Procurement of External Services

Overview
• Provide an initial insight into the procurement of
external services
• The special aspects of procuring external services
are described on the basis of a simple procurement
process, starting with the issue of a purchase order
and ending with the invoice verification phase
• Discusses the service master record and service
conditions, as well as the entry and acceptance of
the work actually done, which corresponds to the
goods receipt phase in materials procurement
Objectives
After completing this unit, you’ll be able to:
• Name the most important master data used in the procurement of
external services
• Describe and handle the basic procurement process for services
• Display a service master record and service conditions
• Explain the structure of the purchase order item for services
• Create a purchase order item for services
• Create a service entry sheet referencing a purchase order
• Add unplanned services during the service entry process
• Accept a service entry sheet
• Check an invoice for a service PO
Contents
• Service Master Record and Conditions
• Purchase Order for Services
• Service Entry and Invoice Verification
Lesson Overview
• Deals with the process of procuring externally
provided services
• Introduces the master data for external service
Objectives
After completing this lesson, you’ll be able to:
• Name the most important master data used in
the procurement of external services
• Describe and handle the basic procurement
process for services
• Display a service master record and service
conditions
Process of External Service
Procurement
 External Services in
Procurement
• The following are the possible steps that can be involved in
procuring external services
• Determination of requirements:
• A requirement for certain external services may arise in a user
department of the enterprise
• It may involve a particular project (for example, the translation of
software documentation) or maintenance work (for example, the
outsourcing of electrical work that becomes necessary on company
premises)
• Creation of service specifications:
• When a requirement is established, a document is created in the
system as the basis for the procurement process (this may be a purchase
requisition, for instance)
• The document can contain a set of service specifications listing the
necessary services in detail
• However, in this early phase of the procurement process, user also has
the option of doing without service specifications entirely and
considering only the unplanned services by setting value limits
 External Services in
Procurement
• Source determination/vendor selection:
• To be able to convert a requirement into a purchase
order, user must determine a suitable bidder who is
prepared to provide the necessary services
• There are a number of different ways in which the system can
support user in finding potential sources of external services
• The source determination function is an instrument for analyzing
and evaluating purchasing data that has already been entered in
the system (in the form of service conditions or contracts, for
example)
• If services for which there has been no previous
requirement (and thus for which no source is currently
recorded in the system) are requested, a bid invitation
process can be carried out
• User can replicate this bid invitation process using the
RFQ/quotation facility for services
 External Services in
Procurement
• Purchase order, PO monitoring:
• In addition to manual entry, purchase orders can also be created by
referencing requisitions, RFQs, or contracts
• During the phase of actual service performance, the actual values for
services performed/work done are continuously updated in the
underlying purchase order (or contract release order)
• User can therefore see at any time how far a certain procurement project has
progressed by referring to the PO history
• If necessary, user can monitor the confirmations of work done for each individual
service line
• Service entry and service acceptance:
• Once the services actually performed have been recorded in a service entry
sheet, they can be checked and accepted by one or more responsible
persons
• User can separate the processes of service acceptance and service entry
organizationally in order to maintain the dual control principle
• However, it is also possible to have service entry and acceptance carried out
by the same individual or department in user company
• Service entry → Service entry number generation
• Service acceptance → Material document and Accounting document is
generated
External Services in
Procurement
• Invoice verification and payment:
• At the end of the procurement process, a check is
carried out as to whether the service provider's
invoices have been drawn up correctly
• The value from the accepted entry sheet is taken as the
basis for this
• This value is compared with the invoice
• The taxes shown in the invoice are also checked
• If the value from the accepted entry sheet is exceeded, the
system issues a warning message
• The checked and released invoices are then paid
automatically
Service Master Record
 Service Master Record
• The service master record belongs to the master data and serves as
a source of data that can be used when user creates service
specifications
• By using service master records, user can reduce the amount
of time needed for this activity, as well as the occurrence of
errors
• This is because user needs to enter the service specifications
completely once only in the service master record
• A service master record contains the following principal
information for the unique description of an external service:
• Service number
• Service category
• Descriptive texts (short and long text)
• Base unit of measure
• Material group
• Valuation class
• Service master records can be used by different applications
• Besides Purchasing (MM-PUR), Service Master Records are also used in
the Project System (PS), Plant Maintenance (PM), and Customer
Service (CS)
Service Master – Transaction
AC03
 Service Master – Transaction
AC03
• The service master record transaction (AC03) is a single-
screen transaction that user can use to create, change, and
display services
• When user invokes the function, user is initially in display mode
• User can choose a specific service with “Other Service” button or
search for one in the overview
• The overview is used in the same way as the document overview in the
purchase order (selection, layout, breakdown), and can also be
shown/hidden in this transaction with “Show/Hide Overview “
button (with the quick-info text Show/Hide Overview)
• User can expand and collapse the data areas in the right-hand
area of the screen via “Open” button (with the quick-info text
Open) and “Close” button (with the quick-info text Close)
• The first time user calls up this screen, the data areas Basic Data and
Long Text are opened
• Each time user calls it up after this, the screen settings and the data
user selected or maintained before exiting the function appear
Price Determination With The
Aid of Master Conditions
 Service Conditions
• Prices for external services that are valid over a longer
period can be recorded in the system in the form of
service conditions
• The system applies these conditions for the purpose of price
determination in the purchasing document
• User can enter further conditions in the purchasing document
itself
• User can define service master conditions at several
levels in the system:
• At service level (“market price” or “own estimate”)
• At the level of service, vendor, and purchasing organization
• At the level of service, vendor, purchasing organization, and
plant
• For more information on service conditions, refers to the
SAP Library, application component External Services
(MM-SRV)
Lesson Overview
• Examine the special features of a service item in
purchasing documents (using a purchase order
example)
• Unlike an item for a material, for services user enters
service specifications and limits for the item
Objectives
After completing this lesson, you’ll be able to:
• Explain the structure of the purchase order item
for services
• Create a purchase order item for services
Service Procurement: Purchase
Order
 Purchase Requisition In
Procurement
• The “External Service Procurement: Purchase Order” figure in next
slide shows a simple process for procurement of services consisting
of purchase order, service entry and acceptance, and invoice
entry
• At the start is the purchase order, where the individual services to be
performed are summarized in a service specification and forwarded to
the service provider
• As a result of material procurement, user already has lots of
information, such as which material is to be procured and the
quantity
• During service procurement, however, it is often the case that neither the
exact service description nor the order quantity are clearly specified
• For example, during maintenance of a machine, user does not know
whether the settings simply have to be adjusted or whether parts have to
be replaced
• User might also be able to specify only an estimate for the working
hours because user does not know exactly how much time it will
take
• By specifying a limit for unplanned services, user can control the costs
for unexpected services and services that cannot be planned
Purchase Order: Stock Material
– Services
Purchase Order: Stock Material
– Services
• The work to be performed cannot be displayed
as a rule in a single service master record
• If, during machine maintenance, wearing parts also
need to be replaced, the total work includes
shutdown, removal of the wearing parts, checking the
parts, cleaning or replacing the wearing parts,
installing the parts, and performing a function test
• These individual services are consolidated in sets of
service specifications
Purchasing Document Structure
 Purchasing Document Structure
• A service item must always have an account assignment
• Procurement for the warehouse, which is possible for material, does not
exist in the service procurement
• However, user can use account assignment category U (unknown) in
connection with the item category D (service) because the account
assignment is sometimes not yet determined at the time of ordering
• During material procurement, enters a material and the
relevant data for each item
• During service procurement, the item has only a short text to describe
the general procurement project
• To list the individual services with description, quantity specification,
price, and other details, uses the service specifications (SS)
• Maintains this at item detail level
• User can summarize both services with master records and services
without master records in the service specifications
• Item category D (service) activates the service function and
enables creation of a service specification and setting of
value limits for unplanned services
Service Specification in
Purchasing Document
Service Specification in
Purchasing Document
• A service specification can consist of any
number of service lines
• For a better overview, user can use the SS outline to
structure the services in the service specification
into a hierarchy of outline levels, similar to a table
of contents
• A maximum of four hierarchy levels is possible
• User can change the numbers of the levels and their
short and long texts at any time
• User can assign as many service lines as user wishes
to each outline level
Lesson Overview
• Deals with the entry and acceptance of services
performed by external service providers
• In the case of external services, these two steps
replace the goods receipt process that takes place in
conjunction with goods deliveries
Objectives
After completing this lesson, you’ll be able to:
• Create a service entry sheet referencing a
purchase order
• Add unplanned services during the service
entry process
• Accept a service entry sheet
• Check an invoice for a service PO
Procurement of Ext. Services:
Entry of Services Performed
Procurement of Ext. Services:
Entry of Services Performed
• In the process of procuring external services, the
issue of the purchase order is followed not by
the receipt of goods – as in the case of material
procurement – but by the entry of the service
actually performed (work actually done) in a
service entry sheet
• Subsequently, the service entry sheet is accepted and
the incoming invoice entered
Service Entry and Acceptance
 Service Entry and Acceptance
• Services that have been performed are recorded in service
entry sheets
• When entering services, user references the purchase order
• User can copy planned services directly from the purchase order into
the service entry sheet
• Unplanned services are not described in detail, neither are their
quantities and prices specified until the work actually done is recorded
• The system checks that the unplanned services do not exceed the limit
set in the purchase order
• Postings are not made in Financial Accounting when the service entry
sheets are saved
• The relevant postings are not made in Financial and Cost
Accounting until the service entry sheets are accepted
• Service entry sheets can be entered and accepted in one step or two,
depending on authorization
• User can set up release procedures for service entry sheets
Entry of Services Performed –
Transaction ML81N
 Entry of Services Performed –
Transaction ML81N
• In the service entry transaction ML81N, all data (header and
service data) is maintained on one screen (single-screen
transaction)
• When user invokes the function, user is initially in display mode
• Enters the purchase order for which the service entry sheet is to be
created with Other purchase order
• If the purchase order is already displayed in the overview, all
that have to do is double-click on the document number to
adopt the data
• Then chooses “Create entry sheet” button (with the quick
info-text Create entry sheet), to start the entry process
• User can enter the services manually in the service entry sheet, or with
“Service selection” button from the purchase order or from a set of
model service specifications
• If user has defined a limit in the purchase order, user can also enter
unplanned services manually, up to this limit
• If necessary, user can print out service entry sheets
 Entry of Services Performed –
Transaction ML81N
• User can also accept the services actually performed
when creating an entry sheet, provided that separate
acceptance is not required as part of a release strategy
• To do so, chooses “Accept” button (with the quick-info text
Accept), before saving the service entry sheet
• Service entry sheets can also be accepted collectively
(transaction ML85)
• By clicking “Hide/display overview” button (with the
quick-info text Hide/display overview), user can call up a
list of the purchase orders for which services actually
performed have recently been entered (in the left-hand
part of the screen)
• User can also call up the associated service entry sheets
• Double-click on the service entry sheets to select them for
display, change, and copy purposes
 Creating and Accepting a
Service Entry Sheet
• Chooses Logistics → Materials Management → Service Entry Sheet → Maintain
• Chooses “Other purchase order” button and enters the number of the
purchase order
• The relevant purchase order is shown preselected in the document overview
• If the PO is shown unselected in the document overview, selects it and adopts the data with a
double-click
• Chooses “Hide/display overview” button to open or close the document overview
• To create a new service entry sheet, chooses “Create entry sheet” button
(with the quick-info text Create entry sheet)
• Maintains a short text for the service entry sheet
• Enters the necessary data, such as an account assignment category (in the
case of account assignment unknown in the PO) or the external number
• If user wishes to adopt services from the service specifications in the
purchase order, chooses “Service Sel.” button
• The system automatically suggests the purchase order number for selection of the services
• Acknowledges with Enter
Creating and Accepting a
Service Entry Sheet
• To adopt the desired services in the service entry
sheet, selects the service lines and chooses
“Services” button
• User is taken back to the service entry sheet
• After adopting the relevant services, makes any
necessary changes (such as correction of the
quantity or specifying the cost center)
• If necessary, enters unplanned services
• Chooses “Accept” button (with the quick-info text
Accept) to immediately accept the entry sheet
• Chooses “Save” button (with the quick-info text
Save) to immediately accept the entry sheet at the
same time as user creates it
Invoice Verification for Entry
Sheet
 Invoice Entry
• User cannot enter a service provider's invoice
against a PO until the relevant service entry sheet
has been accepted
• Invoice verification can be carried out with
reference to the purchase order
• In this case, the system suggests all accepted service
entry sheets relating to this PO for invoice verification
purposes
• The system compares the prices in the invoice with
the prices from the service entry sheets
• If there are no discrepancies, user can enter and posts the
invoice
• If the system finds any discrepancies, it blocks the invoice
for payment
Purchase Order History
Purchase Order History
• In the purchase order history (PO history), all
follow-on activities relating to a PO item are listed,
that is, all services performed and entered (service
entry sheet), all accepted services (material
document), and all invoices that have been entered
• The various options available for managing external
services in SAP ERP Component are discussed in
detail in the two-day course SCM540
• Further information on MM External Services
Management (MM-SRV) is available in the Materials
Management section of the SAP Library
Any Question?