Download pdf - Bbp Emami Mm_v2 Final14

7/28/2019 Bbp Emami Mm_v2 Final14

http://slidepdf.com/reader/full/bbp-emami-mmv2-final14 1/59

EMAMI, PONDICHERRY - 500081, Andhra Pradesh, India, Phone : 39832312 , 39832532, Fax : 282 49457

Page 1 of 59

BBuussiinneessss BBlluuee PPrriinntt

MATERIALS MANAGEMENT




Page 2 of 59

RGS MM TEAM

S.no RevisionCreated

Date

Last

modifiedRemarks

1. 1.0 01.11.2011 11.11.2011

.




Page 3 of 59

BUSINESS BLUEPRINT DOCUMENT

MMM A A ATTTEEERRRIII A A ALLL MMM A A ANNN A A AGGGEEEMMMEEENNNTTT

Version: 1.0

Date: 12-11-2011




Page 4 of 59

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 :

Releas

eDescription Created by Date

Reviewe

d byDate

Approved

byDate




Page 5 of 59

Contents

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

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

EXECUTIVESUMMARY………………………………………….4

ORGANIZATIONALSTRUCTURE.........................................................................

8 REQUIREMENTS/EXPECTATIONS………………………………………………10

TO 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

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

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

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

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




Page 6 of 59

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 EMAMIREQUIREMENTS/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

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




Page 7 of 59

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………………………………………………………………………30SERVICES PROCUREMENT……………….……………………………………….31

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

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




Page 8 of 59

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

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

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

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

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




Page 9 of 59

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.




Page 10 of 59

ORGANIZATIONAL STRUCTURE

AS – IS SITUATION

EMAMI COMESTICS

GROUP

KOLKATA

PLANT

oc1 Stloc3 Sloc1

PONDICHERRY

PLANT

EMAMI MAN

COMPANY

EMAMI MARK

COMPANY

CHENNAI

PLANT

MUMBAI

PLANT

Sloc2 Sloc1 Sloc2 Sloc3 Sloc1

CEN PURCH

OFFICE




Page 11 of 59

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 three purchasing points 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.

Subcontracting




Page 12 of 59

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

PL01

Plant

RM01 FG01

FG01

PL02

Plant

EM01

Company Code

EM02

Company Code

PL03

Plant

PL04

Plant

SF01 RM01 SF01FG01

FG01

CP01

Purchasin Or

EMAMI COMESTICS

GROUP

KP01

P.Org

PP01

P.Org

Storage Location




Page 13 of 59

EXISTING ORGANIZATION PROCESSES

Three purchasing organizations are 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 two characters from left PL01 denotes Plant location




Page 14 of 59

Last digit denotes numbers

Plants under EM01 Company code

Plants under EM02 Company code

Description Geographic

Location

SAP Code

CHENNAI Plant CHENNAI PL03

MUMBAI Plant MUMBAI PL04

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

First two characters from left storage denotes storage

Last characters denotes numbers.

Description Geographic

Location

SAP Code

PONDICHERRY Plant PONDICHERRY PL01

KOLKATA Plant KOLKATA PL02




Page 15 of 59

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 EMAMI, the purchasing activity is carried out by Central purchase organization and

plant specific Pur.Organizations located at Company code level and plant level

(Kolkata & Pondicherry) respectively.

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

First two letters from the word for purchase organization and digit 01 for number of

Pur Org.

Storage

LocationStorage Location Type

RM01 Raw Materials

SF01 Semi Finished

FG01 Finished goods




Page 16 of 59

There will be three purchase organizations in EMAMI with functions as described

below:

CP01: This purchase organization will deal with all the purchase activities for all theraw materials and special procurement of materials at all the plants in two companies

as a referral Purchase Organization.

KP01 & PP01 are plant specific Pur.Organizations which are responsible for purchasing

activities at their respective 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.

SAP CODE PURCHASE ORGANIZATION

CP01

Central

Purchasing Organization for allplants.

KP01 P.Org. for KOLKATA

PP01 P.Org for Pondicherry




Page 17 of 59

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

P01 Herbals

P02 Cosmetics

P03 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




Page 18 of 59

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 and External. This code will

not be the same as is used by the organization in the current scenario. The currentlyused material number can be maintained in the material master in Old Material

Number Field.

The master data 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.

http://localhost/var/www/apps/conversion/tmp/scratch_1/FF515B8C49D811D182B80000E829FBFE/content.htm







Page 19 of 59

MATERIAL TYPE

Materials 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,

Material Type Description

ROH Raw materials

HALB Semi finished






Page 20 of 59

MATERIAL CODIFICATION

Material types and Number range for EMAMI.

SAP Material

Type

Description SAP Code / Number

Range

Account cat. Ref

ROH Raw materials 200001-299999 0001

HALB Semi finished 300001-399999 0008

FERT Finished materials 100001-199999 0009

VERP Packing Internal Alphanumeric 0010


Centralized material master record will have following benefits:

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

same material 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

FERT Finished materials

VERP Packing




Page 21 of 59

VENDOR MASTER

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:




Page 22 of 59

Account group Description Number range

KRLV Local Vendors Internal numeric

KRFV Foreign Vendors Internal numeric

KROT One-time vendors External alphanumeric

PARTNER FUNCTIONS

Business 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.


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

procurement if required while other activities will still be in place.


Security of the master data is improved.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




Page 23 of 59

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.

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


Better control on various functions.


Security of the master data is improved

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.




Page 24 of 59

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.

AS-IS

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

per their QMS (Quality Management System) 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)




Page 25 of 59

PROCURMENT CYCLE

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 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.




Page 26 of 59

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.

REQUIRED BUSINESS PROCESS FLOW DIAGRAM FOR EMAMI

REQUIREMENTS/EXPECTATIONS FROM THE PROCUREMENT

Planning for raw materials

Planning to place the requisition to cover if any requirement exists

Approval process for Purchase Requisition

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




Page 27 of 59

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 EMAMI purchase request is created manually as well as through MRP, 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:

Document

Type

Description Proposed Number Range

NB Standard Purchase Requisition 4500000 - 4599999




Page 28 of 59

ITEM NO. IN PURCHASE REQUISITION

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

Following are the steps to maintain Release Procedure for purchase requisition based

on business requirement.

1. To raise purchase requisition by Buyer g

2. Get approval from concern authority in Release Hierarchy


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.




Page 29 of 59

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, the system 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)

NUMBER RANGE

The number range for RFQ would be:

Document

Category

Doc Type Description Number Range

A AN RFQ and Quotation 6000000-69999999

IMPROVEMENTS

Tracking of quotations

Tracking of linkage between PR and RFQ through collective number.




Page 30 of 59

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

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.

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




Page 31 of 59

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 theuser 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 creationof 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.

The various types of PO for EMAMI would be:

NB (Standard)

UB (Stock Transfer)

Purchase Order Type Number Range

Standard NB 7000000-79999999

Stock Transfer UB 8000000-89999999

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




Page 32 of 59

(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".


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

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




Page 33 of 59

It is a type of outline agreement or long term buying arrangement. It is a binding

commitment to procure a certain material or service from vendor over a certain

period of time.

Document

Category

Document

Type


KWK Value contract

460000 - 469999

K 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.



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




Page 34 of 59

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 theircorresponding planned delivery dates. The scheduling agreement has following

features:

The following procurement types exist:

Standard



Default source assignment for contracted material

Better tracking of gas nominations, confirmations and quantity received.

SERVICES PROCUREMENT

Document

Type


LP Manual3500000000 to 3599999999

LPA Auto4500000000 to 4599999999




Page 35 of 59

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.

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 aservice 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.




Page 36 of 59

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 EMAMI is 1000000000 to 1999999999.

RELEASE STRATEGIES

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

strategies.

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

acceptance, it creates the liability in GR/ IR clearing account for invoice verification.

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




Page 37 of 59

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)

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.




Page 38 of 59

Goods movement between intra-company

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




Page 39 of 59

Document Concept: According to the document principle, a document must begenerated 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.

GR Blocked Stock Goods Receipt stock which is pending for

Physical Inspection

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 steps




Page 40 of 59

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 identification key for a goods movement. The following

table contains examples of movement types

Goods MovementTransaction

code

Movement Type

Goods 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.




Page 41 of 59

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 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.




Page 42 of 59

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


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.




Page 43 of 59

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.

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 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.




Page 44 of 59


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.

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

of movement types




Page 45 of 59

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




Page 46 of 59

(WL) Goods Movements for Delivery Documents (SD)

(WZ) Batch Status Changes

NUMBER RANGES

Document

Category


WA Goods issues, transfer postings,

other goods receipts

6000000000 to 6999999999

WI Inventory Adjustment Postings

WL Goods Movements for Delivery

Documents (SD)

WZ Batch Status Changes




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.

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




Page 47 of 59

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 receipttransactions 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


WA Goods issues, transfer postings, other goods

receipts

6000000000 to

6999999999





Page 48 of 59

WL Goods Movements for Delivery Documents

(SD)

WZBatch Status Changes




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 isto 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.

Transfer posting will be of the following types:

Goods Transfer Plant to Plant – Two Step Procedure




Page 49 of 59

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.

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




Page 50 of 59

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)

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:




Page 51 of 59

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

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.




Page 52 of 59

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.

NUMBER RANGES

Document

Category


WA Goods issues, transfer

postings, other goods receipts

6000000000 to

6999999999


WL Goods Movements for Delivery

Documents (SD)

PHYSICAL INVENTORY VERIFICATION

AS-IS SITUATION

Preparation of excel sheet with all thematerial 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 theentries in separate sheet.

Post the differences and calculate thevalue manually or in excel sheet.




Page 53 of 59


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

If there is difference between book stocks and

physical ststock

PHYSICALINVENTORYDOCUMENT

COUNT

Post

DifferenceUpdates stocksautomatically

Updates Accounts

Automatically




Page 54 of 59

PHYSICAL INVENTORY PROCEDURES

The physical inventory procedures are as follows:

Periodic Inventory

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




Page 55 of 59

Blocked stock

Physical Inventory is carried out in SAP in three steps

Create physical inventory document

Inventory count

Post the difference.

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.




Page 56 of 59

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

doing the counting.

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

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

POSTING INVENTORY DIFFERENCES

If the physical inventory is different from the book inventory, the book inventorybalances 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.




Page 57 of 59

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.

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





Page 58 of 59

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


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:

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 toreflect 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

It is mainly used to maintain the homogeneity of the material and to trace out the

faulty material for recalling the product of customer.

As-Is

Earlier EMAMI was using its own methodology to name batches.

To-Be

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