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Business Blue PrintBusiness Blue Print

MATERIALS MANAGEMENT

EMAMI, PONDICHERRY - 500081, Andhra Pradesh, India, Phone : 39832312, 39832532, Fax : 28249457

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RGS MM TEAM

S.no RevisionCreated

Date

Last

modifiedRemarks

1. 1.0 26.06.2011 30.06.2011

.


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BUSINESS BLUEPRINT DOCUMENT

MATERIAL MANAGEMENTMATERIAL MANAGEMENT

Version: 1.0


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Date:


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Document Information

Document Name Business Blue Print

Title PRP_ MM _BBP_Business Blueprint_ Material Management

Document Purpose Requirement gathering and Mapping to SAP

Key Words

Document Status

Contact for Enquiries

Document Change Control :

Release Description Created by DateReviewed

byDate

Approved

byDate


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ContentsContents

RGS MM TEAM………………………………………………………………………2

MATERIALMANAGEMENT.................................................................................... 3

EXECUTIVESUMMARY…………………………………………………………..4

ORGANIZATIONALSTRUCTURE.........................................................................8

REQUIREMENTS/EXPECTATIONS………………………………………………10TO BE STRUCTURE…………………………………………………………………11

CHANGES TO EXISTING ORGANIZATION

PROCESSES………………………………………………………………………….11

PLANTS AND STORAGE LOCATIONS…………………………………………...11

PLANTS………………………………………………………………………………12

STORAGELOCATIONS……………………………………………………………..12

PURCHASINGORGANIZATIONS………………………………………………….13

PURCHASING ORGANIZATIONS FOR EMAMI

…………………………………...13

PURCHASINGGROUPS……………………………………………………………..14

MASTERDATA……………………………………………………………………..14

AS IS PROCESS…………………………………………………………………….14

DETAILS IN MATERIALS MASTER………………………………………………15

INDUSTRY SECTOR………………………………………………………………15

MATERIAL TYPE………………………………………………………………,,,,,,,15

MASTERIAL CODIFICATION…..…………………………………………………16

TRANSACTION CODE…………..…………………………………………………17

DESCRIPTION OF IMPROVEMENTS…………………………………………….17


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VENDOR MASTER……………………………………………………………..…17

VENDOR GROUP………………………………………………………..…………18

PARTNER FUNCTIONS……………………………………………………………18

VENDOR.RECONCILIATION.ACCOUNTS………………………………………18

TRANSACTION CODE……………………………………….……………………19

DESCRIPTION OF IMPROVEMENTS

PURCHASE INFO RECORDS…………………….………………………………20

TRANSACTION CODE……………………….…………………………………….20

DESCRIPTION OF IMPROVEMENTS…………………….………………………20

SOURCE LIST………………………………………………………………………20

AS-IS……………………………………….…………………………………………21

TO-BE…………………………………………………………………………………21

TRANSACTION CODES

PROCUREMENT FLOW……………………………………………………………21

REQUIRED BUSINESS PROCESS FLOW DIAGRAM FOR EMAMI

REQUIREMENTS/EXPECTATIONS FROM THE

PROCUREMENT………………………………………………………………………22

PURCHASE REQUISTIONS…………………………………………………………23

PURCHASE REQUISTION DOCUMENTS………………………….……………..…24

PROCUREMENTS TYPE……………………………………………………………24

PURCHASE REQUISTION NUMBERING…………………………………..….….24

ITEM NO.INPURCHASE REQUISTION………………………………..………….…25

PURCHASE REQUISTION RELEASE PROCEDURE………..……………………....25


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ATTACHEMENTS IN PRDOCUMENT………………………………………….……25

RFQ……………………………………………………………..……………………..…26

QUOATATION………………………………………………………………………..…26

RFQ TYPE………………………………………………………………………………..26

PROCUREMENT TYPE………………………………………..……………………..…27

NUMBER RANGE…………………………………………………………………….…27

ATTACHEMENTS IN A RFQ DOCUMENT……………………..…………………..…27

IMPROVEMENTS

PURCHASE ORDER…………………………………..………………………………27

AS-IS………………………………………………………………………………….….27

TO-BE……………………………………………………………………………………28

PURCHASE ORDER…………………..…………………………………………….…28

PROCUREMENT TYPES………………………………………………………….…28

DESCRIPTION OF IMPROVEMENTS……………………………….……………..…28

OUTLINE AGREEMENT…………………………………………………………...28

CONTRACT…………………………………………………………………………....29

AS-IS………………………………………………………………………………….…29

TO-BE……………………………………………………………………………..….…29

NUMBER RANGES………………………….……………………………………..….29

RELEASE STRATEGIES……………………………………………………….……..29

SCHEDULING AGREEMENT……………..…………………….…………………..30

NUMBER RANGE………………………………………………………………………30

SERVICES PROCUREMENT……………….……………………………………….31

SPECIAL ORGANIZATIONAL CONSIDERATIONS…………………………...……31


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TO-BE……………………………………………………………………………………31

NUMBER RANGE…………………………………………..……………………….…31

RELEASE STRATEGIES……………………………………………………………….31

INVENTORY MANAGEMENT………………………………………………………32

GOODS RECIEPT……………………………………………………………………..37

TYPE OF GR/MATERIAL DOCUMENT……………………………………………...37

NUMBER RANGE……………………………………………………………………...37

ACCOUNT MOVEMENT……………………………………………………..………..38


GOODS ISSUE…………………………………………………………………………39

NUMBER RANGES…………………………………………………………………….40

ATTACHEMENTS IN A GI DOCUMENT…………………………………………….40

IM (GOODS RETURNS TO VENDOR)………………………………………………..41

REQUREMENTS/EXPECTATIONS…………………………………………………..42

GENERAL EXPLANATIONS………………………………………………………….42

SPECIAL ORGANIZATIONAL CONSIDERATIONS………………………………...43

SOLUTION IN SAP …………………………………………………………………....43

STOCK TRANSFER (PLANT TO PLANT)…………………………………………44

TRANSFER POSTING (STORAGE LOCATION TO STORAGE LOCATION)-

TCODE:MB1B…………………………………………………………………….…….45

ONE STEP AND TWO STEP STOCK TRANSFER…………………………………...45

NUMBER RANGES…………………………………………………………..………...45

PHYSICAL INVENTORY VERIFICATION………………………………………..46


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REQUIREMENTS/EXPECTATIONS………………………………………………….46

TO-BE STRUCTURE…………………………………………………………………...47

PHYSICAL INVENTORY PROCEDURES…………………………………………….47

PHYSICAL INVENTORY……………………………………………………………...48

CREATE A PHYSICAL INVENTORY DOCUMENT. (TCODE MI01)…….………..48

BLOCKING MATERIALS FOR POSTING …………………………………………...48

INVENTORY COUNT………………………………………………………………….49

ENTERING THE COUNT RESULTS IN THE SYSTEM (TCODE: MI04)…………...49

POSTING INVENTORY DIFFERENCES (TCODE: MI07)…………………….…..…49

Batch Management……………………………………………………………….…….50

As-Is Process…………………………………….………………………………………50

To-Be…………………………………………………………………………………….50


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EXECUTIVE SUMMARY

SAP Implementation at EMAMI is being carried out using standard ASAP (Accelerated SAP)

methodology suggested by SAP for implementation.

The consultants from RGS Ltd. referred Q & A DB (Question & Answer Database) as suggested in

ASAP methodology for capturing the requirements from EMAMI process owners, core users and

core team members. A series of various meetings were conducted with EMAMI process owners,

core users and core team members to capture AS-IS process followed in EMAMI. After that SAP

orientation sessions were administered for the process owners, core users and core team members

of EMAMI to give them orientation towards the standard SAP process functionality.

Orientation sessions were followed by exhaustive and interactive business workshops with EMAMI

process owners, core users and core team members, in which RGS consultants demonstrated the

standard SAP process functionality cycles suitable for EMAMI group and got confirmation from

the process owners, core users and core team members regarding the “To- Be” processes to be

followed in EMAMI after SAP implementation. These proposed “To-Be” processes, captured

during business workshops as well as meetings with EMAMI process owners, core users and core

team members, are consolidated in this business blueprint document.

This business blueprint is prepared based on the inputs given by EMAMI process owners, core

users and core team members till the date of submission of the business blueprint. Configuration of

SAP modules for the processes of EMAMI group will be done as mentioned in the business

blueprint. Any future changes in these processes documented and agreed upon as part of this

blueprint sign-off will be addressed strictly through Change Management Procedure as mutually

agreed in the Contract.


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ORGANIZATIONAL STRUCTURE

AS – IS SITUATION


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EMAMI COMESTICS

KOLKATA

PLANT

oc1 Stloc3Sloc 1

PONDICHERRY

PLANT

EMAMI MANCOMPANY

EMAMI MARK COMPANY

CHENNAI

PLANT

MUMBAI

PLANT

Sloc2 Sloc1 Sloc2 Sloc3

Sloc 1

CEN PURCHORG



EMAMI Manufacturing Company consists of two plants located in KOLKATA and

PONDICHERRY which manufactures Cosmetic Products.

EMAMI marketing Company Consists of two Plants located at CHENNAI and MUMBAI Which

is responsible for Distribution across India.

The purchase department is the organization, which handles the acquiring of goods or services to

fulfill the goal of enterprise. It ensures that the materials or services are procured at the best

possible total cost of ownership to meet the needs of the purchaser in terms of quality, quantity,

time and location.

The structure provided above demonstrates the purchasing department of EMAMI. It consists of one purchasing point responsible for procurement of all the materials in all the plants across the

two companies.

There are 3 storage locations in Kolkata plant and the Pondicherry plant which can store Raw

materials, Semi Finished and Finished Goods separately in each storage location. There is an

individual storage location for each plant (Chennai & Mumbai) under Marketing company

which stores Finished goods.

REQUIREMENTS/EXPECTATIONS

Material management organization structure should support:

Purchase of materials, Vendor Consignments and Services for the manufacturing units of

EMAMI at Kolkata and at PONDICHERRY

Purchase of administration related items.

Inter plant stock transfer orders.

Intra company stock transport orders

Inventory Management.


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Subcontracting

A EMAMI production line has two manufacturing plants at Kolkata and Pondicherry where the

Manufacturing of Cosmetic products is made. All the Plants has a common procurement division.

TO-BE STRUCTURE

SL01 SL02 SL03 SL01 SL02 SL03 SL01 SL01


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PL01

Plant

RM01 FG01FG01

PL02Plant

EM01

Company Code

EM02

Company Code

PL03

Plant

PL04Plant

SF01

RM01 SF01 FG01

FG01

CP01

PurchasingOrg

EMAMI COMESTICS

GROUP



EXISTING ORGANIZATION PROCESSES

• One purchasing organizations is responsible for entire purchasing activities.

• Three purchase groups are there to monitor separately the purchase of materials in place

of purchase team.

• 3 storage locations are there for each plant under manufacturing company and 1 storage

location for each plant under Marketing Company which helps in proper tracking and

monitoring of stocks.

PLANTS AND STORAGE LOCATIONS

A plant is an organizational unit within Logistics, serving to subdivide an enterprise according to

production, procurement, maintenance, and materials planning. In all transactions and related

documents, the plant is taken as the reference with respect to which the material is maintained and

valuated.

A storage location is a location within the plant where inventory is stored.

Storage locations are defined for each plant to keep stock of materials.

Separate storage locations are not defined for under test, approved & rejected material,

Vendor Consignments because these are taken care by stock types in SAP.

Storage location is the level at which physical Inventory will be done

Based on these criteria following plant and storage locations will be mapped in SAP:

PLANTS

For naming convention of SAP code for Plant following logic is used

Its four digit code

First character from left K001 denotes Plant location


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Last digit denotes numbers

Plants under EM01 Company code

Plants under EM02 Company code

Description Geographic

Location

SAP Code

CHENNAI Plant PONDICHERRY C001

MUMBAI Plant KOLKATA M001

STORAGE LOCATIONS

A storage location is the place where stock is physically kept within a plant. Material can be stored

in more than one storage location within a plant. A storage location can be a physical or logical.

The Storage Location would be assigned to a plant.

For naming convention of SAP code for Storage Location following logic is used

Its four digit alphanumeric code


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Description Geographic

Location

SAP Code

PONDICHERRY Plant PONDICHERRY P001

KOLKATA Plant KOLKATA K001



First two characters from left storage denotes storage

Last characters denotes numbers.

Storage

LocationPlant Storage Location Type

RAW RM01 Raw Materials

SEMI

FINISHED

SF01 Finished

FINISHED FG01 Raw Materials & Finishesd

PURCHASING ORGANIZATIONS

Purchase Organization is an organizational unit within logistics in SAP, which subdivides the

company to facilitate efficient and effective purchasing. A Purchase Organization procures

materials and services, negotiates conditions of purchase with vendors, and bears responsibility for

such transactions.

A purchasing Organization can be divided into several Purchasing groups that are

responsible for different operational areas.

Purchasing Organization has its own Info Records and Conditions for pricing.

Purchasing Organization has its own vendor master data.

All items in an external purchasing document, that is, request for quotation, purchase order,

contract, or scheduling agreement, belong to a Purchasing Organization

The purchasing Organization serves as the selection criterion for lists of all purchasing

documents.

PURCHASING ORGANIZATION FOR EMAMI

At EMAMIL, the purchasing activity is carried out by Central purchase organization located at

Company code level.

For naming convention of SAP code for Purchase Organization following logic is used


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First two letters from the word Central puechase organisation ‘C P’ for purchase

organization and digit 01 for number of Pur Org.

There will be one purchase organizations in EMAMI with functions as described below:

CP01: This purchase organization will deal with all the purchase activities for all the raw

materials and special procurement of materials at all the plants in two companies.

CP01:This purchase organisation will deal with all the purchase activities in all the plants

PURCHASING GROUPS

A purchase organization can be subdivided into purchase groups, which are responsible for

certain day to day-purchasing activities. A Purchasing group can be a buyer or group of

buyers responsible for procuring the material.

A purchasing group can be an individual or a group of individuals responsible for procuring

the materials. It facilitates approval processes for purchasing documents.

Local purchases for different operational areas will be handled through different purchasing

Groups. To facilitate authorizations at this level for proper control over purchases, release

procedures will be used.

Central office will be able to generate reports separately for both local and central purchases

using these purchase groups. Purchasing Groups for EMAMI are defined based on the type

of material being procured.


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SAP CODE PURCHASE ORGANIZATION

CP01 Purchasing Organization for all plants.



Purchase Groups: Purchase groups i.e. group of buyers who will be carrying out different

purchase activities for the above-mentioned purchase Organizations.

SAP CODE PURCHASER TYPE

001 Herbals

002 Chemicals

003 Packaging

MASTER DATA

Master data, which may include reference data, is information that is key to the operation of

business. This key business information may include data about customers, products, employees,

materials, suppliers, etc. which often turns out to be non-transactional in nature. In this regard,

master data can support transactional processes and operations, but its use is certainly not limited to

such (analytics/reporting is another area greatly dependent on an organization's master data).

Master data is often used by several functional groups and stored in different data systems across an

organization and may or may not be referenced centrally; therefore, the possibility exists for

duplicate and/or inaccurate master data.

TYPES OF MASTER DATA

Material Master

Vendor Master

Info Record

Source List


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MATERIAL MASTER

AS-IS PROCESS

There is no standard material codification system in place, each department is using their

own derived materials codes.

To-BE PROCESS

The Material/Service code will be a 10 digit numeric code. This code will not be the same as is

used by the organization in the current scenario. Vendor material number or the currently

used material number can be maintained in the material master in Old Material Number

Field.

The master will be maintained centrally i.e. same material code across various plants. The

basic data will be the same for all plants but plant specific data will be created for each plant

separately. In that case the material number will be common for all the plants irrespective of

the company to a plant belongs to.

If the data required for a particular function is not maintained in the material master, that

function will not be triggered, for example, if purchasing data does not exist for a material

system, it will not allow creation of any purchasing document for that material.

DETAILS IN MATERIAL MASTER

INDUSTRY SECTOR

Industry sectors are created in the Client level and have control functions in the R/3 System. For

example, it is a factor determining the screen sequence and field selection in a material master

record. Once an industry sector has assigned an industry sector to a material, it cannot be change

the subsequently. The standard R/3 System contains the following industry sectors. The ID used to

identify the industry sector internally appears in parentheses.


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http://ff515b8c49d811d182b80000e829fbfe/content.htm




chemicals industry (c)

For EMAMI group, a customized industry sector will be created in the system.

MATERIAL TYPEMaterials with the same basic attributes are grouped together and assigned to a material

type. This allows managing different materials in a uniform manner in accordance with company's

requirements. The material type determines certain attributes of the material and has important

control functions. For example, it is a factor determining the screen sequence and field selection in

a material master record. When a material master record is created, the material type determines:

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 may be entered.

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. The material types that will be used are,


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Material Type Description Example

ROH for all Raw materials

HALB for semi finished

FERT for finished materials

DIEN For Services





MATERIAL CODIFICATION

The material code will be a ten-digit number.

Material types and Number range for EMAMIL.

SAP Material

Type

Description SAP Code / Number Range

ROH for all Raw materials 1100000-1199999

HALB for semi finished 2200000-2299999

FERT for finished materials 3300000-3399999DIEN for Services 6600000-6699999

TRANSACTION CODE

The Transaction code for creating material master is MM01.


Centralized material master record will have following benefits:

Requirement of a material in a certain plant will be confirmed by the availability of the samematerial in a different plant.

Better control on various functions for example a material can be blocked for procurement if

required while other activities will still be in place.

Instantaneous availability of data for all the functional groups

Security of the master data is improved

Uniform codes ensures better planning

VENDOR MASTER


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Business transactions are posted to various accounts and managed using the details in vendor

masters. The master record would have to control how business transactions are recorded and

processed by the system.

Vendor master should also provide all the necessary details like type of vendor, address and contact

details, procurement currency, payment terms, etc.

AS-IS

There is no unique number assigned to a vendor;

A list of vendors, required by the organizations quality Policy is maintained.

TO-BE

Every vendor will be identified by a unique vendor code. In a company, there can be more than one

purchase organization. A vendor code defined in the company need to be extended to the required

purchase organization.

Vendor is domestic type . Vendor’s address, maintained in vendor master.

The vendor code will be a numeric code. This code will not be the same as is used by the

organization in the current scenario, which is generally vendors name.

The master will be maintained centrally i.e. same vendor code across various company codes. This

vendor code will be extended to other companies and purchasing organizations if required. So any

other purchase organization or company will not have a different vendor code for the same vendor.

VENDOR GROUPS

To create a master record, an account group has to be specified. The account group cannot be

changed after the master record has been created.

Account groups determine:

In case of EMAMI, the Vendor Account Groups are as follows:

Account group Description Number range

KRLV Local Vendors Internal numeric

KRFV Foreign Vendors Internal numeric


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KROT One-time vendors External alphabetic

PARTNER FUNCTIONSBusiness Partner "vendor" can assume different roles in its dealings with the company.

Accordingly, in a procurement transaction, the “vendor” is first the ordering address, then the

supplier of goods, then the invoicing party, and finally the payee. For this reason, several partner

roles (partner functions) can be assigned to the vendor.

VENDOR RECONCILIATION ACCOUNTS

At the time of posting items to a subsidiary ledger, the system automatically posts the same

data to a reconciliation account in the general ledger. Each subsidiary ledger has one or more

reconciliation accounts in the general ledger. These reconciliation accounts ensure that the balance

of G/L accounts is always zero. This means balance sheets can be drawn at any time without having

to transfer totals from the sub ledgers to the general ledger.

Vendor master is used by the MM, PM, and FI modules. Vendor master is linked to FI using the

reconciliation account in the vendor master.

Clearing Between a Customer and Vendor

If a vendor is also a customer, or vice versa, the payment program and the dunning program can be

configured to clear the vendor and customer open items against each other. Customer line items can

also be selected while displaying the vendor line items for this account.

Vendor master is called upon in the following ways:

Linked to various GL accounts by way of special GL indicators depending on the nature of

transaction.

Linked to purchase order creation in material management.

Linked to House Banks for carrying out the payment program in Bank Accounting

TRANSACTION CODE

The Transaction code for creating vendor master is xk01.


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Better control on various functions for example a vendor can be blocked for procurement if

required while other activities will still be in place.



Uniform codes ensures better planning

PURCHASE INFO RECORDS

The purchasing info record should contain information on a specific material and a vendor

supplying the material.

The info records contain the following:

Data such as prices and conditions that can be stored for the relevant purchasing organization or

plant.

Tolerance limits for over deliveries and under deliveries

The planned delivery time (lead time required by the vendor to deliver the material)

Vendor evaluation data

An indicator showing whether the vendor counts as the regular vendor for the material

The vendor sub-range to which the material belongs.

The availability period during which the vendor can supply the material

AS-IS

The organization does not maintain the historical data for the vendor and material price

combination. Prices are solely adopted in the purchasing documents as per prior negotiations with

the vendor.


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TO-BE

The info records will be created automatically as the purchase transactions run. The info record

requires two organization levels: Plant and Purchase Organization.

NUMBER RANGE

Info record Proposed Number Range

For stock material 1100000000 to 1199999999

For Consignment 1200000000 to 1299999999

For Subcontract 1300000000 to 1399999999

TRANSACTION CODE

The transaction code to create info records is ME11. Info records are also updated duringquotations, purchase orders etc.


Better control on various functions.



In the info record the details like payment terms, delivery terms, conditions for pricing like

discount, surcharges etc can be stored which will be taken automatically into the purchase order

from purchasing info record.

SOURCE LIST

The source list is used in the administration of sources of supply.

It 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 record.


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AS-IS

The company maintains a source list detailing the list of items a vendor provides as per their

QMS documents.

However, there is no periods defined for the source list.

TO-BE

A source list will be defined for each material and vendors shall be either allowed, disallowed

or fixed for supplying.

The following functions will be allowed

Allow defining a source of supply as "fixed".

Such sources count as preferred sources over a certain period of time.

(For instance, the fixed vendor for material X is XX. for the first quarter and YY for the

second quarter of the year.)

Allow defining a source of supply as "blocked".

( for instance, the contract F may not be used for a certain period of time.)

As an aid in selecting the preferred source during the source determination process.

To block the external procurement of a material.

(For example, material L may not be ordered from 01.7.11 to 31.12.11)

TRANSACTION CODES

The source list is prepared in ME01

PROCURMENT FLOW

.


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The procurement process at EMAMI starts with requisition from any department/division in the

form of a material indent. Indent would have the details of materials required, required quantity and

required delivery date. This indent would be sent to the purchasing department, after getting the

required approval.

The purchase department based on the material would send RFQ to the vendors. After receiving the

quotations, they will be compared based on commercial and technical terms. Then the best amongst

them would be selected for the purchase order. A purchase order is then raised based on the

quotation and sent to the vendor. Upon delivery, the goods are receipted by the concerned

department and based on the material type; the item is consumed or taken to inventory. The vendor

then sends the invoice and then the invoice is compared against the goods receipt document.

For some materials, the organization maintains contracts for materials (with or without delivery

date mentioned). For executing the goods delivery, the procurement department sends the vendor a

Release order, which contains the amount of goods to be delivered and the delivery period. The

organization also has a contract with predefined scheduling arrangement, where the dates of

delivery and quantity of material to be delivered will be mentioned in the contract.

In case the production lines are exhausted, subcontracting of mayonnaise processes takes place, and

the material is delivered to the PONDICHERRY Plant. In special cases (Like in case the production

capacity is to the maximum), the company procures the material and delivers directly to the

customer (Third party sales).

Preservatives are purchased in consignment, i.e. the items are stored at storage location and invoice

is generated as per the consumption of the stock.

For procurement of services, purchase order is raised and details of the service/services are defined

along with the payment terms. Upon completion of the service, a completion of services sheet is

filled.

3.3 REQUIRED BUSINESS PROCESS FLOW DIAGRAM FOR EMAMI


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PROCUREMENT FLOW

Purchase

Requisition RFQ QUOTATIONPURCHASE

ORDERGOODSRECIEPT

INVOICE

RECIEPT

SOURCEDETERMINATION

STOCK

REQUIREMENTS/EXPECTATIONS FROM THE PROCUREMENT

• Planning for raw materials

• Planning to place the requisition to cover if any shortage exists.

• Creation of RFQ and sending it to vendors

• Maintaining quotations and price comparison

• Creation of purchase orders or contract in the system

• Different Number ranges for Domestic, Direct purchases and Services

• Approval process for Purchase orders

• The discounts and taxes (if applicable) to be captured in the purchase order

• Printing of Purchase Documents

• Asset Purchase

• Goods Receipt

• Contracts and scheduling arrangement functionality


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PURCHASE REQUISITIONS

Purchasing process starts with the generation of purchase requisition (PR). PR is created manually

in a user department or from the location where the material is required. Purchase Requisition

should be raised if there is insufficient stock of material in stores, or if there is either a planned or

an emergency requirement of any material or any services. The concerned authority must duly

approve the purchase requisition.

AS-IS

At EMAMIL purchase request is created manually, whenever a material requirement

arises.

TO-BE

Purchase process in SAP is initiated through purchase requisition functionality. A purchase

requisition is a request or instruction to Purchasing to procure a certain quantity of a material or a

service so that it is available at a certain point in time.

PURCHASE REQUISITION DOCUMENTS

Purchase requisitions at EMAMIL will be of following types characterized by the document type:

NB (Standard)

SER (External Service)

AN

PROCUREMENT TYPE

A purchase requisition consists of a number of items, for each of which a procurement type isdefined. The following procurement types exist:

Standard

External service


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PURCHASE REQUISITION NUMBERING

The number ranges for purchase requisitions are:

Document

Type

Description Proposed Number Range

NB Standard Purchase Order 4500000 - 4599999

ANStandard RFQ

6000000-69999999

ITEM NO. IN PURCHASE REQUISITION

Item No. in PR is the serial number of the item. There would be a difference of 10 between two

item numbers.

PURCHASE REQUISITION RELEASE PROCEDURE

It is an internal document that is not used outside the enterprise and is subject to a release

(clearance or approval) procedure.

This component is used to set up approval procedures for purchase requisitions. Under such a

procedure, if a purchase requisition fulfills certain conditions (e.g. the total order value exceeds

Rs.10, 000), it has to be approved by a person with the requisite authority (the head of thedepartment, for instance) before it can be processed further. This process of approving (clearing, or

giving the "green light" to) a proposed item of expenditure is replicated in the SAP System by the

"release procedure".

ATTACHMENTS IN A PR DOCUMENT

Each PR document in SAP will be having all information regarding the required purchase. It will

not store the information such as drawings, terms and condition documents etc. All those details can

be attached to the PR document in SAP as an attachment.



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Following are the benefits & improvements with respect to changes in the existing

processes:

Visibility in the process is possible

Source suggestion and source determination

Approved vendors only will be able to supply

Better tracking of requisition

Proper and efficient tracking of service requisitions and rented item requisition.

RFQ

A request for quotation (RFQ) is an invitation extended by a purchasing organization to a vendor to

submit a quotation (bid) for the supply of materials or performance of services.

QUOTATION

A quotation is an offer by a vendor to a purchasing organization regarding the supply of materials

or performance of services subject to specified conditions.

In Purchasing, the RFQ and the quotation form a single document. Prices and conditions quoted by

vendors will be entered in the original RFQ. In case an RFQ has been issued to several vendors, thesystem will determine the most favorable quotation submitted through quotation comparison

functionality.

RFQ TYPE

There would be only two types of RFQ in EMAMI that would be:

AN (RFQ and Quotations)

PROCUREMENT TYPE

RFQ can consist of a number of items, for each of which a procurement type is defined. The

following procurement types exist:

Standard


Page 33 of 66



External service

NUMBER RANGE

The number range for RFQ would be:

Document

Category

Doc Type Description Number Range

A AN RFQ and

Quotation

6000000-69999999

ATTACHMENTS IN A RFQ DOCUMENT

Each RFQ document in SAP will be having all information regarding the required purchase. It will

not store the information such as drawings, terms and condition documents, other tender details etc.

All those details can be attached to the RFQ document in SAP as an attachment.

IMPROVEMENTS

Tracking of quotations

Tracking of linkage between PR and RFQ through collective number.

PURCHASE ORDER

The purchase order should contain all the procurement and material / services related information

required by vendor. It should provide the quantity to be purchased, delivery date and other

contractual stipulations. Release order for material or work order for services covered under

contract are required for information regarding delivery of the same. It is a legal document and

should be verified and approved by respective department heads.

AS-IS

EMAMI uses different type of purchase orders.

Standard purchase order – Used for standard domestic material purchase


Page 34 of 66



Service order/Work order -Used for service purchase

Release order/Call out order-Used as call out for material or services contracted

Stock transfer order-Used for material transfer across the plants

Every PO is subjected to a predefined set of approvals based on certain defined criteria.

TO-BE

The system will adopt information from the requisition and the quotation to help the user to create a

purchase order. As with purchase requisitions, Purchase orders can be generated manually or

automatically. Contracts (in the SAP System, types of longer-term purchase agreement) are also

supported. The purchase order will cover all the price heads that are applicable to the purchasing.

PURCHASE ORDER

The purchase order can be used for a variety of procurement purposes. User can procure

materials for direct consumption or for stock. Delivery of the total quantity of material (or

performance of the total volume of services) specified in a purchase order item can be spread

over a certain period in a delivery schedule. This schedule would be recorded in the PO

indicating the individual quantities with their corresponding planned delivery dates.

The system will adopt information from the requisition and the quotation to help the user to

create a purchase order. As with purchase requisitions, Purchase orders can be generated

manually or automatically. Contracts (in the SAP System, types of longer-term purchase

agreement) are also supported. The purchase order will cover all the price heads that are

applicable to the purchasing.

Purchase order can be generated in different ways.

When Vendor is known at PO generation time .This procedure will be used in case when

vendor is known only prior to PO Creation in the system and not during creation of PR.

Creation of POs from assigned requisitions .This procedure will be used for creating PO with

reference to purchase requisitions already assigned to a vendor at the time of latter’s creation.


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The various types of PO for EMAMI would be:

NB (Standard)

UB (Stock Transfer)

Purchase Order Type Purchase Requisition Type

Standard NB Standard NB

Stock Transfer UB Standard UB

PURCHASE ORDER RELEASE PROCEDURE

It is an internal document that is not used outside the enterprise and is subject to a release

(clearance or approval) procedure.

This component is used to set up approval procedures for purchase order. Under such a procedure,

if a purchase order fulfills certain conditions (e.g. the total order value exceeds Rs.10, 000), it has to

be approved by a person with the requisite authority (the head of the department, for instance)

before it can be processed further. This process of approving (clearing, or giving the "green light"

to) a proposed item of expenditure is replicated in the SAP System by the "release procedure".

PROCUREMENT TYPES

The various types of procurement for EMAMI are:

Standard

All material procurements of the company will be handled through standard purchase order of

document type HNB in SAP. The necessary prices, discounts, surcharges, taxes, freight etc will be

included in the PO during its creation.

Services


Page 36 of 66



All external service procurements of the company will be handled through service purchase order

of document type HSER in SAP. The necessary prices, discounts, surcharges, taxes, freight etc will

be included in the PO during its creation

Service item is identified by a separate item category D. Since services cannot be stored in

inventory, they will be directly consumed against a cost centre. The consumption G/L account

needs to be identified at the time creation of Service entry sheet. The pricing procedure will be the

same as the standard PO.


Better tracking of PO processing.

Tracking of reference of PO with PR and contract.

OUTLINE AGREEMENT

An Outline Agreement like a contract should be used if the material is required continuously

throughout a certain predefined period at a certain fixed and agreed price or when there exists a

requirement of a long-term service. Whenever there is a requirement of the material/ service, this

document should be referred to.

There are two types of Outline Agreements

Contracts

Scheduling Agreements

CONTRACT

The contract should avoid repeated initiation of the procurement process if the material is required

continuously throughout a certain predefined period at a certain fixed and agreed price or when

there exists a requirement of a long term service.


Page 37 of 66



AS-IS

A legal document in the form of a contract is maintained and release orders are raised against

the same. The value of the order and order already processed is not maintained.

TO-BE

NUMBER RANGES

Document

Category

Document

Type

Description Proposed Number Range

K WK Value contract

460000 - 469999K MK Quantity contract 470000 - 479999

RELEASE STRATEGIES

Like purchase requisition, purchase order, contract is also subjected to release strategies. If there is

a business process requirement that the respective authority should duly approve the contract, then

it must pass through electronic signature or approval. Also since it is an outline agreement, it should

be approved.

Along with several approvals, tender committee, comprising of personnel form different department

approves contract.


Page 38 of 66



ATTACHMENTS IN A CONTRACT

Each contract document in SAP will be having limited information like validity, price, quantity etc.

It will not store the information such as terms and conditions, legal details etc, which are generally

a part of legal contract. All those details can be attached to the contract document in SAP as an

attachment.



Default source assignment for contracted material

Better tracking of PR and release order for particular contract

SCHEDULING AGREEMENT

The scheduling agreement should be raised if the requirement for procurement of material is on a

long duration basis. The delivery schedule should be given to vendor in advance in order to ensure

compliance to the delivery dates. This should be used only when there is no requirement of raising

a PO to same vendor and the quantity and schedule is known.

AS-IS

The company has a scheduling agreement for dyes and delivery dates are provided to the customer

TO-BE

In outline purchase agreement materials are procured on predetermined dates within a certain time

period and with particular terms and conditions. Delivery of the total quantity of material specified

in a scheduling agreement item is spread over a certain period as per a delivery schedule that

indicates the individual quantities with their corresponding planned delivery dates. The scheduling

agreement has following features:


Page 39 of 66



The following procurement types exist:

Standard

NUMBER RANGE

The number range proposed is:

Document Type Description Proposed Number Range

LP Quantity3500000000 to 3599999999

ATTACHMENTS IN A SCHEDULING AGREEMENT DOCUMENT

Each SA document in SAP will be having all information regarding the required purchase. It will

not store the information such as drawings, terms and condition documents etc. All those details can

be attached to the SA document in SAP as an attachment.



Default source assignment for contracted material

Better tracking of gas nominations, confirmations and quantity received.

SERVICES PROCUREMENT

Procurement of external services follows the same cycle as procurement of materials, with some

changes at document levels.

The service entry sheet should be used to ensure that the service(s) received are accepted by the

concern authorities. The service entry sheet should be duly approved by the respective department

head in order to create the liability in SR / IR clearing account.


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SPECIAL ORGANIZATIONAL CONSIDERATIONS

A service comprises of a number of sub services. Sub services again can be broken to activities

and task levels. For example, AMC is a service, which is consolidation of various service

phases and various activities to be performed either stage wise or parallel. Preliminary

(single activity or task) level service needs to be defined as a service and needs to be

maintained into service master. Service entry sheet for every preliminary activity under

major service is created and maintained.

While making the service entry sheet, a liability to pay the vendor is created in SR/IR clearing

account. If any service is procured with the material e.g. transportation, and cost is to be

included in material cost, this would not be covered under services management.

Service entry sheet is review and closed for predefined invoicing period.

Service entry sheet is maintained at site and is to be certified by relevant authority. Service

entry sheet must undergo release strategy.

AS-IS

The purchase order for material is the same as the purchase order for the service.

TO BE

MM External Services Management is an application component within the Materials Management

(MM) module. It supports the complete cycle of bid invitation, order placement phase, and

acceptance of services, as well as the invoice verification process.

Service Entry Sheet is made with reference to the Purchase Order and the percentage of the services

performed.

NUMBER RANGE

The number range proposed for EMAMIL is 1000000000 to 1999999999.

RELEASE STRATEGIES

Like other purchasing documents Service Entry sheet is also subjected to release strategies.


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The responsible authority should duly approve the service entry sheet since, after the acceptance, it

creates the liability in SR/ IR clearing account for invoice verification.

ATTACHMENTS IN A SERVICE ENTRY SHEET DOCUMENT

Each Service Entry Sheet document in SAP will be having information regarding the required

services received. It will not store the information such as terms and condition documents etc. All

those details can be attached to the Service Entry Sheet document in SAP as an attachment.

INVENTORY MANAGEMENT

AS-IS SITUATION


Page 42 of 66

Material from

supplier

GENER

AL

INSPE

CTION

NOT OK



The goods from the supplier are received at the storage area and the information is given to the

quality department along with the test certificate. Then the inspection of material takes place as per

the sampling plan. If the material inspected is ok it will be kept in respective storage area and if the

material is not ok, it is either rejected or sent back to supplier. In Special cases, it will be kept for

rework, if rework is possible at the company premises. These charges will be incurred from

supplier.

The Goods Receipts Process should ensure that the quantity of the materials is as per the desired

specifications as in the Purchase Order or Contract Release order and it should ensure that the

required materials, components and spares are delivered to the concerned user in time. The GR

process should be reflected in inventory and accounts. In EMAMI, goods receipt will be carried out

against a purchase order document, or stock transfer document. However, in some exceptional

cases like emergency purchase etc., goods receipt can be done without reference of any of these

documents. In the case of goods receipt with/without reference of PO/STO following requirements

should be fulfilled:

Goods to be received with/without PO

Goods receipt against a delivery (stock transfer with delivery)


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Material accepted

MaterialRejected

Material sent back

to supplier or kept

for rework.

OK

Material kept in

respective storage

area.



Physical verification of goods before entering into the system.

Materials are also received based on reservations created by the buyer.

Need to capture delivery details (LR no, delivery note, expiry date quantity in delivery note,

etc)

Credit GR/IR account and debit inventory account

Over/Under delivery tolerance shall be complied with.

TO-BE structure is arrived considering all the requirements.

TO-BE STRUCTURE


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Material fromsupplier with

PO

Materialreceived wrt

PO as QI stock

Material moved to

unrestricted stock typefrom QI stock.

Tcode: MIGOMtype: 101



Goods movement between intra-company


Page 45 of 66

GENER

AL

INSPECTION

Material

RejectedMaterial kept in the plant for

rework and the charges will be

incurred from sup.

Material from

plant 1 to plant 2

with Stock Transport Order.

Material received wrt

PO as QI stock Tcode: MIGO

Mtype:

Material sent back to supplier

with approval.

Supplier sends back new set of

materials.

OK

NOT OK NOT OK

General

Inspecti

on

Material moved to

unrestricted stock typefrom QI stock.

MaterialRejected

Material kept in the plant for

rework and the charges will be incurred from sup.

Material sent back to supplier

with approval.Supplier sends back new

set of materials. OK NOT OK NOT OK



Stock Types: SAP provides the functionality of segregation of various stocks on the basis of its

usage. These stock types are managed at plant level. Following stock types are available:

Stock TypeDescription

Total Valuated Stock Sum of all valuated stock of a material. It consists of all

the stock company owns.

Unrestricted Use Stock Company's own stock that is physically located in the

warehouse, valuated, and not subject to any kind of

usage restrictions

GR Blocked Stock Goods Receipt stock which is pending for Physical

Inspection


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Stock Type

Description

Blocked stock Company’s own stock that is not to be used. (Rejected

materials are also kept here)

Restricted Use Stock Valuated stock of a material managed in batches held

by a company (and belonging to that company), usage

of which is subject to certain restrictions. This category

of stock is only used when batch status management is

active.

Stock in Transfer Quantity that was already withdrawn from stock at the

issuing location (plant, storage location) during a two-step stock transfer but that has not yet arrived at the

receiving location (plant, storage location). Stock in

transfer is managed in the valuated stock of the

receiving location, but it does not yet count as

unrestricted-use stock. It can also not be inventoried

Stock in transit Stock in transfer that is created for a stock transfer

through an STO and for Transfer posting in two stepsDocument Concept: According to the document principle, a document must be generated and

stored in the system for every transaction/event that causes a change in stock. When posting a

goods movement in the SAP system, material document and accounting documents are created

which are explained below:

Material Document: In the Inventory Management system, when a goods movement is posted, a

material document is generated that serves as proof of the movement and as a source of information

for any applications that follow.

Accounting Document: If the movement is relevant for Financial Accounting (that is, if it leads to

an update of the G/L accounts), an accounting document is created parallel to the material

document.

Movement Types: When a goods movement is entered in the system, a movement type must be

entered to differentiate between the various goods movements. A movement type is a three-digit


Page 47 of 66



identification key for a goods movement. The following table contains examples of movement

types

Goods Movement

Transaction code Movement TypeGoods Receipt for Purchase Order into Unrestricted use

Stock

MIGO 101

Goods receipt for Purchase Order into GR Blocked Stock MIGO 103

Release from GR Blocked Stock MIGO 105

Return to vendor from unrestricted stock MB1C 122

Return to vendor from blocked Stock MB1C 124

The reversal movement types are for reversing the above goods movement. These movement types

are numbered as +1 for the movement to be reversed. For example reversal of 101 is 102. The

system automatically determines the reversal movement type. The movement type has important

control functions in Inventory Management.

For example, the movement type plays an important role in

Updating of quantity fields.

Updating of stock and consumption accounts.

Determining which fields are displayed during entry of a document in the system.

GOODS RECIEPT

Goods receipt process in SAP is used to receive the material ordered in the PO or Contract release

order. This process enables the plant / process to be run efficiently. The GR can be done with

reference to PO/RO or without PO. The only difference is that the system creates a PO in

background.The goods receipt is planned by the purchasing component in the form of purchase order scheduled

due dates. The purchase order data get copied into the GR document according to the delivery

schedule of the material. Quantity can be decreased or increased based on actual supply but within

the tolerance limit set in the material master. Other information can also be captured such as LR

number, Delivery note quantity, Vendor Batch No., Manufacturing date; Expiry date, name of


Page 48 of 66



manufacturer; Header text & GR slip number. Goods receipt can also be made without a purchase

order using movement type 505. Then after physical inspection the goods will be transfer posted to

unrestricted use stock using movement type 343. The goods receipt with respect to a purchase order

will be made into Blocked stock first and then physically verified, and if found ok then only it will

be released to unrestricted use stock.

TYPE OF GR / MATERIAL DOCUMENT

Whenever there is a transaction in inventory management, the system creates a document called

material document .The GR type proposed for EMAMI is:

WE (Goods receipts for purchase orders)

WA (Other Goods Receipts and Transfer Postings)

NUMBER RANGE

The Proposed Number range for GR is 5000000000 to 5999999999 for one year.

Document

Category

Description Number Range

WE Goods receipts for purchase

orders

5000000000 to 5999999999

WAGoods issues, transfer postings,

other goods receipts

6000000000 to 6999999999

ACCOUNT MOVEMENT

When GR is posted the following entries are passed in system:

Stock Account Debited

GR/IR clearing account Credited


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Accurate inventory positions can be maintained at any given point of time, this will be on the

basis of quantity as well as value.

Tracking of various Goods Receipts is easy.

Total visibility of stock across the organization. This will include the stock of materials, plant

& storage location wise.

Materials in the blocked cannot be used, thus keeping a check on usage of materials.

Materials will be received within the tolerance limit, thus over & under deliveries can be

allowed but with in limits. This will give flexibility as well as control.

Multiple Goods receipts can be made against a purchase order.

INVENTORY MANAGEMENT (GOODS ISSUES)

AS - IS SITUATION

In EMAMI, the materials which are stored in storage location after the Quality Inspection will be

issued to the production order for the accomplishment of production. Also the material will be


Page 50 of 66

Material stored instorage area after

QI.

Materialissue to

Producti

on

orders

Materialissue to

Transfer

orders

Materialissue to

Indent



issued to material indent raised by the different departments and to the transfer orders where the

material will be transferred from one plant to another plant.


The Goods Issue process should be used in case of material requirement by any department, Project

or Plant Maintenance activity. The goods issue should be done in such a way that there is optimum

use of the material required and the inventory level is within the prescribed range.

Goods issue (to cost centre, to project, to Plant Maintenance Order, Stock Transport Order)

Goods issue with or without reservation.

Interplant stock transfer.

TO-BE STRUCTURE

Movement Types: When a goods movement is entered in the system, a movement type must be

entered to differentiate between the various goods movements. A movement type is a three-digit


Page 51 of 66

Material stored in

storage area after

QI.

Material

issue toCostCenter

Tcode:

MB1A

Material

issue toProducti

on

orders.Tcode :

MIGO

Material

issue to

Stock Transport

orders

Tcode:MIGO

Material

issue toReservation

Tcode:

MB1A

Material

issue to

Plantmaintenan

ce order

Tcode:

MIGO



identification key for a goods movement. The following table contains examples of movement

types

Goods Movement Transaction

Codes

Movement Type

Goods issue for Consumption to a Cost Centre from Unrestricted Use Stock MB1A 201

Goods issue for Consumption to a Cost Centre from Consignment Stock MB1A 201K

Goods issue for Consumption to a Plant Maintenance Order from

Unrestricted Use Stock

MB1A 261

Goods issue for Consumption to a Plant Maintenance Order from

Consignment Stock

MB1A 261K

The reversal movement types are for reversing the above goods movement. These movement types

are numbered as +1 for the movement to be reversed. For example reversal of 201 is 202. The

system automatically determines the reversal movement type. The movement type has important

control functions in Inventory Management.

For example, the movement type plays an important role in

Updating of quantity fields.

Updating of stock and consumption accounts.

Determining which fields are displayed during entry of a document in the system.

GOODS ISSUE

Goods issue refers to withdrawal of material by a department for use, and leads to a reduction in

warehouse stock. Proposed goods issues for EMAMI are:

(WA) Withdrawal of material for consumption.

(WI) Inventory Adjustment Postings

(WL) Goods Movements for Delivery Documents (SD)

(WZ) Batch Status Changes


Page 52 of 66



NUMBER RANGES

Document

Category


WA Goods issues, transfer postings,


6000000000 to 6999999999

WI Inventory Adjustment Postings

WLGoods Movements for Delivery

Documents (SD)

WZ Batch Status Changes

ATTACHMENTS IN A GI DOCUMENT

Each GI document in SAP will be having all information regarding the required goods received. If

additional details are to be attached with the GI document, those details can be attached to the GI

document in SAP as an attachment




Tracking of various Goods issues is easy.

Total visibility of stock across the organization. This will include the stock of materials, plant

& storage location wise.

IM (GOODS RETURNS TO VENDOR)


To ensure that material that has a discrepancy in terms of quantity or quality is returned to

the vendor .


Page 53 of 66



GENERAL EXPLANATIONS

The quantity as mentioned in the purchase order/s is used to determine acceptable quantity. If any

discrepancy is found the material is returned and the cost etc. is reimbursed to the vendor. The

excess or shortage supply report is prepared and material is sent to QC (if it is subject to QC) or

sent to vendor, if QC rejects it.

SPECIAL ORGANIZATIONAL CONSIDERATIONS

It will be mandatory to return the goods to the vendor if the material specification is not met within

the set tolerance limits of quality. This return of goods will be made with reference to the document

against which the material was receipt to have better tracking of materials movements.

SOLUTION IN SAP

The movement types mentioned in following table describes the Goods Returns to vendor process.

These Movement types are the reversals of Goods receipt transactions from vendors (with or

without PO)

Goods Movement Movement Type

Goods Return to vendor (GR with PO) 122

GOODS RETURNED TO VENDOR

In SAP system, the goods are returned with reference to material document against which it was

received. The goods can be rejected and returned from inspection in Blocked Stock; material can

also be returned from unrestricted use stock. The reason for return is to be given in the document of

return; any complaints or notifications can also be given to the vendor.

It is the reversal of the process of goods receiving so all information is same as for GR.

NUMBER RANGES

Document

Category




6000000000 to 6999999999



Page 54 of 66



WL Goods Movements for Delivery

Documents (SD)

WZBatch Status Changes

ATTACHMENTS IN A GOODS RETURN DOCUMENT

Each document in SAP will be having all information regarding the required goods returned. If

additional details are to be attached with the document, those details can be attached to the

document in SAP as an attachment.




Tracking of various Goods movement is easy.

Track of returns to vendors is easy.

Materials in the blocked cannot be used, thus keeping a check on usage of materials.

IM (Transfer Posting / Stock Transfer)


It may be required to transfer material from one plant or storage location to another plant / location.

Especially in the case of EMAMI transfer of stock from storage location to another storage location

within a plant is very frequent. This transaction is to be used for material to be provided to the

receiving location. In some special cases the stock may be transferred from one plant to another

plant. This is to be treated as a stock transport activity for which a Stock transport Order will be

used.


EMAMI has a storage location in the each plant and the material is transferred from one location to

another as per the requirement. This material will be transferred from the issuing location on

request of the receiving location.


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Transfer posting will be of the following types:

Goods Transfer Plant to Plant – Two Step Procedure

Goods can be transferred from one plant to another with a delivery against a stock transport order.

A stock transport order is required for this kind of Stock transfer.

EXPLANATIONS OF FUNCTIONS AND EVENTS

Events: The events in the Stock Transfer/Transfer Posting process are

Receipt of Material Load Out form for Transfer Posting

Receipt of approval for stock transfer against a STO.

Physical checking of material transferred

Functions: The functions of Stock Transfer/Transfer Posting process are

Creation/Changing/Displaying Material transfers records

Collection of Stock Transfer/Transfer Posting data to be entered into the system.

Creating/Changing of Stock Transfer/Transfer Posting document to reflect the required

movement of goods into blocked stock

CHANGES TO EXISTING ORGANIZATION PROCESSES

The current process of Goods Transfers in EMAMI would be replaced by the standard Stock

Transfer/Transfer Posting process of SAP.

In case of inter plant transfers the loss in transit has to be scrapped out through a different

transaction




Tracking of various Goods movement is easy.

Track of returns to vendors is easy.


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Materials in the blocked cannot be used, thus keeping a check on usage of materials

SOLUTION IN SAP

STOCK TRANSFER (PLANT TO PLANT)

A stock transfer from plant to plant not only leads to a change in stock quantity in both plants; if

both plants are assigned to different valuation areas, an accounting document is also created.

This type of stock transfer can only be carried out from unrestricted-use stock of the issuing plant to

unrestricted-use stock of the receiving plant. It will be a two-step procedure

In the first step the stock will be removed from issuing storage location with reference to a

Stock Transfer Order. A material document will be created for quantity postings along with

an accounting document for financial postings in this case. The stock quantity will be reduced

in the issuing storage location of the issuing plant. The stock will be shown in transit at

receiving storage location of receiving plant, and not in the unrestricted use stock of the

receiving plant

In the second step the goods will be received into the receiving storage location with reference

to the Stock transport Order. In this case only a material document will be created thus

increasing the stock in unrestricted stock at receiving storage location of the receiving plant

and will not be shown as stock in transit any more. In this step there will be no accounting

document created as it has already been created in the first step.

TRANSFER POSTING (STORAGE LOCATION TO STORAGE LOCATION) –

Tcode:MB1B

The materials transfer postings from storage location to storage location in a plant will not lead to

creation of an accounting document because the valuation of the material is same in both the

location under the plant. The transfer postings can be made in the two following ways:

Transfer Posting from Storage location to Storage Location in single step:


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Material will be posted from one storage location to another storage location in a single step

using movement type 311. There will be a material document created showing the respective

movement of the goods.

Transfer Posting from Storage Location to Storage Location in two steps:

A stock transfer from storage location to storage location in the same plant simply causes an

update of the stock quantities in both storage locations. The stock value remains unchanged,

and the event is not relevant for accounting. A stock transfer from storage location to storage

location is possible for all stock types. The process for this done in two steps

Removal of stock from issuing storage location: The stock will be removed from the issuing

storage location using movement type 313. A material document will be created showing the

material movement. The stock quantity will be reduced in the issuing storage location and

will be shown as stock in transfer at the receiving storage location.

Placement of Stock in receiving storage location: The stock will be received into the receiving

storage location with reference to the material document created at the time of removal of

stock from issuing storage location using movement type 315. A material document created

and the stock will be updated in the unrestricted use stock of the receiving storage location.

ONE STEP AND TWO STEP STOCK TRANSFER

Both stock transfers and transfer postings consist of a "goods issue" from an issuing point and a

"goods receipt" at a receiving point. Stock transfer from storage location to storage location or from

plant to plant either in one step or in two steps can be posted.

The advantage of the one-step procedure is that there is a single transaction in the system. The two-

step procedure, on the other hand, allows monitoring the stocks in transit. After the goods issue is

posted at the issuing point, the stock appears "in stock transfer" at the receiving point and is

managed as such in the system.

The two-step procedure is also required if users have authorizations only for their own plants.


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NUMBER RANGES

Document

Category




6000000000 to 6999999999


WL Goods Movements for Delivery

Documents (SD)

PHYSICAL INVENTORY VERIFICATION

AS-IS SITUATION


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Preparation of excel sheet with all the

material list consisting of system stock.

The material movement is allowed to and

fro of stores but not updates booked qty

Physical count of materials, lodging the

entries in separate sheet.

Post the differences and calculate the valuemanually or in excel sheet.




Every industry periodically wants to check what is the stocks balance in the books and physical

stocks lying in their stores. And once they know the actual stocks, will adjust the book stocks

accordingly. It helps:

To back up the balance sheet stock figures.

To minimize pilferage and fraudulent practices.

TO-BE STRUCTURE

SOLUTION IN SAP

PHYSICAL INVENTORY PROCEDURES

The physical inventory procedures are as follows:

Periodic Inventory


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If there is difference between book stocks and physical ststock

PHYSICALINVENTORYDOCUMENT

COUNT

Post

DifferenceUpdates stocksautomatically

Updates Accounts

Automatically



In a periodic inventory, all stocks of the company are physically counted on the balance sheet key

date. In this case, all material items 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 all 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.

Inventory Sampling

In MM inventory sampling, randomly selected stocks of the company are physically counted on the

balance sheet key date. If the variances between the result of the count and the book inventory

balance are small enough, it is presumed that the book inventory balances for the other stocks are

correct.

PHYSICAL INVENTORY

In the R/3 System, physical inventory can be carried out for a company’s own stock. Furthermore,

the stock can be divided into stock types. In the standard system, a physical inventory can be

carried out for the following stock types:

Unrestricted-use stock in the warehouse

Quality inspection stock

Blocked stock

Physical Inventory is carried out in SAP in three steps

Create physical inventory document

Inventory count

Post the difference.


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CREATE A PHYSICAL INVENTORY DOCUMENT. (Tcode: MI01)

Physical inventory is always done at storage location level only. A physical inventory document

contains following data:

The plant and storage location in which the count is to take place

When the count is to take place

Which materials are to be counted

For material handled in batches: which batches are to be counted

In the case of split valuation: which sub-stocks are to be counted

Which stock types are to be counted

BLOCKING MATERIALS FOR POSTING

Due to the delay between a material movement and the posting of that movement, there is a short-

term discrepancy between actual warehouse stock and book inventory. To avoid such a discrepancy

during physical inventory, it is recommended to block the materials for posting during the physical

inventory. A posting block can be set in two ways:

Block the relevant materials and generate the physical inventory document. This is

recommended to create the physical inventory document immediately before the count.

Block the relevant materials later by changing the posted physical inventory document. This

is recommended if the physical inventory document immediately is not created before the

count.

The posting block is automatically cancelled after posting the counting results for the physical

inventory document.

Print and distribute the physical inventory document. Print out the physical inventory

document for the physical inventory count and pass it on to the people responsible for doing

the counting.


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INVENTORY COUNT

The stocks are counted individually for the materials in a physical inventory document.

The count results are written on the printout of the physical inventory document.

The printout is then directed back to the person responsible, so that he or she can enter the

count into the system and analyze it.

ENTERING THE COUNT RESULTS IN THE SYSTEM (Tcode: MI04)

After the count has been taken, enter the results of the count into the system.

POSTING INVENTORY DIFFERENCES (Tcode: MI07)

If the physical inventory is different from the book inventory, the book inventory balances must be

corrected by posting the differences. This step ends the physical inventory process.

When physical inventory difference is posted, the system creates a material document that records

the adjusted stock balances and an accounting document that contains the necessary account

activities.

When inventory difference is posted, the material master record is changed; total stock is

automatically adjusted to the counted quantity. From the accounting point of view, this corresponds

to a goods receipt or goods issue, meaning that when the inventory difference is posted, the stock

account is debited or credited.

If the counted quantity is smaller than the book inventory balance, the stock account is credited

with the value, “inventory difference x price”. The offsetting entry is made in the "Expense from

physical inventory" account.

If the counted quantity is greater than the book inventory balance, the stock account is debited with

the value of the “inventory difference x price”. The offsetting entry is made to the "Income from

physical inventory" account.Since the amount posted is calculated on the basis of the current standard or moving average price,

posting inventory differences does not lead to a price change.

If there is any discrepancy in the count (After posting of differences), Recounting can be carried

out.


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INITIATING A RECOUNT

It is possible to initiate recounts for individual items on a physical inventory document. This is

recommended if an error was made during counting. When a recount is initiated, a new physical

inventory document is created.

SESSIONS METHOD

Session’s method is to be used for creating physical inventory documents of many materials

automatically with selection parameters like material numbers range, material type etc. The

following steps are involved for executing this method.

Create a session for the objects in question.

The session is "processed" meaning the system carries out the transaction for every object.

One advantage of this procedure is that it saves monotonous entry time. Another is that a session

can be processed at various times, allowing company’s system administrator to better utilize the

capacities of the computer

NUMBER RANGES

Document Category Description Number Range

IB Physical inventory documents 100000 to 199999

200000 to 299999

300000 to 399999

400000 to 499999

IDPhysical inventory documents

for counts and differences

without reference

IN Physical inventory documents

for recounts

IZ Physical inventory documents

for count without reference


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ATTACHMENTS IN A PHYSICAL INVENTORY DOCUMENT

Each Physical Inventory document in SAP will be having all information regarding the counting

details, difference postings etc. If additional details are to be attached with the document, those

details can be attached to the document in SAP as an attachment.


Accurate inventory positions

Financial implications captured regularly

ACCOUNT DETERMINATION

Account Determination should provide information about the accounts movement in purchasing,

inventory management, physical inventory and invoice verification. It should therefore be enabled

to capture the financial impact on any transaction, including movement of that material. The

different materials falling under the same material type can either be posted to in one G/L account

or different accounts as per requirement.


EMAMI Purchases various types of materials and services. The accounts movement is different for

services and materials. There are separate accounts for materials and services. E.g. the GR/IR

clearing account for materials has the description “GR/IR Clearing Account“ and the ”SR/IR

Clearing Account” is for services. Similarly there is a provision for inventory related accounts.

These accounts would be both general and specific as per requirements.

EXPLANATIONS OF FUNCTIONS AND EVENTS

Events:


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Automatic account determination is used by the system for posting the values to the proper

G/L accounts in many instances such as during creation of GRN / GI documents, processing

IV, etc.

Functions:

Automatic Account determination updates the proper G/L account to reflect

the current financial status.

Solution in SAP

In SAP a valuation class is assigned to each material type. A material type may have one or more

valuation classes depending upon the requirement. The valuation class is assigned to one or more

G/L accounts as per the requirement. Various types of G/L accounts are GR/IR clearing, inventory

posting account etc.

Batch Management

As-Is

Earlier EMAMI was using it’s own methodology to name batches.

To-Be

We are going to implement batch management in EMAMI for procurement of raw materials.