Business Blueprint

Material Management

Submitted to

Sterling and Wilson Pvt Ltd

BY

Wipro Limited
Version 1.0

DOCUMENT INFORMATION
Page 1 of 99
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Project Name Document Name Document

Location
S & W - SAP MM Business Document Server
Blueprint

DOCUMENT HISTORY

Version Document Date Author Reviewed Change

Name By Control
MM
1.0 Business
Blueprint

Note: need to be update by client

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TABLE OF CONTENTS

1 EXECUTIVE SUMMARY 3
1.1 BACKGROUND 3
1.2 BUSINESS BLUEPRINT OVERVIEW 4
1.3 Materials Management 6
1.4 Implementation Scope 12
1.5 Module Integration 16
2 ORGANIZATION STRUCTURE 18
2.1 Company 19
2.2 Company Code 19
2.3 Plant 20
2.4 Storage Location 22
2.5 Purchasing Organization 23
2.6 Purchasing Groups 25
3 MASTER DATA 26
3.1 Material Master 27
3.2 Vendor Master 35
3.3 Service Master 38
3.4 Purchasing Info record 38
3.5 Source List 39
4 BUSINESS PROCESSES 40
4.1 Purpose 40
4.2. Purchasing 43
4.3. Inventory management 64
4.4. Material Valuation 75
4.5 Physical Inventory 82
4.6 Logistics Invoice Verification 85
5. TRANSACTION CODES 93
6. STANDARD INFORMATION SYSTEM 96
7. ANNEXURE 97
7.1 – GAPS 97
8. POINTS OF MOM (MM) 26.09.2008 97
9. SIGN OFF/ APPROVAL 98

1 EXECUTIVE SUMMARY

1.1 BACKGROUND

STERLING AND WILSON –A brief History:

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STERLING AND WILSON an associate company of SHAPOORJI

PALLONJI & COMPANY LTD. is one of India’s leading turnkey MEP
service provider with a varied range of solutions from HV & LV
Electrical Systems, HVAC, Plumbing, Fire Fighting, Fire Alarm
Systems, Security Systems, IBMS, Structured Data Cabling, DG
Sets to Control Panels. Through our national network of 9 branch
offices and strength of over 1500 engineering and support staff

STERLING AND WILSON has decided to implement as integrated

ERP Solution and have selected Sap R/3. STERLING AND WILSON
is Implementing SAP R/3 (ECC6.0) with country Version to
support up to 125 users across all the locations. Wipro InfoTech is
the implementation Partner for R/3 Implementation.

The R/3 Modules which are being implemented are:-

FI Financial Accounting
CO Controlling
PS Project System
MM Materials Management
SD Sales & Distribution

1.2 BUSINESS BLUEPRINT OVERVIEW

This document summarizes the findings of the WIPRO consulting

team, which conducted requirement analysis of STERLING AND
WILSON for the SAP R/3 system.

The information was gathered through interviews conducted at

the STERLING AND WILSON with the managers, key users and
personnel from Information Systems, as well as through
reviews of business processes, business procedures,
documentation and relevant reports.

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The immediate purpose of the analysis is to prepare to move

forward rapidly with the implementation of STERLING AND
WILSON’S R/3 system. At the conclusion of the blueprint,
the WIPRO consultants will determine the SAP functionality
required to run the STERLING AND WILSON business.

The Blueprint and its associated appendices present a summarized

perspective of all functional business Processes that will be
implemented. As such, the Blueprint document will serve - from
this point forward the dual role of both official project scope as well
as system acceptance criteria.

The body of this document describes the organizational

structure, enterprise area, and R/3 functional process flows to
be implemented at STERLING AND WILSON. Generally,
requirements that can be met using standard R/3 functionality
through routine configuration tasks are not explicitly documented.
However, certain key requirements are explicitly identified and
summarized to highlight their importance to STERLING AND
WILSON and to document the approach proposed to meet the
requirement.

One section of the BOQ 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(BOQ)

• Recognition and acceptance of procedural changes
("Workarounds") using standard R/3 Additional resource
commitment

• The deferral of a feature to a later phase

• Simply the recognition and acceptance of a limitation.

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The Blueprint reiterates the R/3 organizational structures that have

been identified and will serve as the basis for the initial
configuration activities. The WIPRO team believes that R/3 can
accurately model STERLING AND WILSON’S organizational
requirements.

No significant configuration choices have been identified that

will prevent the future implementation of additional capabilities
within the R/3 environment.

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 WIPRO and STERLING AND
WILSON team 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.

1.3 Materials Management

This section will describe the components of material

management module that are used for mapping the business
processes at STERLING AND WILSON for procurement , Receipts,
Issues, Transfer Posting , Valuation of Materials and Excise
• Consumption based planning
• Purchasing
• Inventory Management & Physical Inventory
• Valuation
• Invoice Verification
• Excise Related Transactions
Consumption based planning
The Central Role of Material Requirement planning is to monitor
stocks and, in particular, to generate order proposals for
purchasing (planned Order, purchase requisition, or delivery

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schedule). This target is achieved by using material planning

methods which cover different procedures.

At STERLING AND WILSON materials are procured externally and

not follow standard SAP planning methods

Purchasing

The tasks of the MM Purchasing component are as follows:-

• External Procurement of Materials and services
• Determination of Possible sources of supply for a
requirement identified by the materials planning and control
system or arising directly within a user department.
• Monitoring of deliveries from and payments to vendors.
Good communication between all the participants in the
procurement process is necessary for purchasing to function
smoothly.

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The typical procurement cycle for a service or material consists of

the following phases:-
1. Determination of requirements
Materials requirement are identified either in the user department
or via materials planning and control.
2. Source Determination
The purchasing component helps you identify potential sources of
supply based on past orders and existing longer-term purchase
agreements.
3. Vendor Selection and Comparison of Quotations
The system is capable of simulating pricing scenarios, allowing
you to compare a number of different quotations.

4. Purchase Order Processing

The Purchasing system adopts information from the requisition
and quotation to help you create a purchase order.
5. Order follow up

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The follow up can be carried out with vendors for expediting the
purchase orders.
6. Good Receiving and Inventory Management
Goods receiving personnel can confirm the receipt of goods
simply by entering the PO number. By specifying permissible
tolerances, buyers can limit over- and under deliveries of ordered
goods. At this time we can have quality checking for the material.
7. Invoice Verification
The system supports the checking and matching of invoices. The
account payable department is notified of quantity and price
variances because the system has access to PO and good receipt
data. This speeds the process of auditing and clearing invoices for
payment.
8. Payment
Payments are processed from Accounts payable in FI.

Terminology Match
SAP STERLINGANDWILSON
Purchase Requisition Service Request
Request for Quotation Request for Quotation
Quotation Quotation
Purchase Order Purchase Order
Service Purchase Order PurchaseOrder (hardware items)
Sub Contract Purchase order Purchase order

Inventory Management and Physical Inventory

This component deals with the following tasks:

• Management of material stocks on a quantity and value
basis
• Planning, Entry, and Documentation of all Goods Movements

Terminology Match

SAP STERLING AND WILSON

Goods Receipt/Material Document Good Receipt Note(GRN)

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Good Issue/Material Document Issue Slip

Transfer Posting/Material Document Goods Movements

Material is procured from external or internal sources on the basis

of the requirements determined by Material Requirements
Planning. The delivery is entered in Inventory Management as a
goods receipt. The material is stored (and managed under
Inventory Management) until it is delivered to Project site (Sales
& Distribution), or is used for internal purposes (for example, for
Projects).

During all transactions, Inventory Management accesses both

master data (such as material master data) and transaction data
(such as purchasing documents) shared by all Logistics
components

Material Valuation
This includes the following application areas:
• Purchasing
• Inventory Management
• Logistics Invoice Verification

Material Valuation determines or records the stock value of a

material. The stock value is calculated using the formula:
Stock value = stock quantity x material price
Thus, if the stock quantity or the material price changes, the
stock value changes.

Logistics Invoice Verification

This process is situated at the end of the logistics supply chain
that includes Purchasing, Inventory Management, and Invoice
Verification. It is in Logistics Invoice Verification that Incoming
Invoices are verified in terms of their content, prices.
When the invoice is posted, the invoice data is saved in the
system. The system updates the data saved in the invoice
documents in Materials Management and Financial Accounting.

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You receive an invoice and enter the information contained in it in

the system and then post the invoice.

Country Version India

This country version is designed for use by businesses with

operations in India. As well as the generic SAP R/3 functions, it
comprises functions designed for laws and business practices
particular to India.
Most of the country-specific functions for India relate to Financials
and Logistics are covered under CIN.
The main areas are as follows:
• Excise duty and the central value-added tax system
(CENVAT).
• Withholding tax also known as tax deducted at source
(TDS).
VAT - Under VAT law, first, the dealer pays tax on the sale or purchase of goods. The
subsequent dealer pays tax on the portion of the value added upon such goods. Thus, the tax
burden is shared equally by the last dealer. To illustrate the whole procedure of VAT, we give
you an example as follows:

At the first point of sale, the value of goods is Rs.100. The tax on this is 12.5%. Therefore, the
net VAT would be 12.5%. At the second change of sale, the sale value is Rs.120 and the tax
thereon is 15%. The tax that is to be paid at every point is 15%. The input tax is 15%. You will
get a credit for first change in sale of 2.5%-- i.e. 15% -12.5%. Therefore, 2.5% will be the net
rate. At the third change of sale, the sale value is Rs.150 and the tax on this is 18.75%. At the
last stage, the tax paid is 18.75%. The Input Tax is 18.75%. You get a credit for second change
in sale?i.e. 18.75% -15% = 3.75%. Therefore, 3.75% would be the net VAT. This means that
VAT is paid in the last point tax under the sale

• CST - Under the CST Act, the tax is collected at one stage of purchase or sale
of goods. Therefore, the burden of the full tax bond is borne by only one dealer,
either the first or the last dealer. However, under the VAT system, the tax burden
would be shared by all the dealers from first to last. Then, such tax would be
passed upon the final consumers.
• Octroi – local tax levied on incoming foreign
matrl.[Foodstuffs]

2 DIFFERENCE BETWEEN VAT AND CST

Under the CST Act, the tax is collected at one stage of purchase or sale of goods. Therefore,
the burden of the full tax bond is borne by only one dealer, either the first or the last dealer.

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However, under the VAT system, the tax burden would be shared by all the dealers from first to
last. Then, such tax would be passed upon the final consumers.
Under the CST Act, the tax is levied at a single point. Under the VAT system, the retailers are
not subject to tax except for the retail tax.
Under the CST Act, general and specific exemptions are granted on certain goods while VAT
does not permit such exemptions. Under the CST law, concessional rates are provided on
certain taxes. The VAT regime will do away with such concessions as it would provide the full
credit on the tax that has been paid earlier. Under VAT law, first, the dealer pays tax on the sale
or purchase of goods. The subsequent dealer pays tax on the portion of the value added upon
such goods. Thus, the tax burden is shared equally by the last dealer. To illustrate the whole
procedure of VAT, we give you an example as follows:

At the first point of sale, the value of goods is Rs.100. The tax on this is 12.5%. Therefore, the
net VAT would be 12.5%. At the second change of sale, the sale value is Rs.120 and the tax
thereon is 15%. The tax that is to be paid at every point is 15%. The input tax is 15%. You will
get a credit for first change in sale of 2.5%-- i.e. 15% -12.5%. Therefore, 2.5% will be the net
rate. At the third change of sale, the sale value is Rs.150 and the tax on this is 18.75%. At the
last stage, the tax paid is 18.75%. The Input Tax is 18.75%. You get a credit for second change
in sale?i.e. 18.75% -15% = 3.75%. Therefore, 3.75% would be the net VAT. This means that
VAT is paid in the last point tax under the sale

2.1 Implementation Scope

2.1.1 Geographical Coverage:

The following units are within the scope of SAP Implementation at

STERLING AND WILSON:

STERLING AND WILSON

Zone Branch/Plant Dedicated Unit
Project Unit(
North Delhi Electrical/HVAC/Plumb/firefighting)

Project Unit(
West Mumbai Electrical/HVAC/Plumb/firefighting)
Project Unit(
Pune Electrical/HVAC/Plumb/firefighting)
Baroda Project Unit(
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STERLING AND WILSON

Zone Branch/Plant Dedicated Unit
Electrical/HVAC/Plumb/firefighting)
Project Unit(
Goa Electrical/HVAC/Plumb/firefighting)

Project Unit(
East Calcutta Electrical/HVAC/Plumb/firefighting)

Project Unit(
South Chennai Electrical/HVAC/Plumb/firefighting)
Project Unit(
Coimbatore Electrical/HVAC/Plumb/firefighting)
Project Unit(
Bangalore Electrical/HVAC/Plumb/firefighting)
Project Unit(
Hyderabad Electrical/HVAC/Plumb/firefighting)

2.1.2 Functional Scope

Sterling and Wilson SAP implementation scope for Materials
Management module under Logistics & Country India Version is
as follows:

Logistics > Materials Management >

• Purchasing
o Purchase Requisition
o RFQ/Quotation
o Purchase Order
o Master Data
▪ Info Record
▪ Source List
▪ Vendor
▪ Vendor Evaluation
▪ Conditions
▪ Messages
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• Inventory Management
o Goods Movement
o Material Document
o Periodic Processing
o Environment(Std SAP Reports)
• Valuation
o Change in Material Price
• Service Entry Sheet
o Maintain
o List Analyses
• Service Master
o Service
• Material Master
o Material
o Special Stock
o Other

Purchase Requisition Processing

− Identifying the requirements, generated manually PR in
the user departments
− Identifying the sources of supply
− Request for quotation and quotation processing
− Release PR and follow up
Purchase Order Processing
− Placement of Purchase order against respective project
− Maintenance of Delivery schedules
− Check the Positive and Negative deviation to get
approval
− Release( below 5L one level, above 5L Two Level ) and
follow up
− Amendment PO(before GRN), Deletion of Items and
Cancellation
− Planned and Unplanned Delivery Charges

Procurement via Subcontracting

− Provision of Components to Vendor
− Monitoring the Components provided to Vendor
− Adjustment and Settlements

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Procurement via Service(hardware items)

− Placement of Service Purchase order against respective
project
− Maintenance of Delivery schedules
− Release( below 5L one level, above 5L Two Level ) and
follow up
− Amendment(Before Entry Sheet), Deletion of Items and
Cancellation
− Planned and Unplanned Delivery Charges

Inventory Management
Good Receipt Process for External Procurement
− Goods received at site against purchase order & WBS
− Confirmation Receipt send to respective head office with
authorized signatory
− GRN based on the confirmation receipt from respective
site
− Return of Rejected material to Vendor
Goods Issue Processing
− Identifying the purchase requisition quantity and WBS.
− Checking the Quantity in store.
− Physical Transfer of Goods to Project site with reference
to the Purchase requisition
− Post the Goods issue.

Other Possible Goods issue Processes addressed at

STERLING AND WILSON are:-
− Good Issue for Sampling
− Good Issue for Subcontracting etc.,
− Good Issue for Scrapping

Stock Transfers & Transfer Posting

− Plant to plant With in Company code
− Project to project
- Project stock to own stock
- Store to Project Site
- Project site to store(scrap material)
- Vendor to another vendor(Subcontract with Third party)
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Physical Inventory

− Preparation of Physical Inventory Document

− Physical Counting
− Entering the results in the system
− Posting the differences
− Recount

Invoice Verification

− For Payment for Invoices

− For Import Custom Duty Payment
− For Delivery Cost Payment (Freight Etc.)

Material Valuation

− Materials at STERLING AND WILSON to be valuated at

Plant Level
− Split Valuation to be carried out for Imported,
Indigenous, Trading and manufactured items

2.2 Module Integration

Materials Management is integrated with all relevant modules.

▪ Project System – Material planning Cost and

Actual cost etc.
▪ Sales & Distribution – Stock transfers, etc.,
▪ Finance/Controlling – Material Valuation, Vendor
payments, Material costing etc.
▪ Controlling - Internal order and Cost center Etc.
▪ CIN Version – All incoming excise entries are
posted in the Separate G/L.

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3 ORGANIZATION STRUCTURE

(Sterling & Wilson)1000

MUMB PUNE DELH BANG HYDE CHEN KOLC

MUMB PUNE DELH BANG HYDE CHEN KOLC

(Mumbai) (Pune) (Delhi) (Bang) (Hyde) (Chen) (Kolc)

MUMB PUNE DELH BANG HYDE CHEN KOLC

(Mumbai) (Pune) (Delhi) (Bang) (Hyde) (Chen) (Kolc)

Central Specific Purchase Organization Structure

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SW01 MUMB PUNE DELH BANG

Central P.org (Mumbai (Pune) (Delhi) (Bang)
)

HYDE CHEN KOLC

(Hyde) (Chen) (Kolc)

3.1 Company

A company is an organizational unit in Accounting which

represents a business organization according to the requirements
of commercial law in a particular country.

3.2 Company Code

− Company code is used to structure the Business

Organization from a financial accounting perspective.

− It represents a legal entity.

− Company code is the level of External Reporting or

Legal Sets of Books.

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− General Ledger will be kept at this level for which a

complete set of books are maintained for preparation of
legally required financial statements.

3.3 Plant

Plant is an organizational unit within Logistics, serving to

subdivide an enterprise according to procurement, maintenance,
and materials planning. A plant is a place where either material is
produced, or goods and services are provided. Material stocks are
valued at the plant level.

Introduction

− Material requirements planning is done at plant level

− Can be a Physical Location (cost centers may or may not be
associated to a plant i.e. administrative vs. trading cost centers)
− All logistics transactions use plant.
− Logistics operations analysis can be done.
− Authorizations in logistics modules can be given by plant.
− Requirements transfer from PM/PS to purchasing will be done by
plant.
− Links to Materials Management (MM), and Sales and Distribution (SD)
− A Plant is always Assigned to a Company Code
− Purchasing Organization are always Assigned to Plants
− Plant is mandatory for excise registration

Plants/branches for STERLING AND WILSON

Separate plant/plant by business unit & Location (One plant for
business unit)
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Territory Type SAP Location SAP Description Company

Plant
Code
WEST Trading MUMB Mumbai/Govan Mumbai Plant Sterling &
di Wilson
WEST Trading PUNE Pune Pune Plant Sterling &
Wilson
NORTH Trading DELH Delhi/Noida Delhi Plant Sterling &
Wilson

SOUTH Trading BANG Bangalore Bangalore Plant Sterling &

Wilson
SOUTH Trading HYDE Hyderabad Hyderabad Sterling &
Wilson
SOUTH Trading CHEN Chennai Chennai plant Sterling &
Wilson

EAST Trading KOLC Kolcutta Kolcutta Sterling &

Wilson

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3.4 Storage Location

Storage Location is an organizational unit SAP MM Organization

structure allowing differentiation between the various stocks of a
material in a plant. These are the smallest unit in an organization
hierarchy.
Storage location is the place where stocks are physically kept
within a plant. Stocks are managed only on a quantity basis and
not on a value basis at storage location level. Physical inventories
are carried out at storage location level. (Material valuation will
be at plant level)
A storage location has the following attributes:

• There may be one or more storage locations within a plant.

• It is possible to store material data specific to a storage
location.
• Stocks are managed only on a quantity basis and not on a
value basis at storage location level.
• Physical inventory is carried out at storage location level.
• Storage locations are always created for a plant.

They must be assigned to plants and are relevant for Inventory

Management functions.

Storage Location Codification Strategy

▪ Storage Location codes comprise four characters long

▪ The strategy for the codification is as under

SAP Storage SAP Description

Location Code
MSEW STORES- SEWRI
MFOR STORES- FORT
MGOV STORES –GOVANDI
MPAN STORES – PANVEL

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SAP Storage SAP Description

Location Code
MBHI STORES- BHIVANDI

MKAL STORES – KALAMBOLI

MRKU STORES – RAJ KURLA

MRBH STORES- RAJ BHIVANDI

PMAIN STORES – CENTRAL

BMAIN STORES- CENTRAL
DMAIN STORES- CENTRAL
HMAIN STORES- CENTRAL
CMAIN STORES- CENTRAL
KMAIN STORES- CENTRAL

Need to be finalized by Client

3.5 Purchasing Organization

Purchasing Organization is an organizational unit within Logistics,

subdividing an enterprise according to the requirements of
Purchasing. A Purchasing Organization procures materials and
services, negotiates conditions of purchase with vendors.
Master data:
For every new Purchasing Organization created, a new set of
master data at the Purchasing Organizational level will have to be
created for vendor masters, purchasing information records,
source lists, and pricing information.

Maintenance of purchasing documents:

Many purchasing documents are purchasing Organization specific.

This is because the Purchasing Organization is a header field in

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the following SAP transaction documents Purchase order,

Contract etc.

Reporting Flexibility:

In any business function, reporting is one of the basic business

requirements. The choice of the Purchasing Organisation will
influence the ease with which reports are being generated. In
particular, reports that provide information on collective
activities/transactions will be greatly affected by this decision.
With multiple Purchasing Organisations, consolidating of
information by plant will be more straightforward as Purchasing
Organisations are used as selection criteria.
Authorisation Control:

The Purchasing Organization is one of the authorization objects in

SAP. The adoption of multiple Purchasing Organizations implies
that authorization can be enforced via the Purchasing
Organization. If this is not the case, authorization may have to
be enforced via other alternatives such as Purchasing Groups.
At STERLING AND WILSON - Purchase Organization:
It has been decided that for STERLING AND WILSON, there
would be Purchasing Organizations based on division & territory,
following are the Purchasing Organization as per Sterling & Wilson

Purchasing Purchase Organization Plants Under

Organization Description These
Code Organization
SW01 Central Purchasing All plants
Organization

MUMB Mumbai Purchase Mumbai

Organization
PUNE Pune Purchase Organization Pune

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DELH Delhi Purchasing Delhi

Organization
BANG Bangalore Purchase Bangalore
Organization
HYDE Hyderabad Purchase Hyderabad
Organization
CHEN Chennai Purchase Chennai
organization
KOLC Kolcutta Purchase Kolcutta
Organization

3.6 Purchasing Groups

The purchasing organization is further subdivided into purchasing

groups (buyer groups), which are responsible for day-to-day
buying activities.
A purchasing group can also act for several purchasing
organizations.
Purchasing Group is a buyer or a group of buyers responsible for
certain purchasing activities. The Purchasing Groups defined for
Sterling and Wilson are:

Purchasin Description Telephone Fax No.

g Group (max 18 char) No. (max 12 (max 31
(max 3 char) char)
char) 25485459 25485459
E01 SANJEEV 536
E02 ZARIR 349
E03 CHANDER 348
E04 RAMESH 347
E05 NIVEDITA 336
E06 UMESH 401
E07 VIJAY 345
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Purchasin Description Telephone Fax No.

g Group (max 18 char) No. (max 12 (max 31
(max 3 char) char)
char) 25485459 25485459
E08 MAHESH 342
E09 PRAVIN 528
E10 SHADAB 418
E11 DEAN 415
E12 SACHIN 392
E13 MANECKSHA 514
H02 Dhanesh 489
H03 AMIT 490
H04 Sandosh 444
H05 Gaurav 466
H06 Saka 465
H07 Asha 518
P01 Dhanesh 489
P02 AMIT 490
P03 Sandosh 444
Need to be finalized by
client

Suggestion: Whenever any departments want to raise any

requisition, they need to put the requisitioner name and Purchase
group depending on type of purchase.

4 MASTER DATA

Master data relevant for Materials Management

• Material Master
• Service Master
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• Vendor Master
• Info Records
• Source list

4.1 Material Master

The material master contains information on all the materials that

a company procures or produces, stores, and sells. It is the
company's central source for retrieving material-specific data.
This information is stored in individual material master records. A
material master record contains data of a descriptive nature
(such as size, dimension and weight) and data with a control
function (such as Material type, MRP type and price control,
Purchase group, Profit center etc.). Description of the material is
at Client level. In addition to this data, which can be directly
maintained by the user, it also contains data that is automatically
updated by the system (such as stock levels).

The material master is used by all components in SAP logistics.

The integration of all material data in single database object
eliminates redundant data storage.
In the SAP Logistics System, the data contained in the material
master is required, for example, for the following functions:

▪ In Purchasing for ordering

▪ In Inventory Management for goods movement postings
and physical
Inventory
▪ In Invoice Verification for posting vendor invoices
▪ In Sales and Distribution for sales order processing
▪ In Production Planning and Control for material
requirements planning,
Scheduling and work scheduling

Master data is common across all plants. There are no multi-

lingual descriptions for the materials. All the descriptions are in
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English. In addition to the basic description, Purchase Order Text

will be maintained for the materials. All the existing materials will
be loaded to the SAP system; to avoid duplication of master data
a central department will create new materials. Sterling and
Wilson will be operating in a multi-plant environment in SAP R/3.
For common materials, master data in more than one plant will
have to be maintained on an ongoing basis. The ownership and
corresponding process for maintenance of these master data has
to be finalized by S&W, in the Realization Phase and documented.

When create a material master record, it is required to classify

the material according to industry sector and material type.

• Industry

It is a factor determining the screen sequence and field selection

in a material master record. Once assigned an industry sector to
a material, it cannot change the industry sector again afterwards.

• Material Type

Material type groups’ together materials with the same basic

attribute, for example, raw materials, semi-finished products, or
finished products. When creating a material master record,
materials are assigned to a material type. Material type
determines whether the material number can be assigned
internally or externally and the number range from which the
material number is drawn.

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When a material master record is created, the material type

determines:
▪ Whether the material is intended for a specific purpose,
for example, as a process material
▪ Whether the material number can be assigned internally
or externally
▪ The number range from which the material number is
taken
▪ Which screens appear and in what sequence
▪ Which departmental data is allowed to enter
▪ What procurement type the material has; that is, whether
it is manufactured in-house or procured externally, or
both

Together with the plant, the material type determines the

material's inventory management requirement; that is:

▪ Whether changes in quantity are updated in the material

master record
▪ Whether changes in value are also updated in the stock
accounts in financial accounting

In addition, the accounts affected by a material entering or

leaving the warehouse depend on the material type.

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[Type here]

In Sterling and Wilson currently the Material Master or item

master or BOQ, as it is known, is maintained commonly at Head
office and for the projects the materials are created as and when
required. The concept of material type is followed to distinguish
the material.
The following Material types will be used in Sterling and Wilson

Serial Material Type - Description

No Key
1 ZTRE Trading Goods(EL)
2 ZTRH Trading Goods(HVAC)
3 ZTRP Trading Goods (Plumb)
4 ZTRF Trading Goods(Fire
Fighting)
5 ZROE Raw Material(EL)
6 ZROH Raw Material(HVAC)
7 ZROP Raw Material(PLUMB)
8 ZROF Raw Material(FIRE)
9 ZFEE Finished Goods(EL)
10 ZFEH Finished Goods(HVAC)
11 ZFEP Finished Goods(PLUMB)
12 ZFEF Finished Goods(FIRE)
13 ZCOM Consumable
goods(common)
14 ZSCE Scrap goods(EL)
15 ZSCH Scrap goods(HVAC)
16 ZSCP Scrap goods(PLUMB)
17 ZSCF Scrap goods(FIRE)
18 ZPAK Packaging goods common

• Material Numbering

For every material a material master record in the material

master must exit. A material number uniquely identifies this
record.

[Type here]
[Type here]

Material numbering will be *internally/externally generated

according to the material type. However the existing stock
numbers in the legacy system will be transferred to SAP as an Old
material number in the material master record. The maximum
number of characters will be *18. In the case of external if the
number of characters is less, then the leading zeros will not be
displayed and for internal number assignment system will use the
number from the range allocated.

Material Master Number

H A V c W A T E R X X X 1 2 3 4 5 6
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

First - 4 digits is Division of S&W

Second - 5 digits is main group of division.
Third - 3 digits is Sub group of main Group
Fourth - 6 digits is number range of material.

• Material Group

A key that is used to group together several materials or services

with same attributes. Each material can belong to only one
material group. Material groups can be used to restrict the scope
of analysis and search specifically for material master records via
search helps. Material groups can access necessary reports.

The following material groups are identified and if required

further material groups will be added in the Realization Phase.

Material Group
S. Material Group
Description
No. (max 9 characters

1 ACCESS CONTROL ELEC1001

2 ACCESSORIES ELEC1002
[Type here]
[Type here]

ALLUMINIUM EARTHING
3
STRIP ELEC1003
ALLUMINIUM EARTHING
4
STRIP ELEC1004
5 ALUMINIUM CABLES ELEC1005
6 ALUMINIUM EARTHING WIRE ELEC1006
7 AUDIO VISUAL SYSTEM ELEC1007
8 BARREL NIPPLE ELEC1008
Need to be finalized by Client

Unit of measure:
The SAP R/3 System distinguishes between the following units of
measure:

• Base unit of measure

This is the unit of measure in which the stocks of a material are

managed. The system converts all quantities entered in other
units to the base unit of measure.

• Alternative units of measure

Individual departments may have their own units of measure. For

example, Purchasing may use a different unit than Sales or
Production. All units of measure other than the base unit of
measure are referred to as alternative units of measure.

The SAP R/3 System supports the following alternative

units of measure:

Order unit

Allows a material to be ordered in a unit differing from

the base unit of measure. The order unit is proposed
[Type here]
[Type here]

automatically in purchasing functions, where it can be

changed.

• Sales unit

Allows a material to be sold in a unit differing from the

base unit of measure. The sales unit is proposed
automatically in the sales order, where it can be
changed.

• Unit of issue

Unit of measure in which the material is issued from

the stock. It allows consumption, stock transfers,
transfer postings, and physical inventories to be
recorded in a unit differing from the base unit of
measure and from the stock keeping unit.

The relationship between the base unit of measure and

alternative units of measure is depicted as follows:

Material Valuation

Material valuation is the determination of the value of a stock of

materials. The valuation relevant data on a material include:

[Type here]
[Type here]

a) Valuation price

b) Assignment to a valuation class, Valuation class is used to

determine the G/ L account during the material movement.

c) Selection of the valuation method using the price control

indicator, S – Standard Price , V – Moving Average Price

The materials will be valuated at Standard Price and Moving

average price.

For Standard Price Control indicator will be S and Moving average

price control indicator will be V. Material valuation is only in INR
(Indian Rupees). The Standard / moving average price should be
entered at the time of creation of the Material Master. Standard
cost estimate can be carried out in SAP to arrive at the standard
price and can automatically update the current standard price of
the material. Also the standard price can be changed manually
through the price change functionality in SAP. Necessary
authorization control will be put in place to restrict unauthorized
change in the standard price.

Period end closing has to be carried out in Materials Management

at the end of each period to allow goods movement in the next
period. This is required as the price; stock value and quantity are
managed period wise in the system.

Split valuation gives the option of allowing different stocks of the

same material to be valuated separately. The various sub-stocks
present are Import, Domestic, Subcontract, In-house, FOC,
Repaired. In Wheels India Ltd, split valuation will be used for the
above Scenario.

Valuation Category that will be used for sub stocks is Z – Split

Valuation.

The valuation types for Valuation category are finalized as

follows:

[Type here]
[Type here]

Import, Domestic, Subcontract, In-house, FOC. If required any

changes will be looked into in realization Phase.
The valuation classes that will be required will be finalized during
the realization Phase.
Different Valuation classes are defined for different types.

Code Valuation Class

3000
HVAC-Trading goods

Need to be finalized with s&w

Finance team

For all stock accounting documents generated in MM, the below

mentioned Document Types and Posting keys are automatically
defaulted.
Document Types in SAP
WE - Goods receipt
WA - Goods issue
RE - Invoice receipt

Posting keys for inventory depending on the transaction:

89-Stock Dr (Debit)
99-Stock Cr (Credit)

4.2 Vendor Master

Vendor master record is the data record containing all the

information necessary for any contact with a certain vendor, in
particular for carrying out business transactions. Data in the
vendor master record is organized under general data, company
code data and purchasing organization data.

Vendor master records have the following structures:

[Type here]
[Type here]

General Data

Company Code Data Purchasing

Organization Data

It consists of data like Vendor name, address, reconciliation

account, payment terms, Schema group etc (Schema group in
SAP differentiates the type of purchase depending on the origin of
purchase like domestic or import).

The vendor master will be created centrally and the required

purchasing data will be maintained in the respective purchasing
organization level. The order currency and the terms of payment
will be in the display field in the purchasing organization data. If
the master data currency differs from the purchasing currency it
can be changed in the Purchase order.

Business partners have a number of different functions, described

as partner functions, in connection with your company. You use
partner functions to define the rights and responsibilities of each
partner type in a business transaction. When you sell or order
goods, for example, your business partners can assume partner
functions such as: Ordering Address, Goods supplier, Alternate
payee.

Vendor Account Group:

Vendor account group is a classifying feature within vendor

master records that determines:

• The type of Number Assignment (internal or external)

• Number Range for Vendor Master
• Whether the account is for one-time vendors

[Type here]
[Type here]

• which fields are displayed and whether their entry is optional

or required (field status) when you enter or change vendor
master data

To create a master record, an account group must be specified.

The account group cannot be changed after you create the
master record.

The following account group is suggested for Sterling and Wilson:

Account Account Description From To
Group number number
ZDTG Domestic Vendor –Trading
Goods
ZDRM Domestic Vendor-Raw
materials
ZDCG Domestic Vendor-Capital
Goods
ZDSC Domestic Vendor-
Subcontract
ZDSE Domestic Vendor- Service
ZDOH Domestic Vendor -Others
IMTG Import Vendor- Trading
Goods
IMCG Import vendor –Capital
Goods
IMRM Import vendor -Raw
Material
IMSE Import Vendor –Service
IMOH Import Vendor- Others

Number range will be finalized in realization phase

Vendor Purchasing Organization data:

Vendors can be maintained for each company code and for a

purchasing organization. Wherever a Vendor exists in both a
Company Code and a Purchasing Organization, the vendor master

[Type here]
[Type here]

data can be copied to the other Purchasing Organizations or

Company Codes.

If required, default data for the material master like the planned
delivery time, purchasing groups, etc. can be maintained at the
vendor level in the vendor master. The data maintained in the
vendor master will be defaulted and can be changed when
purchasing. Inco terms are international commercial terms
negotiated with vendor. Tax codes and payment terms are
discussed and would be given by S&W in next phase.

4.3 Service Master

Services that are procured on a regular basis can be created in a

service master. In the service master service specifications will be
maintained.

A service master record contains the following principal

information for the unique description of a service:

• Service number
• Service category
• Descriptive texts (short and long text)
• Base unit of measure
• Material group
• Valuation class

Service masters can be referenced at the time of creation of the

Purchase requisition and all the Purchasing documents.

4.4 Purchasing Info record

Purchasing info record contains concise information about a

material and a vendor supplying that material (Material, Vendor
combination).

Information like price, lead times, reminders, etc. can be stored

in the info record. An info record thus represents a material-
[Type here]
[Type here]

vendor relationship. Info records can be created for different

procurement types (standard, sub-contracting etc). Info records
can be created with material master.

New data will be maintained on line in the info record prior to

purchasing. Automatically it will be updated during the quotation
process. The number range will be ten digits and will be system
generated.

Info records are to be created with internal number range.

Info records From To Internal

number Number (I) /
Max 10 Max 10 External(E)
digits digits

Info records and number Internal

ranges

4.5 Source List

A Source list specifies the allowed and disallowed sources of a

material for a certain plant within a predefined period. Each
source is defined by means of a source list.
A Source list is also used to define a source as fixed for a period.
In this case the system takes this source as a preferred source
over that period. It is also used to define a vendor/source as
blocked over a period of time; it can also be used as an aid in an
optimized purchase.

In Sterling and Wilson, the source list will be used to maintain the
preferred vendor list. If a contract/Schedule Agreement exists it
will be maintained in the Source list.

[Type here]
[Type here]

Currently in some of the plants preferred vendors exist for

supplying certain parts, these will be maintained in the source list
in SAP so MRP can automatically determine the source of supply.

No restriction will be placed initially for procurement only from

the vendors maintained in the source list. There is no
requirement to restrict suppliers according to their region

5 BUSINESS PROCESSES

5.1 Purpose
Supply management and related activities are carried out at
sterling and Wilson to ensure that the purchased products and
services, including imports, confirm to the required specification
and are supplied on time, for smooth execution of the projects to
the satisfaction of the customers.

The material requirement planning is not automatically but done

by manually. BOQ (Bill of Quantity) is a Bible of Sterling and
Wilson and all material are commonly maintained in BOQ master
for Branch level. The Purchase Department will calculate net
requirement for each material based site SR and create a
Purchase requisition.
This output can be converted Purchase orders & send to vendors
for supply of materials.

4.1.1 Master Data

The master data in the area of manual based planing includes:

▪ Material Master
▪ Vendor master
▪ Purchase Info Record
[Type here]
[Type here]

▪ Source List

4.1.2 Current State Business Process WRT Sterling

and Wilson.

In Sterling and Wilson currently following practice is

followed,

Sterling and Wilson have multiple projects in various parts of

India.S&W Projects used different type of Bill of quantity
(BOQ).BOQ is a bible of sterling and Wilson.

The BOQ has an Item master, descriptions and units. S&W Head
office issue the item of master of BOQ to Respective site engineer
for every project.

Based the Project site requirement, Site engineer prepare a

Service requisition with reference of item master (BOQ) and send
to purchase department of sterling and Wilson. The Service
requisition has item No, description, requirement quantity and
units. The Purchase teams are collecting the service request and
verify all information of SR.

The Purchase Department will calculate net requirement for each

material based site SR and create a Purchase requisition.

This PR contains BOQ number, quantity, Project name and unit of

measurement. The S&W Purchase department is choosing best
vendor with reference BOQ estimated material cost. The purchase
teams create a Purchase order based on best quotation and send
to HOD of Purchase for approval.

Once get a approved purchase order send to vendors for supply

of materials at site place. After that the vendor send invoice to
respective branch office of Sterling and Wilson. Respective
branch offices get an invoice first before reaching material at site.

[Type here]
[Type here]

4.1.3 Future State Business Process WRT S & W

Sr. Current Business Proposed Solution

No. Processes
1 Sterling and Wilson have In SAP, Material master have
multiple projects in various the (material) item number,
parts of India.S&W descriptions units and etc
Projects used different
type of Bill of quantity
(BOQ).BOQ is a bible of
sterling and Wilson.
The BOQ has an Item
master, descriptions and
units. S&W Head office
issue the item of master of
BOQ to Respective site
engineer for every project. BOQ- full format has
developing under process for IN
SAP
Based the Project site
requirement, Site engineer
prepare a Service
requisition with reference
of item master (BOQ) and
send to purchase IN SAP,
department of sterling and Case: 1 First check the
Wilson. materials are stock in storage
location/Project stock.
The SR has item No, If requirement quantity is there
description, requirement then create a Purchase
quantity and unit. The requisition based on SR and to
Purchase departments get a approval of HOD then
People are collecting the issue material against the
service request and verify project
all information of SR.
Case: 2 If the material stocks
are nil, then the purchase
department create a PR based
on SR and to get an approval of
[Type here]
[Type here]

HOD.

2 Material Planning is based The advantage of creating a

on Project site Purchase requisition is that the
Requirement. The Net Authorized (HOD of Purchase)
requirements calculations controller has more control
are derived by only over the procurement
purchase department. proposals.
The purchasing department
cannot order the material until
the Authorized (HOD) controller
has checked and converted the
order proposal

4.2. Purchasing

The Materials Management (MM) module is fully integrated with

the other modules of the SAP System. It supports all the phases
of materials management: materials planning and control,
purchasing, goods receiving, inventory management, and invoice
verification.

The tasks of the MM Purchasing component are as follows:

▪ External procurement of materials and services

▪ Determination of possible sources of supply for a
requirement identified by the materials planning and
control system or arising directly within a user
department
▪ Monitoring of deliveries from and payments to vendors

Good communication between all participants in the procurement

process is necessary for Purchasing to function smoothly.

[Type here]
[Type here]

Purchase requisitions are usually regarded as internal documents

used within Purchasing. Requisitions can be created either
directly or indirectly.

Procurement of stock material

A stock material is a material that is kept in stock. Such materials

are placed in storage following a goods receipt. When goods are
received by or issued from stores or the warehouse, the stock on
hand is increased or reduced by the amount of the quantity
received or issued.

When you order a material for stock, the system does not require
an account assignment. This is because the posting to the
appropriate stock and consumption accounts occurs automatically
after each goods movement (for example, after a material is
received by the stores or issued from stores). Furthermore, the
value and the quantity of the stocked material are updated in the
material master record.
To order a material for stock, the material must have a master
record.

Accounting Entries:

At the time of Goods Receipt:

GR/IR Account Cr
Stock Account Dr (Excise duty material amount added to
material cost)

At the time of Invoice Verification:

Vendor Account Cr
GR/IR Account Dr
VAT Clearing Dr
[Type here]
[Type here]

• Procurement for Direct Consumption

When you procure for direct consumption, you specify the

consumption purpose by entering an account assignment (for
example, a cost center, Project). On goods receipt, the material
or service counts as having been consumed. If a material is
procured for direct consumption, the consumption accounts in
Financial Accounting are posted when the goods receipt is
entered. The total quantity and value of existing stocks of the
material are not affected.

▪ Account assignment category(Q) & Item category is

mandatory(S)
▪ Material number is mandatory.
▪ For non-valuated materials, which are being managed only
on quantity basis, system updates the quantity but posts the
value to the consumption account.
▪ It is possible to specify multiple account assignments against
one order item.
▪ Item category is a type of procurement (ex:Third party,
service)

Accounting Entries:

At the time of Goods Receipt:

Stock Account Dr
GR/IR Account Cr

At the time of Goods Issue:

Consumption Account DR
GR/IR Account CR
[Type here]
[Type here]

At the time of Invoice Verification:

Vendor Account Cr
GR/IR Account Dr

VAT clearing A/c Dr

Procurement of external services

External services management is an application component within

Materials management. It supports the complete cycle of creation
if service master records, RFQ for services, service orders, service
entry & acceptance & invoice verification.

The External Services Management component is linked to the

SAP modules PM Plant Maintenance and PS Project System. As a
result, it is possible to create purchase requisitions for external
services within the framework of maintenance measures or a
project and then transmit them to Purchasing without incurring
additional data maintenance work.

Accounting Entries:

At the time of Service Entry Sheet Acceptance:

Consumption Account Debit

GR/IR Account Credit

At the time of Invoice Verification:

Vendor Account Cr
GR/IR Account Dr

[Type here]
[Type here]

The following list shows the various external purchasing

documents available in the standard SAP System.

Purchase Requisition:

Purchase requisitions are “internal” documents, which are used

to notify Purchasing department to procure a particular quantity
of a material or a service for a particular date.

Purchase requisitions are either created manually by the

individual department/person responsible based on requirement.

If purchase requisition is created for materials that have a

material master record, the R/3 System transfers data from the
material master record into the purchase requisition.
Purchasing department can convert the purchase requisition into
a request for quotation (RFQ), purchase order, or an outline
agreement.

Following document types will be defined for Purchase

Requisition:

Sr PR Doc Type Description Doc

No Type
Code
1 Emergency PR ZEMG
2 Third Party PR ZTHD
3 Subcontract PR ZSUC
4 Service order PR ZSEV
5 Standard PR ZNB
6 Import PR ZIMP
RFQ & Quotation

Purchasing department uses “Request for Quotation” as a

notification to the selected vendors to submit the terms &
conditions (including prices) to supply the specified materials or
performance of specified services.

[Type here]
[Type here]

Upon receipt of quotation from vendors the same is entered in

system along with the terms & conditions with reference to the
corresponding RFQ.

Purchasing can determine most favorable items of quotation by

quotation comparison. It is possible to save the condition in
quotations in purchasing info records.
Following document types will be defined for RFQ

Sr Doc
No Purchasing Order Doc Types Type
Need to be finalysed by
client

Purchase order

Purchase order is a formal request to the vendor to supply

material or perform services at defined terms & conditions

It is possible to create purchase order directly (without reference)

or with reference to a PR, RFQ or another purchase order.
Following document types will be defined for PO

4.2.1. Purpose

Various activities are involved in Purchasing

• Requirements identification
• Source determination
• Vendor selection & comparison of quotations
• Ordering the requirements
• Purchaser order follow up
• Vendor evaluations

Every document stores the history & subsequent relevant flow to

have traceability & reporting purpose. Required purchasing
documents will go through release strategy for better control on
purchasing.

[Type here]
[Type here]

4.2.2. Master Data

• Material master
• Vendor master
• Service master
• Purchasing info record
• Source list
• Condition record
• Work breakdown structure

4.2.3 Current & Future State Business Process WRT

STERLING AND WILSON Group.

Sr. Current Business Proposed Solution

No. Processes
1 Material Master:- Material Types have been
S & W have following type Defined in point 3.1 Material
of materials:- Master
• Raw Material
• Semi finished Goods
• Finished Goods
• Scrap
• Trading Goods
• Miscellaneous
o Elect Div
material
o Hvac Div
material
o Plumb Div
Material
o Fire Fighting Div
Mat
o Imported
2 Define Item master First 4 digit for DIV,5 Digit for
Number Main Group, Sub group 4 digit
and remain Number.(total 18
digit standard SAP)
3 For Domestic and imported Here we have two option
[Type here]
[Type here]

material we open different Option 1: We can also open two

material code codes.
Option 2: We have functionality
of split valuation, where we can
maintain the two valuations for
single material code, but when
ever any material movement
will happen user has to define
which material he is using.
4 Manual SR is received from In standard we can create the
Site Engineer for all PR for material and service
materials. either manually or
automatically by MRP.
5 SR is approved by In SAP we can have release
concerned department strategy for the release for
Head and then by store Purchase Requisition either on
and later on by technical Item level or for a whole
and commercial team, and document, advantage of going
if it is BOQ Cost high then for item level is that individual
approved by upper item can be released if one
management item is in stock same can be
blocked. Different release
strategy can be determined
based on Plant, Valuation price
of Material, Created by,
Account assignment etc.
6 Request for quotation We can create Request for
(RFQ) are sent to Service Quotation with and without
or Material Vendor either reference PR. Once RFQ are
by mail and phone or fax. created same can be sent to
vendor in Hard copy or can be
provided in PDF format from
SAP System later user can use
the same for sending him in
soft copy.
7 Quotation comparison and In Standard system we can
quotation approval. If compare the different quotation
Quotation price Greater sent by vendor by punching the
then Estimation price then same in the system, but in
[Type here]
[Type here]

to get a approval from system only compare the basic

upper management price of the Material it doesn’t
take care of technical detail or
any other commercial term
mentioned in the system.
Check with BOQ developing
Reports.
8 Purchase order for In SAP we use the Document
following materials is type to differentiate the
raised:- Domestic , import and service
Purchase Order, with of help of
• Raw Material
these using account assignment
• Consumable and item category when can
run following business
• Packaging Material scenarios:-
• Trading Material • Raw Material Purchase
using Item category ‘S”
• Capital Goods & ETC (third party) and Account
assignment Q.
• Service Procurement using
Sterling and Wilson follow Item Category ‘D’
only one type purchase (Service) and Account
order all type of assignment Q.
procurement.
• Purchase order with • Job work (Conversion and
delivery schedule by Repair) using item
defining the Breakup category indicator ‘L’ (Sub
of delivery date. Contracting) & and
Account assignment Q.

• Non Stock able item using

Account assignment like
cost centre, Order etc.

• Import Purchase Order

9 Purchase orders are In SAP we have release

approved by concerned strategy for Purchase order on
[Type here]
[Type here]

dept. Head and header level and item level. We

commercial based upon can’t have release at item level
their authority level. in case of Purchase requisition.
Check entry -1
If the Po value is <= 5L The release can be defined on
then To get a one level of the basis of document type,
approval like respective company code, Purchasing
dept .of Head. If the PO Group, Purchasing Organization
value is >= 5L then to Get and net value of purchase
a two level of approval order.
like Hod and MD
Check entry-2
Approval taken for
Negative deviation(Based The Comparative statement
on comparative statement analysis development report
) has tender value, Po value and
% of negative deviation.
10 At the time of raising the We have separate Tax
purchasing order we procedure for Taxation in
mention the excise duties Purchase order which is
applicable on the purchase Determined on the basis of Tax
order. code, each tax code is defined
certain set of condition like
14% ED, 2% ECS, 1% HCESS,
3% CST etc.
We can have separate tax code
for cenvatable and Non-
Cenvatable Taxes.
11 Different Goods Supplier we can have different Good
for one material. Supplier for material if we have
defined the good supplier in
partner function of the vendor,
so while doing the GR system
will automatically capture the
Vendor and good supplier in the
GR.

[Type here]
[Type here]

4.2.4. Business Process

• Identifying requirement

The task in purchasing starts from identifying the purchasing

requirement, which could be originated either by MRP or by
manual. Manually created requisition will go through release
strategy .Several selection criteria available to get list like
manually crated PR, approved PR etc for buyers as well as
indenters.

In case of services, manual PR will be created with service

numbers indicating service wise qty & tentative rate will be paid
for each service rendered.

Release strategy will be set up with pre requisites for requisitions

that need to be fulfilled by respective release code approver. This
will ensure administrative control
as well as visibility across organization.
• Requirements processing

The approved requisitions (PR) can be converted to a Purchase

order, if there is preferred vendor or if there is an existing
[Type here]
[Type here]

contract. Using, the ‘create with reference functionality’; a single

PO can be created with reference to multiple PR’s. Individual PR’s
will be represented as separate line items in the PO to maintain
the reference of the PR and through the same functionality a
single PR can be split into multiple PO’s.

In the absence of the above, a Request for Quotation (RFQ) will

be raised in the system with reference to the PR. SAP System
doesn’t restrict the number of quotations to be created.

In SAP the quotation number is generated internally for each

vendor. All these quotations can be linked through a collective
number. The quotation can be sent electronically or can be
printed and the hard copy forwarded. . Vendor selection can be
decided with the help of the Info Record and the source list or
vendor evaluation parameters available in the SAP.

In SAP both the Requests for Quotation and the vendor’s

response to the quotation documents will be handled through the
Request for Quotation function.

The vendors pricing and different conditions can be entered in the

maintenance of the quotation document. CST/LST, Excise can be
maintained through the condition record.

History of all generated RFQ/quotations/Comparisons is available

in the system for future reference or any traceability. This will
help for vendor selection for RFQ also.

Service also PR can be converted to RFQ, quotation, comparison

in the same line as material.

• Vendor selection & comparison of quote

Through the price comparison screen SAP ranks all the quotations
based on the price. Price comparison can have the break of
pricing components like discount, packing, freight, insurance etc.
along with taxes. The other details such as delivery date and
[Type here]
[Type here]

related information is also displayed. The entire quotation of the

vendors also can be viewed from the same screen. If quotation is
submitted in foreign currency it can be converted to local
currency.

The decision to select a vendor or a reject a vendor can be based

on the price comparison list generated by the system and by
checking the vendors technical competency (specifications,
delivery terms), which will be done outside the system.

If vendors are negotiated, the same can be maintained with valid

effective period & revised comparison can be done against the
same quotations.

Services will follow the same procedure.

• Ordering the requirements

Purchase orders can be created with reference to the quotation.

Purchase orders will go through release strategy for approval.
Ordering can be done different unit of measure than stock
keeping unit.

Delivery schedules can be maintained in Purchase Order for every

line item. The reference document information is maintained in
the consecutive document.

The necessary payment terms and the Inco terms are

automatically copied from the quotation and it can be changed in
the purchase order if required. Purchase orders can be raised in
foreign currency, standard functionality is available to maintain
the foreign currency requirements.

In the purchase order delivery address, if there is a requirement

to maintain delivery addresses other than the ordering plant,
then they can be maintained at item level.

If more than one delivery address is required to be maintained

then the item has to be split into more than one line item.
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In the Purchase order apart from the material price, freight,

Insurance, excise, tax and other delivery charges can be
maintained in the pricing condition. These will be maintained
through separate Condition types. Condition types are the various
elements in the pricing of the Purchase order. Different condition
types will be defined to meet the requirements of Import
purchases and local purchases.
The other delivery charges can be maintained in the Header level
i.e. applicable to the whole Purchase order or in the item level of
the Purchase order.
If the delivery charges are maintained at Purchase order level,
then the system will treat them as planned delivery costs. For
freight and other delivery charges, if there is a different vendor
for the planned delivery costs, the vendor details can be
maintained in the Purchase order against each of the condition
types. Cenvatable & non-cenvatable excise component will be
determined by Condition Type. Vendor pricing schema will decide
which pricing procedure is applicable for the specific vendor.
Tool amortization will be handled with qty specific rate updating
in Purchase Order (ie) To the extend of Qty Applicable for Tool
Amortization the P.o is Raised.

The Purchase Order created will be subjected to an approval

process. In the approval process certain approving personnel can
be maintained as mandatory and non mandatory. If the person is
not available alternative persons can be configured in the system
to approve the document.

The Following Document Type and Number Range has been

Identified and it will internally Generated Number.

Sr Doc Purchasing Doc From To Number

No type Type description Number
1 ZEMG Emergency PO 4100000000 4199999999
2 ZTHD Third Party PO 4200000000 4299999999
3 ZSUC Subcontract PO 4300000000 4399999999
4 ZSEV Service order PO 4400000000 4499999999
5 ZNB Standard PO 4500000000 4599999999
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6 ZIMP Import PO 4600000000 4699999999

• ZEMG No release Strategy and Only authorized person

create a PO

Purchase Orders will have a 10-digit number.

Procurement types are primarily getting divided based on account

assignment & Item category given in the purchasing document.
For all procurement types overall all purchasing cycle remains the
same. Various types of Purchasing involved in Wheels India are:

Procurement for stock Material

All purchasing document having materials code & no account

assignment, all such materials receipts will go to inventory. It will
be issued from inventory for usage.

Procurement of non-stock items

Materials with material type non-valuated or all purchasing

document having account assignment will get consumed on
receipt. Such Purchasing documents need to have consumption
G/L account defined in the document. This will not update
inventory nor for qty nor for value.

Procurement of Imported materials

Orders are placed in foreign currency; system calculates the net

value based on exchange rate updated in master. Exchange rate
can be changed in PO based on the requirement. Customs duty &
CVD are the conditions maintained in pricing procedure. Customs
as a vendor needs be updated for each customs duty condition in
PO/Contract. This is only procurement type where GR based IV
will not be used. Tax code should be nil tax code. Import freight
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& local freight needs to maintained separate condition type. After

goods shipped by vendor, it will go through customs procedure.
Customs will issue bill of entry for the received material. Logistics
invoice verifications will to be posted for customs duty amount.
Based on LIV Finance will release the payment to the customs.
Goods receipt & excise capturing will be done based on LIV
document generated for customs duty posting. After good receipt
LIV will be done for material vendor & freight vendor separately.

Centralized purchase organization will take care of all

purchasing need of imports.

Procurement of Capital items

Purchase orders will be created with reference to account

assignment A or F. Incase procurement against asset number
account assignment will be A & incase of procurement against
internal order it will be F. All the procurement cost will be get
debited to asset/internal order & not to the inventory.

Item Categories:

Item Category defines the procurement of Materials and Services.

Standard Item categories are used for Sterling and Wilson.
Standard

L Subcontracting
D Service
S Third Party

Account Assignment Categories:

Account assignment categories define if accounting for an item is

effected by an auxiliary account. Standard Account assignment
categories are used for Wheels India.

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F Order
K Cost center
Q Proj. Make-to-order
D Ind.cust/settlm.proj

Sub-contracting orders processing

In SAP for a subcontracting purchase, the Purchase Orders are

raised with a sub contracting item category indicator L. SAP
allows creation of the Purchase Order with/ without creating a
RFQ.

Bill of material for the final product can be maintained in SAP.

When this material is ordered through the subcontracting
Purchase Order, the system explodes the BOM and displays the
component list, and any changes can be made here. If there is
no BOM the list of components require to be supplied to the sub
contractor for the finished product can be entered in the Purchase
Order. Availability of the components in the stock can be checked
through the availability control. If another vendor to the sub
contractor’s vendor supplies the components the necessary
details can be maintained in the sub contractor Purchase Order.

Stock transfer between plants/Branches

Plant to plant transfer between S&W’s physically separate

locations will be done with MM & SD route. Stock transfer order
will be created in MM by receiving plant for the supply of
materials. Based on this stock transfer order, Delivery will be
created by dispatching plant with proforma & excise invoice in
SD. After dispatch, material will be in transit. Based on delivery,
receiving plant will make the good receipt & material stock will be
updated to unrestricted stock. (Two step process). Cost of freight
can be inventorised in receiving plant with material cost. In MM
Route Stock Transfer order will be created and Good issue will
take place and Relevant Excise Document Generated and Good
receipt will be carried out at the other plant.

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Procurement of external services:

The procurement of services may involve the following steps:

• Determination and recording of requirements
A need for certain services can arise in a user department of
your enterprise, within the framework of a project (such as
the translation of software) or with regard to regular
maintenance work (such as the outsourcing of routine
electrical jobs) for instance. The user department can either
prepare a purchase requisition itself, or request Purchasing
to do so. In each case, the requisition is the trigger for
procurement activities in MM Purchasing.
• Determination of possible sources
In the source determination facility, an instrument for
analyzing this data, enabling to establish whether suitable
potential bidders exist for the requested services and
whether longer-term business relationships have already
been set up with certain service providers in the form of
contracts. The price simulation function can help to choose
the desired source of supply from the sources suggested by
the system. In this case, the requisition can then be
converted directly into a standard purchase order or a
release order to be issued against a contract that already
exists with the service provider.
• Bid invitation procedure
If a bid invitation process is to be initiated for services, an
RFQ must be created.
• Entry of data from quotations submitted by bidders
When quotations (bids) are received from bidders, the
latter’s prices and conditions are entered in the RFQs that
already exist in the system. The status of the RFQs is then
changed: the RFQs in fact become quotations
• Comparison of quotations
When all quotations have been received and entered, the
most favorable one is quickly determined using the price
comparison list. The price comparison list evaluates the
quotations for you at different levels. Can make your
decision on the basis of list of all quotations ranked by total
value or compare the quotations at individual outline levels.
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The system provides comparative data right down to the

individual service (task or activity) level if required.
• Award phase (order placement)
The successful bidder receives either a standard purchase
order or a release order issued against an existing contract,
either of which is created by conversion of the relevant
quotation
• Monitoring of purchase orders
During the phase of service performance, the cumulative
“actual" values (for the services actually performed) are
continually updated in the underlying purchase order
(standard PO or contract release order).
• Entry of services actually performed
You enter services that have actually been performed by
means of service entry sheets with reference the PO. Each
individual service is recorded together with quantities and
values.
• Acceptance of services performed
After services that have been performed for the firm has
been recorded in the service entry sheet check & formally
accept the services.
• Verification of invoices for services.
At the conclusion of the procurement process, the service
provider’s invoices are checked for correctness. This involves
comparing the value from the accepted entry sheet with that
shown in the invoice and checking that the tax amounts are
correct.

Types of Services:

MM External Services Management offers two basic ways of

specifying services:
– As planned services with description, quantity, and
price.
“Planned Services” means, services whose nature and scope
is known to you at the start of a procurement project or
transaction.
At the time the services are requested, the individual
specifications are entered either with the aid of a service
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master record or directly as short and long texts. Price and

quantity are specified in both cases.
– As Unplanned Services with the setting of a value limit
only.
“Unplanned Services”, means services that cannot be
specified in detail because their precise nature and scope are
not initially known, or services which - for various reasons -
you do not wish to plan. Unplanned services therefore have
no descriptions.
They are entered in the form of maximum values in the
relevant currency. Services may be performed up to a value
not exceeding these value limits. This ensures an element of
cost control
Vendor evaluation
Vendor evaluation is the process of evaluating the vendors on
the basis of following main criteria:
Price
Quality
Delivery
Service (After Sales)
Service (ESM)

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SAP offers scoring from the range of 1 to 99, which is used to

measure the performance of the vendor. You can compare
different vendors on the basis of their overall scores without
generating a detailed analysis of their evaluations. The overall
score represents the general evaluation of a vendor. It is a
combination of the scores the vendor has achieved for all the
main criteria.
The main criteria form the basis for assessing the performance of
a vendor. The system calculates the vendor's overall score from
the scores achieved for the main criteria. Sub criteria are the
smallest units for which scores are awarded in Vendor Evaluation.
The system calculates a score for the relevant higher-level main
criterion based on the scores a vendor receives for the various
sub criteria.

These main criteria are again sub divided into sub criterion to
calculate the scores of these main criteria.
Following are the sub criteria’s for the main criteria:
• Price
o Price level
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o Price history
• Quality
o Goods receipt
o Quality audit
o Complaints/rejection level
• Delivery
o On-time delivery performance
o Quantity reliability
o Compliance with shipping instructions
o Confirmation date

• General Service/Support (ISO compliance)

• External Service Provision

o Quality of Service
o Service Timeliness

Calculation Procedure of Scores:

1. Manual
Enter the score into the system yourself before carrying out an
evaluation.
2. Semi-automatic
Enter scores for quality and timeliness of delivery or
performance at info record level (for a material) or in the
service entry sheet (for an externally performed service).
3. Fully automatic
The system calculates the scores for automatic sub criteria on
the basis of data from other areas of the enterprise outside the
Vendor Evaluation system (for example, Goods Receiving or
Quality Management). The individual scoring methods fulfill
different purposes and involve different kinds of maintenance

4.3. Inventory management

Material is procured from external or internal sources on the basis

of the requirements determined by Manual Requirements
Planning. The delivery is entered in Inventory Management as a
goods receipt. The material is stored (and managed under
Inventory Management) until it is delivered to customers
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(projects), or is used for internal purposes (for example, for

Project).
During all transactions, Inventory Management accesses both
master data (such as material master data) and transaction data
(such as purchasing documents) shared by all Logistics
components.

It involves
• Management of material stocks on a quantity and value
basis
• Planning, Entry, and Documentation of all Goods Movements

All transactions that bring about a change in stock are entered in

real time, as are the stock updates resulting from these changes.
You 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 warehouse
• Have already been ordered, but have not yet been received
• Are located in the warehouse, but have already been
reserved for production or a customer
• Are in quality inspection.
• Are in blocked stock

Inventory Management can manage various types of a company’s

own special stocks and externally owned special stocks separately
from standard stock.
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.

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In Inventory Management, work is basically done at plant and

storage location levels. When you enter a goods movement, you
only have to enter the plant and the storage location of the
goods. The system derives the company code from the plant.

When Good receipt for the purchase order is done system

automatically updates stock quantities & values including P&F,
Freight, Delivery charges, incidental charges mentioned in the
PO. For PO’s having account assignment cost will be debited to
relevant G/L account indicated in PO.

Goods movements include both "external" movements (goods

receipts from external procurement, goods issues for Projects)
and "internal" movements (goods receipts from project,
withdrawals of material for internal purposes, stock transfers, and
transfer postings).
For each goods movement a document is created which is used
by the system to update quantities and values and serves as
proof of goods movements.

Movements within Inventory Management can be grouped into

three categories, goods receipts, goods issues and transfer
postings. Each category is discussed in more detail in the
following sections.

Whenever a movement is performed and posted, a record of it is

kept on a material document. The material document shows the
result of the movement from a quantity point of view. If the
movement has financial implications, that is, the stock account is
updated, or a variance is incurred, a financial accounting
document is also created which shows the results of the
movement from a financial point of view.

The system determines which accounts should be posted to via

the automatic account determination facility in Materials
Management.

If an incorrect goods movement is performed, for example the

wrong quantity or the wrong batch number is entered, a material
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document must be cancelled or reversed, and the correct entry

added. Goods movements can also be created with reference to
an existing material document.

Inventory management basically involves:

• Goods receipt
A goods receipt (GR) is a goods movement with which the receipt
of goods from a vendor or from production is posted. A goods
receipt leads to an increase in warehouse stock.
The System distinguishes between the following types of goods
receipts:

1. Goods receipts with reference to an order.

2. Goods Receipts with reference to a Purchasing Document.
(Purchase Order)
3. Other goods receipts.
4. Goods Receipts for Initial Stock Balances.
5. Goods Receipt against inbound delivery.

Goods receipt slips can be printed when a movement is executed.

The result of the movement is contained on the slip.

Goods Receipt Against PO

Goods received from Vendor can be posted directly into

unrestricted use stock or Quality Stock and placed in the
appropriate store location.

Good can also be posted first to GR Blocked Stock for Physical

Inspection with movement type 103, which can be subsequently
released to Un-Restricted Use Stock with movement type 105.
Liability will be created once the material is released from GR
Blocked Stock to Unrestricted Use Stock.
If the storage location view of the material does not exist in the
material master, SAP will be configured so that the store person
cannot place the items into that storage location.
To extend a material for storage locations so that material can be
posted use the SAP transaction MMSC – Enter Storage Locations.
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If the existing bin location of a material needs to be changed this

has to be done via material master maintenance.
Initial Stock Entry
The goods receipt for initial stock entry is to be performed as part
of the data conversion procedure. This process is used to load
the inventory balances, both quantity and amount, into SAP. This
posting produces both a material document and a financial
document.

Movem Description
ent
Number
101 Goods receipt for purchase order into
warehouse/stores
103 Goods receipt for purchase order into GR
blocked stock
105 Release GR blocked stock for warehouse
561 Initial entry of stock – unrestricted use
563 Initial entry of stock – quality inspection
565 Initial entry of stock – blocked stock

• Goods issue
A goods issue (GI) is a goods movement with which a material
withdrawal or material issue, a material consumption, or a
shipment of goods to a customer is posted. A goods issue leads to
a reduction in warehouse stock.
The Inventory Management system supports the following types
of goods issues:
1. Withdrawal of material for projects
2. Scrapping and withdrawal of material for sampling
3. Return deliveries to vendors
4. Other types of internal staging of material
5. Deliveries to vendors without the involvement of the SD
Shipping component

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Goods issue postings result in the removal from inventory of a

quantity of a material or materials.

Goods Issue to projects

To issue goods to projects, the movement type ‘221’ & Q- Goods
Issue to projects will be used. The expense account to be used
will be automatically determined by SAP automatic account
determination. The user issuing (returning) the goods will need
to specify the projects that are to be charged (credited) for the
goods.

Issue Stock to Return to Supplier

In the normal receipting procedure, some stocks are receipted
into goods receipt blocked stock or Quality Stock to enable an
inspection to be performed to determine the quality of the goods
delivered. Normally a sample is checked. If the goods fail the
inspection process, they must be returned to the supplier. The
process to do this is to invoke a return delivery from goods
receipt blocked stock or Quality Stock. Goods can also be
returned from unrestricted use stock.

Goods issues for SD deliveries will be via Shipping of Sales &

Distribution module.

Movem Description
ent
Number
122 Return delivery to vendor
124 Return delivery from GR blocked stock
201 Goods issue to cost centre
221 Goods Issue to project
241 Goods Issue to asset
261 Goods issue to order
551 Goods issue to scrapping from unrestricted
stock
555 Goods issue to scrapping from blocked
stock
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• 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.
There are two methods of stock transfer without delivery.
One-Step Procedure:
• During a one-step stock transfer, the system creates issue
of stock at sender plant & receipt of stocks at receiver plant
with in the same step. Material will be transferred at the
MAP/Standard Price at the Issuing Plant.

Two-Step Procedure:
• During two-step process, system transfers material from
issuing plant to stock in transit. At receiver plant after
receipt document is posted stock in transit gets transferred
to receiver plant. Material will be transferred at the
MAP/Standard Price at the Issuing Plant.

A stock transfer between plants can also be initiated using a stock

transport order.

• Transfer posting

A transfer posting is a general term for stock transfers and

changes in stock type or stock category of a material. It is
irrelevant whether the posting occurs in conjunction with a
physical movement or not.
Storage Location/project to Storage Location/project
Transfers
Storage location to storage location transfers is used to transfer
materials from one storage location to another within the same
plant. It is possible to carry out this movement either as a one-
step process where the quantity of stock is transferred
immediately or as a two-step process where the quantity
removed from one location remains as stock in transfer until the
receipt into the other location is processed.

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Material-to-Material Transfers
In some cases, a transfer posting from material to material is
necessary. This might be the case, for example, if a material
changes over time in such a way that it no longer corresponds to
the features defined in the material master record, but it
corresponds to the features defined in another material master
record. A transfer posting from material to material results in the
transferred quantity being managed under another material
number. A prerequisite for posting a transfer from material to
material is that both materials be managed in the same stock-
keeping unit.

Movement Description
Number
311 Transfer posting storage location to storage
location unrestricted to unrestricted(project –Q)
313 Transfer posting SLoc to SLoc – remove from
storage
315 Transfer posting SLoc to SLoc – place into storage
325 Transfer posting storage location to storage
location blocked stock to blocked stock
321 Transfer posting stock to stock – quality inspection
to unrestricted
343 Transfer posting stock to stock – blocked to
unrestricted
349 Transfer posting stock to stock – blocked to quality
inspection
453 Transfer posting stock to stock – own stock from
returns
457 Transfer posting stock to stock – quality inspection
from returns
459 Transfer posting stock to stock – blocked stock
from returns
541 Own stock to stock at subcontractor

4.3.1. Purpose

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Material tracking with value or only qty tracking is effectively

achieved.
Physical location identification of material stocks within location or
across locations online will be possible.
Stocks status of the materials like under quality, blocked, In-
transit, unrestricted can be easily available.
Special stocks like material with sub-contractor, Project stock,
Returnable Materials of Vendor, Returnable material Issued to
Vendors are tracked online.

4.3.2. Master Data

• Material master, vendor master

4.3.3. Current & Future State Business Process WRT

sterling and Wilson.

Sr. Current Business Proposed Solution

No. Processes
1 Following things are In SAP Standard system there
checked and recorded is no concept of Gate Entry.
when material reaches the For Rejection due to quality
gate:- norms if Excise is already
• Challan quantity, captured we can do the return
• Permit Copies, delivery of material by creation
• Keep the record of of returnable excise invoice
material like 2 loose (manually) and can reverse the
or 1 packed baggage, credit if same.(S&W not come
• Here he also checks under the excise Act)
the indent of certain
material also in case
when the purchase
order is not there.
• He passes the
information to site
Engineer that
material has reached
gate,
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• Then Material goes to

site area for
unloading only.
• Here Site Engineer do
the quality check of
material and if it is
okay then its send
the confirmation
receipt to office else
it is returned to
vendor, but in some
special cases the
Quality is done on
loaded truck itself and
if it not okay it is
returned back.

4 Materials issued from store Each User Department can

to respective site.
6 Transfer the material from
one storage
location/Project to Other
Storage location /Project.
11 Scrapping ---Here if
material is need to be
scrapped in that case we
issue it simply and reduce
its stock and value is
transferred to scrap
account by finance later.
We do not maintain the
inventory of scrap. But
when Scrap need to be
sold we show the dummy
quantity of scrap in stock
and sell the same (this
scrap material has no
Value in book of account).
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create a PR Issue for material
We can transfer the material
from storage location/Project to
other in two ways:-
• Single step transfer
• Two Step transfer
In SAP if material is need to be
scrapped it is done by separate
movement type meant for the
same purpose it not only
decrease the inventory, it also
transfer the Current valuation
price*quantity to scrap GL, and
when Scrap need to be sold we
show the dummy quantity of
scrap in stock and sell the same
(this scrap material has no
Value in book of account).
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13 Empties are received from Please Refer Sales and

customer along with
damaged bottles or shell,
or any other type of
material
14 GRN is done on the base of
Confirmation receipt from
site and number is also
assigned as per nature i.e.
each one has their own GR
number range.
15 All documents are financial
year specific.
Distribution Blue print.
In sap we have material
document number generated
on client level i.e. we cannot
have material document
generated plant wise.
In System we can have Material
Document Generated based on
calendar Year whereas the
Financial Document can be
generated based on Companies
Fiscal Year like April to March.
All the document generated in
Material Document are not
plant or company specific but
all the fiscal document are
company code specific.

4.3.4. Business Process

• Goods receipts

Goods Receipt will be done against a Purchase Order, Production

Order, Stock Transport Order or without order purchases and for
Scrap inventory building.
Goods Receipt for Non-Returnable Packing will be entered along
with Material as a separate line Item.
If Order Price Unit is different than Order Unit then, the same will
be specified at the time of Goods Receipt.

• Vendor returns

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In case of material rejection, return delivery will be created in

system, with appropriate reason code & text.

• Goods Issue

Materials, which are in Custody of Stores Department, will be

Issued/Transferred against PR to the relevant Projects
Packing materials will be transferred to storage locations, and
then will be consumed against Purchase Orders.
Raw Materials will be consumed at site directly against Purchase
Orders.

• Transfer posting
Transfer posting from one location to other location will be done
against reservation in case if Material is to be transferred to
Production Storage Location.

• Stock transfer

One step stock transfer will be used for transferring the materials
between the plants of same location.

4.4. Material Valuation

Material Valuation is not an independent application area, since
most Material Valuation functions take place automatically in the
SAP System. Depending on how a company is structured, tasks
that have to be carried out manually belong to either Inventory
Management or Invoice Verification.

Material Valuation represents a link between Materials

Management (MM) and Financial Accounting (FI), since it updates
the G/L accounts in Financial Accounting.

Material Valuation serves the following purposes:

• Adjusting material prices to market prices
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• Performing revaluations
• Executing balance sheet valuation

Material Valuation is basically controlled by two factors:

• System settings
• Material master record

System setting
Plant level materials will be valuated.
Movement types will decide which are relevant for financial
posting.

Material Master Record - As a rule, a material master record is

created for every material. The information contained in this
record includes valuation data for the material. When maintaining
the material master record, Must decide the following:
• Whether a particular material should be valuated at all
• Whether different sub-stocks of a material should be
valuated differently
• Whether the stock of a material should be valuated at a
constant price (standard price) or whether the price should
change in accordance with the delivered price (moving
average price)
• Which G/L account the stock value of a material should be
managed in
The stock quantity and value of a material and the material price
are also recorded in the material master record.

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.

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

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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.

Split Valuation

If a material is subject to split valuation, the material is managed

as several partial stocks each partial stock is valuated separately.

Each transaction that is relevant for valuation be it a goods

receipt, goods issue, invoice receipt or physical inventory, is
carried out at the level of the partial stock. When one of these
transactions used, must always specify which partial stock is
involved. This means that only the partial stock in question is
affected by a change in value, the other partial stocks remain
unaffected.
Alongside the partial stocks, the total stock is also updated. The
calculation of the value of the total stock results from the total of
the stock values and stock quantities of the partial stocks.

Can define whether the material is subject to split valuation on

the accounting view of the material master record.

There are two fields for this:

▪ The valuation category specifies which criterion should be

used as the basis for differentiating between the various
partial stocks.
▪ The valuation type specifies an individual characteristic of
a partial stock.

Material 1 is managed separately according to origin (valuation

category H). The valuation types Italy and France have stocks.

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The fact that these stocks are in different storage locations is not
important for valuation.

In the valuation header record, the separate stocks are

cumulated:
▪ The total stock in the plant is 100.
▪ The moving average price is calculated from valuation of
the individual stocks:
▪ Average price = total value / total quantity

Data on a material is valuated using the following structure:

• Valuation area

Valuation area = one plant

The stocks of a particular material in this individual plant are
valuated together. Stocks in other plants are not included in this
valuation area.

• Valuation class
You group together different materials with similar properties into
valuation classes so that you do not have to manage a separate
stock account for every material.

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Which valuation class a material can be assigned to depends on

the material type. You can define the following assignments in
Customizing:
• All materials with the same material type are assigned to
just one valuation class.
• Different materials with the same material type are assigned
to different valuation classes.
• Materials with different material types are 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 posting is made
for this material.
Refer the excel sheet for valuation class,

The system refers to the valuation class of a material to

determine which stock account to post to when a posting is made
for this material.

• Valuation category
Criterion according to which split valuation is carried out:

• Procurement
You can valuate a material differently depending on whether
it is manufactured in-house or procured externally.

• Origin
You can valuate a material differently depending on where it
comes from (such as home or abroad).

• Status
You can valuate a material differently depending on its
status (such as new, used, and repaired).

• Valuation type

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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,
you can define the different countries as the valuation types.
You define valuation types in Customizing. You first
determine all the valid valuation types for a valuation
category.

You define in the material master record which valuation

types are allowed for a particular material. For every
material subject to split valuation, you must enter all the
valuation types allowed in the material master record.

• Material type
You assign every material to a material type when you
create it. 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. The
following control features are important for valuation:

o Is the material managed by quantity?

o Is the material managed by value?
o Which price control type may be used for the
material?
o Which valuation class can the material be assigned
to?

• 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 you must
make when entering a material movement, and which
updates are carried out when the movement is posted. The
following control features are important for valuation:

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o Does the material movement cause the quantity to

be updated?
o Does the material movement cause the value to be
updated?
o Does the material movement lead to postings in
Accounting?
o Is the material movement relevant for LIFO/FIFO
valuation?

4.4.1. Purpose

Material Valuation determines or records the stock value of a

material. The stock value is calculated using the formula:
Stock value = stock quantity x material price
Thus, if the stock quantity or the material price changes, the
stock value changes.

4.4.2. Master Data

▪ Material master

4.4.3. Future State Business Process WRT Sterling and

Wilson

Sr. Current Business Proposed Solution

No. Processes
1 Currently all material are In SAP we can have two type of
valuated at FIFO Basis valuation :-
• Standard
• Moving Average
For Finished Material we usually
have Standard Valuation and
for other materials we have
moving average Valuation.

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4.4.4 Business Process

Material Valuation is not an independent application area, since

most Material Valuation functions take place automatically in the
SAP System.

All the materials will be created in the system with accounting &
costing views which needs to be valuated either with price
control S or V. Initial price will be updated in material master
while creation. Based on receipts value moving average price will
keep on getting updated online for every receipt. Material having
standard price will have moving average price Up-dation only for
statistical purpose. Every issue will be with corresponding price
in the material master with relevant financial posting.

4.5 Physical Inventory

In SAP R/3, physical inventory can be carried out both for a

company’s own stock and for special stock. Inventory for a
company’s stock and for special stocks (such as consignment
stock at customer, external consignment stock from vendor, or
returnable packaging) must be taken separately (in different
physical inventory documents), however. Note that the blocked
stock returns and the stock in transfer cannot be inventoried. If
these stocks are still to be counted in a physical inventory, must
be transfer post these stocks to other stocks capable of inclusion
in a physical inventory.
The stock in a warehouse can be divided into stock types. In the
standard system, a physical inventory can be carried out for the
following stock types:

• Unrestricted-use
• Quality inspection stock
• Blocked 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.

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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.

SAP R/3 supports the following physical inventory procedures:

• Periodic inventory
• Continuous inventory
• Cycle counting

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

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

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

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The Cycle Counting Method of Physical Inventory allows fast-

moving items to be counted more frequently than slow-moving
items.

4.5.1 Purpose

This component allows you to carry out a physical inventory of

your company’s warehouse stocks for balance sheet purposes.

4.5.2 Master Data

• Material master

4.5.3 Current & Future State Business Process WRT

Sterling and Wilson

Sr. Current Business Proposed Solution

No. Processes
1 Physical Inventory is done
on Middle of Projects and
completion of Projects
In SAP we can have material
physical Inventory counting
based upon Plant material,
Storage location and special
stock type. It is user
requirement whether user want
to have physical inventory
daily, Weekly, Fortnightly,
Monthly or Yearly.

4.5.4 Business Process

The physical inventory procedure is carried out in three steps:

1. Creating a Physical Inventory Document

2. Entering the Physical Inventory Count
3. Posting inventory differences

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You can also group together individual phases and carry them out
in a single step, as follows:
• Posting the physical inventory count without reference to a
physical inventory document
In this step, the following are combined:
– A physical inventory document is created.
– The count is posted.
• If a Posting the physical inventory count and inventory
differences physical inventory document exists, the following
are combined in this step:
– The count is posted.
– Any inventory differences are posted.
• Posting the physical inventory count without reference to a
physical inventory document
In this step, the following are combined:
– A physical inventory document is created.
– The count is posted.
– Any inventory differences are posted.

5.6 Logistics Invoice Verification

In Materials Management, Logistics Invoice Verification has the

following features:

It completes the material procurement process, which has

started with the purchase requisition and resulted in a goods
receipt.
It allows invoices that do not originate in materials procurement
(such as services, expenses) to be processed.
It allows credit memos to be processed, either as invoice
reversals or return deliveries.
The Invoice Verification procedure in SAP encompasses the
matching of invoices, purchase orders and goods receipts and
the reversal of invoices and entering of credit memos. The
Invoice Verification procedure is commonly termed a three-way
match as it allows comparison between the purchase order,
goods receipt and the invoice receipt. Any subsequent credit
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memos or invoices can be linked to the original purchase order

so that they appear in purchase order history. Any variances
reported can cause the invoice to be blocked for payment. This
speeds the process of auditing and clearing invoices for payment.

An invoice can be processed in Logistics Invoice Verification in

various ways:

Invoice Verification Online

You receive an invoice and enter the information contained in it 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. You then post the invoice. In the SAP R/3
System, a distinction is made between the following types of
invoices:
• 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 with goods receipt reference
Each goods receipt is settled separately.
• Invoices without purchase order reference
Invoices can be posted directly to G/L accounts or
material accounts.

Document Parking

When company receives an invoice, enter the data in the system,

and save the invoice document. The system does not make any
postings. Parked documents can be changed. When finished
changing the document, can post the parked document.

Tolerance
When the system performs the three-way matching it also takes
the tolerance limits into consideration if variances occur. The
tolerances, which can be defined, are listed below. Tolerances can
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be defined as Upper and Lower percentage values as well as

Upper and Lower Absolute values. Both % and absolute values
can be defined, such that if either of these tolerance limits is
triggered, the invoice is blocked.

Delivery Costs
Delivery costs are costs that are invoiced for a delivery over and
above the value of the delivery itself. This includes freight
charges, customs duty, or other costs.
There are the following types of delivery costs:

•Planned Delivery Costs

Planned delivery costs are entered in the purchase order on an
item basis. Provisions are set up for the relevant costs at goods
receipt. The delivery costs planned in the purchase order are
referenced when the invoice is entered. The provisions are
cleared. The values proposed for the items come from the
purchase order history.
• Unplanned Delivery Costs
Unplanned delivery costs are only entered when the invoice is
entered. No provision is made at goods receipt.

Logistics invoice verification facilitates four different activities:

• Invoice
The vendor invoices for the goods that have ordered from
the company. Passing the same bill submitted by him.
• Credit memo
The vendor has invoiced too much for the last delivery, for
example, less than the agreed quantity was delivered and
that at the agreed total price, or returned part of a delivery
to the vendor due to quality problems.
• Subsequent debit
Already received & posted an invoice from vendor for all the
goods received. Subsequently, freight costs are to be taken
into account; however, the invoice quantity remains the
same.

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•Subsequent credit
Already received a credit memo from vendor for all the goods
received. Subsequently, freight costs & rate difference are to be
credited to company; however, the credit memo quantity
remains the same.

4.6.1. Purpose

Logistics Invoice Verification is situated at the end of the logistics

supply chain that includes Purchasing, Inventory Management,
and Invoice Verification. It is in Logistics Invoice Verification that
Incoming Invoices are verified in terms of their content, prices
and arithmetic.

When the invoice is posted, the invoice data is saved in the

system. The system updates the data saved in the invoice
documents in Materials Management and Financial Accounting.

Visibility across MM & FI module on the status of invoices is

online. Material price changes are adjusted in inventory valuation
at the time of invoice posting. GR based invoice verification
ensures document flow & data consistency.

4.6.2. Master Data

• Material master
• Vendor master

4.6.3 Current & Future State Business Process WRT

Sterling and Wilson

Sr. Current Business Proposed Solution

No. Processes
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1 Sterling and Wilson follow In SAP, When company

95% business process like receives an invoice before
request a vendor send a receiving material, Select Park
material directly at site, Invoice and enter the data in
but Invoice of material the system, and save the
send to respective office. invoice document.

Sterling and Wilson get an Once confirmation receipt come

invoice of material before from respective site area, and
material reached at site. Parked documents can be
changed. When finished
changing the document, can
post the parked document.

5.6.4 Business Process

Receive an invoice from the vendor referring to a purchase order
and a goods receipt, for example. When first call up the
application, enter the company code that work in. All further
transactions are then posted in this company code. If want to
switch to a different company code, can do this during
processing.

Entering a vendor invoice involves:

1. Choosing the Transaction
2. Entering Document Header Data
3. Entering the reference document and Invoice Type
(Goods/Service Item or Planned Delivery Cost or Both)
4. Verifying the Invoice Quantity & Values with system
proposed Quantity & Values based on Purchase Order &
Goods Receipt.

The following accounts are particularly important for Invoice

Verification:

Vendor Accounts
There is a separate account in the sub-ledger for each vendor
that all amounts concerning this vendor are posted to. Making a
posting to the vendor account is not the same as making a
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payment; payment is only made when the Financial Accounting

department posts the vendor's payment to a bank account.

Stock Accounts
In the R/3 System, there is no separate account for each
material. Instead, different materials with similar features are
grouped together in a common account (for example: raw
materials). The account relevant for a material is defined in the
material master record when a material is created.
The system only posts to the stock account when a price
difference occurs for an invoice provided stock of Material Exists.

GR/IR Clearing Accounts

The GR/IR clearing account is an "intermediate" account between
the stock account and the vendor account. At goods receipt, the
net invoice amount expected is posted to the stock account. The
offsetting entry is posted to the GR/IR clearing account. This
posting is then cleared by an offsetting entry on the vendor
account at invoice receipt.

Tax Accounts

The system makes postings to special tax accounts when invoices

include tax.

Price Differences Accounts

Price differences have to be posted to a price differences account

if price differences have occurred in an invoice and when invoices
are posted net and no posting can be made to the stock account.

Freight Clearing Account

The stock account is debited with the planned delivery costs at

goods receipt and the system makes the offsetting posting to a
freight clearing account. This posting is then cleared by an
offsetting entry to the vendor account at invoice receipt.

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S & W TO Be Procurement Flow cycle

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Material Requirement at site

SR received in purchase dept

SR Made at planning dept

Create a PR with reference SR

Check for stock in store Goods Issue to site

Create a RFQ High Value Items

With reference PR

Compare Rec.RFQ with BOQ Price.

Approval taken from negative
Negotiate & Freeze Vendor & Price
deviation

Payment terms,Deleivery address, Create a Purchase order ref with

Tax quotation

Compare to po value with BOQ/tender

Approval taken from negative
value (only greater then po value 50000
deviation
)

PO value is <5L to get a approval from

HOD.
PO value is >5L To get a approval from
HOD& MD

Advance Payment @ PO Released a Purchase order to vendor

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Type of Procurement

Third party (mat at site) Subcontract Stock Procurement Service

Mat .Rec.from main Mat .Rec.at site

Mat .Rec.at site Mat .Rec.at store
vendor(GR1)

Assembly goods Rec.

at site frm s.vendor.gr2

Site Engg issue Site Engg issue(gr1,gr2) Site Engg issue Site Engg issue
confirmation to office confirmation to office confirmation to office confirmation to office

GRN / Entry sheet

Office

Received vendor Invoice and park it after do GR,

Posted the Park invoice

Vendor Payment display

5. TRANSACTION CODES

T.code Description
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T.code Description
MM01 Create Material &
MM02 Change Material &
MM03 Display Material &
MM50 List Extendable Materials
MMBE Stock Overview
AC03 Service Master
AC06 List Display: Service Master
ME1E Quotation Price History
ME1L Info Records Per Vendor
ME1M Info Records per Material
ME1P Purchase Order Price History
ME01 Maintain Source List
ME03 Display Source List
ME04 Changes to Source List
ME05 Generate Source List
ME0M Source List for Material
MB90 Output Processing for Mat. Documents
ME9A Message Output: RFQs
ME9F Message Output: Purchase Orders
ME9K Message Output: Contracts
ME51N Create Purchase Requisition
ME52N Change Purchase Requisition
ME53N Display Purchase Requisition
ME5A Purchase Requisitions: List Display
ME5J Purchase Requisitions for Project
ME5K Requisitions by Account Assignment
MELB Purch. Transactions by Tracking No.
ME54 Release Purchase Requisition
ME55 Collective Release of Purchase Reqs.
ME5F Release Reminder: Purch. Requisition
ME1P Purchase Order Price History
ME21 Create Purchase Order
ME22 Change Purchase Order
ME23 Display Purchase Order
ME25 Create PO with Source Determination
ME2B POs by Requirement Tracking Number
ME2C Purchase Orders by Material Group
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T.code Description
ME2J Purchase Orders for Project
ME2K Purch. Orders by Account Assignment
ME2L Purchase Orders by Vendor
ME2M Purchase Orders by Material
ME2N Purchase Orders by PO Number
ME2O SC Stock Monitoring (Vendor)
ME2S Services per Purchase Order
ME57 Assign and Process Requisitions
ME58 Ordering: Assigned Requisitions
ME80 Purchasing Reporting
ME81 Analysis of Order Values
ME1P Purchase Order Price History
ME21N Create Purchase Order
ME22N Change Purchase Order
ME23N Display Purchase Order
ME24 Maintain Purchase Order Supplement
ME25 Create PO with Source Determination
MB1C Other Goods Receipts
MB90 Output Processing for Mat. Documents
MB01 Post Goods Receipt for PO
MB02 Change Material Document
MB03 Display Material Document
MB0A Post Goods Receipt for PO
MB51 Material Doc. List
MB90 Output Processing for Mat. Documents
ML81N Maintain Service Entry Sheet
MN13 Create Message: Service Entry
MN14 Change Message: Service Entry
MN15 Display Message: Service Entry
MBRL Return Delivery per Mat. Document
MR2M Change Invoice Document
MR3M Display Invoice Document
MR5M Delete Invoice Document
MR8M Cancel Invoice Document
MR90 Messages for Invoice Documents
MIRO Enter Invoice

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6. STANDARD INFORMATION SYSTEM

SAP as standard functionality offers various module wise reports

for various analysis & help in decision making for the business
organisation. List of such standard reports is given below:

T Transaction code description

Code
AC05 List Processing: Service Master
AC06 List Display: Service Master
MB03 Display Material Document
MB52 List of Warehouse Stocks on Hand
MB53 Display Plant Stock Availability
MB5B Stocks for Posting Date
MB5T Stock in transit CC
ME04 Changes to Source List
ME05 Generate Source List
ME06 Analyze Source List
ME1E Quotation Price History
ME1P Purchase Order Price History
ME1W Info Records Per Material Group
ME2B POs by Requirement Tracking Number
ME2C Purchase Orders by Material Group
ME2J Purchase Orders for Project
ME2K Purch. Orders by Account Assignment
ME2L Purchase Orders by Vendor
ME2M Purchase Orders by Material
ME2N Purchase Orders by PO Number
ME2O SC Stock Monitoring (Vendor)
ME2S Services per Purchase Order
ME2W Purchase Orders for Supplying Plant
ME5A Purchase Requisitions: List Display
ME5F Release Reminder: Purch. Requisition
ME5J Purchase Requisitions for Project
ME5K Requisitions by Account Assignment
ME80 Purchasing Reporting
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T Transaction code description

Code
ME81 Analysis of Order Values

7. ANNEXURE

7.1 – GAPS

8. POINTS OF MOM (MM) 26.09.2008

Sl.No Requirements Feasibility

1 BOQ to be manually key in –
Earlier decided that it will be
uploaded
1.BOQ uploaded through the XL
file to SAP system
2.After BOQ file loading ,we
gives the
change(add/modify/delete)
option in BOQ user screen in
SAP

2 Procurement of items based 1. PR and PO are maintaining

on job definition (lumsum + only WBS number. We are
Qty) recommending to WBS definition
based on the projects
codification.
3 Factory calendar to be Yes, Factory calendar is
suppressed suppressed.

4 EPC Division to be added Yes ,EPC division is added in S &

5 PR to be created by Project
W SAP project
PR is created by manually with
reference of SR. You can enter
WBS in the requirement field of
PR.

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6 PO release strategy and SAP is recommended, If PO

printout before MD release release then take a print out.

7 PO amendment details to be Yes, PO amendment details to

displayed on PO print out be displayed on PO print out

8 Creditor / Debtors aging Date wise report based on PO

report to be developed by and GR and Invoice.
document date/ posting date
& baseline date

9 GRN report Need to be finalized fields, and

then we develop GRN report.

9. SIGN OFF/ APPROVAL

Name of BPO/ Role/ Organization/Busine Signatur Date

Core team Designatio ss Unit e
members n
CFO Sterling & Wilson
Pvt.Ltd.
Program Wipro Infotech
Manager
Project Wipro Infotech
Manager
Client Sterling & Wilson
Project Pvt.Ltd.
Manager
Client Ass. Sterling & Wilson
Project Pvt.Ltd.
Manager
MM Core Sterling & Wilson
Team Pvt.Ltd.
member
MM Wipro Infotech

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Consultant

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