SAP MM ORGANISATIONAL STRUCTURE

COMPANY HP GROUP

COMPANY CODE HP01

REGD LEGAL ENTITY

Purchase
Organisation

PLANT-1 PLANT-2

Storage Storage Storage Storage

Location-1 Location-2 Location Location

Plant A Plant in SAP can denote a manufacturing location, distribution center or a warehouse.The Plant is the place

Purchase A purchasing organization in SAP MM represents a physical entity, a team of persons, that is responsible to
Organisation a company has several purchasing organizations, each of them responsible of one or more specific geographi

For example, in a multinational, one purchasing organisation is responsible of buying all metal from providers
while an other purchasing org is responsible for procurement of perishable materials for one country, and anoth

1. Plant Specific : if all procurement activities are done at plant for meeting its requirement then we should cr
Purchasing Organization. One Plant = One Purchasing Organization

2. Cross Plant : single procurement Purchasing organization is responsible for procurement activities of more
create CROSS PLANT purchasing Organization. Two Plant = One Purchasing organization

3. Cross Company Code : one purchasing organization for multiple plants of different company code.
Two or more company code = One Purchasing Organization

4. Reference Purchasing Organization : Central purchasing organization created at Corporate Group level and
and creation of global agreements.
 4. Reference Purchasing Organization : Central purchasing organization created at Corporate Group level and
and creation of global agreements.

5. Standard Purchasing Organization: This is required during automatic purchase order creation. and also req
like pipeline procurement, consignment etc

Storage Storage location is the sub-division of plant where the stocks are physically stored and maintained within a p
Location Each storage location can have its own address within a plant. It is required to maintain at least one storage

Purchase A purchasing group is a key for a buyer or group of buyers in SAP ERP.and they responsible for creating Purch
Groups
 HP02

se.The Plant is the place where you normally valuate the inventory in SAP.

ns, that is responsible to purchase some materials and services. Typically,

more specific geographical localizations, providers, or types of materials.

all metal from providers for the whole company,

or one country, and another one for the other company locations.

ement then we should create plant specific

ement activities of more than one plant then we should

zation

company code.

orporate Group level and responsible for negotiation

orporate Group level and responsible for negotiation

der creation. and also required for certain business process

nd maintained within a plant.

ain at least one storage location for one plant.

nsible for creating Purchase Order or Contracts

 SAP MM ORGANISATIONAL STRUCTURE
1 Define Company Code
IMG ⇒ Enterprise Structure ⇒ Definition ⇒ Financial Accounting ⇒ Edit, Copy, Delete, Check Company Code
2 Define Plant
IMG ⇒ Enterprise Structure ⇒ Definition ⇒ Logistic General ⇒ Define, Copy, Delete check plant
3 Define Storage Location
IMG ⇒ Enterprise Structure ⇒ Definition ⇒ Materials Management ⇒ Maintain Storage Location
4 Define Purchase Organisation
IMG ⇒ Enterprise Structure ⇒ Definition ⇒ Materials Management ⇒ Maintain Purchasing Organization
5 Define Purchase Group
IMG ⇒ Materials Management ⇒ Purchasing ⇒ Create Purchasing Group

SAP MM ORGANISATIONAL STRUCTURE

6 Assign Plant to Company Code
IMG ⇒ Enterprise Structure ⇒ Assignment ⇒ Logistics - General⇒ Assign Plant to Company Code
7 Assign Purchase Organisation to Company Code
IMG ⇒ Enterprise Structure ⇒ Assignment ⇒ Materials Management ⇒ Assign Purchasing Organization to
Company Code
8 Assign Purchase Organisation to Plant
IMG ⇒ Enterprise Structure ⇒ Assignment ⇒ Materials Management ⇒ Assign Purchasing organization to Plant

9 Assign Standard Purchase Organisation to Plant

IMG ⇒ Enterprise Structure ⇒ Assignment ⇒ Materials Management ⇒ Assign Standard Purchasing
Organization to Plant

SAP MM VENDOR MASTER INTRODUCTION

The Vendor Master Contain Information About the Vendor that Supply Material or Services to an Enterprises.
Information about a vendor is stored in individual vendor master records.
Vendor master record contains data like :-
Vendor Name, Address, Terms of payment, etc.

SAP MM VENDOR MASTER CONFIGURATION

10 Define Vendor Account Group.
IMG ⇒ Logistic General ⇒ Business Partner ⇒ Vendors ⇒ Control ⇒ Define Account group and field
Selection(vendor)
11 Define Number Range.
IMG ⇒ Logistic General ⇒ Business Partner ⇒ Vendors ⇒ Control ⇒ Define Number Range for Vendor master
Record
12 Vendor Creation
SAP Menu ⇒ Logistics ⇒ Material Management ⇒ Purchasing ⇒ Master Data ⇒ Vendor ⇒ Central ⇒ Create
 13 Display & Edit in Vendor
SAP Menu ⇒ Logistics ⇒ Material Management ⇒ Purchasing ⇒ Master Data ⇒ Vendor ⇒ Central ⇒
Display/Edit

SAP MM MATERIAL MASTER INTRODUCTION

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.
Every area of resposibility can have a material master view Because different user deptmartment in a company
work with same material and each of these department to store diffenent information on the material.

SAP MM MATERIAL MASTER

14 Define Attributes of Material Types.
IMG ⇒ Logistics General ⇒ Material Master ⇒ Basic Settings ⇒ Material Types ⇒ Define Attributes of Material
Types
15 Define Material Groups.
IMG ⇒ Logistic General ⇒ Material Master ⇒ Settings for Key Fields ⇒ Define Material Groups
16 Define Number Range for Each Material Type.
IMG ⇒ Logistic General ⇒ Material Master ⇒ Basic Settings ⇒ Material Types ⇒ Define Number Range for Each
material Type
17 Create Material Master
SAP Menu ⇒ Logistics ⇒ Materials Management ⇒ Material Master ⇒ Material ⇒ Create Material

External number assignment − While creating a material, you have to enter your own number (containing
alphabets or digits),
Internal number and that −should
assignment While be unique.
creating a material, you need not enter any number. The system
automatically generates a unique number to that material.

SAP MM INFO RECORD INTRODUCTION

Material and vendor master are separate data records for keeping information of materials and vendors from
where material is procured. The combined information of material and vendor altogether is kept in a record that
we call as purchase info record.
Purchasing info record stores information on material and vendor, supplying that material. For example, a
vendor’s current price of a particular material is stored in info record.
Purchase info record can be maintained at the plant level or at the purchasing organization level.

SAP MM INFO RECORD

18 Create Info Record
SAP Menu⇒Logistics ⇒ Material Management ⇒ Purchasing ⇒ Master Data ⇒ Info Record ⇒ Create
19 Info Record Report –
Information Systems → Logistics → Purchasing → Material/Service → Material → Info Records.

Vendor Code
Material Code 500000 500001
300000000 20,000 22,000
 Quotation of Materials
20 Create Request for Quotation
SAP Menu⇒Logistics ⇒ Materials Management ⇒ Purchasing ⇒ RFQ/Quotation ⇒ Request for Quotation ⇒
Create
21 Display & Print Request for Quotation
SAP Menu⇒Logistics ⇒ Materials Management ⇒ Purchasing ⇒ RFQ/Quotation ⇒ Request for Quotation ⇒
Masseges ⇒ Print/Transmit
22 Maintain Quotation
SAP Menu⇒Logistics ⇒ Materials Management ⇒ Purchasing ⇒ RFQ/Quotation ⇒Quotation ⇒Maintain
Quotation
23 Price Comparison
SAP Menu⇒Logistics ⇒ Materials Management ⇒ Purchasing ⇒ RFQ/Quotation ⇒Quotation ⇒Price
Comparison

Procurement Process
24 Create Purchase Order
Logistics ⇒ Materials Management ⇒ Purchasing ⇒ Purchase Order ⇒ Create ⇒ Vendor/ Supplying Plant
Known
25 Goods Receipt

Logistics ⇒ Materials Management ⇒ Inventory management ⇒ Goods movement ⇒ Goods movement

26 Invoice Receipt
Logistics → Materials Management → Logistics Invoice Verification → Document Entry → Enter Invoice

27 Vendor Payment
SAP Menu->Accounting->Financial Accounting->Accounts Payable->Document Entry->Outgoing Payment->Post

PO 4500017088
GRN NO 500000010

Procurement Process with Tax

28 Create Purchase Order
Logistics ⇒ Materials Management ⇒ Purchasing ⇒ Purchase Order ⇒ Create ⇒ Vendor/ Supplying Plant
Known
29 Goods Receipt
Logistics ⇒ Materials Management ⇒ Inventory management ⇒ Goods movement ⇒ Goods movement
30 Invoice Receipt
Logistics → Materials Management → Logistics Invoice Verification → Document Entry → Enter Invoice
 31 Vendor Payment
SAP Menu->Accounting->Financial Accounting->Accounts Payable->Document Entry->Outgoing Payment->Post

PO 4500017089

Procurement Process with Freight Charge

32 Create Purchase Order
Logistics ⇒ Materials Management ⇒ Purchasing ⇒ Purchase Order ⇒ Create ⇒ Vendor/ Supplying Plant
Known
33 Goods Receipt
Logistics ⇒ Materials Management ⇒ Inventory management ⇒ Goods movement ⇒ Goods movement
34 Invoice Receipt
Logistics → Materials Management → Logistics Invoice Verification → Document Entry → Enter Invoice
35 Vendor Payment
SAP Menu->Accounting->Financial Accounting->Accounts Payable->Document Entry->Outgoing Payment->Post

PO 4500017090

Procurement Process with Freight Charge (Other Vendor)

36 Create Purchase Order
Logistics ⇒ Materials Management ⇒ Purchasing ⇒ Purchase Order ⇒ Create ⇒ Vendor/ Supplying Plant
Known
37 Goods Receipt
Logistics ⇒ Materials Management ⇒ Inventory management ⇒ Goods movement ⇒ Goods movement
38 Invoice Receipt
Logistics → Materials Management → Logistics Invoice Verification → Document Entry → Enter Invoice

39 Vendor Payment
SAP Menu->Accounting->Financial Accounting->Accounts Payable->Document Entry->Outgoing Payment->Post

Price Difference Process

Exp. Goods Receipt Invoice Receipt

Qty Rate Qty Rate
10 100 10 110

Case-1 :- Available Stock - 10 Value-1000

 Accounting GR/IR Clearing A/c Dr. 1000
Entry Inventory A/c Dr. 1000 Inventory Stock A/c Dr. 100
To GR/IR A/c 1000 To Vendor A/c 1100
PO 4500017092
Case-2 :- Full Material Consume
GR/IR Clearing A/c Dr. 1000
Price Difference A/c Dr. 100
To Vendor A/c 1100

Case-3 :- Material Consume Qty-7 and Available Qty-3

GR/IR Clearing A/c Dr. 1000
Inventory Stock A/c Dr. 30
Price Difference A/c Dr. 70
To Vendor A/c 1100

Movement Type General Modifire

Scrap 551 VNG
Consume GBB 201 VBR
Sample Mat. 333 VQP
Price Diff PRD

Unit of Measure in Inventory Management

A product can have multiple units of measures. This helps the enterprise clearly define the units in which they can
be procured, manufactured, packed and ordered.
Example:- Product Name I3 Laptop
Unit PC
Conversion Unit 1Box = 50PC

Procurement Process
36 Create Purchase Order
Logistics ⇒ Materials Management ⇒ Purchasing ⇒ Purchase Order ⇒ Create ⇒ Vendor/ Supplying Plant
Known
37 Goods Receipt

Logistics ⇒ Materials Management ⇒ Inventory management ⇒ Goods movement ⇒ Goods movement

Initial Entry of Stock Balances

It means when you implement the SAP system in order to record the starting physical stock balance from lagacy
system, in this process no any physical movement occurs during this process.
The Initial Entry of Stock Balances can take place by posting to three stock types.
Unrestricted-Use stock - Movement Type(561)
stock in quality inspection - Movement Type(563)
Block Stock - Movement Type(565)
 Tcode
OX02 HP01
elete, Check Company Code
OX10 PL01
te check plant
OX09 ST01/ST02
torage Location
OX08 HP00
Purchasing Organization
OME4 HP1

Tcode
OX18
Company Code
OX01
urchasing Organization to

OX17
urchasing organization to Plant

andard Purchasing

Services to an Enterprises.

Tcode
OBD3
unt group and field

XDN1
ber Range for Vendor master

XK01
Vendor ⇒ Central ⇒ Create
 XK02/XK03
Vendor ⇒ Central ⇒

ures or produces, stores, and

formation is stored in

deptmartment in a company
tion on the material.

TCODE
OMS2
Define Attributes of Material

OMSF
terial Groups
MMNR
Define Number Range for Each

MM01
⇒ Create Material

wn number (containing
mber. The system

materials and vendors from

ogether is kept in a record that

material. For example, a

anization level.

TCODE
ME11
fo Record ⇒ Create
ME1M
→ Info Records.
 TCODE
ME41
⇒ Request for Quotation ⇒

ME9A
⇒ Request for Quotation ⇒

ME47
⇒Quotation ⇒Maintain

ME49
⇒Quotation ⇒Price

TCODE
ME21N
Vendor/ Supplying Plant

MIGO

nt ⇒ Goods movement

MIRO
Entry → Enter Invoice

F-53
try->Outgoing Payment->Post

TCODE
ME21N
Vendor/ Supplying Plant

MIGO
nt ⇒ Goods movement
MIRO
Entry → Enter Invoice
 F-53
try->Outgoing Payment->Post

TCODE
ME21N
Vendor/ Supplying Plant

MIGO
nt ⇒ Goods movement
MIRO
Entry → Enter Invoice
F-53
try->Outgoing Payment->Post

TCODE
ME21N
Vendor/ Supplying Plant

MIGO
nt ⇒ Goods movement
MIRO
Entry → Enter Invoice
F-53
try->Outgoing Payment->Post
y-7 and Available Qty-3

(3*10=30)
(7*10=70)

fine the units in which they can

TCODE
ME21N
Vendor/ Supplying Plant

MIGO

nt ⇒ Goods movement

cal stock balance from lagacy

 Procurement Process Consumable Material
Consumable Material is understood to cover a material that is subject to a procurement transaction and whose value is
recorded in the cost element or asset accounts. Consumable material is thus procured directly for an account assignment
object.

Examples of consumable materials are and or

1 Office supplies
2 Computer systems
3 Machines.

Consumable Material

Without (Qty & Value) With (Qty & Value)

Without Material With Material With Material

Mater Master(NLAG) Master(UNBW)

Procurement Process

Purchase Purchase Goods Invoice

Req. Order Receipt Verification

Assets/Expenses A/c Dr.

To GR/IR A/c Cr.

Step For Configuration

1 Accounts Assignment Categories - OME9

SPRO -> IMG-> Material Management -> Purchasing -> Accounts Assignment -> Maintain Account Assignment Cat

A ASSETS
K Cost Center
P Project

2 Maintain Controlling Area Settings(It's a FICO Process)

Process-1 Without Material Mater

Procurement Process Without Material Mater TCODE

1 Create Purchase Requisition ME51N
2 Create Purchase Order ME21N
3 Goods Receipt MIGO
4 Invoice Receipt MIRO

Process-2 With Material Mater (NLAG)

Procurement Process With Material Mater TCODE

1 Material Type OMS2
2 Create Material Master MM01
3 Create Purchase Requisition ME51N
4 Create Purchase Order ME21N
5 Goods Receipt MIGO
6 Invoice Receipt MIRO

Process-3 With Material Mater (UNBW) - Qty Update

Procurement Process With Material Mater TCODE

1 Material Type OMS2
2 Create Material Master MM01
3 Create Purchase Requisition ME51N
4 Create Purchase Order ME21N
5 Goods Receipt MIGO
6 Invoice Receipt MIRO
rial
nsaction and whose value is
tly for an account assignment

Invoice Payment
Verification

GR/IR A/c Dr.

To Vendor A/c

Maintain Account Assignment Catagories

 Material Type Material Feature
Purchase Inventory RM DR. 550
Raw Material(ROH) Use in production To GR/IR CR. 500
No Sales To Freight A/c Cr. 50
Purchase
Packing Material(VERP) Use in packing
No Sales GR/IR A/c Dr. 500
No Purchase Freight A/c Dr. 50
Semi-Finished
Material(HALB) Use in production To Vendor Cr. 550
No Sales
No Purchase
Finished Material(FERT) Production
Sales
 SAP MM - Outline Agreement
Vendor selection is an important process in the procurement cycle. Vendors can be selected by quotation process.
After having shortlisted a vendor, an organization enters into an agreement with that particular vendor to supply
certain items with certain conditions. Typically when an agreement is reached, a formal contract is signed with the
vendor. So, an outline agreement is a long-term purchasing agreement with a vendor.

An outline agreement is a long-term purchasing agreement with a vendor containing terms and conditions regarding
the material that is to be supplied by the vendor.

The terms of an outline agreement are valid up to a certain period of time and cover a certain predefined quantity or
value.

An outline agreement can be of the following two types

1. Contract
2. Scheduling Agreement

Contract
A contract is a long-term outline agreement between a vendor and an ordering party over a predefined material or
service over a certain framework of time. There are two types of contracts −

Quantity Contract − In this type of contract, the overall value is specified in terms of the total quantity of material to
be supplied by the vendor.

Value Contract − In this type of contract, the overall value is specified in terms of the total amount to be paid for that
material to the vendor.

Scheduling Agreement
In scheduling Agreement we can maintain the detailed schedule lines. Which explains, Material details, material
required quantity, Date of requirement,Which we cant mention in contracts.

Contract Aggrement TCODE

1 Create Contract ME31K 200000
2 Change Contract ME32K
3 Display Contract ME33K
 SAP MM - Frame Order
Frame work order:
Framework order (FO) is a document type which is provided by the standerd SAP.

It can be used for the consumable material ( Which is having low value & where making GR is not of worth like C category item
blanket PO. Here we need to mention the validity period & target value or quantity as a restriction as well as need to mention
as a "b".
Also it can be used for the procurement of extarnal services (Item category "D" ). Here we need to do the entry of services wh
performed & need to accept the same whereas in blanket PO, GR is not required.

At the end i would tel u that Framework order is the document type which can be used as blanket Po & procurement of servic

Outline Frame Order Service Service Invoic

Agreement Entry Entry Accept Verificati

Expenses A/c Dr. GR/IR A/c Dr.

To GR/IR A/c Cr. To Vendor A

SAP MM EXTERNAL SERVICE CONCEPT T-Code

1 Create Outline Agreement ME31K
SAP Menu → Logistics → Materials Management → Purchasing → Outline Agreement → Contract → Create

2 Create Frame Order Against Outline Agreement ME21N

SAP Menu → Logistics → Materials Management → Purchasing → Purchase Order →Create
 worth like C category item.) & called as
as well as need to mention item category

do the entry of services which have been

o & procurement of services.

Invoice Payment
ept Verification

GR/IR A/c Dr.

To Vendor A/c

200000

4500017102
 SAP MM - Service Management
Besides procurement of goods, an organization may occasionally require some kind of services. Such services include small ma
as changing the lights, painting, and housekeeping. These services are carried out by external contractors and hence the whol
procurement of services is known as service management. The key points to note about service management are as follows −
>Services are meant for direct consumption instead of keeping them in inventory.
>Service description along with its unit of measure is stored as master data in a record that is known as the service master rec
>The system stores the services that have been procured as a record in a sheet that is called as the service entry sheet.

Service procurement can be of the following two types−

Planned Services − In planned services at the time of procurement specifications like quantity and price are known in advance
and scope of service is clear before procurement.

Unplanned Services − In unplanned services at the time of procurement specifications like quantity and price are not known in
nature and scope of service is not clear before procurement. These services can be extended as per the requirement.

Outline Frame Order Service Entry Service Entry Inv

Agreement Accept Verifi

Expenses A/c Dr.

To GR/IR A/c Cr.

SAP MM EXTERNAL SERVICE PROCESS

1 Create Outline Agreement
SAP Menu → Logistics → Materials Management → Purchasing → Outline Agreement → Contract → Create

2 Create Frame Order Against Outline Agreement

SAP Menu → Logistics → Materials Management → Purchasing → Purchase Order →Create

3 Create Service Entry Against Frame Order

SAP Menu → Logistics → Materials Management → Service Entry Sheet → Maintain
4 Display Service Entry
5 Print Service Entry
6 Invoice Receipt
Logistics → Materials Management → Logistics Invoice Verification → Document Entry → Enter Invoice

7 Vendor Payment
SAP Menu->Accounting->Financial Accounting->Accounts Payable->Document Entry->Outgoing Payment->Post
agement
f services. Such services include small maintenance tasks such
external contractors and hence the whole process of
out service management are as follows −

d that is known as the service master record.

called as the service entry sheet.

quantity and price are known in advance. It means nature

s like quantity and price are not known in advance. It means

tended as per the requirement.

Service Entry Invoice Payment

Accept Verification

GR/IR A/c Dr.

To Vendor A/c

T-Code
ME31K
ment → Contract → Create

ME21N
Create

ML81/ML81N

ML82
ML83
MIRO
y → Enter Invoice

F-53
>Outgoing Payment->Post
 SAP MM - CONSIGNMENT PROCUREMENT
In Consignment Process, the vendor provides material and stores them on the Company premises. The vendor remains the leg
material until the Company withdraw materials from the Consignment stores. Only then does the Vendor requires payment. T
set periods of time, for example, monthly. In addition, you can also arrange with the vendor that you take over ownership of t
consignment material after a certain period of time.

In this Consignment Process, we will not create purchasing document for the vendor, vendor himself send the material to our
material is available to our plant, the responsibility and ownership of the material is of vendor. A liability only arises when the
(consumption) is posted in the system from Consignment Stock.

We don't write price in the Consignment Purchase Order. The price is taken from the Consignment Info Record.

Consignment Stock is the special kind of stock. The stock is lying at the Company Storage Location but the responsibility belon

Consignment Stock are not valuated. When the material is withdrawn it is valuated at the price of the respective vendor from
record.

Info records with info category Consignment is required to create before creation of Consignment Purchase Order. Here main
Tax Code mandatory in the Info Records for material against vendor.

Info Purchase Goods Goods Consi

Records Order Receipt Withdraw settl

SAP MM CONSIGNMENT PROCUREMENT

1 Create Consignment Vendor Master
2 Create Consignment Material Master
3 Create Info Record for Consignment
4 Create Purchase Requisition
5 Create Purchase Order
6 Goods Receipt
7 Check Stock Report
Transfer Goods to own stock
8
9 Consignment Settlement
10 Transfer Goods to Cost Center

Consignment Settlement
11
ROCUREMENT
ny premises. The vendor remains the legal owner of the
en does the Vendor requires payment. The Invoice is due at
vendor that you take over ownership of the remaining

vendor himself send the material to our plant, though the

f vendor. A liability only arises when the material withdrawal

Consignment Info Record.

age Location but the responsibility belongs to vendor.

the price of the respective vendor from Consignment info

Consignment Purchase Order. Here maintain the Price and

Goods Consignment Payment

Withdraw settlement

T-Code
XK01 500011
MM01 300000021
ME11 5300005537
ME51N 10013385
ME21N 4500017109
MIGO 500000047
MMBE/MB52
Inventory A/c Dr.
MIGO To Consignment Payable 5E+08
MRKO
MIGO VBR
Consignment Payable Dr.
MRKO To Vendor A/c
 Consignment Oder (Vendor) Transfer goods to own stock
5,000.00 1000

MIGO
Inventory A/c Dr.
1 Transfer goods to own stock 411K
To Consignment Payable
Expenses A/c Dr.
2 Transfer goods to Cost Center 201K
To Consignment Payable
 MRKO
Consignment Payable Dr.
To Vendor A/c
Consignment Payable Dr.
To Vendor A/c
 SAP MM - PIPELINE PROCUREMENT
A pipeline material is a material that enters the production process directly from a pipeline (for example, oil), from a pipe (for
water), or via a cable (for example, electricity), and can be consumed. Pipeline materials are represented by the material type

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

2. In this we need not create a PO or keep the material in stock. We only record the consumption and pay accordingly.
3. We only record the consumption. In MIGO transaction, special stock type is “P”
4. All the rate and tax info is stored in info records. Info record category for this is Pipeline

Info MIGO Pipline

Records Consumption settlement

SAP MM PIPELINE PROCUREMENT

1 Create Pipeline Vendor Master
2 Create Pipeline Material Master
3 Create Info Record for Pipeline
4 Goods Issue For Consumption
5 Pipeline Settlement
CUREMENT
peline (for example, oil), from a pipe (for example, mains
ials are represented by the material type PIPE.

onsumption and pay accordingly.

eline

Pipline Payment
settlement

T-Code
XK01 500012
MM01 1259
ME11 5300005538
MIGO 500000050
MRKO
 SAP MM - SUBCONTRACTING PROCESS
Subcontracting is one of the manufacturing strategy by which a company decides to outsource some or all of its production op
Subcontracting is one of the special procurement type in the SAP MM.

Subcontracting can be defined as the processing of the material by the external supplier to get the final products.

In this process, a manufacturing company provides raw materials/ components to a subcontracting vendor. The vendor in turn
them into end products. This final product is then used by the manufacturing company to carry out the rest of the operations.

Goods Issue to Goods Receive

Info Recored Purchase Order Subcontractor from
Subcontrator

SAP MM SUBCONTRACTING PROCESS

1 Create Subcontracting Vendor Master
2 Create Subcontracting Material Master
3 Create Info Record for Subcontracting
4 Create Purchase Order for Subcontracting
5 Goods Issue to Subcontractor
6 Post Goods Receipt
7 Invoice Receipt

DIFFERENT SUBCONTRACTING PROCESS

All Component Provide to Subcontractor by another vendor directly
1 (Third Party Procurement).
2 Some Component Provide by Subcontractor.
3 Multilevel Subcontracting Exp. One Subcontractor to Another Subcontrator.

Exp1 Laptop Assemble

Our Company Subcontractor

Send Raw Material

Payment
Raw Vendor
Exp2 Some Component Provide by Subcontractor.

Raw Material Qty Price

1 Motherboard(1262) 1 2000 4500017120
2 Laptop Body(1263) 1 2000
Subcontractor 3 Harddisk(1264) 1 2000

Finished Goods Qty Cost

1 Laptop(300000023 ) 1 0

Exp-3 Multilevel Subcontracting (One Subcontractor to Another Subcontrator)

SAP MM SUBCONTRACTING PROCESS

1 Create Subcontracting Vendor Master
2 Create Subcontracting Material Master
3 Create Info Record for Subcontracting
4 Create Purchase Order for Subcontracting
5 Goods Issue to Subcontractor
6 Post Goods Receipt
7 Invoice Receipt

Our Company Subcontrator-1 Subcontrator-2

(Component) (Assemble Laptop) (Laptop with OS)

4500017121 4500017122
NG PROCESS
some or all of its production operations to a vendor. In SAP,

the final products.

ting vendor. The vendor in turn process these components to turn

out the rest of the operations.

Goods Receive Invoice

from Verification Payment
Subcontrator

T-Code
XK01 500013
MM01
ME11 5300005542
ME21N 4500017112
MIGO/ME2O
MIGO 500000056
MIRO

PO-4500017114

nd Raw Material
 T-Code
XK01 500014
MM01 300000024
ME11
ME21N
MIGO/ME2O
MIGO
MIRO

Our Company
 Subcontrating
Raw Material Qty Price ABC Infotech
Charges
1 Motherboard(1262) 1 2000 1000
2 Laptop Body(1263) 1 2000 Liab
4000 GR/IR 1000
Finished Goods Qty Cost
1 Laptop(300000023 ) 1 5000

Journal Entries for Subcontracting

1 Purchase Order No Accounting Entry

2 Goods Issue No Accounting Entry

Inventory A/c Dr. BSX

To Raw Material Consumption A/c BSV
3 Goods Receive GBB-VBO
Raw Material Consumption A/c Dr.
To Raw Material A/c BSX
Subcontrating Charge/RMC A/c Dr. FRL
To GR/IR A/c WRX
 Balance Sheet
Asset
Raw Mat. 4000
Motherboard 2000
Laptop Body 2000

-2000
-2000
0
Finish Goods 5000
 SAP MM - AUTOMATIC PURCHASE ORDER
Automatic purchase order creation is one of the most important functionalities in SAP Material Management. Due to this functi
purchasing team can save time from the manual work.
In normal operations a purchase order is created and then a goods receipt takes place against PO, However the purchase order c
created prior to the goods arriving at the plant. This can occur when a raw material is being received and the quantity can be de
until it’s delivered.
I will show you how to generate purchase order on a goods receipt, this activity is needed so that your warehouse can perform a
receipt when the material arrives without a purchase order from vendor.

SAP MM - AUTOMATIC PURCHASE ORDER

1 In Vendor Master Purchasing Data View, Tick the Automatic PO check box.
2 In Material Master Purchasing View, Tick the Automatic PO check box.
3 Maintain Purchase Info Record for your Vendor Material Price.
4 Configuration to Generate a Purchase Order on a Goods Receipt
IMG-> Materials Management-> Inventory Management and Physical Inventory->
Goods Receipt-> Create Purchase Order Automatically

6 Post Goods Receipt

7 Invoice Receipt
ASE ORDER
Material Management. Due to this functionality,

gainst PO, However the purchase order can’t be

being received and the quantity can be determined

ded so that your warehouse can perform a goods

T-Code
XK01/XK02
MM01/MM02
ME11

OMB3

MIGO
MIRO
 SAP MM - VENDOR RETURN PROCESS
Return is where a Company is not satisfied with the product or the deliverable, & businesses need to create a return the good
return request.
Exp.1 Return Material without Purchase Order

Procure Process Return Process

4500017125 PO 10 Qty PO 10 Qty

G/R 10 Qty G/R 5 Qty

I/R 10 Qty I/R 5 Qty

Exp.2 Return Material with Purchase Order

Return Material with Purchase Order TCODE

1 Create Purchase Order ME21N
2 Goods Receipt MIGO
3 Check Stock Overview MMBE
4 Create Return Purchase Order ME21N
5 Goods Issue MIGO MT-161
6 Post Credit Memo MIRO

Exp.3 Cancel Material Document

Cancel Material Document TCODE

1 Create Purchase Order ME21N 4500017128
2 Goods Receipt MIGO
3 Check Stock Overview MMBE
4 Cancellation GR MIGO
3 Check Stock Overview MMBE
ESS
eed to create a return the good, based on

Return Delivery-MIGO

Credit Memo

Buy Sell Balance

Monday 100 60 40
Tuesday 100 40 60
Wednesday 100 80 20
Thursday 100 90 10
Friday 100 35 65
Saturday 100 45 55
Sunday 100 60 40
290
 SAP MM - MATERIAL VALUATION
Material valuation help in determining the price of the material,and in which general ledger account it needs to be posted. M
valuation can happen at company code level or plant level.
Valuation at Plant level.

Suppose you have two plant one at Mumbai and another at Chennai Manufacturing Laptop.
This two different location may have different manufacturing cost for Mumbai Rs.12,000 per Laptop and for Chennai Rs.14,000 per Laptop.

If you select valuation at plant. You can easily identify cost at plant level.

Valuation at Company code level.

In above example if you configure valuation at company code level then you can not identify cost for Mumbai and Chennai individually rather it will reflected at company code
level. This will be same for Mumbai as well as Chennai.

Valuation Class categorizes the G/L account on the basis of material type. For example, Raw Matetrial will have different G/L
account than the finished material, as the costs will be different in the both the class. Account reference is also maintained alo
with the valuation class.

Case-1 Material Type

Raw Material(ROH) Finished Goods(FERT)
Valuation Class 3000 7920

1 Goods Receive (MT-101) Raw Material A/c Dr. Finished Goods A/c Dr.
To GR/IR A/c To GR/IR A/c

Case-2 Material
LAPTOP PRINTER
Valuation Class LP01 PR01

1 Goods Receive (MT-101) Inventory - Laptop A/c Dr. Inventory - Printer A/c Dr.
To GR/IR A/c To GR/IR A/c
N
count it needs to be posted. Material

Laptop.

ally rather it will reflected at company code

atetrial will have different G/L

eference is also maintained along
 SAP MM - STANDARD and MOVING PRICE
Moving Average Price(V) :- Price determining on the basis of averaging the total value of the stock by distributing cost over
stock. Moving average price is adjustable or flexible. Moving avarage price calculated automatically.

Formula
Total Value + GR Value
Moving Average Price =
Total Stock + GR Quantity

Example
Date Qty Price Value
1-Jan 10 100 1000
5-Jan 15 120 1800

Moving Average
Total Stock/Value 25 2800 112

Standard Price(S) :- Price determining on the price set by organization based on historical/assume value which will be conside
price for that material. Standard price is fixed. Price differnence is post in other GL account.

Example Price Difference

Date Stock Qty Stock Price Stock Value DR
1-Jan 100 10 1000
2-Jan 200 15 3000 1000
3-Jan 100 8 800

Total Stock/Value 400 10 4000 1000

CE
y distributing cost over

lue which will be considered as standard

Price Difference
CR

200

200
 SAP MM - SPLIT VALUATION

Split Valuation :- It is used to valuate stock of a material in same valuation area differently.
Exp. If material is produce externally from the vendor has different valuation price than the material of inhouse production.
and if you are procuring same material from differnet origin at that time this split valuation is use.

RAM

RAM

SAP MM - SPLIT VALUATION

1 Activate Split Valuation
2 Define Global Valuation Categories
SPRO > SAP Reference IMG > Material Management > Valuation and Account
Assignment > SplitValuation > Configure split valuation
3 Define Global Valuation Types
4 Assign Valuation type to valuation categories
terial of inhouse production.
se.

Internal External
10 15

USA France
10 15

T-Code

OMWC
 SAP MM - STOCK TRANSFER
Stock transfer :- Stock transfer is a process to transferring of materials from one storage location to another storage location,
another plant, one company code plant of another company code.

Stock Transfer

Storage Location to Storage Plant to Plant

Location

1- Step Procedure: Stock Updation takes place between two destinations at a time automatically by using Single Movement Ty

2- Step Procedure: Stock Updation takes place at Supplying and Receiving Plant by using two different Movement Types.
PLANT PL01

PLANT PL02
ST01 ST01
ST02 ST02
ST03 ST03

Stock Stansfer Order(STO)

1 Create Stock Trasfer Order

2 Goods Issue from One Plant
3 Goods Receive in Another Plant
 on to another storage location, and one plant to

Plant

ly by using Single Movement Type.

fferent Movement Types.

PLANT PL02

ST01
ST02
ST03
 SAP MM - PHYSICAL STOCK
Physical inventory is the process of counting the material stock physically in the warehouse with the stock present in the SAP system.
The process of counting physical inventory, posting corresponding document and posting the difference is called Physical Inventory.
It is mandatory for legal reasons every company must carry out a physical inventory of its warehouse stocks at least once per fiscal year to
balance its inventory for Balance Sheet purpose.

Why we do physical inventory?

1. To know the correct stock in hand. Due to some inconvenience (like some materials have been stolen or broken) it may happen that the
stock reflecting in sap system differs from the actual stock in storage location. Physical inventory is then carried out to synchronize the sto
in hand with the stock reflecting in SAP system.
2. In many countries there is a law that Company have to do physical inventory to check the current stock in hand and that stock or assets
taken into consideration in Company’s financial statement.

The following physical inventory procedures can be used in SAP system:

Periodic inventory: Most of the time companies use this kind of inventory. In most cases, it is done once a year, and this kind of inventory
called annual physical inventory. That means that material stock is counted once a year. Most of the times at the end of the year or after t
season ends (in seasonal industries).

Continuous inventory: All materials are counted at some point in the year, but that can be at any day appointed for. So we can count som
material in February, others in April and so on. A single material can be counted on a single date. This type of inventory is mainly utilized in
warehouse management based warehouses, but it can be done in inventory management too.

Cycle counting: This type of inventory allows us to set a period for regular intervals for physical inventory on the material level. So a fast
moving and high value material can be counted four times a year while slow moving and low value material can be counted once a year.

Step to Maintain Physical Inventory

1 Creating Physical Inventory Document MI01

2 Change in Physical Inventory Document MI02
3 Display Physical Inventory Document MI03
4 Entering the Counting Results MI04
5 Posting the Differences MI07

100
Posting Block 95
Goods Receive 5
Goods Issue
Book Inventory Goods Receive Physical
Freeze Book Inventory 9AM 100

12PM 20

6PM 70

Book In. 100

Damage 30
Diff 70
 GR 20
90

At the time of Counting 9 10

1 1
Diff 8 9
GR 1
9
k present in the SAP system.
s called Physical Inventory.
ks at least once per fiscal year to

r broken) it may happen that the

arried out to synchronize the stock

in hand and that stock or assets is

a year, and this kind of inventory is

s at the end of the year or after the

pointed for. So we can count some

e of inventory is mainly utilized in

on the material level. So a fast

ial can be counted once a year.
 SAP MM - Purchase Order Release Strategy
The procurement department of a company consists of many buyers who are responsible for buying goods from the market. There is a hierarchy of people
the buyer who creates the order and purchasing managers to supervise and control the procurement process. Since purchase order is a legal document an
company to the vendor, it is very much important to control the process to avoid any errors or unauthorized transaction. When the Purchase order is proc
receipt and invoice verifications, there will be accounting entries generate and it creates Accounts Payable entries (AP).

Because of this reason and legal implications of Purchase orders, it is very much required to control the procurement process by introducing approvals. Fo
provided a concept of release strategy. In release strategy, there are different released codes which are used for designated users. The release code is a tw
allowing a person to release (clear, or approve) a purchase requisition or an external purchasing document. The release codes are basically controlled via a
authorizations (authorization object M_EINK_FRG). The user with specific release code assigned can perform a respective release in a purchase order. For
creates the purchase order is assigned the lowest level release code. When the purchase order is saved or checked, system will trigger the Release Strateg
depending on the defined criteria. In the purchase order which is required to be released by a higher level user, there will be a Release Strategy tab on hea
document. In this tab, system shows all the levels of release codes who are involved in approving the purchase order. Following practical example will dem
of release strategy and its implementation in SAP.

There are 2 types of release procedures

1 With Classification : In this we can release these documents in Document header level or Item level
2 Without Classification : In this we can release these documents in Item level
>>Header level contains PR, PO, Contract, Scheduled Agreement, RFQ
>>Item level contains PR.

Document type Communication table

PR CEBAN
PO CEKKO
SES CESSR

We have T-code to help to find the component for the respective field in the communication table, that is SE11, where we
can only display the data (ABAP Data), its mainly used to find the component for the document type with the help of
communication table.

A company where there is following approval mechanism used in procurement department needs to have a release strategy in SAP.

Order Value <=50000 Manager(A1) Z1

Value Between Manager(A1) Z2

>50000 To <= 100000 Contract Head(A2)

Manager(A1)
Order Value >100000 Contract Head(A2) Z3
Department Head(A3)

Characteristic Characteristic Value Table Name Field

Order Value Above Condition CEKKO GNETW ZR_ORDERVALUE
Document Type NB CEKKO BSART ZR_DOCUTYPE
Purchase Org. HP00 CEKKO EKORG ZR_PURORG
Company Code. HP01 CEKKO BUKRS ZR_CompCode
Plant. PL01 CEKKO WERKS ZR_PLANT

Preparation of required objects for Release Strategy in SAP

1 Edit Characteristic CT04

 2 Edit Class CL02 ZPO_CLASS
3 Define Release Procedure for Purchase Orders MI03
Path – SPRO: Materials Management -> Purchasing -> Purchase Order -> Release Procedure for
Purchase Orders -> Define Release Procedure for Purchase Orders.

1. Release Groups
2. Release Codes
3. Release Indicator
4. Release Strategies
5. Workflow
y
There is a hierarchy of people like the operator or
e order is a legal document and it goes outside the
hen the Purchase order is processed further for goods

s by introducing approvals. For the same, SAP has

users. The release code is a two character ID
es are basically controlled via a system of
ease in a purchase order. For example, the user who
will trigger the Release Strategy for that document
a Release Strategy tab on header of the PO
ing practical example will demonstrate the purpose

elease strategy in SAP.

 Pricing Procedure
Pricing procedure in MM module is a way to determine prices in purchasing documents. it is the combination of different type
Discount,Surcharge Etc. we use pricing procedure to determine all condition into one procedure. It give us functionality to ass
Defining a pricing procedure can be done by creating an access sequence, and assigning it to condition types. Access sequence
values. It can search multiple condition tables based on our settings. Tables have different priority, and different key fields. De
Procedure is practically assigning the calculation schema to a combination of vendor schema group and purchasing organizatio
schema group on vendor master, and assign schema group to purchasing organization, in order for the system to find the calc

To understand pricing procedure, we have to be comfortable about these below things :

1. Condition Table
2. Access Sequence
3. Condition Type
4. Condition Record.
5. Schema Group
6. Calculation Schema
7. Schema Determination

Condition Table It’s a table where system saves the all fields with the combination for individual condition record. Suppose if I
record will be created for plant only.We can use many fields in one condition tables.

Access Sequence The main concept of Access sequence is, it searches condition record for condition type from condition table
condition tables.
Suppose we maintain 4 condition tables in one access sequence. Then when a condition type will search for condition record v
allow to search only these 4 condition tables.

Condition Type In simple term, condition type is used for different type of charges. Like gross price, discount, freight, rebate e
Suppose we purchase a material for price 10, we get a discount of price 2. Then the price 10 will be going to a condition type a
type.

Condition Record Condition record contains the record which is maintained against condition table with regards to condition t
condition type.
Suppose we maintain a condition record against condition table (vendor) with regards to condition type. Then whenever the v
will be fetched.

Schema Group It’s assigned to our vendor and Purchase Organization, It helps the vendor and purchase organization to choos
One schema group will be assigned to vendor and one schema group will be assigned to Purchase organization. With this com

Calculation Schema Here we maintain sequence for the pricing calculation, like gross price, discount, rebate, surcharges etc. H
types and group together all required condition types for our pricing procedure.

Schema Determination Here we maintain the pricing procedure for purchasing document. We maintain calculation schema co
each purchase organization – schema group.
In general, below image will give the concept how a condition type will search for the condition records
 Steps for Physical Inventory Proess Tcode Procedure
1 Maintain Condition Table M/03 Step
SPRO-IMG-MM-Purchasing-Conditions-Define Price Determination Process-Maintain
Condition Table-Create condition table. 1

2 Maintain Access Sequence M/07 1

SPRO-IMG-MM-Purchasing-Conditions-Define Price Determination Process-Define
Access Sequences. 5

3 Maintain Condition Type M/06 10

SPRO-IMG-MM-Purchasing-Conditions-Define Price Determination Process-Define
Condition Types-Define Condition Type 10

4 Maintain Calculation Schema M/08 10

SPRO-IMG-MM-Purchasing-Conditions-Define Price Determination Process-Define
Calculation Schema 15

5 Maintain Schema Group for Vendor OMFN 20

SPRO-IMG-MM-Purchasing-Conditions-Define Price Determination Process-Define
Schema Group-Schema Groups: Vendor 20

6 Maintain Schema Groups for Purchasing Organizations OMFM 25

SPRO-IMG-MM-Purchasing-Conditions-Define Price Determination Process-Define
Schema Group-Assignment of Schema Group to Purchasing Organization
7 Maintain Schema Determination OMFO
SPRO-IMG-MM-Purchasing-Conditions-Define Price Determination Process-Define
Schema Determination-Determine Calculation Schema for Standard Purchase Orders
8 Assign Schema group to Vendor XK01
9 Maintain Condition Record MEK2
cedure
e combination of different type of charges like Gross price, freight,
. It give us functionality to assign different calculation types for different needs.
ndition types. Access sequence tells the system where to look for the condition
ty, and different key fields. Determination of the SAP MM or SAP SD Pricing
oup and purchasing organization schema group. So, you need to enter the vendor
for the system to find the calculation schema to be used in the document.

condition record. Suppose if I use Plant as condition table, then the condition

tion type from condition table. One access sequence can contain one or multiple

ll search for condition record via this access sequence, the access sequence will

ice, discount, freight, rebate etc etc.

be going to a condition type and the price 2 will be going to another condition

ble with regards to condition type. It can be fetched via access sequence and

on type. Then whenever the vendor used this condition type, the condition record

urchase organization to choose pricing procedure.

se organization. With this combination, system will fetch the pricing procedure.

ount, rebate, surcharges etc. Here we maintain the calculation for all condition

maintain calculation schema combination of per each vendor – schema group and

records
Procedure ZM0000
Counter Condition Type Discription From To M R S P
1 PB00 Gross Price
x
2 PBXX Gross Price x
0 Total Gross Price 1 1
x
1 R000 Dis % on Gross x
2 R001 Dis/Quantity
x
3 R002 Dis(Value) x
0 Discounted Price 5 10
x
1 FRA1 Freight % 15 15 x
2 FRB1 Freight(Value)
x
0 Net Price 15 20 x