Professional Documents
Culture Documents
Module 2 Unit 3
Module 2 Unit 3
Module 2 Unit 3
Training Objectives:
• Explain the Basic Procurement Cycle
• Explain MM Integration with other Modules
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Agenda
• Basic Terminologies in MM
• Procurement Cycle
• MM Integration with other Modules
• Discussion Points
• Quiz
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Terminologies in SAP MM
• Material Master : A data record containing all the basic information required to
manage a material.
• Vendor : An organization or entity that provides goods or services to the
company
• Vendor Master: The vendor master contains the data of all vendors with which
a company conducts business.
• Customer : An organization or entity that purchases goods or services from the
Company
• Customer Master : The vendor master contains the data of all vendors with
which a company conducts business
• Service Master : A data record containing all the basic information required to
manage a service
• Purchase Requisition: A Purchase Requisition(PR) is a request to
Purchasing(buyers) to procure a certain quantity or service so that it is
available as per the requirements. A PR is an internal document
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Terminologies in SAP MM
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Terminologies in SAP MM
• Invoice : A list of goods sent and service provided with a statement of the
amount due is termed as an invoice. This will be provided by the Vendor to the
company
• Invoice Verification: The matching of documents created during the purchase
order process, the goods receipt process, and the accounts payable process is
termed as Invoice Verification. It contains verifying incoming invoices in terms
of content, price and arithmetic
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Agenda
• Basic Terminologies in MM
• Procurement Cycle
• MM Integration with other Modules
• Discussion Points
• Quiz
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Introduction to Procurement
• Definition: Acquisition of goods or services at the best possible price, with the
right quantity, at the right time, from the right place.
• The process of obtaining services, supplies, and equipment from a vendor is
called Procurement.
• The internal Purchasing Department normally manages the majority of
purchasing activities in most of the organizations.
• Exceptions may lie in large industrial complexes where procurement may also
be handled by engineering, or third party outsourced companies.
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Procurement Cycle:
Determination
Payment of requirement
Invoice Source
Verification Determination
Procurement
Selection of
Goods vendors from the
Receipt vendor database
PO Monitoring PO processing
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Procurement Process
1. Determination of Requirements
• Identification of materials requirements either manually by business
users or automatically by IT system of the organization are passed on
to the Purchasing department via Purchase Requisitions
2. Source Determination
• The IT System helps to identify potential sources of supply based on
old orders and existing longer-term agreements with the vendor. This
speeds the process of creating requests for quotation (RFQs), which
can be sent to vendors.
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Procurement Process
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Procurement Process
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Procurement Process
7. Invoice Verification
• Vendor invoices are checked for accuracy of prices and contents.
Buyers can also specify permissible value tolerances for invoices
8. Payment Processing
• Based on the invoice verification, the Accounts Department / Accounts
Payable normally deals with vendor payments
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Procure to Pay Process:
• Procure to Pay process starts from requisition determination until the payment
of the correspondent invoice.
• It is comprised by the following SAP documents:
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Procure to Pay Process – Requirements:
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Procure to Pay Process – PR:
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Procure to Pay Process – PO:
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Procure to Pay Process – GR:
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Procure to Pay Process – IR:
• Is the verification of invoice data sent by the vendor against the goods receipt
and the original purchase order.
• This ensures that the goods received match the cost and quantity requirements
of the purchase order and the vendor’s invoice.
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Procure to Pay Process – IR:
• Once the invoice is posted, the payment is made on the basis of the payment
terms and conditions defined in the purchase order.
• It is processed through Accounts Payable in the FI module.
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Sample Copy of a PO
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Sample Copy of Invoice
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Agenda
• Basic Terminologies in MM
• Procurement Cycle
• MM Integration with other Modules
• Discussion Points
• Quiz
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MM Integration with other Modules:
SD FI
Sales & Financial
Distribution Accounting
MM
Materials CO
Mgmt. Controlling
PP
SAP
Production TR
Planning Treasury
EC
Enterprise
Controlling
QM
Quality
Client / Server PS
Project
IM
Investment
Management
ABAP/4 System Management
PM WF
Plant Workflow
Maintenance
PD IS
Personnel Industry
Development Solutions
PA
Personnel
Administration
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MM Integration with other Modules:
MM
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MM integration with other modules
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MM integration with other modules
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MM integration with other modules
to the vendor against all the procurement. The vendor master record
represents the creditor account in financial accounting.
• Through PO account assignment, Purchasing can also specify which G/L
accounts are to be charged in the financial accounting system.
• These information are used by Financial Accounting at the time of payment
to the vendor against all the procurement. The vendor master record
represents the creditor account in financial accounting.
• Through PO account assignment, Purchasing can also specify which G/L
accounts are to be charged in the financial accounting system.
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MM integration with other modules
• Financial Accounting (FI)(contd..)
• Whenever any inventory posting are done, it updates the G/L accounts
online in the background.
• Logistics invoice verification will create vendor liability in vendor account
immediately on posting the document.
• Any advance given against the purchase order updates the PO history.
• For every inventory posting there is corresponding CO document to update
profit center accounting reporting.
• Finish goods costing is link through MM & PP.
• Procurement of capital item cost can be directly booked against asset
number.
• Controlling (CO)
• The interface to the cost accounting system (Controlling) can be seen above
all in the case of purchase orders for materials intended for direct
consumption and for services, since these can be directly assigned to a cost
center or a production order.
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MM integration with other modules
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MM integration with other modules
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MM integration with other modules
• Once the requirements are converted into production orders, MRP run can
create planned orders or purchase requisitions and buyer can then procure
the goods from Vendors via purchase order or from other plants via stock
transport orders.
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Discussion
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Checkpoint
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Module Summary
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Questions and Comments
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