SAP R/3Materials Management

Module

Materials Management

• Procurement

• Inventory Management

• Warehousing

• Material Master

• Materials Planning

• Hazardous Materials Management

Organizational Elements

• Organizational elements are structures that represent the organizational views of an enterprise.

• Company structure is designed based on business processes.

• The organizational elements provide a framework that supports all business activities.

Organizational Elements for the Procurement Process

• Company Code

• Plant

• Storage Location

• Purchasing Organization

• Purchasing Group

Company Code

• A company code represents an independent accounting unit.

• Balance sheets and Profit and Loss statements, required by law, are created at the company code level

Plant

• A plant is an organizational unit within a company. It produces goods, renders services, or distributes goods.

• A plant can be one of the following types of locations:– Manufacturing facility– Warehouse distribution center– Regional sales office– Corporate headquarters

Storage Location

• Storage locations are organizational units that allow the differentiation of material stocks within a plant.

Purchasing Organization and Groups

• Decentralized with a separate organization for each plant.

• Centralized, one organization for all plants.

• Hybrid - multiple organizations buy for multiple plants.

• Groups can be a further division of purchasing responsibility and/or structure.

Material Master• The material master contains all data

required to define and manage material. It integrates data from engineering, manufacturing, sales and distribution, purchasing, accounting, and other departments.

• The material master is used as a source of data for purchase order processing throughout the procurement cycle.

Material Master - View(s)

• The R/3 system allows selection and maintenance of the data that is relevant to a particular department.

• To create a view, the view must be selected on the “Select View(s)” screen before the material data is entered.

• Users are responsible for creating and maintaining the view(s) of the materials that are relevant to their departments.

Material Master - Industry Sector

• Industry sector determines the type of industry to which the material will be assigned.

• Industry sector information determines:– which screens will appear and in what

sequence– what industry-specific data will appear

Material Master - Maintenance• Defaults - speeds entry of data by using the most

frequently used organizational levels and views as default values. These defaults are user-specific and may be overridden.

• Reference Material - speeds entry by copying pertinent data from existing material master records.

• Profiles - speeds entry by copying standard data created in a profile into a selected view.

• Collective entry of storage locations - speeds creation of additional storage locations by adding multiple locations at one time.

Material Master - Material Type

• Groups material with same basic attributes

• Determines:– which department views are maintained– whether changes in material quantities are

updated– whether internal or external procurement is

allowed– which general ledger accounts are updated

Vendor Master• The vendor master includes all the data

necessary for processing business transactions and corresponding with vendors.

• Information is shared between the accounting and purchasing departments.

• Data is grouped into three categories:– general data– accounting data– purchasing data

Basic Procurement Process

• Requirements determination - purchase requisition

• Source determination - RFQ and quotation• Vendor selection• Order processing - purchase order • Order follow-up• Goods receipt and inventory management• Invoice verification• Payment

Purchase Requisitions

• Internal document

• Requesting a certain quantity of material or service on a certain date

• Can be created: – Manually– Automatically (MRP, sales orders, etc.)

• Release approval procedures can be established

Purchase Requisition Sources

• Manually created by user department

• Automatically created by:– Planning (MRP, MPS)– Plant maintenance– Production orders– Sales orders

Processing Purchase Requisitions

• Create purchase requisition (manually or automatically)

• Determine source of supply

• Release procedure (optional)

• Allocate vendor and process

Creating a Purchase Requisition• Default data for line items

– delivery dates, plants, purchasing groups, etc.

• Maintain line item data– materials, quantities, delivery dates, etc.

• Maintain account assignment (if required)– cost center, G/L accounts, project number,

etc.• Check data• Save

Purchase Requisitions - Menu Paths

• Create: Logistics -> Materials management -> Purchasing -> -> Requisition -> Create

• Change: Logistics -> Materials management -> Purchasing -> -> Requisition -> Change

• Display: Logistics -> Materials management -> Purchasing -> -> Requisition -> Display

Purchase Requisitions – Transaction Codes

• Create: Logistics -> Materials management -> Purchasing -> -> Requisition -> Create

• Change: Logistics -> Materials management -> Purchasing -> -> Requisition -> Change

• Display: Logistics -> Materials management -> Purchasing -> -> Requisition -> Display

Purchase Orders• Purchase orders are:

– a formal request to provide materials or services

– an internal planning and tracking tool

• Purchase orders identify:– vendor– material and/or service– quantity and price– delivery dates– terms of payment

Purchase Order Structure

• Header - information specific to the entire purchase order– vendor– currency– payment terms

Purchase Order Structure

• Line item details– account assignment– delivery schedule– materials/services quantity– price – description– item category

Item Category• Item category defines the form of

procurement

• Whether a purchase order requires:– material number– account assignment– goods receipt and/or invoice receipt

• Examples:– subcontracting– consignment– stock transfer

Purchase Order Output

• Request for quotations

• Purchase order

• Order acknowledgment

Purchase Order Output Format

• Printed and mailed

• EDI

• Faxed (hardcopy or electronic)

Purchase Order - Menu Paths

• Create: Logistics -> Materials management -> Purchasing -> -> Purchase order -> Create– vendor known– vendor unknown– via requisition

• Change: Logistics -> Materials management -> Purchasing -> -> Purchase order -> Change

• Display: Logistics -> Materials management -> Purchasing -> -> Purchase order -> Display

Purchase Order – Transaction Codes

• Create: Logistics -> Materials management -> Purchasing -> -> Purchase order -> Create– vendor known– vendor unknown– via requisition

• Change: Logistics -> Materials management -> Purchasing -> -> Purchase order -> Change

• Display: Logistics -> Materials management -> Purchasing -> -> Purchase order -> Display

Goods Receipt • Goods receipt with reference to a purchase

order: – copy data from purchase order– delivery notification– invoice verification– updates PO history– inventory update– automatic update of G/L accounts

• You can search for the PO number with:– material number, vendor number, etc.

Goods Receipt Destinations• Stock - given a storage location, can be

posted to three different stock types:– unrestricted-use– quality inspection– blocked stock (valuated)

• Consumption - can be assigned a recipient or unloading point

• Goods Receipt Blocked Stock - updates inventory, but material is not valuated (conditional acceptance)

Goods Receipt - Movement Types

• Movement types - stock transactions:– goods receipt– goods issue– stock transfer

• Movement type determines which:– quantity fields are updated– stock types are updated– G/L stock or consumption accounts are

updated– fields are displayed during document entry

Movement Type - Examples• 101 - goods receipt for purchase order

into warehouse/stores

• 102 - reversal of goods receipt for purchase order into warehouse/stores

• 122 - return delivery to vendor

• 501 - receipt w/o purchase order into unrestricted-use stock

Goods Receipt - Account Postings

• Inventory account is debited at standard price

• GR/IR clearing account is credited at purchase order price

• Price difference account is debited (credited) with difference between standard price and purchase order price

Effects of a Goods Receipt

• PO history and PO updated• Material master - stock and value updated• Notification of goods receipt issued (optional)• Transfer request to Warehouse Management

system (if active)• Material and financial documents created and/or

updated• Stock and consumption accounts updated• Inspection notification in QM (if active)

Goods Receipt - Menu Paths

• Create: Logistics -> Materials management -> Inventory management -> -> Goods movement -> Goods receipt -> For purchase order ->– PO number known– PO number unknown

• Change: Logistics -> Materials management -> Inventory management -> -> Material document -> Change

• Display: Logistics -> Materials management -> Inventory management -> -> Material document -> Display

Goods Receipt – Transaction Codes• Create: Logistics -> Materials management ->

Inventory management -> -> Goods movement -> Goods receipt -> For purchase order ->– PO number known– PO number unknown

• Change: Logistics -> Materials management -> Inventory management -> -> Material document -> Change

• Display: Logistics -> Materials management -> Inventory management -> -> Material document -> Display

Invoice Verification

• Matches the vendor’s invoice to the purchase order and the goods receipt (3rd part of 3-way match)

• Matches price and quantity

• Updates the purchase order and its history

• Updates accounting information

Invoice Payment

• Selects invoices for payment based on the payment terms in the vendor master or purchase order

• Generates payment for released invoices

• Updates accounting information

Accounts Payable Payment Process

• Determines:– open items to be paid– when they will be paid– bank from which payment will be made– payment medium– who will get paid

• Payment process creates a financial accounting document to record the transaction

Invoice Processing - Menu Paths

• Enter an Invoice: Logistics -> Materials management -> Invoice verification -> Invoice verification ->-> Document entry -> Enter invoice

• Change: Logistics -> Materials management -> Invoice verification -> Invoice verification ->-> Further processing -> Change

• Display: Logistics -> Materials management -> Invoice verification -> Invoice verification ->-> Further processing -> Display

Invoice Processing - Menu Paths

• Payment Processing: Accounting -> Financial accounting -> Accounts payable ->-> Document entry -> Outgoing payment -> Post

• View PO History Documents: Logistics -> Materials management -> Purchasing ->-> Purchase order -> List display -> By PO number

Invoice Processing – Transaction Codes

• Enter an Invoice: Logistics -> Materials management -> Invoice verification -> Invoice verification ->-> Document entry -> Enter invoice

• Change: Logistics -> Materials management -> Invoice verification -> Invoice verification ->-> Further processing -> Change

• Display: Logistics -> Materials management -> Invoice verification -> Invoice verification ->-> Further processing -> Display

Invoice Processing - Menu Paths

• Payment Processing: Accounting -> Financial accounting -> Accounts payable ->-> Document entry -> Outgoing payment -> Post

• View PO History Documents: Logistics -> Materials management -> Purchasing ->-> Purchase order -> List display -> By PO number