available for all different business partner roles, specific data is stored for
each role
 Several Addresses possible with a default Address
 Time dependency on different sub entities e.g. roles, address, relationship, bank data
etc.
The vendors created in system have a unique vendor ID. Ankit Aerospace captures all
Procurements via Purchase Organisation. Payments paid to Vendor are treated as payment to
clear Vendor invoices. This will immediately reduce the Vendor’s outstanding.
Details of vendors like company's full name, contact person full name, registered company
addresses (multiple ordering address & goods supplier),Region, Country, post code, nature of
business, fixed line telephone number, mobile phone number, fax number, email address(s),
website, payment terms, banking information and contact person(s) are captured in the Vendor
Master.
3.2 VENDOR GST DETAILS

In order to indicate that a specific person/company has been registered for GST, the GST
registration number and validity date will be stored in SAP vendor master. All vendor GST related
transactions would have the unique identification number known as GSTIN or GST Identification
Number kept in the Vendor Master record in SAP.
3.3 VENDOR MASTER DATA

All the data captured for each vendor is stored as Vendor Master Data. The details are as given
below –
 Unique Vendor code will be generated for every AAPL vendor.

 Vendor Master Data contains Details of suppliers - full name, address(s), telephone no,
fax no, mobile no, contact person(s), email addresses, website, payment terms
 User can maintain the legacy Vendor Number against each SAP vendor created

 Partner function will be assigned to each of the vendors.

 Vendor Master data can be searched by following category :
 Specific country & region
 Search Term
 Manufacturer
 Services Type
 Status (e.g. Vendor block )
 System Supports Vendor evaluation. Suppliers performance can be reviewed based on
following criteria :
 Quality
 Delivery
 Cost
3.3.1 Vendor Partner Functions
In SAP, the following business partner functions shall be defined for AAPL.
Partner Function Description

VN Vendor
OA Ordering Address
GS Goods Supplier
IP Invoicing Party
Vendor
In most cases, Vendor is the partner to whom we places an order, who delivers the goods or the
renders services, issues the invoice and receives payment on the invoice. Typically this partner
encompasses the roles of the ordering address, goods supplier and invoicing party. For this
reason, when a vendor is created in the SAP system for AAPL, the internal number assigned to
this new vendor will be defaulted to the ordering address, goods supplier and invoicing party
functions.
Ordering Address
If we define another partner for the partner role OA, a standard PO or release order will not be
sent to the address of the vendor (role VN) but to the ordering address of the partner.

Goods Supplier
A goods supplier is the partner who delivers ordered goods. The address of the goods supplier
will be determined for return deliveries in Inventory Management. For this reason, definition of a
goods supplier in the SAP customer master requires address, data on output, and possibly data
on electronic communication.
Invoicing Party
An invoicing party is the partner who processes the invoices for delivered goods or rendered
services. The invoicing party’s account will be charged instead of the vendor’s. For this reason,
definition of an invoicing party in the SAP customer master requires payment data.
3.3.2 Terms of Payment

Customers’ terms of payment are defined in the vendor master record. This information will be
automatically copied into the purchasing document. Standard SAP Terms of Payment will be
maintained. Additional terms can be maintained as and when needed.
Payment Terms Explanation

0001 Payable immediately Due net
0002 14 days 2%, 30 net
0003 14 days 3%, 20/2%, 30 net
0004 14 days 3%, 30/1%, 60 w/o
0005 10 days 2%, 30/1%, 50 w/o
0006 End of Month 4%, 15ofM w/o
0007 14 days 4%, 30/2%, 60 w/o
0008 Special Payment Terms 0008
0015 15 DAYS FROM DATE OF INVOICE
ZA60 25% ADV&BAL60DAY ILC Pri desp etc
3.3.3 Incoterms
Incoterms are the internationally recognized shipping terms that establish the respective
liabilities of both the shipping party and the recipient.
The Incoterms defined in the vendor master are as per Global SAP CORE definition below
Inco terms Description

CNF CNF at Port
CIF Costs, insurance & freight at Port
FOB Free on board
EXW Ex-Work

DDD Door-door delivery

CFR Costs and freight
CIP Carriage and insurance paid to
DAF Delivered at Frontier
DDP Delivered Duty Paid
DES Delivered ex ship
3.4 VENDOR ACCOUNT GROUP

All business partner creations are determined via Account Groups. In SAP S4 HANA, account
groups for each partner functions will determine the screens and fields that are required. The
account groups and number ranges are created for AAPL’s partner functions as follow:
Account Number
Account Description From To
Group Range
ZDOM Distribution Domestic Vendor

ZIMP Distribution Imports Vendor
ZONE One Time Vendor
ZPLN Plant Vendor
ZEMP Employee Vendor
AAPL prefers to not use the one-time vendor as far as possible due to GST related
limitations.
Internal number range assignment refers to a system provided sequential number for each
vendor master data created. This enable ease of tracking the number of Vendor created, and
provides a uniform numbering convention.
Purchasing activity is based on groups like Asset, Spares, Consumables, Raw Materials, SFG/FG,
and General items.
AAPL Vendors
 AAPL procures items under Stock, Raw, Asset materials, Consumables and Services type.
 Finance department monitors account payable via Creditors aging report.
 Terms of Payment / Credit terms for vendors are maintained in the Vendor Master.

SAP Vendor Process Flow
4. Material Master
4.1 BUSINESS REQUIREMENT

The material master record is the source of material specific data, which is used throughout the
SAP S4 HANA system. The data contained in the material master record is required for many
functions within the logistics system such as purchasing data for ordering, sales data for sales
and availability check, inventory management for posting goods movements, accounting data for
valuation upon goods movements or invoice verification and materials planning data and for the
storing the materials in storage location.
4.2 BUSINESS BLUEPRINT

Maintaining absolutely accurate and reliable master data in SAP is an essential prerequisite for
ensuring a smooth running system. It is imperative that all master records in SAP be maintained
with utmost care and steps should be taken to avoid occurrence of mistakes
4.2.1 Material Data at different organizational levels

Data on client level: Material group, base unit of measure, material descriptions, general
technical data and conversion factors for alternative units of measure.
Data at plant level: All plant and related storage location specific data.

Data at storage level: All storage location specific data.
4.2.2 Material Master Views

The material master contains information on all the materials that a company procures,
produces, stores and sells. It is the company's central source for retrieving material-specific data.
Here all data will be stored in an integrated form. There is an integration of MM, FI, SD, QM, PP
and PM related data in one master. The Material Master consists of different views relevant to
the different operations in the organization.
The Material Master

The different views are:
 Basic Data 1
 Basic Data 2
 Classification
 Sales: Sales Org. Data 1
 Sales: Sales Org. Data 2
 Sales General: Plant
 Foreign Trade: Export Data
 Sales Text
 Purchasing
 Foreign Trade: Import Data
 Purchase Order Text
 MRP 1
 MRP 2
 MRP 3
 MRP 4
 Work Scheduling
 General Plant Data / Storage 1
 General Plant Data / Storage 2
 Quality Management
 Accounting 1
 Accounting 2
 Costing 1
 Costing 2
4.2.3 Functions of Material Master in SAP

 In Purchasing, for ordering
 In Inventory Management, for goods movement postings and physical inventory
 In Invoice verification, for posting invoices
 In Sales & Distribution, for sales order processing
 In Production, for MRP
4.2.4 Material Master Codification

Material number in SAP is the unique key used to identify a material. Material number in SAP can
be a maximum of 18 characters (numeric/ alphanumeric). The number range is defined to be
either internal or external based on the Material Type.
4.2.5 Material Type

In SAP, all materials will be categorized and grouped based on usage like Raw Materials, Semi -
finished, Finished, Spare Parts, and Consumables etc. which are called Material Types. While
creating a material master record a material is to be assigned to a material type.

Features
While creating a material master record, the material type chosen for a particular record
determines:
 Whether the material is intended for a specific purpose, e.g. as a process material or
configurable material
 The sequence in which the screens appear for capturing departmental data
 Procurement type of the material – whether it is to be procured externally or produced
in-house
 Valuation Class of the material.
 The Number Range for the material. Currently External Number range is planned for all
material types.
The following Material Types will be configured for AAPL –
Material Type Description

ZROH Raw Materials
ZSFG Semi-finished goods
ZFRT Finished goods
ZERS Spare parts
ZCON Consumables
ZTOL Tools and Dies
ZCAP Capital Goods
ZMNF Manufacturer Parts
ZNLG Non-Stock material

4.2.6 Unit of Measurement

Base unit of measure:
Stock-keeping unit all other units of measure that are used converted to the base unit of
measure.
Under the base unit, a number of alternative units can be used. These units may be converted
from one to the other. If there is no standard formula for converting an alternative unit of
measure to the base unit of measure, the conversion factor for the units of measure in the
material master is to be entered.
Examples of alternative units of measure are:
 Order unit (purchasing)

 Sales unit
 Stock Keeping Unit
 Unit of issue
4.2.7 Material Group

Material group can be defined as a key that is to be used to group together several materials or
services with the same attributes, and to assign them to a particular material group. Material
groups can be used to:
 Restrict the scope of analyses

 Search specifically for material master records via search helps
Following Material group will be created in AAPL -
Material Group Description

FURNIT Furniture
ITHW I/T Hardware
ITSW I/T Software
PLNT&MC Plant and Machinery
ABGRWHL Abrasives & Grinding Wheels

ELECT Electrical
HANDTOOLS Hand Tools
HOUSEKEEP House Keeping
ELECTMTCE Electrical Maintenance
MECHMTCE Mechanical Maintenance
MATHANDL Material Handling
MISC Miscellaneous
OILS Oils & Lubricants
PACKING Packing materials
PRINTING Printing & Stationery
SAFETY Safety items
STATIONRY Stationery
TPGAUGE Thread Plug Gauge
TRGAUGE Thread Ring Gauge
SNAPGAUGE Snap Gauges
NONINVENT Non Inventory
DBOARDS Display Boards
MCOMP Machined Components
SALES Sales
BARS Bars
HEXBARS Hexagon Bar
PLASTIC Plastic
SHEETS Sheets
WIRES Wires
RETURNS Returns
SERVICE Service
CARBIDEDR Carbide Drills
CENTREDR Centre Drills
COBALTDR Cobalt Drills
EMCR End Mills, Cutters & Reamers
HDTTB HSS Drills, Taps & Tool Bits
INS Inserts, Tools ,Tool Holders & Spares
JIGS Jigs & Fixtures
MTAPS Machine Taps
MEASURING Measuring Masters
REAMERS Reamers
TAPSTHRD Taps & Threading Dies
THRDDIES Threading Dies
TOOLSTL Tool Steel
CARBIDEIN Carbide inserts

4.2.8 Valuation Price Control
In the SAP System, there are two types of price control:

 Standard Price
 Moving Average Price
These two types of price control differ in how they handle price variances resulting from goods
receipts or invoice receipts. The price control for a material is maintained when the material is
created. One of the following indicators is to be entered in the Price control field to determine
how the price is controlled:
 S for standard price control

 V for moving average price control
The different price control methods
Figure 3-6 Price Control Method
Standard Price
Valuation using a standard price has the following features:

 All inventory postings are carried out at the standard price
 Variances are posted to price difference accounts
 Variances are updated
 Price changes can be monitored
If a material is assigned a standard price (S), the value of the material is always calculated at this
price. If goods movements or invoice receipts contain a price that differs from the standard
price, the differences are posted to a price difference account. The variance is not taken into
account in valuation.
Moving Average Price

Valuation using a moving average price results in the following:

 Goods receipts are posted at the goods receipt value.

 The price in the material master is adjusted to the delivered price.
 Price differences occur only in exceptional circumstances.
 Manual price changes are usually unnecessary. However, they are possible.
If a material is assigned a moving average price (MAP), the price is automatically adjusted in the
material master record when price variances occur. If goods movements or invoice receipts are
posted using a price that differs from the moving average price, the differences are posted to the
stock account; as a result, the moving average price and the value of the stock change.
The moving average price displayed in the material master record is rounded off. For valuation
calculations, the system always uses the exact price (stock value / stock quantity).
Business Requirement
 AAPL will use Moving average price to value its stocks which are non-SFG and non-FG.
 The Semi-Finished and Finished products will be valuated with Standard Price.
4.2.9 Material Master Impact in GST
In the Purchase and Sales views of the Material Master, the GST related Tax classification can be
maintained for a material code. The HSN code will be stored in Control code field of foreign data
tab.
Whenever any purchase/sales document is raised, the related tax condition record with HSC
Code, defined tax classifications, and tax indicators combination will be read. This is used for tax
calculation for each line item.
4.2.10 Automatic Account Determination

In SAP, we configure the system settings for Inventory Management and Invoice Verification
transactions for automatic postings to G/L accounts.
 Valuation Structure
Data on which a material is valuated using the following structure:
 Valuation area
 Valuation class
 Valuation category
 Material type
 Movement type
 Valuation Area
Organizational level at which material valuation is carried out.

 Valuation area = Plant
Each material is valuated at the Plant level. This means that the stocks of a particular
material in a plant are valuated together. Stocks in other plants are not included in this
valuation area.
 Valuation Class
The system groups together different materials with similar properties into valuation classes
so that the user does not have to manage a separate stock account for every material.
The following table contains examples of possible valuation classes –
Valuation class Description
3000 Raw Materials

3030 Spare parts
3040 Consumables
3050 Tools
3060 Capital Goods
3100 Services
7900 Semi-finished goods
7920 Finished goods
Which valuation class a material can be assigned to depends on the material type. The
following assignments can be defined in Customizing:
 All materials with the same material type may be assigned to just one or more valuation
classes.
 Different materials with the same material type may be assigned to different valuation
classes.
 Materials with different material types may be assigned to a single valuation class.
A material is assigned to a valuation class in the material master record. The system checks
whether the material type allows the material to be assigned to the valuation class specified.
The system refers to the valuation class of a material to determine which stock account to
post to when a goods movement posting is made for this material.
 Valuation Type
The valuation type specifies the individual characteristic of the valuation category, such as
internal or external, in the case of Procurement. Within the valuation category Origin, one
can define the different countries as the valuation types. The user defines valuation types in
Customizing. First all the valid valuation types for a valuation category are determined. The

user defines in the material master record which valuation types are allowed for a particular
material.
Based on the valuation type, the system maintains Split Valuation for the material. i.e.
maintains stock quantities and values for that material-plant in separate buckets.
 Material Type
One can assign every material to a material type when it is created. Examples of material
types in the standard system include raw materials, operating supplies and finished products.
The material type controls the properties of a material and which data must be maintained
for the material.
 Movement Type
For every material movement, there is a movement type in the SAP System. The movement
type controls the properties of the movement, for example, which entries must be made
when entering a material movement, and which updates are to be carried out when the
movement is posted.
4.2.11 Consumption based planning for Material
Net requirements calculation is carried out by the system for a specific plant during the
planning run as part of MRP. The system checks whether the forecast requirements can be
covered by the available stock and planned receipts. If material shortage occurs, the system
calculates the shortage quantity and creates an order proposal.
Lot-size calculation is carried out as part of requirements planning according to the lot-size
calculation procedure defined in the material master.

The manual reorder point procedure uses the MRP indicator HB. The reorder point procedure is
based on a comparison between the Plant stock and the reorder point. If the available Plant
stock is less than the reorder point, the system initiates requirements calculation. The reorder
point comprises the expected average material requirements during the replenishment lead time
and the safety stock.
 In AAPL, reorder point planning will be used for some Consumables materials.
 Fix lot size is used & maintained in Material Master.
 MRP will run in background at the schedule time & generate Purchase Requisition for
Materials using information maintained in Material Master Record.
 User will convert these Auto generated Purchase Requisition into Purchase Order.
5. Batch Management
Batch management is used to identify one lot of procurement/production from another. This
helps in tracking the lots during their life-cycle, as well as recording the unique characteristics of
each lot. For instance, the expiry date or date of production of 2 lots can be different. Material
having similar characteristics but slight difference in specifications shall be managed with
activation of batch management.
Batch will be at Plant/Material level for AAPL. A Material can have same batch number in
multiple plants (for traceability).
Batch Management will be activated for Raw, SFG and FG materials. Batch numbering shall be
externally assigned.
 For Raw Materials, the Heat Number of the received lot will be maintained manually as
the Batch Number for the lot.
 For In-house Produced materials, the Production Order will be maintained as the Batch
Number for the lot.
 For Sub-contract materials which are GR’ed, user shall enter the Batch Number as
required.
The Raw material is posted to the stock in Quality Inspection during goods receipt and an
inspection lot is created.
The SFG materials are subjected to operational Quality Inspection. For FG UD will be taken by the
user.
AAPL requires Qualitative (Yes/No) type of inspection to be done for all the materials.
AAPL requires the traceability of all Batches used in the production of FG material.

6. Service Master
The service master record counts as part of the master data within External Services
Management and serves as a source of data to draw upon when creating service specifications.
This enables the user to save time and reduces the frequency of errors, since the user 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 measurement
 Material/service group
 Tax Tariff Code (HSN/SAC code for the Service)
Service Master Impact on GST
In Service Master SAC code will be included, For Tax Calculation as well as reporting to be
captured for each Invoice line item.
Service master will be created in SAP system. Service master code will be internally generated in
SAP system. User will enter the Service Code in PO at Service item level, quantity of service and
the related G/L Account and Cost Center.

7. Purchasing Info Record
Purchasing Info Records serves as a source of information for Purchasing. The purchasing info
record (also referred to as the "info record") contains information on a specific material and a
vendor supplying the material. For example, the vendor's current pricing is stored in the info
record.
The info record allows buyers to quickly determine on the history:
 Which materials have been previously offered or supplied by a specific vendor
 Which vendors have offered or supplied a specific material
Content of an Info Record
The info record contains:
 Data such as prices and conditions that can be stored for the relevant purchasing
organization or plant
 The number of the last purchase order
 Tolerance limits for over deliveries and under deliveries
 The planned delivery time (lead time required by the vendor to deliver the material)
 Vendor evaluation data
 An indicator showing whether the vendor counts as the regular vendor for the material
 Tax code to be used for ordering the material
 The availability period during which the vendor can supply the material
The info record contains quotation and ordering data. The data in the info record (prices for
example) is also used as default data for purchase orders.

For instance, one can store the current and future quotation conditions (discounts, fixed costs
etc.) in the info record, in order to be able to copy them into POs. Also the vendor’s conditions
can be maintained directly in the info record.
Organizational Levels: An info record can apply to the following organizational levels:
 Purchasing organization
 Plant
Procurement Types in Info Records:
 Standard
A standard info record contains information for standard purchase orders. The info
records can be created for materials and services with and without master records.
 Standard SAP info records to be used for AAPL without Customization.
 System maintains Suppliers and Purchasing Company's product number/code.
8. Source List
A source list is the list of all vendors (with validity period/status) for the purchase of a material in
a plant. One can define a preferred source of a material (for example, a vendor) as "fixed". The
system will then suggest precisely this source even if other possible sources exist.
The standard SAP system determines whether an entry in the source list exists for the material
within whose validity period, the delivery date of the requisition falls. The source in question
may be a fixed vendor or an outline agreement (contract or scheduling agreement).

If the source list contains a unique source, the requisition is assigned to that source.
If several sources are found, a box appears for selection purposes.
If no source could be determined, the existing info records are examined.
 System is able to lists authorized vendors for each item. User can define preferred
vendor during specified period as per sap standard functionality without customization.
9. GST Tax Payable (Inbound)
The SAP system offers a number of features that are specifically designed to cover Indian legal
requirements and business practices, mainly related to FI, MM and SD Modules. Although each
business is unique, common patterns of activities and challenges appear in almost every
business. GST is a consumption tax made on different stages and GST incurred on inputs is
allowed as a credit to the registered person/business. GST is charged on the taxable supply of
goods and services, to the chargeable person, business in India and also during the import of
goods and services.

Condition Type Description Key Combination

CGST Central Sales Tax Payable Vendor Reg/Plnt Reg/HSN/VenCl/MatCl
SGST State sales tax payable Vendor Reg/Plnt Reg/HSN/VenCl/MatCl
IGST Integrated sales tax payable Vendor Reg/Plnt Reg/HSN/VenCl/MatCl
10. Procurement Process
10.1 PURCHASING

 Determination of Requirements
Materials requirements are identified either in the user departments or via materials
planning and control. (This can cover 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 latter.) One can enter purchase requisitions manually, or they
can be generated automatically by the materials planning and control system.
 Source Determination
The Purchasing component helps to identify potential sources of supply based on past
orders and existing longer-term purchase agreements. This speeds the process of
creating requests for quotation (RFQs), which can be sent to vendors.
 Vendor Selection and Comparison of Quotations
The system is capable of simulating pricing scenarios, allowing the user to compare a
number of different quotations.
 Vendor evaluation.
In the SAP System, Vendor Evaluation is completely integrated into the MM Purchasing
component within Materials Management. This means that information such as delivery
dates, prices, and quantities can be taken from purchase orders. Vendor Evaluation also
uses data from the Quality Management component, such as the results of incoming
inspections or quality audits.
Vendor Evaluation accesses basic Materials Management data, Inventory Management

data (such as goods receipts), and data from the Logistics Information System (LIS).
 Procurement of Materials
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.
 Procurement of Services
You can check the reliability of the vendors from whom you procure services on a plant
by plant basis. You can determine whether the vendors perform the services within the
specified timeframes and appraise the quality of the work carried out.

 Scores and Criteria
The standard SAP System offers you a scoring range from 1 to 100 points, which is used
to measure the performance of your vendors on the basis of the main criteria. You can
determine and compare the performance of your vendors by reference to their overall
scores.
 The main criteria available in the standard system are
 Price
 Quality
 Delivery
You can also define other or further main criteria, as required.
You can assign different weights to the individual criteria. The vendor’s overall score is
computed taking into account the weighted scores awarded for each of the main criteria.
The Vendor Evaluation System ensures that evaluation of vendors is objective, since all
vendors are assessed according to uniform criteria and the scores are computed.
 Purchase Order Processing
The Purchasing system adopts information from the requisition and the quotation to help
the user to create a purchase order/ scheduling agreements. With purchase requisitions,
the POs can be generated. User can also create Quantity/Value based Contracts with
validity dates, which can be referenced in the POs.
 Goods Receiving and Inventory Management
Goods receiving personnel can confirm the receipt of goods simply by entering the PO
number/SA number. By specifying permissible tolerances, buyers can limit over- and
under deliveries of ordered goods. The relevant accounting entries are performed by the
SAP system in background.
 Invoice Verification.
Once goods/services are received then the vendor payment is done for acquired goods
and services. The amount to be paid along with details of material/service is provided by
vendor in form of document. This is maintained in SAP and is known as invoice
verification.
The incoming invoices are verified in terms of their quantity, prices, and taxes. When the
invoice is posted, the invoice data is saved in the system. The system updates the data
saved in the invoice documents in MM and FI modules. Down Payment cleared by
Functionality to be available during Invoice verification. The same will from Purchase
Order.

10.1.1 Purchase Requisition
Time
In SAP, Purchase requisitions (PR) will be generated by MRP or manually.
The PR will have different document types with different number range.
Doc Type Description Number Range (Internal)
NB Purchase Requisition (MRP) 0010000000 - 0019999999
ZNB Purchase Requisition (Std.) 0020000000 - 0029999999
ZPTO Purchase Requisition (PTO) 0030000000 - 0039999999
The Purchasing Group can be used to determine which department has raised the PR.
Account assignment category fields basically used to differentiate for example PR for asset or
consumables.
Item category used to identify what type of PR for example service requirement or material
requirement.
 PR to be used to request purchase of material/services by different departments.

 System provides the function to attach drawings and files to requisitions.
 Only Authorize Users can create Purchase requisition manually.
 All the PRs (except those from MRP) will be subject to PR Release (Approval) process
containing 1 level which is the HOD of the related department. In SAP, the HOD will be
represented by the Purchase Group.
PR Release Level Approver Net Value
First HOD N/A

10.1.2 RFQ & Quotation
Request for quotation (RFQ) is created with reference to PR.

This document type is for inviting quotations from vendors. The different vendors send their
terms and prices. Then the quotation is maintained and the vendors compared on the basis of
their prices, discounts and delivery costs, then most competitive vendor is selected. After this
the PO generated.
 Request for Quotation will be generated with reference to Purchase requisition.
10.1.3 Purchase Order
Purchase Orders can be created with reference to PR/Quotations/Contracts. Purchasing Info

Records shall be maintained for a vendor-material combination.

The following PO document types will be created for AAPL –
Doc Type Description Number Range

ZNB Domestic Purchase Order 4510000000-4519999999
ZCAP Capital Goods PO 4570000000-4579999999
ZIMP Import Purchase Order 4520000000-4529999999
ZSC Sub-Contract PO 4530000000-4539999999
ZSEV Service PO 4590000000-4599999999
ZSTO Stock Transfer Order 4540000000-4549999999
ZMTO Make to Order 4550000000-4559999999
ZMK Contract 5000000-5999999
ZLP Scheduling Agreement 6000000-6999999
Please check <Addendum> for changes to PO Document Types.
 Purchase requisitions can be converted to Purchase Order directly. Multiple Purchase

requisitions can be converted into single Purchase order.
 Purchase Order supports multiple line items.
 Users can stipulate delivery date by line item.
 Item Category defines if a purchasing document belongs to Service or Sub-Contracting
type. Following Item categories are available –
 Standard
 Limit
 Service
 Subcontracting
 Third-party
 Service PO created for Service Activities purchased from External Vendor. Cost captured
using account assignment category.
 The account assignment category determines which account assignment data (such as
cost centre, asset) is necessary for the item. Following Account assignments are
available –

 Asset
 Cost Centre
 Sales order
 Production Order
 Project
 Network
 User shall enter Quotation Reference in the PO Header field <Our Reference>.
 User shall have ability to change the Terms of Payment and Inco Terms at the PO Header.
The values will flow from the Vendor Master data.
 System has detailed Purchase Order audit trail.
 System updates the respective PO when down-payment has been made by Finance.
 User will create ZNLG type material codes as TEXT ITEMS. This can be used for
maintaining different “Terms & Conditions” that need to be printed at the item level.
 User will also use a Make-To-Order process to plan and produce FG items specific to any
customer(s). The purchase documents and stock related to this process will always have
the Sales Order link.
10.1.4 Outline Agreements
An “outline agreement” is a longer-term purchase arrangement with a vendor concerning the

supply of materials or the performance of services according to predetermined conditions. These
are valid for a certain period of time and cover a predefined total purchase quantity or value.
Contracts
Contracts are outline agreements. They do not contain details of the delivery dates for each of
the items.
To inform vendors of which quantities you need for which date, you enter contract release
orders for a contract. A release order is a purchase order that references a contract.
If an info record with conditions exists for the material and the vendor, the system automatically
suggests the net price according to these conditions when you create the contract item.
AAPL will create Quantity Contracts in SAP, similar to the legacy Open Rate Contracts with
specified price and time validity. The quantity in the SAP Contract documents will be a huge
number. As and when required, POs will be created with reference to these contracts and
released to the vendor.

You can create contracts manually. When doing so, you can reference other contracts, purchase
requisitions, and RFQs or quotations.
One of the things you define in the contract header is the validity period.
For each item in a quantity contract, you define the target quantity and purchase order
conditions.
You can enter contracts as a source of supply in the purchase requisition. This ensures that the
outline agreement is referenced when the purchase requisition is converted into a purchase
order. We would also call this a contract release order.
Scheduling Agreements
A scheduling agreement (SA) is a longer-term purchase arrangement with a vendor covering the
supply of materials according to predetermined conditions. These apply for a predefined period
and a predefined total purchase quantity.
Scheduling agreements can be created with or without reference to an outline agreement
requisition, an RFQ or another scheduling agreement.
Details of delivery dates and quantities are communicated to the vendor in the form of delivery
schedules.
Delivery schedule lines can be created with or without reference to a purchase requisition.
Schedule lines can also be generated automatically using the MRP system. For this the SA needs
to be part of the source list.
Such delivery schedules/schedule lines do not constitute separate documents, but form part of
the scheduling agreement. Procurement using scheduling agreements therefore helps to reduce
the volume of documents in use.

If you use scheduling agreements with release documentation, the delivery schedule lines are
not transmitted to the vendor automatically as soon as they are created. Instead, you initially
record schedule lines that are final in character in a scheduling agreement release. Transmission
of scheduling data can take place only after you have created such a release.
Release of Individual Schedule lines to vendor is not possible, as the release is done at SA Header
level.
GST Impact on Domestic Purchases
In normal business procurement scenario based on Goods Supplier (GS) partner and receiving
plant that you select in the Purchase Order, system identifies the transaction as intrastate or
interstate, and calculates the taxes accordingly.
Goods Supplier partner selected flows in the Goods Receipt document, which will then be passed
on to invoice verification to identify their GS Region and receiving plant region, and then taxes
are calculated accordingly.

 In the case of service purchase orders, based on the Plant Region and Goods Supplier
Region, intra state or interstate would be determined.
GST Impact on Imports

 Basic Custom Duty will remain the same.
 CVD and additional duties will be subsumed by IGST
 Service tax & Cess components will be subsumed by IGST
GST Impact on Sub-Contracting

The subcontracting activates are done frequently at AAPL. The Business wishes to identify the
stocks under each Vendor, whether the Operations is done outside the plant.
Material Requirement Planning (MRP) is scheduled for background process for a particular
interval (weekly). Based on demand, MRP can generate SubCon Purchase Requisitions (PR) based
on BOM and Routing. Users can manually create SubCon PRs based on need also.
SubCon Purchase Order is created with reference to SubCon Purchase Requisitions (PR).
Child components are issued via Goods Issue to subcontractor with reference to SubCon
Purchase Order. During Goods Issue to Subcontractor the goods is transfer from one storage
location to Vendor Storage Location. After the SubCon activity is completed, the SFG/FG material
is received via Goods Receipt with ref to Subcontract Purchaser Order.
Accounting Entries for Subcontracting:
Subcontracting Charges A/c Debit(+)
GR / IR A/c Credit(-)
Semi-Finished Goods- Stock A/c Debit(+)
Change in SubCon Stock A/c Credit(-)

Consumption A/c of Components Debit(+)
Stock A/c of Components Credit(-)
At the time of invoice Verification:
GR/ IR A/c Debit(+)
Service Vendor A/c Credit(-)
10.1.5 Vendor Consignment

Vendor Consignment is a process in which the vendor provides materials and stocks them in the
purchaser’s premises. The material remains in the books of the vendor at this point. i.e. it is non-
valuated in the purchaser’s books. The inventory gets transferred to the books of the purchaser
only when the same is removed from the consignment stock.
The Vendor does not send invoice when the goods come into the premises of the purchaser. The
purchaser is liable to pay the Vendor only when the stock is withdrawn (consumed).
The price of the consignment is maintained in the purchasing info records (PIR) of the info
category, Consignment. The stocks are will be valuated at the Info Record on that date.
Since the sourcing of a material can happen from multiple parties, the consignment stock is
maintained at the level of each supplier or vendor.
The vendor liability has to be created for the stocks consumed. This is done through a periodic
settlement process.
10.1.6 Pricing in Purchase Order

Domestic Purchase Pricing
The following is the Pricing Procedure (Calculation Schema) for Domestic Purchases in AAPL –
Header Level Pricing Condition Type M/O Vendor

Packing Cost Value O Main
Item Level
Base Price Value per unit M Main
Disc % % O Main
Disc Value Value per unit O Main
Freight cost Value O Freight
M – Mandatory; O - Optional
Imports Purchase Pricing

The following is the Pricing Procedure (Calculation Schema) for Imports Purchases in AAPL –

Header Level Pricing Condition Type M/O Vendor

Packing Cost Value O Main
Item Level
Base Price Value per unit M Main
Disc % % O Main
Disc Value Value per unit O Main
Customs Duty % M Customs
Customs Cess % M Customs
Freight cost not adding for GST O
calculations Value Freight
Freight cost adding for GST O
calculations Value Freight
Testing etc Charges Value O Main
The Header Level packing cost is required to be distributed to the items in the PO based on Item
weight.
Any other pricing condition (such as Cash Discount etc.) can be added as required to the above.
But the new conditions will affect only the POs created after the change.

10.1.7 Purchase Order Release Procedure

 All the POs will be subject to PO Release (Approval) process containing 3 levels –
PO Release Level Approver Net Value
First HOD
Second Finance
Third CEO
Please check section <Addendum> for exact values for release.
The above Approving authority matrix will be used to Configure release group, release
code and release strategies.
 POs can be amended after final release also. System to maintain Versions to track the
same. Any change to Quantity, Price to the PO after full release will change the version
number in the PO.
o User needs SAP to change PO Version Number for any Change in Text ID <Terms
& Conditions>. Ayan shall try to configure this if available out of standard.
o Also to check if the Version can be changed manually.
 If the change in PO price does not change the <Approve Bucket>, then the PO WILL NOT
go for re-release.
Delivery Cost in Purchase Order
System differentiates between planned and unplanned delivery costs, we can arrange planned
delivery costs in advance with the vendor, a carrier, or the customs office and enter them when
creating the purchase order. At goods receipt, provision accounts are posted, which are then
cleared when the invoice is received.
While creating PO, if user does not know delivery cost then user can settle it while posting
Invoice using unplanned cost function. For planned delivery charges is to charge to expense
account with Cost centre.


10.2 INVENTORY MANAGEMENT
Objective
Goods Movement
 Management of
material stocks on a Goods Receipt
quantity and value
basis
Goods Issue
 Planning, Entry, and
Documentation of all
Goods Movements Stock Transfer
Transfer Posting
Subcontracting in Inventory
Management
Return Delivery
Managing Stocks by Quantity & by

Value
10.2.1 Goods Movement
When a goods movement in the system is entered, a movement type must also be entered to
differentiate between the various goods movements. A movement type is a three-digit
identification key for a goods movement. The following table contains examples of movement
types.
Goods movement Movement type

Goods receipt for a purchase order 101
GR for PO to Blocked Stock without valuation 103
GR for PO – From Blocked Stock to Unrestricted 105
GR for PO to Blocked Stock with Valuation (Acceptance at Origin) 107
GR for PO – From Blocked Stock to Unrestricted 109
GI to Production Order 261
Goods issue for a cost center 201
Goods Issue for Outbound Delivery for Customer 601
Goods Issue for Outbound Delivery for STO 641
Transfer of storage location to storage location in one step 311
Transfer of unrestricted-use stock to subcontracting stock 541 – O
Transfer stock from Material to Material 309

Managing Stocks by Quantity
All transactions that bring about a change in stock are entered in real time, as are the stock
updates resulting from these changes. One can obtain an overview of the current stock situation
of any given material at any time. This, for example, applies to stocks that:
 Are located in the Plant

 Have already been ordered, but have not yet been received (in-transit)
 Are located in the Plant, but have already been reserved for production or a customer
 Are in quality inspection.
If a further subdivision by lots is required for a material, one batch per lot is possible. These
batches are then managed individually in the stock as per SAP Standard.
The shelf life of a material can be entered in a goods receipt. You can thereby ensure that you
store only materials that are still usable.
When you do Goods Receipt for a material in the System, it will ask for Date of Production of
materials and from that date the system automatically calculates its Shelf Life. Remaining shelf
life will be calculated as the Expiry Date of the material.
Managing Stocks by Value
The stocks are managed not only on a quantity basis but also by value. The system automatically
updates the following data each time there is a goods movement:
 Quantity and value for Inventory Management

 Account assignment for cost accounting
 G/L accounts for financial accounting via automatic account assignment
The valuation area is the organizational level at which a material's stock value is managed. The
valuation area can be plant level or company code level. By default it is at the Plant Level.
In Inventory Management, activity is basically done at plant and storage location levels. When a
goods movement is entered, only the plant and the storage location of the goods have to be
entered. The system derives the company code from the plant via the valuation area.
For each goods movement a Material Document is created which is used by the system to
update quantities and values and serves as proof of goods movements.
The user can print standard goods receipt/issue slips to facilitate physical movements and
monitor the individual stocks in the Plant.

10.2.2 Integration with logistics
Material Master will have reoder point indicator. On the MRP running, it will have a List for end
user to select the item and generate to Purchase Requisition. MRP running can be setting as a
Schedule background job.
Goods receipt
The goods receipt process for inbound deliveries is an essential part of the supply chain. This
process includes the steps after creation of the purchase order: the inbound delivery (for
Imports), subsequent put away of goods, and the goods receipt posting of the ordered goods.
The significant advantage of depicting the goods receipt process through the inbound delivery
function is that one can execute many processes in advance, even before the actual goods
receipt posting takes place. The user will have all the necessary information beforehand because
the supplier notifies the user of the inbound delivery ahead of time. The inbound delivery
describes exactly which materials or pallets can be received on what date and at what time.

The inbound delivery process starts when the goods are staged at the vendor’s shipping point,
and it ends when the ship-to party makes an acquisition posting for the goods.
1. Create a purchase order

2. The system can determine a goods receiving point.
3. Creates an inbound delivery – to capture the Title transfer of goods at Vendor’s Factory
4. Post the goods receipt
5. If there is delivery charges in PO line item, system will charge the delivery cost to
expense account.
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 Plant stock.
In the quality management the system will post the stock as an inspection stock. Only after the
usage decision, the stock will be posted to unrestricted stock.
The system will create a material document and the accounting document.
There is no Over-Delivery or Under-Delivery tolerance allowed in Goods Receipt.
The FI module will be updated with the following entries:
Stock Account Debit(+)
GR / IR A/c Credit(-)
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 Plant stock.
The FI module will be updated with the following entries:

GR/IR Clearing Account Debit(+)
Vendor Account Credit(-)
Stock transfer
A stock transfer is the removal of material from one storage location and its transfer to another
storage location. Stock transfers can occur either within the same plant or between two plants.
A stock transfer from plant to plant generally takes place within a company code using the stock
transfer order (STO).
Process flow:
1. Stock transport order in the receiving plant

2. Delivery in the issuing plant
3. Goods receipt in the receiving plant

GST Impact on Stock Transfers
In GST regime the STO would require a Tax Invoice to be created if stock transfers are
happening between two GST different Registration numbers (i.e. typically if the plants are
located in different states)
Note: SAP recommends STO to be handled through SD route only.
10.2.3 Return delivery
In the GST regime, the Returns to Vendor process is handled by creating a customer code for
the Vendor. The goods to be returned are then sold (as it were) to this customer. This is
done to effect the reversal of the input tax that was paid during the purchase.
10.2.4 Physical Inventory
Create Physical Inventory Document
Set Blocking Indicator
Physical Inventory
Arrange for
Recount Post Count Results
Material
Change Count Document
Post Differences
Accounting
Document

This component allows carrying out a standard SAP physical inventory of the company’s
Plant stocks for balance sheet purposes.
The process of carrying out the Physical Inventory

The stock in a Plant can be divided into stock types. In the standard system, a physical
inventory can be carried out for the following stock types:
 Unrestricted-use stock in the Plant
 Quality inspection stock
 Blocked stock
If batch status management is active, the first stock type covers both unrestricted-use stock
and restricted-use stock.
Inventory of all stock types mentioned can be taken in a single transaction. For the materials
to be inventoried, one item is created in the physical inventory document for every stock
type.
Physical inventory takes place at storage location level. A separate physical inventory
document is created for every storage location.
If a material does not exist in a storage location, this means that no goods movement has
ever taken place for the material in the storage location. The material, therefore, has never
had any stock in this storage location. The material does not exist at stock management level
in the storage location. It is therefore not possible to carry out a physical inventory for the
material in this storage location.
This is not to be confused with a material for which a goods movement has taken place and
for which the stock balance is currently zero. A physical inventory must be carried out in this
case, since storage location data is not deleted when the stock balance is zero.
The posting period is automatically set during counting. Therefore, the inventory difference
must be posted to the same period or - if postings to the previous period are allowed - in the
following period.
1. Create a physical inventory document.
A physical inventory document contains, among other things, the following data:
 The plant and storage location in which the count is to take place
 When the count is to take place
 Which materials are to be counted
 For material handled in batches: which batches are to be counted
 Which stock types are to be counted
2. Blocking Materials for Posting
Due to the delay between a material movement and the posting of that movement, there is a
short-term discrepancy between actual Plant stock and book inventory. To avoid such a
discrepancy during physical inventory, it is recommended that to block the materials for
posting during the physical inventory. A posting block can be set two ways:

 Block the relevant materials when the physical inventory document is entered. This is
recommended if the physical inventory document is created immediately before the
count.
 Block the relevant materials later by changing the posted physical inventory document.
This is recommended if the physical inventory document is not created immediately
before the count.
The posting block is automatically cancelled when one posts the counting results for the
physical inventory document.
3. Print and distribute the physical inventory document.
One must print out the physical inventory document for the physical inventory count
and pass it on to the people responsible for doing the counting.
10.3 INVOICE VERIFICATION
An invoice is received and the information contained in it is entered in the system, comparing
the data (such as quantities and values) suggested by the system with that in the invoice and
making any necessary corrections. Then the invoice is posted (Fixed assets, consumables &
services, Inventory).

In the SAP system, a distinction is made between the following types of invoices:
10.3.1 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. Invoices received from Vendors are to be entered in the
system and the data will be verified with respect to Purchase orders.
10.3.2 Invoices with goods receipt reference

Each goods receipt is settled separately.
 System allows payment processing for vendor for the multiple POs in a single invoice.
 System can incorporate other charges like, freight, handling, insurance & other charges
into the Purchase Order.
 GST will be calculated as per conditions maintained, in invoice.
 The system supports the ability to accumulate carrier freight costs into an accrual
account for later match up and payment against an invoice.
 No tolerance is allowed for Price Deviation between PO and Invoice.
The accounting entries at the time of Invoicing are as follows
GR/IR Clearing Account Debit(+)
Vendor Account Credit(-)

10.4 PROCESS FLOW DIAGRAMS

The purchase documents PR, PO, contract and Schedule Agreement are all subject to 3 level
release procedure based on value.
All Purchase Orders except Imports related, will be created with <GR Based IR> flag ticked. This
ensures that Goods Receipt precedes Invoice Receipt always. For Imports, this flag will NOT be
ticked, to enable Vendor and Customs/Freight payment before actual goods receipt.
Where QM is required with Certificate, need to be able to accept the same and store it in the
system.
10.4.1 Raw Materials Purchase

10.4.2 Consumable Material / Tools / Capital Goods Purchase

10.4.3 Sub-Contract Purchase
In case of SubCon, if there is any issue with the received material -

 Material can go back to SubCon vendor for rework.
 It can be reworked at AAPL and a debit note raised to vendor.

10.4.4 Service Purchase

10.4.5 Imports Purchase
The above procedure is valid, when the title transfer happens offshore (EXW or FOB or FCA). The
stock will be GR’ed in IT01 storage location. Once actually received, user will move it to RM01.

10.4.6 Stock Transport (Plant to Plant)

There will be a 1-step approval process for STO PO.
11. List of Business Processes

The following are the list of Business Processes to be configured and tested for AAPL plants –
Mfg Trading WH
No Business Process 1100 1200 1300
1 PR for Raw Material X X
2 PR for FG X X X
3 PR for SFG X
4 PR for consumables X X
5 PR for Spares X
6 PR for Tools X
7 PR for Capital Goods X X X
8 Sub-Contract PR X X
9 Sub-Contract PO X X
10 PO for Raw Material X X
11 PO for SFG X
12 PO for FG X X X
13 PO for consumables X X

14 PO for Spares X
15 PO for Tools X
16 PO for Capital Goods X X X
17 Outline Agreements X X X
18 Goods Movements (GR/GI) X X X
19 Invoice Verification X X X
20 Vendor Returns X X X
21 RFQ X X X
22 Quotation X X X
23 Service PR X X X
24 Service PO X X X
25 Stock Transfer PR X X X
26 Stock Transfer PO X X X
27 Account Assignment PR X X X
28 Account Assignment PO X X X
29 Quality Control X X X
30 Vendor Evaluation X X X
31 Inbound Delivery for Imports X X
32 Imports PO X X
33 Imports Customs Invoice X X
34 Make To Order Scenario X
35 Unplanned Delivery Costs X X
36 Vendor Consignment X
Pending Points
The following points will be confirmed during the Realization and Testing phase –
a. Use of Scheduling Agreement or Contract for Purchase releases

b. Batch Classification to identify stock based on Version
c. Engineering Change Number (ECN) for Materials / BOMs
d. Net Values for PO / PR Release for different levels
12. Reports and forms
BUSINESS REQUIREMENT
AAPL’s users will enter all Contracts, Scheduling Agreements, Purchase order, and Goods receipt
into AAPL’s system and generate outputs for the same.

12.1 FORMS
S.No Layouts Required
Purchase Order (Standard, Service, Sub-Contract to have same layout). The standard
SAP PO Output format will be used. Modifications as necessary will be made to print
1 the custom Text Information, Delivery Schedule etc that will be maintained in the PO.
2 Contract
3 Scheduling Agreement
12.2 STANDARD SAP REPORTS

AAPL MM Reports (Current):
S.No AAPL Report Details SAP Equivalent
1 PO Pending Report ME2L – Purchase Documents
2 Purchase Indent Report ME5A – Purchase Requisitions
3 RM GRN Report MB51 – Material Document List
4 RM Stock Report MB52 – Warehouse Stocks of Material
5 RM Stk Val. Rep MB52 – Warehouse Stocks of Material
Below are standard SAP reports available that can be used in AAPL.
S. No Reports
1 Stock Overview
2 List of Stock Values: Balances
3 Material Purchase Value Selection
4 Material List
Standard Reports Available in
5 Plant Anal. Selection: Stock
SAP S4 HANA
6 Plant Anal. Selection Receipt /Issue
7 Material Anal. Selection Stock
8 Mat. Anal. Selection Receipt /Issue
9 Batch Analysis Selection

10 Material Movement Report

11 Inventory Report
12 Vendor Analysis Selection
13 Contracts/Sch Ag/Purchase Requisitions/Orders by Vendor
Contracts/Sch Ag/Purchase Requisitions/Orders by Material

14
Contracts/Sch Ag/Purchase Requisitions/Orders by Number
15
Material Analysis Selection
16
12.3 CUSTOMIZED SAP REPORTS
S. No Reports/Forms
PO Layout – Changes to be made to Standard SAP Layout
1
as per requirement for all document types.
Customization Reports
2
3
4
13. Pending for Scope Change
The requirements mentioned below have been identified during the Blueprint requirements. All
these points will be discussed separately with steering committee for the approval.
Requestor Estimated Man-

S.No New Requirement Details Name days
1 AAPL Trading Unit and processes
2 AAPL GE Warehouse Unit and processes

14. Addendum
14.1 PURCHASE ORDER RELEASE

 All the POs will be subject to PO Release (Approval) process containing 3 levels as
mentioned below –
For Capital Goods:
First Purchase Officer N/A
Second Finance N/A
Third CEO N/A
For Consumables and Sub-Contracting:

First Purchase Officer <= 1 Lakh
Second Finance > 1 Lakh and <= 3 Lakhs
Third CEO > 3 Lakhs
For Raw Materials:

First Purchase Officer <= 2 Lakh
Second Finance > 2 Lakh and <= 5 Lakhs
Third CEO > 5 Lakhs
For Services:
First Purchase Officer <= 3 Lakhs
Second Finance <= 3 Lakhs
Third CEO > 3 Lakhs
For Stock Transport Orders:

First Purchase Officer N/A

14.2 PO DOCUMENT TYPE CHANGES

The following document types will be changed as per PO Release/PTO requirements:
Doc Description Changed Changed Number Range

Type Doc Type Description
ZNB Domestic Purchase Order Purchase Order 4510000000-4519999999
ZCAP Capital Goods PO 4570000000-4579999999
ZIMP Import Purchase Order ZRMT Raw Material PO 4520000000-4529999999
ZSC Sub-Contract PO 4530000000-4539999999
ZSEV Service PO 4590000000-4599999999
ZSTO Stock Transfer Order 4540000000-4549999999
ZMTO Make to Order ZPTO Purchase to Order 4550000000-4559999999
ZMK Contract 5000000-5999999
ZLP Scheduling Agreement 6000000-6999999
14.3 MATERIAL TYPES

The following added Material Types will be created to handle Trading goods that are not
manufactured in AAPL and for Non valuated materials. All the number ranges will be external.
Material Type Description

ZTRG Trading Goods
ZNVT Non-Valuated Material
14.4 ENGINEERING CHANGE MANAGEMENT

Engineering Change Management is a central logistics function that can be used to change
various aspects of production basic data (for example, BOMs, task lists, materials, and
documents) with history (with date effectivity) or depending on specific conditions (with
parameter effectivity).
A change with history has the following distinctive characteristics:
 It takes effect under precisely defined conditions (precise date or specific effectivity
parameter value).
 The changed object is saved twice: in its state before and after the changes.
 A change master record or ECR/ECO controls and documents the changes.
This function shall be included under scope for AAPL.

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AAPL

DocuSign Envelope ID: 68AEA4BC-5C2F-49A9-9B4B-5BDC78A9EF6A

SAP S4HANA IMPLEMENTATION

MATERIALS MANAGEMENT BLUE PRINT DOCUMENT

Author Document Location (repository/path/name)

1.0 22.12.2017 Initial Version

SAP S4HANA BLUEPRINT FOR MM MODULE AYAN TECH SOLUTIONS PAGE 1 OF 62

REVIEW AND APPROVAL

Natarajan / Syed Khadar

Name Date (DD-MM-YYYY)

23 January 2018 | 19:07 IST

Name Date (DD-MM-YYYY)

Name Date (DD-MM-YYYY)

Name Date (DD-MM-YYYY)

SAP S4 HANA Blueprint for MM module Ayan Tech Solutions Page 2 of 62

SAP S4 HANA Blueprint for MM module Ayan Tech Solutions Page 3 of 62

10.3 INVOICE VERIFICATION ................................................................................................ 50

SAP S4 HANA Blueprint for MM module Ayan Tech Solutions Page 4 of 62

1. Scope and Purpose of Document

1.1 INTENDED AUDIENCE

1.2 SCOPE OF REQUIREMENT

SAP S4 HANA Blueprint for MM module Ayan Tech Solutions Page 5 of 62

 Additional programming or technical effort

The following entities will to be configured:

 Ankit Aerospace Private Limited

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SAP Systems, Applications, Products (company name)

2.1 SAP MM ORGANIZATION UNITS

2.1.1 Company Code

Company Code Description

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2.1.2 Purchasing Organization

In AAPL one purchasing organizations will be configured as mentioned below:

Purchasing Organization Description

2.1.4 Storage Location

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The following storage locations will be configured for AAPL plants –

Storage Location Description

2.1.5 Purchasing Group

Purchasing Group Description

Final list of Purchasing Groups to be provided by AAPL. (Production Cells to be treated as

Subsequent new purchasing groups could be maintained by an authorised user.

SAP S4 HANA Blueprint for MM module Ayan Tech Solutions Page 9 of 62

3. Vendor & Business partner

3.1 BUSINESS PARTNER

 Different Business Partner Categories – Organization, Person, Group

3.2 VENDOR GST DETAILS

3.3 VENDOR MASTER DATA

 Unique Vendor code will be generated for every AAPL vendor.

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 Partner function will be assigned to each of the vendors.

3.3.1 Vendor Partner Functions

Partner Function Description

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3.3.2 Terms of Payment

Payment Terms Explanation

Inco terms Description

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