MIS 163-Exam 2

Product Catalog

A number of media can be used as vehicles for presentations, including: Print media CD-ROM Online services (such as internet, T-Online, CompuServe, AOL) Information kiosks at the point of purchase The Product Catalog functionality comprises a programming interface (Business API) for accessing the data and integrated maintenance of product catalog-related data. This data comprises: The layout of the product catalog The materials and prices in the product catalog Texts Multi-media objects (graphics, sound documents, video clips etc.).

Storage Location

A place, within a plant, where materials are stored -Areas designated for different types of material (raw material, work-in-process, finished goods) -Does not have to be physical, can be logical -More sophisticated divisions including storage bins, cabinets, trays is part of warehouse management A plant must have at least one storage location A storage location is assigned to a single plant -Storage locations in different plants can have the same name --Finished Goods FG00 in MI00, FG00 in DL00

Corporate-group-wide purchasing:

A purchasing organization is responsible for the purchasing activities of different company codes.In this case, you do not assign a company code to the purchasing organization, but specify the company code concerned for each individual purchasing transaction. You assign plants from different company codes to the purchasing organization.

Company-specific purchasing:

A purchasing organization is responsible for the purchasing activities of just one company code.In this case, you assign a company code to the purchasing organization. The purchasing organization may procure only for this company code. You assign only plants of the company code concerned to the purchasing organization.

Plant-specific purchasing:

A purchasing organization is responsible for the purchasing activities of one plant.In this case, you assign the plant and the company code of the plant to the purchasing organization. The purchasing organization may procure for this plant only.

Quotation

A quotation contains the vendor's pricing and conditions for providing the material or service stated in the Request for Quotation (RFQ) In the SAP component Materials Management (MM) Purchasing, the RFQ and quotation are the same document. You enter the vendor's pricing and conditions in the original RFQ. 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. A quotation is legally binding on the vendor for a certain period. The quotation is the vendor's response to a request for quotation issued by a purchasing organization. A quotation consists of items in which the total quantity and delivery date of an offered material or service are specified. An item of a quotation may contain a delivery schedule made up of a number of schedule lines in which the total quantity is broken down into smaller quantities to be delivered on the specified dates over a certain period. An item of the procurement type External service contains a set of service specifications. The latter can be hierarchically structured. The summary view of such a hierarchical structure is referred to as an outline. The outline comprises a number of levels, each representing a level of the service hierarchy. The quantities of the quotation are set out in service lines, representing individual jobs or activities. If services cannot be defined precisely, value limits are stipulated instead of service lines. Value limits can be set for certain contracts. Conditions can apply at various levels: To the entire quotation At item level, to the material to be supplied or to the planned procurement in the case of services At service line level for individual services (tasks or activities)

Reservations

A request to have a material ready for issue at a future date for a production order, sales order, etc. The purpose of a reservation is to ensure that a material is available when required and not assigned to another use The purpose of a reservation is to ensure that a material will be available when it is needed. It also serves to simplify and accelerate the goods issue process and prepare the tasks at the point of goods issue. It is also important that reservations are taken into account by Material Requirements Planning (MRP), which means that required materials are procured in time if they are out of stock. You enter reservations for planned receipts for either of the following reasons: to plan goods receipts from production if your company does not use the PP Production Orders component to plan goods receipts from vendors, if your company does not use the MM Purchasing component

Maintain storage location

A storage location is the place where stock is physically kept within a plant. A storage location has the following attributes: There may be one or more storage locations within a plant. A storage location has a description and at least one address. It is possible to store material data specific to a storage location. Stocks are managed only on a quantity basis and not on a value basis at storage location level. Physical inventories are carried out at storage location level. A storage location can be assigned to a warehouse number in the Warehouse Management System . You can assign more than one storage location to the same warehouse number within a plant. Storage locations are always created for a plant. Could be inventory management Production floor Quality Engineering bin

Purchasing Tolerances

A tolerance limit is set for allowed variance before a warning/error message is displayed -Price variance --Compares the price in the purchase order with the valuation price stored in the material master -Maximum cash discount --This tolerance limit is set to assure that cash discounts do not exceed allowable discounts Now earlier created tolerances in accounting for AR/AP Now we will have some material tolerances Tolerances can be set at the material level or the vendor info record level. This allows for the tailoring of tolerances as needed. In the Customizing system for Inventory Management, you can define two tolerances for variances in the order price quantity: Tolerance for an error message: if the variance is larger than this tolerance specified, the system issues an error message, and you cannot post the goods receipt. Tolerance for a warning message: if the variance reaches this tolerance specified, the system issues a warning message during entry of the goods receipt. However, you can still post the goods receipt. The buyer receives a message pointing out the discrepancy.

Automatic Account Assignment(continued)

Automatic account assignment is a set of rules and master data which enable the financial tracking of logistics movement The G/L account to which the goods movement is posted is determined by the system through automatic account assignment. You need not enter a G/L account unless you want to post the goods movement to a different account.

Automatic Account Assignment

Automatic account assignment is created to avoid manual postings of financial transactions which follow goods movements to reflect the values of transferred materials Automatic account assignment is used across all modules to keep track of the values of materials that are being consumed (e.g., production), or transferred into other valuation areas of the company Track all transactions - Debits/Credits automatically through all transactions Receiving Movement Raw Materials Issue The stocks are managed not only on a quantity basis but also by value. The system automatically updates the following data each time there is a goods movement: Quantity and value for Inventory Management Account assignment for cost accounting G/L accounts for financial accounting via automatic account assignment The valuation area is the organizational level at which a material's stock value is managed. The valuation area can be plant level or company code level. In Inventory Management, work is basically done at plant and storage location levels. When you enter a goods movement, you only have to enter the plant and the storage location of the goods. The system derives the company code from the plant via the valuation area.

Vendor Master Data

Data needed to do business with vendors Data needed to execute transactions related to vendors Data are specific to (defined for) different organizational levels. The three segments are: -Client level data (General) -Company code level data (Accounting) -Purchasing organization level data (Purchasing)

Material Master

Data needed to execute transactions related to materials Data are grouped by different user / functional areas (views) Basic data Purchasing Accounting Forecasting Sales Plant / Storage Work Scheduling MRP Classification Warehouse Management Master date are defined for specific organizational levels Can have different data for different combinations of Org data -Purchasing: Plant, storage location -Sales: Sales Area (Sales Org, Distribution Channel) -Warehouse: Warehouse #, storage type

Purchase Requisitions Creating

Default data for line items -Delivery dates, plants, purchasing groups, etc. Maintain line item data -Materials, quantities, delivery dates, etc. Maintain account assignment (if required) -Cost center, General Ledger accounts, project number, etc. Check data Save The default data will come from the material master, vendor info record, vendor master, and User preferences. Update, change or supply the information for line items Maintain account assignment for controlling Verify

Material Master Maintenance

Defaults - speeds entry of data by using the most frequently used field values (plant, purchasing organization, etc.) Reference Material - speeds entry of data by copying data from existing material master Profiles - speeds entry of data by copying standard data created in a profile into a selected view Materials Requirements Planning (MRP) Collective entry of storage location data - speeds creation of multiple storage locations If you frequently assign materials to the same industry sector, it is useful to define it as a default to save you having to keep entering it whenever you create or access a material master record. Likewise, if you always require the same views when creating or accessing material master records, you can define that they are selected by default in the Select View(s) dialog box. Like the industry sector, you can also predefine the organizational levels for which you maintain data, and the profiles you use. Reference material Number of the material whose data you want the system to copy as default values.

Material Requirements Planning

Detailed planning level Primary Functions -Monitor inventory stocks -Determine material needs --Quantity --Timing -Generate purchase and/or production orders The central role of MRP is to monitor stocks and in particular, to automatically create procurement proposals for purchasing and production (planned orders, purchase requisitions or delivery schedules). This target is achieved by using various materials planning methods which each cover different procedures. Consumption-based planning is based on past consumption values and uses the forecast or other statistical procedures to determine future requirements. The procedures in consumption-based planning do not refer to the master production schedule. That is, the net requirements calculation is not triggered either by planned independent requirements or dependent requirement. Instead, it is triggered when stock levels fall below a predefined reorder point or by forecast requirements calculated using past consumption values.

Fiscal Period

In order to execute any material postings, the current fiscal period has to be activated By initializing the company code for material management, the first major integration between Financial Accounting (FI) and Logistics is completed This exercise is critical If you create a material fiscal period in the future YOU CANNOT post for any reason. Before data can be posted in FI-SL, you must define accounting periods and allowed accounting periods. Accounting period definitions determine the fiscal year(s) and posting periods that are available on the system; allowed accounting periods determine which posting periods are open for posting data. You can define your fiscal calendars so that the system identifies data by a unique posting period. You only define the end date for the period. The system uses the business transaction date (posting date) to calculate to which fiscal period of a special purpose ledger the transaction data should be posted.

Materials Requirements Planning(continued)

Integrates Production Planning (PP) module with the Materials Management (MM) module Prerequisites for Materials Requirement Planning (MRP) -Activate Material Requirements Planning (MRP) for a plant -Material Master created -- Material Requirements Planning view --Material Requirements Planning type

Purchase Requisitions

Internal document Requesting a certain quantity of material or service on a certain date Can be created: -Manually -Automatically (Materials Requirements Planning (MRP), sales orders, etc.) Release approval procedures are optional You use this component if you wish to give notification of requirements of materials and/or external services and keep track of such requirements. Requisitions can be created either directly or indirectly. "Directly" means that someone from the requesting department enters a purchase requisition manually. The person creating the requisition determines what and how much to order, and the delivery date. "Indirectly" means that the purchase requisition is initiated via another SAP component. The creation indicator in the requisition shows whether the requisition was created directly or indirectly. It is displayed in analyses of requisitions and in the statistical data of a requisition item. Purchase requisitions can be subject to a release (clearance, or approval) procedure

Creating a Contract

Is a long-term agreement with a vendor to provide a material or service -For an agreed upon period of time -At a negotiated price or quantity Can be created manually or with reference to purchase requisition, Request for Quote (RFQ)/quotation etc. You can create a contract as follows: Manually You enter all data relating to the contract manually. Using the referencing technique As reference document (the document you copy from), you can use: Purchase requisitions RFQs/quotations Other contracts You can also combine the two options. For example, you can copy data from a reference document and then change or supplement this data as required.

Material Master - MRP 3

Availability Check -Specifies whether and how the system checks availability and generates requirements for materials planning Planned delivery time in days Number of calendar days needed to obtain the material or service if it is procured externally. Procedure If you have different vendors for a material, you must specify an average value. The same applies if you order the material from a fixed vendor that has varying delivery times. Scheduling Margin Key for Floats Key that the system uses to determine the floats required for scheduling an order. You define the following floats with the scheduling margin key: opening period float after production (only in the case of in-house production) float before production (only in the case of in-house production) release period (only in the case of production order management) Floats are maintained in workdays. Safety stock Specifies the quantity whose purpose is to satisfy unexpectedly high demand in the coverage period. The risk of shortfalls is reduced by having a safety stock. Checking Group for Availability Check This field has two uses: 1. Specifies whether and how the system checks availability and generates requirements for materials planning. 2. In Flexible Planning, defines - together with the checking rule - the different MRP elements that make up this key figure. The sum of these elements gives the key figure. Use 1: Availability Checking and Materials Planning Use The value you enter for use 1 (see above) is a default value which defines: Which MRP elements (for example, purchase orders, reservations) the system includes in the availability check Whether the system checks availability only until the end of the replenishment lead time or whether it checks availability over the entire period for which MRP elements exist Whether the system generates individual requirements or summarized requirements if you enter sales orders or deliveries for the material Use 2: Flexible Planning Dependencies If you use this field to define the MRP elements of a key figure for Flexible Planning, you must also select Document KF in the Customizing parameters of the information structure.

Material Master - Material Management

Basic Data Purchasing MRP 1,2,3 General Plant Data/Storage Accounting 1 Once you create a view, you can only change a view. You cannot delete it.

Material Master - Views

Basic data 1, 2 Classification Sales: sales organization data 1, 2 Sales: general/plant data Sales text Purchasing Purchase order text Forecasting 256 fields available in the material master. You do not need them all By selecting the views, by default, it will result of that information being created regardless is you access the screen or not.

Material Master - Levels

Client -Description -Units of measure -Material number -Engineering data Plant -Planning data -Manufacturing data -Purchasing data Client data is used enterprise wide. It will default for all lower levels Plant data can be plant specific. Demand at one plant may result in a production order Another plant's demand may result in a transfer order from the production plant. These causes different 'behaviors' in operations per plant. Thus, material master is partially independent Different plant views - we do not have to create the same material over again at each plant Different functions

Request for Quotation (RFQ)

Is an invitation to a vendor to indicate their terms and conditions (in particular, their price) for the supply of a material or the provision of a service by submitting a quotation Identifies the required material, quantity, and delivery dates A request for quotation (RFQ) is an invitation extended to a vendor by a purchasing organization to submit a quotation (bid) for the supply of materials or performance of services. Structure An RFQ consists of the RFQ header and the items. RFQ header Contains general information on the RFQ, such as the vendor's address Items Contain the total quantities and delivery dates for the materials or services specified in the RFQ. An item of a quotation may contain a delivery schedule made up of a number of schedule lines in which the total quantity is broken down into smaller quantities to be delivered on the specified dates over a certain period. An item of the procurement type "external service" contains a set of service specifications. The latter can be hierarchically structured. The summary view of such a hierarchical structure is referred to as an outline. The outline comprises a number of levels, each representing a level of the service hierarchy. The RFQ quantities are set out in service lines, representing individual jobs or activities.

Buyer/Supplier Relationships(continued)

Long term partnerships are the objective of the supplier evaluation and selection process for contracts Traditional purchasing process -Creates an environment of mistrust and low bidder mentality -Leads to higher total purchasing costs The objective is to build a strong relationship with one another. Evaluations and purchase transactions are costly, so the objective is to do it well at the beginning and build a long term relationship.

Purchase Orders

Purchase Orders are: -A formal request to a vendor to provide materials or services -An internal planning and tracking tool Purchase Orders identify: -Vendor -Material and/or service -Quantity and price -Delivery dates -Terms of payment The PO is a formal request, not a contract. They coordinate data and identify what, who, when, how much, and when to pay.

3-Way Match

Purchase order is matched against the invoice against the amount of the goods receipt. Purchase order defines what is expected for price and quantity Goods receipt is the actual quantity and will be matched against the PO The Invoice received from the vendor will be matched against the expected quantity from the purchase order.

Maintain purchasing organization

Required to a plant - PO org purchases for the plant Multiple purchasing orgs - Centralized - Does it for all plants Maintain purchasing organization From the Materials Management and Purchasing view, the purchasing organization is responsible for all purchasing activities (including the processing of requests for quotations and purchase orders, for example). The purchasing organization is integrated within the organizational structure as follows: A purchasing organization can be assigned to several company codes.(= Corporate-group-wide purchasing). A purchasing organization can be assigned to one company code.(= Company-specific purchasing). A purchasing organization can also exist without being assigned to a company code. Since each plant must be assigned to a company code, the latter can be determined via the plant at the time of each procurement transaction even if the procuring purchasing organization has not been assigned to a company code. A purchasing organization must be assigned to one or more plants.(= Plant-specific purchasing). A purchasing organization can be linked to one or more other purchasing organizations.(= reference purchasing organization)For more on this topic, refer to Assign Purchasing Organization to Reference Purchasing Organization. A purchasing organization can be divided into several purchasing groups that are responsible for different operational areas. Each purchasing organization has its own info records and conditions for pricing. Each purchasing organization has its own vendor master data. Each purchasing organization evaluates its own vendors using MM Vendor Evaluation. Authorizations for processing purchasing transactions can be assigned to each purchasing organization. All items of an external purchasing document, that is, request for quotation, purchase order, contract, or scheduling agreement, belong to a purchasing organization. The purchasing organization is the highest level of aggregation (after the organizational unit "client") for purchasing statistics. The purchasing organization serves as the selection criterion for lists of all purchasing documents.

Material Master - Material Types(continued)

Standard material types are used in all industries. -ROH: Raw Materials --Purchased externally only --No sales view -HAWA: Trading Goods --Always purchased externally --Sold without any change to the material --No manufacturing views exist ROH German acronym for Raw materials Raw materials (ROH) Raw materials are always procured externally and then processed. A material master record of this type contains purchasing data, but not sales data since they cannot be sold. Trading goods (HAWA) Trading goods are always procured externally and then sold. A material master record of this material type can contain purchasing data and sales data. FERT: Finished Products Are produced internally Normally no purchasing views exist Finished products (FERT) Finished products are produced in-house. Since they cannot be ordered by Purchasing, a material master record of this material type does not contain purchasing data.

Contract Process Overview

Step one is to identify and evaluate suppliers It may involve supplier development The goals are: -Develop partnerships with good suppliers -Reduce total cost of purchased materials and services Bottom line is we think we are going to save money with a relationship. Vendor evaluation and development The first step is partially outside the software. We must identify and evaluate potential suppliers. While some may be existing vendor, others may not. Existing suppliers will have transactions in the system which we can evaluate. Companies may also want to engage in vendor development. This is usually a continuous improvement program with the vendors. Often called a collaborative effort. The goals of developing a relationship is to weed out the poor suppliers and strengthen the relationship with good ones, and also reduce the cost of purchasing.

Valuation Area

The valuation area determines at which level a material is valuated (inventory value is established) SAP ERP allows valuation at the company code or plant level, but recommends valuation area be set at the plant level

Procurement Process

This is a standard view of the procure to pay process and the most common. It may vary significantly based upon the company procedures, the products/services purchases and other factors. SAP allow businesses to tailor it to their needs. Starts with a requisition or need that needs to be filled. This can come from Planning (MRP), manually or other The purchase order is the document to fill the need: usually includes the vendor, cost/price, quantity, terms and other pertinent information. [ part one of the 3-way match] Notifying the vendor The goods are shipped and brought to the organization The goods are received (typically at the dock) and then put away [ part two of the three way match] An invoice is received from the vendor [third part of the 3-way match] After the tolerances/verification of the 3-way match are met a payment is made according to the terms agreed to on the purchase order.

Business Rules and Parameters

Tolerance limits -Purchase order --Purchase price (PO price vs. material price) --Discounts (cash discount in PO) -Goods receipt --Quantity (warning and error) --MAP change -Invoice receipt --Quantity tolerances --Value tolerances -Vendor payment Plant parameters -Goods movement -Material reservations

Automatic Account AssignmentTransaction Keys

Transaction Keys -Inventory Postings --BSX -Offsetting Entry for Inventory Postings --GBB -Materials Management Small Differences --DIF -Cost (price) differences (PPV) --PRD -Goods receipt / inv. receipt clearing acct --WRX

MRP Procedures in Consumption-Based Planning

Use In consumption-based planning, the following MRP procedures are available: Reorder point procedure Forecast-based planning Time-phased materials planning

Automatic Account AssignmentValuation Grouping Code

Valuation grouping code - groups valuation areas together Example: valuation area is plant, five plants exist in the company, all five plants use the same accounts. Multiple valuation groups are possible

Define valuation level

We are going to create at the plant level. System defaults to plant level. Define valuation level You define the valuation level by specifying the level at which material stocks are valuated. You can valuate material stocks at the following levels: Plant level Valuation must be at this level in the following cases: If you want to use the application component Production Planning (PP) or Costing Company code level The decision you make is valid for the whole client. You are recommended setting material valuation at plant level.

Supplier Evaluation and Selection

Identify need for long term supplier contract Determine specific sourcing requirements Identify potential suppliers Determine method of evaluating suppliers Select supplier for contract Negotiate and execute contract The vendor evaluation standard analysis enables you to evaluate the data from the vendor evaluation in Purchasing. The analysis is based on data that is updated. This standard analysis allows you to find out whether a certain vendor delivers material on time and in the correct quantity required. The key figures that can be evaluated are the scores for the criteria: quantity reliability, on-time delivery performance, deviation from shipping notification (keeping the confirmation date), shipping instructions, quality audit (is currently not updated). Once the data is compiled it must be evaluated. Based upon the evaluation supplier are selected, negotiations take place, and the contracts are executed.

Goods Receipt - Movement Types (continued)

101 - goods receipt for purchase order into warehouse/stores 102 - reversal of goods receipt for purchase order into warehouse/stores 122 - return delivery to vendor 501 - receipt w/o purchase order into unrestricted-use stock

Purchasing Group

A buyer or group of buyers responsible for certain materials or groups of materials Can be internal to the company or external -Decide to purchase land, but use a realtor (external purchasing group) to execute the purchase Not assigned to or related to purchasing org GBI Purchasing Groups: -North America (N00) -Europe (E00)

Material Types & Valuation Classes

Account category reference: -Builds the link between material types and the valuation class(es) The valuation class has the following functions: Allows the stock values of materials of the same material type to be posted to different G/L accounts. Allows the stock values of materials of different material types to be posted to the same G/L account. Determines together with other factors the G/L accounts updated for a valuation-relevant transaction (such as a goods movement). Indicates a grouping of valuation areas to facilitate the administration of the table of standard accounts by minimizing the number of entries. Use Together with other factors, the valuation grouping code determines the G/L accounts to which a goods movement is posted ( automatic account determination). Indicates a grouping of valuation areas to facilitate the administration of the table of standard accounts by minimizing the number of entries. Use Together with other factors, the valuation grouping code determines the G/L accounts to which a goods movement is posted ( automatic account determination).

Buyer/Supplier Relationships

Antagonistic - parties view each other as the enemy (lose/lose) Adversarial - each party attempts to maximize their gain (win/lose) Cooperative - parties understand the benefits of working together (win/win) Collaborative - parties look for opportunities to create value (win/win) Antagonistic: The two parties do not trust each other and work to undermine each other. Trust and belief in the other is typically in short supply. Adversarial: Low price mentality. Customer tries to get the lowest price possible and the vendor tries to get the highest price. Each tries to cut corners wherever possible to save money Cooperative: Good relationship with each other. They view each other as important to their business and try to do good business together. Try to move to collaborative - This is when the vendor and customer view each other as extensions of themselves.

Business Rules and Parameters

Automatic Account Determination -Material accounts -GR/IR account -Price difference account -Posting keys for invoice verification Tax related parameters -Tax version (how many tax rates and amounts) -Tax accounts (G/L account for posting) -Default values for tax codes (when entering invoices) Attributes for material types -Views to be maintained -Type of inventory management --quantity basis --value basis

Goods Receipt

If your company uses the MM Purchasing component, deliveries from vendors are most likely the result of purchase orders initiated by the purchasing department. Stock items or non-stock items Production order or external purchase orders One at a time or as a group Tolerances as mentioned earlier Loads may have special movement types.

Automatic Account AssignmentComponents

Components of Automatic Account Assignment -Chart of Accounts -Valuation Grouping Code -Transaction Key -Modifier for Transaction Key -Valuation Class This is materials management, you want to bring in the accountants to set up the accounts Postings are made to G/L accounts automatically in the case of Invoice Verification and Inventory Management transactions relevant to Financial and Cost Accounting. Example:Posting lines are created in the following accounts in the case of a goods issue for a cost center: Stock account Consumption account How does the system find the relevant accounts? When entering the goods movement, the user does not have to enter a G/L account, since the ERP System automatically finds the accounts to which postings are to be made using the following data: Chart of accounts of the company code If the user enters a company code or a plant when entering a transaction, the ERP System determines the chart of accounts which is valid for the company code. You must define the automatic account determination individually for each chart of accounts. Valuation grouping code of the valuation area If the automatic account determination within a chart of accounts is to run differently for certain company codes or plants (valuation areas), assign different valuation grouping codes to these valuation areas. You must define the automatic account determination individually for every valuation grouping code within a chart of accounts. It applies to all valuation areas which are assigned to this valuation grouping code. If the user enters a company code or a plant when entering a transaction, the system determines the valuation area and the valuation grouping code. Transaction/event key (internal processing key) Posting transactions are predefined for those inventory management and invoice verification transactions relevant to accounting. Posting records, which are generalized in the value string, are assigned to each relevant movement type in inventory management and each transaction in invoice verification. These contain keys for the relevant posting transaction (for example, inventory posting and consumption posting) instead of actual G/L account numbers. You do not have to define these transaction keys, they are determined automatically from the transaction (invoice verification) or the movement type (inventory management). All you have to do is assign the relevant G/L account to each posting transaction. Account grouping (only for offsetting entries, consignment liabilities, and price differences) Since the posting transaction "Offsetting entry for inventory posting" is used for different transactions (for example, goods issue, scrapping, physical inventory), which are assigned to different accounts (for example, consumption account, scrapping, expense/income from inventory differences), it is necessary to divide the posting transaction according to a further key: account grouping code. An account grouping is assigned to each movement type in inventory management which uses the posting transaction "Offsetting entry for inventory posting". Under the posting transaction "Offsetting entry for inventory posting", you must assign G/L accounts for every account grouping, that is, assign G/L accounts. If you wish to post price differences to different price difference accounts in the case of goods receipts for purchase orders, goods receipts for orders, or other movements, you can define different account grouping codes for the transaction key. Using the account grouping, you can also have different accounts for consignment liabilities and pipeline liabilities. Valuation class of material or (in case of split valuation) the valuation type The valuation class allows you to define automatic account determination that is dependent on the material. for example: you post a goods receipt of a raw material to a different stock account than if the goods receipt were for trading goods, even though the user enters the same transaction for both materials. You can achieve this by assigning different valuation classes to the materials and by assigning different G/L accounts to the posting transaction for every valuation class. If you do not want to differentiate according to valuation classes you do not have to maintain a valuation class for a transaction.

Benefits of Managing the Supply Base

Contract with only world-class suppliers The fewer suppliers the lower the purchasing overhead Purchasing can pursue strategic sourcing issues, instead of clerical functions Streamline the supply chain Improved overall quality Improved delivery performance Less total costs Robust and accurate operations Streamline the supply chain will optimize the communication and accuracy of supply of goods

Purchase Requisitions Processing

Create purchase requisition (manually or automatically) Determine source of supply Release procedure (optional) Assign vendor and process Steps involved in the Purchase requisition process. Creation Who Releases (workflow) Vendor assignment

Material Master - Accounting 1 (continued)

Current Valuation -Price Control Indicator --The price control used to valuate the stock of a material (e.g, Standard or Moving Average Price) -Standard Price --The valuation of material stocks at standard prices means that all goods movements are valuated at the same price over an extended period -Moving Average Price --The system calculates the moving average price automatically by dividing the material value in the stock account by the total of all storage location stocks in the plant concerned Price Control Indicator Indicates the price control used to valuate the stock of a material. You have the following options: Standard price Moving average price Price Unit Number of units to which the price refers. Example If 10 gallons of gasoline cost $12.00, the price unit is 10. Standard Price Standard price of the material Use The valuation of material stocks at standard prices means that all goods movements are valuated at the same price over an extended period. Moving Average Price/Periodic Unit Price Price of the material. This can be one of the following: Moving average price Periodic unit price (only if the material ledger is activated for the material) Use The system calculates the moving average price automatically by dividing the material value in the stock account by the total of all storage location stocks in the plant concerned. It changes the price with each valuation-relevant movement. The system changes the periodic unit price if you settle the material ledger and then save the data. The valuation of stocks at moving average price or periodic unit price means that the price of the material is adapted to the continual fluctuations in the procurement price.

Material Master - Accounting 1

Current Valuation -Valuation Class --Allows the stock values of materials of the same material type to be posted to different G/L accounts. --Allows the stock values of materials of different material types to be posted to the same G/L account. --Determines together with other factors the G/L accounts updated for a valuation-relevant transaction (Material Movements) -Price Unit --Number of units to which the price refers Price Control Indicator Indicates the price control used to valuate the stock of a material. You have the following options: Standard price Moving average price Price Unit Number of units to which the price refers. Example If 10 gallons of gasoline cost $12.00, the price unit is 10. Standard Price Standard price of the material Use The valuation of material stocks at standard prices means that all goods movements are valuated at the same price over an extended period. Moving Average Price/Periodic Unit Price Price of the material. This can be one of the following: Moving average price Periodic unit price (only if the material ledger is activated for the material) Use The system calculates the moving average price automatically by dividing the material value in the stock account by the total of all storage location stocks in the plant concerned. It changes the price with each valuation-relevant movement. The system changes the periodic unit price if you settle the material ledger and then save the data. The valuation of stocks at moving average price or periodic unit price means that the price of the material is adapted to the continual fluctuations in the procurement price.

Maintaining a Quotation

Enter each vendor's quotation in the associated Request for Quotation (RFQ) Compare prices using the price comparison list Store the best quote in an info record Optionally, send rejection letters to the losing bidders Enter each vendor's quotation in the associated Request for Quotation (RFQ) Compare prices using the price comparison list Store the best quote in an info record Optionally, send rejection letters to the losing bidders

Enterprise structure

Enterprise structure elements -Client -Company code (CC) -Plant -Storage location (SLoc) -Purchasing organization (POrg) -Purchasing group -Valuation areas Define / Maintain Assign

Material Master - Purchasing View

General Data -Order Unit --The unit of measure in which a company purchases the product -Purchasing Group --Key for a buyer or a group of buyers, who is/are responsible for certain purchasing activities. -Purchasing Values --Purchasing Value Key ---Define the reminder days and tolerance limits for purchasing Order unit Specifies the unit of measure in which the material is ordered. Procedure Enter a value in this field only if you want to use a unit of measure differing from the base unit of measure. If the field does not contain an entry, the system will assume that the unit of measure is the base unit of measure. Material Group Key that you use to group together several materials or services with the same attributes, and to assign them to a particular material group. Use You can use material groups to: Restrict the scope of analyses Search specifically for material master records via search helps Purchasing Value Key Key defining the reminder days and tolerance limits valid, as well as the shipping instructions and order acknowledgment requirement of the material for Purchasing.

Material Master - MRP 1

General Data -Purchasing Group --The buyer(s) who are responsible for certain purchasing activities MRP Procedures -MRP Type --Determines whether and how the material is planned -Reorder Point --If stock falls below this point, the system is flagged to create a planned order -MRP Controller --The person(s) responsible for the material planning Purchasing Group Key for a buyer or a group of buyers, who is/are responsible for certain purchasing activities. MRP Type Key that determines whether and how the material is planned. You have the following options: manual reorder point planning automatic reorder point planning forecast-based planning material requirements planning with forecasts for unplanned consumption master production scheduling (MPS) Reorder point If the stock falls below this quantity, the system flags the material for requirements planning by creating a planning file entry. MRP Controller Specifies the number of the MRP controller or group of MRP controllers responsible for material planning for the material. Lot size (materials planning) Key that determines which lot-sizing procedure the system uses within materials planning to calculate the quantity to be procured or produced. Minimum lot size Minimum procurement quantity Fixed lot size Quantity that will be ordered or produced in the event of a shortage.

Material Master - Plant Data/Storage 1

General Data -Container Requirements --Define the regulations that govern which type of container the material must be stored and shipped in -Storage Conditions --Defines the conditions on how a material must be stored or warehoused Shelf Life Data -Minimum remaining shelf life --Minimum time the material must keep upon goods receipt for the goods receipt to be accepted by the system -Total Shelf Life --Period of time the material will keep in total, from the date of production or receipt to the shelf life expiration date Container requirements Key for the regulation that governs which type of container the material must be stored and shipped in. Storage conditions Indicates what storage conditions are required for the material. Minimum remaining shelf life Minimum amount of time for which the material must keep upon goods receipt for the goods receipt to be accepted by the system. Total shelf life Period for which the material will keep in total, that is, from the date of production to the shelf life expiration date.

Material Master - Basic Data

General data -Basic Unit of Measure --Unit of measure in which stocks of the material are managed -Material Group --Key that you use to group together several materials or services with the same attributes -Division --Used to determine the sales area and the business area for a material, product, or service Once you create a view, you can only change a view. You cannot delete it. Base Unit of Measure Unit of measure in which stocks of the material are managed. The system converts all the quantities you enter in other units of measure (alternative units of measure) to the base unit of measure. Material Group Key that you use to group together several materials or services with the same attributes, and to assign them to a particular material group. Use You can use material groups to: Restrict the scope of analyses Search specifically for material master records via search helps Division A way of grouping materials, products, or services. The system uses divisions to determine the sales areas and the business areas for a material, product, or service. Use A product or service is always assigned to just one division. From the point of view of sales and distribution, the use of divisions lets you organize your sales structure around groups of similar products or product lines. This allows the people in a division who process orders and service customers to specialize within a manageable area of expertise.

Material MasterAdditional Material Types

HIBE: Operating Supplies VERP: Customer returnable packaging LEER: Empty containers KMAT: Configurable material ERSA: Spare parts DIEN: Services Operating supplies (HIBE) Operating supplies are procured externally and required for the manufacture of other products. A material master record of this material type can contain purchasing data, but not sales data. Packaging materials (VERP) Packaging materials are used to transport goods and come with the goods free of charge. A material master record of this material type is managed on both a quantity basis and value basis. Empties (industry LEER, retail LGUT) Empties are a type of returnable transport packaging generally subject to a deposit. They can consist of several components grouped together in a bill of material (BOM) that are assigned to a full product. For example, an empty crate and the empty bottles are assigned to the full product beer. Each of the components in the BOM has a separate material master record. Configurable materials (KMAT) Configurable materials are materials that can have different variants. For example, an automobile can have different types of paintwork, trim, and engine. The Material is configurable indicator is already set for this material type in Customizing for the Material Master in Define Attributes of Material Types. Spare parts (ERSA) Spare parts are used to replace defective parts. They may be kept in stock. A material master record of this material type can contain purchasing data, but not sales data. Services (DIEN) Services can be performed internally or procured externally (outsourced). They cannot be stored or transported. Construction work Janitorial/cleaning services Legal services Savings on Customer Returnable containers Configurable - Dell or Gateway

Contracting Questions

How will potential suppliers be evaluated and selected? What procedures will be required to manage the contracts (and suppliers)? How will performance be measured? How many are too many suppliers? -Too many suppliers cost money -Supplier integration -Collaborative agreements -Supplier development -Without material production shuts down What is the risk? A program definition has to be defined before the evaluation begins. Result must be measurable. Some of the most common evaluation measures: On-time delivery Quality Price Variance The key figures that can be evaluated in the standard analysis vendor evaluation, are scores for the following criterion: On-time delivery performance Quality audit (currently cannot be updated) Quantity reliability Shipping instructions Shipping notification deviation (keeping the confirmation date) Xerox - 80's benchmarking Thousands of supplier Dozens for the same component Reduced and saved money Sole source is a risk because if they falter in their supply to the company there is not alternative.

Purchasing Organization

Identify and select vendors Negotiate general conditions of purchase and contracts for one or more plants or companies. Determine pricing conditions Typically three models for Purchasing Organization -Enterprise-Level (assigned to plant) -Company-Level (assigned to plants and one company code) <- GBI model -Plant-Level (assigned to plant and its company code) -Hybrid

Outline Agreement

Long-term purchase agreements Outline agreements can be subdivided into the following types: -Contracts -Scheduling agreements Outline agreements can be subject to a release (approval or clearance) procedure An outline purchase agreement is a longer-term agreement between a purchasing organization and a vendor regarding the supply of materials or the performance of services within a certain period according to predefined terms and conditions. (Outside SAP, such agreements may be referred to by a number of terms, including "blanket", "master", "framework" or "umbrella" agreements) In the SAP System, such agreements are subdivided into: Contracts Centrally agreed contracts Distributed contracts Scheduling agreements Scheduling agreement referencing a centrally agreed contract

Material Master - MRP 1 (continued)

Lot Size Data -Lot Size --The lot sizing procedure to calculate the quantity to be produced or procured -Minimum Lot Size --The smallest order quantity -Fixed Lot Size --The quantity to be ordered

Valuation

MM - Material Price Change (MM-IV-MP) Balance Sheet Valuation (MM-IM-VP) Actual Costing/Material Ledger (CO-PC-ACT)

Service Master

MM External Services Management provides a basic process for the procurement of externally performed services. This basic process comprises the following functionality:

Material Master - Views (continued)

MRP 1, 2, 3, 4 Work scheduling Storage Warehouse management Quality management Accounting 1, 2 Costing 1, 2

Purchase Requisitions Sources

Manually by user. This can be integrated with Controlling (BPI - II) Materials planning and control can stipulate that a purchase requisition is to be resubmitted to the purchasing department if it has not been processed after a predefined period of time. Requisitions are generated automatically from networks if: A material component with non-stock material or an external service component has been assigned to an operation and The indicator allowing automatic generation of requisitions immediately the network is saved has been set in the network. In this way, requisitions can be forwarded to Purchasing early in the planning phase. If the indicator has not been set, the system passes the data on to materials planning and control when the network is released. The latter component then creates the requisition. Via maintenance orders Requisitions are generated automatically from maintenance orders if: A material component with non-stock material has been assigned to an operation, or An operation with the control key for external services has been created. Requisitions are generated automatically from production orders if: They contain an external processing operation (e.g. subcontracting work). A precondition is that the control key for the operation allows or prescribes external processing. They contain non-stock components

Plant

Many definitions or uses. A location -That holds valuated stock (for distribution) -Where production planning is carried out -Where products and services are created -That contains service or maintenance facilities Where work is performed -Office, store, factory, warehouse, distribution center Can be assigned to one CC only A CC can have many plants

Invoice Receipts Tolerances

Many tolerance limits that can be configured for invoice receipts: price, quantity, and blanket purchase orders These tolerances include: -Amount for item with or without order reference -Form small differences automatically -Percentage Over/Under Quantity Variance -Exceed amount: quantity variance -Blanket purchase order - value and time limit -Price variance When you enter an invoice, the system proposes certain values from the purchase order or goods receipt. If the invoice item differs from the default values, you must determine the reason for the variance by contacting the purchasing or goods receipt department or the vendor. It is too time-consuming to investigate very small variances. So tolerance limits can be defined in the system. If variances in an invoice item are within these limits, they are accepted by the system. If a tolerance limit is exceeded, you receive a system message. You can still post the invoice but it will be automatically blocked for payment if it exceeds the upper tolerance limit (see also Tolerances). If the invoice is blocked, all the items are blocked. Even if the invoice only displays variances in one item, the whole invoice is blocked for payment. If you post an invoice with a blocking reason, the system carries out two steps: The account postings resulting from the invoice are made. In the vendor item, the system enters an R in the field Payment block so that Financial Accounting cannot make payment for the invoice. The following blocking reasons exist for variances in invoice items (the relevant blocking indicator is specified in parentheses): Quantity variance (M) A quantity variance exists if the invoiced quantity is larger than the difference between the quantities delivered and those already invoiced. In the SAP System, a quantity variance is treated differently depending on the amount of the variance. The product of the order price and the variance quantity is used as the basis for determining whether the invoice is to be blocked. Lower priced items are permitted relatively large quantity differences, whereas more expensive items are allowed only very small differences. Price variance (P) A price variance exists if the invoiced price (invoiced amount divided by the invoiced quantity) is not the same as the net order price. Variance in order price quantity (G) A variance in order price quantity exists if the ratio between the order price quantity and the order quantity in the invoice differs from the ratio specified at goods receipt (or if it differs from the ratio in the purchase order, if no goods receipt has taken place). Schedule variance (T) A schedule variance exists if the date of invoice entry is before the delivery date specified in the purchase order. In the SAP system, schedule variances are treated differently depending on the value of the invoice items. The product of the invoice item value and the number of days variance is used as a basis for determining whether the invoice is to be blocked. In this way, relatively large schedule variances are allowed for lower value items, whereas only very small schedule variances are permitted for high value invoice items (When an invoice refers to a scheduling agreement, the system does not check for a schedule variance, since there is no clearly fixed delivery date in a scheduling agreement.). Quality inspection (I) If a material is defined as being relevant for quality management, goods receipts for this material are posted to stock in quality inspection. Invoices for the material are blocked until the inspection has been successfully completed. If more than one goods receipts is posted for an order item, an inspection is carried out for every goods receipt. A distinction is made between two different scenarios in Invoice Verification: Goods-receipt-based Invoice Verification has been defined in the purchase order: The invoice is blocked if the inspection has not been completed for the goods receipt. No goods-receipt-based Invoice Verification has been defined in the purchase order: The invoice is blocked if any goods receipts are still in quality inspection. If an invoice is posted before the goods are received, it cannot be blocked for quality inspection. When Quality Management is active, we recommend you work with goods-receipt-based Invoice Verification. In addition to the fact that invoices are only blocked that pertain to the exact goods receipt, this also ensures that an invoice cannot be posted before the goods receipt and subsequently before the quality inspection has taken place.

Master Data

Material Master Vendor Master Purchasing info record Conditions

Plant Parameters

Material Requirements Planning (MRP) controllers -Individuals responsible for running and maintaining Material Requirements Planning data and reports Negative stock allowance -If a material is allowed to go negative for inventory stock

Material Master Data

Material master data can be related to all organizational levels General information of a material (description, number, base unit of measure) -Has to be related to the highest level of organization - the client The material master has a hierarchical structure resembling the organizational structure of a company. Some material data is valid at all organizational levels, while other data is valid only at certain levels. Client Company Code -Plant --Storage Location ---Purchasing Organization ----Sales Organization ----Warehouse Number ----Storage Type

Conditions

Pricing Conditions -Gross price -Discounts and surcharges -Freight / shipping Pricing data in a purchase order is obtained from -Condition records -Purchasing info records -Contracts and agreements -Other sources

Material Master - Material Type

Material types group materials with the same attributes Material type information determines: -What views are maintained -Whether internal or external procurement is allowed -If changes in material quantity are updated -Which general ledger accounts are updated Every material has a material type Material Type controls the views and fields to create the material Material types are controlled at the client level Materials with the same basic attributes are grouped together and assigned to a material type. This allows you to manage different materials in a uniform manner in accordance with your company's requirements. When you create a material master record, the material type you choose determines: Whether the material is intended for a specific purpose, for example, as a configurable material or process material 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 you may enter 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.

Automatic Account AssignmentModifier

Modifier - modifies the transaction key for various movement types -Blank - Goods receipt from purchase order with account assignment -VBR - Goods issue to consumption -VAX - Goods issue to sales - post to cost of goods sold -AUF - Goods receipt from a production order - post to production settlement -Etc. - Many others

Goods Receipt - Movement Types

Movement types - stock transactions -Goods receipt -Goods issue -Stock transfer Movement type determines which -Quantity fields are updated -Stock types are updated -General Ledger (G/L) stock or consumption accounts are updated -Fields are displayed during document entry Goods receipt A goods receipt (GR) is a goods movement with which the receipt of goods from a vendor or from production is posted. A goods receipt leads to an increase in warehouse stock. Goods issue A goods issue (GI) is a goods movement with which a material withdrawal or material issue, a material consumption, or a shipment of goods to a customer is posted. A goods issue leads to a reduction in warehouse stock. Stock transfer A stock transfer is the removal of material from one storage location and its transfer to another storage location. Stock transfers can occur either within the same plant or between two plants. Transfer posting A transfer posting is a general term for stock transfers and changes in stock type or stock category of a material. It is irrelevant whether the posting occurs in conjunction with a physical movement or not. Examples of transfer postings are: Transfer postings from material to material Release from quality inspection stock Transfer of consignment material into company's own stock When you enter a goods movement in the system, you must enter a movement type to differentiate between the various goods movements. A movement type is a three-digit identification key for a goods movement 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 When you enter a goods movement, you start the following chain of events in the system: A material document is generated, which is used as proof of the movement and as a source of information for any other applications involved. If the movement is relevant for Financial Accounting, one or more accounting documents are generated. The stock quantities of the material are updated. The stock values in the material master record are updated, as are the stock and consumption accounts.

Material MasterAdditional Material Types (continued)

NLAG: Non-stock, non-valuated material UNBW: Non-valuated, stocked material FHMI: Production resources/tools WETT: Competitive products PROD: Product group IBAU: Maintenance assembly (Plant Maintenance) Nonstock materials (NLAG) Nonstock materials are not held in stock because they are consumed immediately. Nonvaluated materials (UNBW) Nonvaluated materials are managed on a quantity basis, but not by value. Production resources/tools (FHMI) Production resources/tools are procured externally and used in production or plant maintenance. A material master record of this material type can contain purchasing data, but not sales data. It is managed on a quantity basis. Jigs and fixtures Measuring and test equipment Competitive products (WETT) Observing and evaluating the activities of your competitors is essential for optimum market analysis. You can enter basic data on the products of your competitors in material master records of this material type. By specifying a competitor number, you can assign the product to a particular competitor. Maintenance assemblies (IBAU) Maintenance assemblies are not individual objects, but logical elements to separate technical objects into more clearly defined units in plant maintenance. For example, an automobile can be a technical object, and the engine, gearbox, chassis, and so on the maintenance assemblies. A material master record of this material type can contain basic data and classification data. Product groups (PROD) Product groups aggregate materials according to certain freely definable criteria. For example, the products may be similar to each other in some way, or they may be finished products that were produced on the same machine.

Foreign Trade

Official customs brokers are licensed by the customs service to assist you with import and export transactions. They have the responsibility to ensure that all foreign trade customs procedures are followed completely and comply to legal regulations. They also ensure that the duties collected from your company are turned over to the government when they become due. Although the services of a customs broker replace the need for your company to handle the necessary tasks associated with foreign trade, they can be very costly. SAP's FT system incorporates all of the necessary checks and balances necessary to ensure that your import and export transactions are handled lawfully and that the duties owed to the customs authorities are calculated instantly and accurately.

Material Master - Basic Data (continued)

Once you create a view, you can only change a view. You cannot delete it. Gross weight Gross weight expressed in the unit of weight specified by you in the Unit of weight field. Use The system can use the gross weight at a later stage, depending on what kind of capacity check you run, to check storage bin capacity for warehouse management purposes. Net weight Net weight expressed in the unit of weight specified by you in the Unit of weight field. This is the weight shipped or without packaging Weight Unit Unit referring to the gross weight or net weight of the material. Volume Space that the material occupies per unit of volume. The volume refers to the unit specified in the "Volume unit" field. The volume and its unit always refer to the base unit of measure. International Article Number (EAN/UPC) Glossary definition Use The EAN on the Basic Data screen always relates to the base unit of measure.

Plant (continued)

Plant is a physical or logical location It may be a warehouse: PHYSICAL Vendor are in warehouse (Vendor managed inventory) Customer site (consigned inventory): LOGICAL Can do multiple plants within the same physical structure We value material at the plant level. Planning done at the plant not organizational level The plant is an operating area or branch within a company. The plant is embedded in the organizational structure as follows: The plant is assigned to a single company code. A company code can have several plants. Several storage locations in which material stocks are managed can belong to a plant. A single business area is assigned to a plant and to a division. A plant can be assigned to several combinations of sales organization and distribution channel. A plant can have several shipping points. A shipping point can be assigned to several plants. A plant can be defined as a maintenance planning plant. A plant has the following attributes: A plant has an address. A plant has a language. A plant belongs to a country. A plant has its own material master data. You can maintain data at plant level for the following views on a material master record in particular: MRP, Purchasing, Storage, Work scheduling, Production resources/tools, Forecasting, Quality management, Sales, Costing. The plant plays an important role in the following areas: material valuation If the valuation level is the plant, the material stocks are valuated at plant level. If the valuation level is the plant, you can define the material prices for each plant. Each plant can have its own account determination. inventory management The material stocks are managed within a plant. MRP Material requirements are planned for each plant. Each plant has its own MRP data. Analyses for materials planning can be made across plants. production costing In costing, valuation prices are defined only within a plant. plant maintenance If a plant performs plant maintenance planning tasks, it is defined as a maintenance planning plant. A maintenance planning plant can also carry out planning tasks for other plants (maintenance plants).

Goods Receipts Tolerances

Purchase order price quantity - there are two tolerance levels maintained per item -The maximum percentage variance before a goods receipt postings is not allowed -A percent variance that generates a warning message but allows posting Moving average price variance - the maximum allowable moving average price change allowed Goods Receiving personnel can confirm the receipt of goods simply by entering the Po number. By specifying permissible tolerances, buyers can limit over- and under deliveries of ordered goods. In this step, you set the tolerance limits for goods receipts. When processing a goods receipt, the system checks each item to determine whether the goods receipt varies from the purchase order or the material master data. The different types of variances are defined by tolerance keys. For each tolerance key, tolerance limits can be set per company code. The following variances are checked in Inventory Management: Variance in the purchase order price quantity For this variance, two tolerance keys are provided: Tolerance key B1 (error message) You use tolerance key B1 to define the maximum percentage variance. If the variance is greater than the maximum variance, the system creates an error message. The user cannot post the goods receipt. Tolerance key B2 (warning message) Tolerance key B2 defines the percentage variance from which a warning message is to be issued. It is possible to post the goods receipt. Variance for the moving average price of the material You use tolerance key VP to define the percentage variance from which a warning message is issued. This warning message indicates a price change.

Plant Parameters - (continued)

Purchasing -Special purchasing rules -External purchasing only settings Planned orders -Rescheduling -Conversion to purchase requisitions Days and Floats - For instance, do we have to place the PO today for it to be conveyed to the vendor for tomorrow (e.g. 1 day float) Document number ranges -Planned orders -Purchase requisitions -Material Requirements Planning (MRP) lists -Reservations Each of these different order types can/will have their own number ranges.

Components of Materials Management

Purchasing Inventory Management Logistics Invoice Verification Material Master Valuation MRP Physical Inventory Service Master Service Entry Sheet Foreign Trade/Customs Product Catalog

Logistics Invoice Verification (MM-IV-LIV)

Purpose Logistics Invoice Verification is a part of Materials Management (MM). It is situated at the end of the logistics supply chain that includes Purchasing, Inventory Management, and Invoice Verification. It is in Logistics Invoice Verification that Incoming Invoices are verified in terms of their content, prices and arithmetic. When the invoice is posted, the invoice data is saved in the system. The system updates the data saved in the invoice documents in Materials Management and Financial Accounting.

Purchasing (MM-PUR)

Purpose The ERP System consists of a number of components that are completely integrated with one another. This integration allows the various departments and units of an enterprise to share and maintain the same information. Purchasing is a component of Materials Management (MM). The Materials Management (MM) module is fully integrated with the other modules of the SAP System. It supports all the phases of materials management: materials planning and control, purchasing, goods receiving, inventory management, and invoice verification. The tasks of the MM Purchasing component are as follows: External procurement of materials and services Determination of possible sources of supply for a requirement identified by the materials planning and control system or arising directly within a user department Monitoring of deliveries from and payments to vendors Good communication between all participants in the procurement process is necessary for Purchasing to function smoothly.

Material Master (LO-MD-MM)

Purpose The material master contains information on all the materials that a company procures or produces, stores, and sells. It is the company's central source for retrieving material-specific data. This information is stored in individual material master records.

Inventory Management and Physical Inventory (MM-IM)

Purpose This component deals with the following tasks: Management of material stocks on a quantity and value basis Planning, Entry, and Documentation of all Goods Movements Carrying out the Physical Inventory Features

Two Types of Contracts

Quantity contracts are agreements with a particular vendor to purchase a specific quantity of materials. Example: Target quantity of 50,000 meters of electrical wire at $2/meter. (MK) Value contracts are similar to quantity contract except the agreement is to purchase an established monetary value of materials. Example: Target value of $100,000 for electrical wire. (WK) Quantity contracts Use this type of contract if the total quantity to be ordered during the validity period of the contract is known in advance. The contract is regarded as fulfilled when release orders totaling a given quantity have been issued. Value contracts Use this type of contract if the total value of all release orders issued against the contract is not to exceed a certain predefined value. The contract is regarded as fulfilled when release orders totaling a given value have been issued.

Material Master - Industry Sector

Records are grouped according to industry sector and material type Determines the industry specific data that will appear on the master record When you create a material master record, you are required to classify the material according to industry sector and material type. Like material types, industry sectors have control functions in the ERP System. For example, it is a factor determining the screen sequence and field selection in a material master record. Once you have assigned an industry sector to a material, you cannot change the industry sector.

Purchasing Info Records

Relates vendors and materials. One info record per combination of vendor and material (or material group) -General data -Conditions: pricing, discounts, free goods (current and future) -Vendor data -Texts (notes)

Quotations/Contracts Process

Requirement for material is identified Process followed to select a vendor Request for Quotation (RFQ) Maintaining a Quotation Comparison of Prices Creating a Contract Creating a Release Order A request for quotation (RFQ) is an invitation extended to a vendor by a purchasing organization to submit a quotation (bid) for the supply of materials or performance of services. A quotation is legally binding on the vendor for a certain period. The quotation is the vendor's response to a request for quotation issued by a purchasing organization. A quotation consists of items in which the total quantity and delivery date of an offered material or service are specified. An item of a quotation may contain a delivery schedule made up of a number of schedule lines in which the total quantity is broken down into smaller quantities to be delivered on the specified dates over a certain period. Issuing RFQs and Obtaining Quotations You use this process if you wish to manage and compare RFQs issued to vendors and the quotations received from them. You can compare the prices from all quotations received as a result of a competitive bidding process using the price comparison list . The comparison list ranks the quotations by item from lowest to highest price. From there we can optionally create a contract or release an order as discussed earlier

Material Master - MRP 2

Scheduling -Planned Delivery Time --Number of calendar days needed to obtain the material -Scheduling Margin Key --Used to determine the floats required for scheduling Net Requirement Calculation -Safety Stock --Specifies the quantity whose purpose is to satisfy unexpectedly high demand in the coverage period Planned delivery time in days Number of calendar days needed to obtain the material or service if it is procured externally. Procedure If you have different vendors for a material, you must specify an average value. The same applies if you order the material from a fixed vendor that has varying delivery times. Scheduling Margin Key for Floats Key that the system uses to determine the floats required for scheduling an order. You define the following floats with the scheduling margin key: The specified order dates or production dates (scheduled dates) form the starting point for scheduling an order and the scheduling type determines whether the start or finish date is required to do this. Since disturbances and delays in the production process can never be completely avoided, you can plan in additional time floats at the beginning and end of an order (float before production, float after production). You define the duration of these floats in the master record of the material to be produced. Scheduling determines the required dates using these floats. The float before production is a start float. It has two functions: It can compensate for delays in the staging of the material components. If there is a capacity bottleneck at the work centers involved, the production dates can be moved forward in the future. In this way it serves as a float for capacity leveling. The float after production is a finish float. It is used to compensate for unexpected disturbances in the production process, so that they do not delay the scheduled finish date. The floats before and after production are defined for each material using a scheduling margin key. This scheduling margin key is automatically transferred from the material master when an order is created. However, you can change the times in the order. opening period float after production (only in the case of in-house production) float before production (only in the case of in-house production) release period (only in the case of production order management) Floats are maintained in workdays. Safety stock Specifies the quantity whose purpose is to satisfy unexpectedly high demand in the coverage period. The risk of shortfalls is reduced by having a safety stock. The safety stock exists to cover both excess material consumption within the replenishment lead time and any additional requirements that may occur due to delivery delays.

Invoice Verification

Set parameters for invoice verification -Quantity, price, receiving date, P/O quantity -Updates material master if moving average price -Automatic account assignment for price differences - if allowed Verify actual versus target Rules for price differences and where are we going to post those. Materials Management, Logistics Invoice Verification has the following features: It completes the material procurement process, which started with the purchase requisition and resulted in a goods receipt. It allows invoices that do not originate in materials procurement (such as services, expenses, course costs) to be processed. It allows credit memos to be processed, either as invoice reversals or return deliveries

Goods Receipt - Destinations

Stock - given a storage location, can be posted to three different stock statuses -Unrestricted-use -Quality inspection -Blocked stock (valuated) -Consumption - can be assigned a recipient or unloading point -Goods receipt for blocked stock- updates inventory, but material is not valuated (conditional acceptance) Stock Update Which stocks are updated in the material master record depends on the destination of the goods: Goods receipt into the warehouse If the goods are destined for the warehouse, the system increases total valuated stock and the stock type (for example, the unrestricted-use stock) by the delivered quantity. The stock value is updated at the same time. Goods receipt into consumption If the goods are destined for consumption, only the consumption statistics are updated in the material master record. The system does not update the consumption statistics in the material master record, if you post goods movements using the special stock types Sales order stock and Project stock. Goods receipt into goods receipt blocked stock If the goods receipt is posted into goods receipt blocked stock (see also Goods Receipts Into Goods Receipt Blocked Stock), the stock level remains the same. The goods are recorded only in goods receipt blocked stock of the purchase order history. Goods receipt into a new storage location If you post goods into a storage location that does not yet exist for this material, the storage location data is automatically created in the material master record when the goods receipt is posted.

Goods Receipt - (continued)

Stock items can be received into restricted or unrestricted stock Non-stock items are received into orders, projects, cost centers Materials that are usually received into inventory can also be received into orders, projects, cost centers Restricted stock is stock that is not available Non-stock does not go into inventory - Costs are used against orders, projects or cost center Material can also go against cost.

Material Master - Levels (continued)

Storage Location -Stock quantities Storage Location An organizational unit allowing the differentiation of material stocks within a plant. All data referring to a particular storage location is stored at storage location level. This applies mainly to storage location stocks. A plant may contain one or more storage locations.

Organizational Relationships

Storage locations are assigned to a plant Do not confuse inventory locations with storage locations Storage locations equates to a warehouse Inventory location is a bin or place where individual inventory is kept We would want to create these things because we want to have them in quality until we inspect them. Could have a return: Check the return before we place it back into inventory.

Contract Management

Supplier performance metrics -On-time delivery -Material and/or service quality -Returned materials -Expedite issues -Pricing analysis Problem resolution procedures -Improve or else -Continuous improvement process When to end the contract You can determine the type and number of main criteria yourself. The system supports a maximum of 99 main criteria. You can specify the number of main criteria for each purchasing organization and decide which main criteria are to be covered by the overall score. The following five main criteria are available in the standard system: Price Quality Delivery Gen. service/support These four main criteria serve as a basis for evaluating vendors from whom you procure materials. External service provision This main criterion serves as a basis for evaluating those vendors you employ as external service providers. Reports on the performance metrics give the information necessary to make informed decisions about vendors Corrective action plans Dissolution of contracts for non-performance

Comparison of Prices

You can compare the prices from all quotations from the competitive bidding process using the price comparison list The comparison list ranks the quotations by item from lowest to highest price

Possible organizational forms

You can organize your purchasing function in the following ways: Corporate-group-wide purchasing Company-specific purchasing Plant-specific purchasing All of these forms can co-exist within a single client.