VK BBP-MM V3 (1)

Business Process Procedures

Viswakirti projects Pvt ltd -Business Blue Print for SAP

MATERIALS MANAGEMENT

Contents

1 Purpose

2 Organizational units...................................................................................................................3

2.1 Company Code...................................................................................................................3

2.2 Plant...................................................................................................................................4

2.3 Valuation level.....................................................................................................................5

2.4 Purchasing Organization.....................................................................................................5

2.5 Purchasing Group...............................................................................................................5

2.6 Storage Location.................................................................................................................5

2.7 Organization Structure........................................................................................................6

3 Master Data Management.........................................................................................................6

3.1 Material Master.....................................................................................................................7

3.2 Vendor Master......................................................................................................................9

3.3 Purchasing Master Data......................................................................................................10

3.3.1 Purchasing Info Record..............................................................................................10

3.3.2 Source List .................................................................................................................11

3.3.3 Quota Arrangement....................................................................................................11

3.4 Service Master Record........................................................................................................12

3.5 Condition Record.................................................................................................................12

3.6 Transaction codes for Master Record..................................................................................12

4 Purchasing Document Types.....................................................................................................13

4.1 Purchase Requisition..........................................................................................................13

4.1.1 Approve requisitions based on approval limits and approval hierarchies...................15

4.2 Request for Quotation........................................................................................................16

4.2.1 Maintaining Quotation................................................................................................16

4.2.2 Comparing Quotation................................................................................................16

4.3 Rate Contract.................................................................................................................. ..17

4.4 Scheduling Agreement.......................................................................................................18

4.5 Purchase Order..................................................................................................................18

4.5.1 Approve requisitions based on approval limits and approval hierarchies.................19

4.5.2 Version Management (Amendment of PO)..............................................................19

5 Functional Scope Supported Business Processes or Scenarios in Materials Management..20

5.1 General Procurement.........................................................................................................20

Key points...............................................................................................................................21

5.2 Consumable Procurement.................................................................................................21

Key points...............................................................................................................................21

5.3 Project procurement..........................................................................................................21

5.4 Service Procurement.........................................................................................................21

Key points...............................................................................................................................22

5.5 Subcontracting...................................................................................................................22

Key points................................................................................................................................22

5.6 Release Procedure............................................................................................................23

Key points...............................................................................................................................23

5.7 Pricing Procedure..............................................................................................................23

Key points...............................................................................................................................23

5.8 Vendor Evaluation...............................................................................................................25

Key points................................................................................................................................25

5.9 Goods Receipt....................................................................................................................26

Key points................................................................................................................................26

5.10 Goods Issue......................................................................................................................29

Key points................................................................................................................................29

5.11 Stock Transfer...................................................................................................................29

Key points................................................................................................................................29

5.12 Return to Vendor..............................................................................................................30

Key points................................................................................................................................30

5.13 Stock handling : Scrap and Blocked Stock.......................................................................31

Key points...............................................................................................................................31

5.14 Physical Inventory.............................................................................................................31

Key points...............................................................................................................................31

6 Invoice Verification....................................................................................................................33

Key points...............................................................................................................................33

7 Batch Management...................................................................................................................34

Key points...............................................................................................................................34

8 Serial Number Management.....................................................................................................35

Key points...............................................................................................................................35

9 SAP Reporting.........................................................................................................................36

Business Blue Print Solution Scope

Purpose

This Solution scope provides an overview pf the processes and functions covered by SAT Infotech for Viswakirti Projects Pvt Ltd. It describe the functions and explains their business purposes.

2 Organizational Units:

2.1 Company Code :

its a legal entity and independent accounting unit in SAP. The balance sheets required by law and profit and loss statement are carried out at company code level.

2.2 Plant :

In logistics a plant is an organizational Logistics unit for dividing an enterprise according to procurement, production, maintenance & material planning. A place where materials are produced, or goods and services are provided.

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 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 has its own material master data. (Example: one material code created for this plant can be extended to other plant.)

The plant plays an important role in the following areas:

Material valuation: When the valuation level is plant, the material prices are defined 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. Analysis for materials planning can be made across plants.

Production Costing: In costing, valuation prices are defined only within a plant.

Example of Plant: Production facility, branch office.

2.3 Valuation Level:

You define the valuation level by specifying the level at which material stocks are valuated

You can valuate material stocks at following levels :

1)Company code

2)Plant.

2.4 Purchasing Oraganization

Organizational unit within Logistics, subdividing an enterprise according to the requirements of Purchasing. A purchasing organization procures materials and services, negotiates conditions of purchase with vendors, and bears responsibility for such transactions.

The form of procurement is specified through the assignment of purchasing organizations to company codes and plants.

2.5 Purchasing Group

The Purchasing group is organizational unit within logistics and it is

Responsible for procuring a material or a class of materials for internal units

The contact for external suppliers

You define the purchasing group during Customizing (not part of the enterprise structure). You do not assign purchasing groups directly to purchasing organizations.

You may define purchasing areas to describe in detail the fields of activity of a purchasing group.

2.6 Storage location :

A storage location is a an organizational unit that allows the differentiation of material stocks within a plant. Storage locations are always created for a plant. A storage location is the place where stock is physically kept within a plant. This field in SAP is a four-digit code.

The storage locations will have the following attributes.

There may be one or more storage locations within a plant.

A storage location has following attributes :

There may be one or more storage location within a plant

A storage location has a description and at least one address.

It is possible to store material data specific in a storage location.

Stocks are managed only on quantity basis and not on a value basis at a storage location level.

Physical Inventories are carried out at storage location level.

Organizational ElementCodeDescription

Plant0008Viswakirti Plant 1

Storage locationVSL1Main stores

SLU1Storage location UNIT 1



Purchasing Organization0008VKPO Purchase Organization

Purchasing Group01Projects

02 General

03Factory sales

2.7 Organization Structure :

3. Master Data Management

The following masters that are important and used in SAP:

Material master

Vendor master

Purchasing master data

Purchasing Info record

Source list

Quota arrangement

Service master record

Condition record

3.1 Material Master

The material master contains the information of a material which is procured / produced / stored and sold. It is the company's central source for retrieving material-specific data. This information is stored in individual material master records.

The material master is used by all agencies in a Logistics System. The integration of all material data in a single data base object eliminates redundant data storage. In the SAP Logistics, the data contained in the material master is required in the following:

Procurement of material in Purchasing.

Movement of goods in Inventory Management.

Invoice posting in Invoice Verification.

Processing of Sales order in Sales and Distribution.

Material requirements planning / scheduling in Production Planning and Control.

Material Valuation in the Valuation Area.

Material number is a number which uniquely identifies a material in material master record.

User can have Internally generated material number through system or can have his own externally entered number. User will be identifying material with maximum 18 digit alphanumeric code having description of 40 Characteristics.

Material typeDescriptionNumber Range

ROHRaw material100000000000-19999999999

BOTBought-out goods200000000000-29999999999

UNBWConsumables300000000000-39999999999

FERTFinished goodsXXXXXXXXXX-XXXXXXXXX

HALBSemi-finishedXXXXXXXXXX-XXXXXXXXX

DIENServiceXXXXXXXXXX-XXXXXXXXX

VERPPackagingXXXXXXXXXX-XXXXXXXXX

ZASSAssetsXXXXXXXXXX-XXXXXXXXX

Material TypeMaterial GroupMaterial Sub Group

BOTMotorsAC motors

DC motors

Gear BoxesHelical GB

Worm GB

Bevel Hel.GB

Geared Motors

CouplingsGeared couplings

Tyre couplings

Fluid couplings

Pin & Bush couplings

HRC couplings

Jaw couplings

BearingsIdler bearings

Pulley bearings

Adapter sleeve

Plummer blocksS-Series

SN-Series

SD-Series

Grease Nipples

Locating rings

Flange Mounted Brg. Unit

Conveyor belt

V-belt

Safety switchesZero speed switch

Seals

VFD

Magnetic seperator

Metal Detectors

Crushers

Vibrating screens

Vibro feeders

locating Rings

Bag filters

Pulley/shelves

Blowers

Raw materialsShafts

Pipe

Bright Rod

Flat

Angles

Channels

Beam

Square Bar

T-Angle

MS Rounds

M.S.Square

M.S.Plates

Rod

Paints

ScrapScrap

ConsumablesHardwareLock nut

Fasteners

Lock washer

Pins

3.2 Vendor master

The Vendor master contains information on vendor from whom a company procures material or services. vendor master records controls how transaction data is posted and processed for a vendor.

Vendor Account number (Vendor Code) created for a purchasing organization, is a number uniquely identifying a vendor master record, and thus a vendor. Vendor master contains mainly three types of data namely General, company code and purchasing.

General data (Relevant for both Material Management and financial accounting)

Company code data (Relevant for financial accounting only)

Purchasing organization data (Relevant for specific purchasing area only)

General data includes address for communication with vendor, contact persons ,telephone number etc

Company code data includes vendor bank details , account management and payment data.

Purchasing data includes ordering currency, Vendor schema group, person responsible and some control data which includes Automatic purchase order, ERS settlement, GR based Invoice verification, Returns agreement.

BUSINESS PARTNER: Vendor can assume different roles in its dealings with 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. The roles a partner function can take are :

Order receiver

Goods supplier

Invoice presenter

Payment receiver

The following account groups are used :

The following Account Groups are identified for VPPL and shall be as follows:

Account Group DescriptionNumber Range

V01Raw materials1000000 - 1999999

V02BOT2000000 - 2999999

V03Service vendors3000000 - 3999999

V04Freight vendors4000000 - 4999999

V05One time vendors5000000 - 5999999

V06General vendors6000000 - 6999999

V07Sub contractor7000000 - 7999999

V08Scrap vendors8000000 - 8999999

V09Employees9000000 - 9099999

V10Statutory vendor 9100000 9199999

3.3 Purchasing Master Data

It consists of following types:

3.3.1 Purchasing Info record (Vendor pricing information)

Info record is a source of information for procurement of a particular material from a particular vendor

Purchase info record enables the buyer to determine:

Which materials, a certain vendor has offered or supplied to date.

Which vendors can offer or supply certain material.

A purchasing info record can be valid for all plants covered by a purchasing organization or for a single plant within a purchasing organization.

Info record can be created manually or automatically during the maintenance of a quotation, a purchase order or an outline purchase agreement. Ordering data is updated automatically in info record.

Purchasing Info Record will have fallowing key data :

Info Record Number

Vendor Code

Material Code & Description

Vendor material Number

Purchasing Organization

Plant

Pricing Conditions

Validities

Tax Code

Planned Delivery Time

Order Unit and its conversation factor in SKU ( Stock Keeping Unit)

3.3.2 Source List (Register & Manage Supplier)

Source list contains a list of available sources of supply (vendors) for a material for a particular plant, indicating the periods during which the procurement from such sources possible.

The source list let you determine the vendor that is valid (effective) at a certain time and it also facilitate adherence to purchase agreements and the avoidance of errors in Purchasing where several vendors exist for a specific material. It also allows certain vendors to be blocked for any chosen period of time (e.g. in the case of delivery problems).

Before creating a Source list, you require the following information

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.

By source list we can define a source of supply as "fixed". Such sources count as preferred sources over a certain period of time.

source list can also defines a source of supply as Blocked.

By using source list we can block external procurement of service.

You can define several validity periods.

3.3.3 Quota Arrangement

Quota Arrangement is a mechanism for determining which portion of the total requirement of a material over a period is to be procured from a certain source. If quota arrangements exist in the system, they exert an influence with regard to precisely which source (perhaps from a number of different possibilities) is assigned to a given purchase requisition.

You establish the quota arrangement for a material over a certain period by entering quotas for the various sources of supply in a quota arrangement item.

Before creating a quota arrangement, you require the following information

Material Number or the plant to which the quota arrangement applies

Procurement type of the material (that is, whether the material is manufactured in-house or procured externally)

Vendor number

Quota arrangement validity period

Quota to be assigned to each source of supply

Key Points

The quota specifies which portion of the total requirement should be procured from a given source.

If a quota arrangement exists for a material, it is taken into account in the source determination process.

3.4 Service master Record

The service master record counts as part of the master data within External Services Management and serves as a source of data for you to draw upon when creating service specifications. This enables you to save time and reduces the frequency of errors, since you need only enter the complete service descriptions in the service master record once.

A service master record contains the following principal information for the unique description of a service:

Service number

Service category

Descriptive texts (short and long text)

Base unit of measure

Material group

Valuation class

3.5 Condition Record

Condition records allow you to store and retrieve pricing data in the system. All the pricing elements of your daily business - the prices, discounts, and surcharges for freight and taxes - that you want to use for automatic pricing must be stored in the system as condition records. You can define as many condition records as you want for the different pricing elements for any validity period.

You create condition records for all the pricing elements that the system takes into account during automatic pricing. During document processing, the system transfers data from the condition records and determines the amounts for individual pricing elements (prices, discounts and surcharges)

3.6 Transaction codes for Master Record :

Procedure TcodeInputOutput

1Create Material MasterMM01Material, plant & storage locationMaterial number

2Create vendor MasterXK01Account group, company code & purchasing orgVendor number

3Create Purchasing Info recordME11Material number, vendor number, purchase organization & plantInfo record

4Create Source listME01Material and plantSource list

5Quota ArrangementMEQ1Material and PlantQuota arrangement

6Create service masterAC03Service descriptionService number

7Create Condition RecordMEK1Condition typeCondition record

4. Purchasing Document Types

In materials management the following document types are used:

PR

RFQ

contract

Scheduling Agreement

PO

4.1 Purchase Requestion (Indent)

The purchasing department works with the purchasing request, decides on whether the requirement of products can be covered from stock or needs to be procured externally considering optimization issues.

The requirements that have been created and released for procurement (for example, demands for spare parts coming from plant maintenance, demands for raw materials determined in a planning run, or requests for office supplies entered by an employee) are transferred to purchasing as purchase requisitions. A purchase requisition can be fulfilled through purchase orders or longer-term purchase agreements. Release procedures are available to control critical procurement processes.

Requisitions can be created either Manually or MRP.

Manually means the person responsible in the department enters a purchase requisition manually. The person creating the requisition determines, what to order, how much to order and the Delivery date.

MRP means that the purchase requisition is initiated via another component say through MRP.

Trigger to the Process:

Material Requirement (in the form of Purchase Requisition), which is generated either through MRP or manually, triggers the Procurement Process.

The different types of Purchase requisitions:

The following procurement types exist:

General

Spares

Project

Subcontracting

Service

FLOWCHART : Ways of Generating Indent

The Purchase Requisition processing consists of the following steps:

Creating a Purchase Requisition directly by user or indirectly by MRP.

Release Purchase Requisition by concerned user

convert into required purchase document.

Document TypeDescriptionNumber Range

NBGeneral Purchase41300000-41399999

NSSPARES51300000-41399999

NPProject81300000-81399999

SBSubcontracting61300000-61399999

ZBService71300000-71399999

FLOW CHART:

4.1.1 Approve requisitions based on approval limits and approval hierarchies

Two different procedures are available for requisitions:

With classification

With this procedure, requisitions can be released both at item level (i.e. item-by-item) and in total. The latter approach is also termed "overall release".

Without classification

With this procedure, requisitions can only be released at item level.

The two procedures are mutually exclusive (that is to say, you must decide in favor of one of them only - you cannot use both).

4.2 Request for Quotation

The request for quotation (RFQ) process starts with a request for material(s) from vendors. The RFQ process includes a price comparison for the selection of the best source. The buyer evaluates the vendor responses to determine the best source of supply. The accepted quotation is converted into a purchase order and a rejection letter is sent to the vendor(s) whose quotations were rejected.

Material-specific information including vendor pricing and lead-time from the quotation are captured within ERP master data records.

4.2.1 Maintaining 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. A quotation is legally binding on the vendor for a certain period. The quotation is the vendors 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.

4.2.2 Comparing Quotation

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.

Features

In Purchasing, the RFQ and the quotation form a single document.

Prices and conditions quoted by vendors are entered in the original RFQ.

If you have issued an RFQ to several vendors, you can have the system of determining the most favorable quotation submitted and automatically generate letters of rejection to the unsuccessful bidders.

You can also store the prices and terms of delivery from certain quotations in an info record for future accessing.

RFQs can be subject to a release procedure.

The RFQ consists of the following steps:

Request for quotation

Vendor Quotation processing

Comparison, rejection and selection of vendors

RFQ can be followed by Source list generation / purchasing documents


ANGeneral Purchase113

ZNProjects 213

Process Flow

4.3 Rate Contract

Contracts are agreements with a vendor to supply materials or services under negotiated conditions, within a certain period. Contracts are defined as follows:

Rate contracts: An agreement between the Company and Supplier for a material with a fixed rate and a validity period.

The process to create a contract begins with the need to secure a big number of supplies as well as reducing procurement costs. The creation of a contract can start if the following issues have been clarified:

Number/amount of material or services

Validity start / validity end

Payment terms

Quantity of each contract material/service,

Price of each position in the contract

Location to where the goods/services are delivered.

A contract is signed by a purchasing manager or a buyer.

After the creation of a contract, purchase requisitions and purchase orders can be performed with relation to the contract.

The Contract procurement consists of the following steps:

Creating a basic agreement (Rate contract)

Creating a purchase requisition

Assigning requisition and creating Contract release order

Approval of contract release order

Contract monitoring

Goods receipt with excise invoice

Invoice receipt by line item

Outgoing payment

Key Points

Upon Contract release order creation with reference to a contract, the contract data is used and purchasing info records are ignored

Reduced procurement costs


ZKRate contracts312

4.4 Scheduling Agreement

Scheduling Agreement are outline purchase agreement under which materials are procured on predetermined dates within a certain time period.

Delivery of the total quantity of material specified in a scheduling agreement item is spread over a certain period in a delivery schedule, consisting of lines indicating the individual quantities with their corresponding planned delivery dates.

Scheduling agreement releases (comprising a header and the actual delivery schedule) are issued to the vendor, instructing the latter to effect deliveries of the relevant material on the dates shown.

A scheduling agreement consists of a number of items, for each of which a procurement type is defined. The following procurement types exist:

Standard

Subcontracting

Stock transfer


LPAWith release

LPWithout release

4.5 Purchase Order Processing

A purchase order is a formal request or instruction from a purchasing organization to a vendor or a plant to supply or provide a certain quantity of goods or services at or by a certain point in time. The purchase order can be used for variety of procurement purpose such as

The following procurement types exist:

Standard

Spares

Project

Subcontracting

External service

Stock transfer

When a purchase order has been created a number of checks and validations make sure that the right contract, discount, price and so on is referenced correctly. Purchase Order Processing also deals with the communication of the purchase order to the supplier.

The Purchase order processing consists of the following steps:

Creating a purchase order with reference to PR / quotation /contract /previous PO

Release Purchase order by concerned user

Follow-up and send remainders if necessary


NBGeneral purchase41300000-41399999

NSSpares51300000-41399999

NPProject81300000-81399999

SBSubcontracting61300000-61399999

ZBService71300000-71399999

FLOWCHART

4.5.1 Approve Purchase Order based on approval limits and approval hierarchies

Purchase Order are released at header level. Item-by-item release is not possible. These documents can only be released using the release procedure with classification.

Release Conditions :The release conditions determine the release strategy in accordance with which a external purchasing document is to be released.

Release Strategy : The release strategy defines the approval process for external purchasing documents. The strategy specifies the release codes necessary and the sequence in which releases have to be effected. Release strategy is assigned to purchasing document based on the release conditions

Release Code: The release code is a two-character ID allowing a person to release external purchasing document.

4.5.2 Version Management (Amendment of PO)

In the procurement function, we need to work with internal documents and legal documents like Purchase Requisition, Purchase order, Invoice etc., Here we need a process to track any changes done to these documents. Version management plays a significant role in tracking the changes in purchasing documents. Also this tracking is essential for audit requirements.

Version Management in PO groups a set of changes against version number and provides the user with an overview of the various changes that may have been made in the course of time.

In the case of procurement transactions extending over a longer period of time (for example, in the procurement of capital goods), you may need to differentiate between various versions of the purchasing document. You may also need to refer to one particular version when corresponding with the vendor.

Version Management enables you to generate and manage versions of purchase requisitions and external purchasing documents, such as purchase orders. A version groups together the change documents generated in the course of subsequent processing of the relevant document. A version thus indicates the revision level of a document (version 0 = original document, versions 1 + = revisions) and provides the user with an overview of the various changes that may have been made in the course of time.

Process Flow

Enhancement : 1)LC report details against PO

2)PO with both unit of measures

3)PO Processing against LC/Bank guarantee /advance

5. Functional Scope Supported Business Processes or Scenarios in Materials Management

5.1 General Procurement

In this procurement process a quotation comparison list enables the purchasing employee to select the best source of supply by evaluating quotations from vendors.

A purchase requisition is either generated via the Material Requirements Planning (MRP) process, or manually by a requester. A buyer validates the accuracy of the purchase requisition and converts the purchase requisition into a purchase order. The purchase order is subject to approval based on a predefined amount before being issued to a vendor.

This scenario consists of the following steps:

Display and assign purchase requisitions

Convert assigned requisitions to purchase orders or create purchase order manually

Approve purchase order

Print purchase order

Receive goods from vendor


Outgoing payment

Key Points

Use of integrative data sets like purchasing info records, source lists, contracts

Automatic assignment of RFQs to purchase orders

5.2 Consumable Procurement

This scenario deals with purchase order creation activities during the procurement process. Furthermore it describes the additional process steps of a purchase order approval, goods receipt of consumables and invoice receipts by line item.

Consumable items/goods are entered without material number but rather a short text description as the main identifiable characteristic. The purchase order is subject to approval based on predefined parameters prior to being issued to a vendor.

For consumable goods, there is no inventory in the system. By posting a goods receipt the value of the goods is expensed to a cost center or another cost element.

When the invoices are received from the vendor, they are entered with reference to a purchase order and item, providing a three way match of purchase order value, goods receipt value and invoice value. If there are any variances between invoice and purchase order value, the invoice is blocked and forwarded to the Buyer for approval.


Purchase order creation for consumable goods

Approval of purchase orders for consumables

Goods receipt of consumables


Key Points

Quick, one-time-purchases are possible: material consumption is directly posted, no posting into storage

5.3 Project procurement

In this procurement is decided based on project systems

A purchase requisition is created with account assignment category Q (special indicator for project) via the Material Requirements Planning (MRP) process, or manually by a requester. A buyer validates the accuracy of the purchase requisition and converts the purchase requisition into a purchase order. The purchase order is subject to approval based on a predefined amount before being issued to a vendor.


Display and assign purchase requisitions

Account assignment category is Q(project make-to-order).

Convert assigned requisitions to purchase orders or create purchase order manually

Approve purchase order

Print purchase order

Receive goods from vendor


Outgoing payment

5.4 External procurement of Services

External Services Management provides a basic process for the procurement of externally performed services.

The service entry is booked to confirm the service performed. The invoice is booked with reference to the purchase order.

This basic process comprises the following functionality:

Service master records, in which descriptions of all services that may need to be procured can be stored. In addition, a standard service catalog and model service specifications are available.

A separate set of service specifications can be created for each concrete procurement project in the desired document (e.g. MM purchase requisition, RFQ, contract, purchase order, or service entry sheet).

Service entry sheet :Service entry sheets refer to the total service specifications ordered. Service entry sheet in external services management is the same as a goods receipt posting when procuring materials.


Creating a Service purchase order

Approve the Service Purchase order

Invoice verification

Posting Manual Outgoing payment

Key Points

Service procurement processing

Efficient processing

5.5 Subcontracting

The MM Subcontracting process involves sending raw components to a vendor for specific manufacturing processes and receiving the value-added finished material back into inventory.

A Subcontract Purchase Requisition is either generated via the Material Requirements Planning process or manually by a requester. A Buyer validates the accuracy of the Purchase Requisition and convert it into a Purchase Order. The purchase order is subject to approval based on predefined parameters prior to being issued to a vendor.

The consumption of sent components is recorded upon receipt of the value-added finished material. The vendor sends the invoice for the services provided which is paid during the normal payment cycle.

This scenario consists of the following steps on goods delivery:

Subcontracting purchase order creation

Subcontracting purchase order approval (if required)

Transferring of Components to Subcontractor

This scenario consists of the following steps on goods receipt:

Receiving Goods from Subcontracting PO


Outgoing payment

Key Points

Automatic posting of stocks into corresponding stock types

Subcontracting info record shows added value

ENHANCEMENT :

1) Subcontracting scrap linked to scrap account (FI )

2) Justification note

3) DCR(Design concession Report) with drawing no and proper approval

5.6 Release Procedure

You use this component if you wish to set up approval procedures for purchase requisitions or other purchasing documents. Under such a procedure, if a purchase requisition or external purchasing document fulfills certain conditions it has to be approved (by the cost center manager, 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".

Release procedures can be defined for the following documents:

Purchase Requisition

The external purchasing documents purchase order (PO), contract, scheduling agreement, request for quotation (RFQ), and service entry sheet

Release Procedure for Purchase Requisitions

Two different procedures are available for requisitions:

With classification

With this procedure, requisitions can be released both at item level (i.e. item-by-item) and in total. The latter approach is also termed "overall release".

Without classification

With this procedure, requisitions can only be released at item level.

The two procedures are mutually exclusive (that is to say, you must decide in favor of one of them only - you cannot use both).

Release Procedure for External Purchasing Documents

External purchasing documents (i.e. purchasing documents other than requisitions) are released at header level. Item-by-item release is not possible. These documents can only be released using the release procedure with classification.

5.7 Pricing Procedure

Pricing procedure in MM module is a way to determine prices in purchasing documents. It give us functionality to assign different calculation types for different needs.Defining a pricing procedure can be done by creating an access sequence, and assigning it to condition types. Access sequence tells the system where to look for the condition values. It can search multiple condition tables based on our settings. Tables have different priority, and different key fields.Determination of the pricing procedure is practically assigning the calculation schema to a combination of vendor schema group and purchasing organization schema group. So, you need to enter the vendor schema group on vendor master, and assign schema group to purchasing organization, in order for the system to find the calculation schema to be used in the document.

Condition Technique

The condition technique is used to determine the purchase price by systematic consideration of all the relevant pricing elements. A feature of the technique is the formulation of rules and requirements. By applying conditions defined by means of the condition technique, the system arrives at a suggested price for purchase transactions.

Condition Type

Condition types represent price factors in the system. There are condition types for absolute and percentage discounts, freight costs, customs duties, or taxes, for example. Via the condition type, you specify how the price factor is calculated (e.g. percentage or absolute amount).

Access Sequence

An access sequence is a search strategy by means of which the system searches for valid records in various condition tables. It consists of one or more accesses. The sequence of accesses controls the priority of the individual condition records among each other. Through the accesses, the system is told where to look first and where to look next for a valid condition record in each case.

Calculation Schema

A calculation schema groups together all condition types that play a part in calculating the price. It sets out the order in which the condition types are taken into account in the calculation. In addition, the calculation schema specifies the following:

The subtotals

The extent to which manual processing of price determination is possible

The basis upon which the system calculates percentage discounts and surcharges

The prerequisite that have to be fulfilled so that a particular condition type to be taken into account

we define different calculation schema for example for domestic and import purchasing

The conditions types supplied include the following:

Condition typeCondition classDescription

PB00PriceGross price: Price without taking any possible discounts and surcharges into account

RB00Discount/surchargeAbsolute discount

ZB00Discount/surchargeAbsolute surcharge

FRB1Discount/surchargeAbsolute freight amount

ZOA1Discount/surchargePercentage duty amount

SKTODiscount/surchargeCash discount

NAVSTaxesNon-deductible input tax

5.8 Vendor Evaluation (Supplier Evaluation)

The Vendor Evaluation component helps you select sources of supply and facilitates the continual monitoring of existing supply relationships. It provides you with accurate information on prices, and terms of payment and delivery. By evaluating vendors, you can improve your enterprise's competitiveness.

On the basis of detailed information, and in collaboration with the relevant vendors, you can quickly identify and resolve any procurement problems that may crop up from time to time.

The results of vendor evaluation are displayed in the form of analyses. For example, you can generate ranking lists of the best vendors according to their overall scores or ranking lists for specific materials.

Changes to evaluations are recorded in logs, and you have the option of printing out evaluation sheets.

This scenario consists of the following Key points:

you can generate ranking lists of the best vendors according to their overall scores or ranking lists for specific materials.

check the reliability of the vendors from whom you procure Goods & Services

scoring range from 1 to 100 points, which is used to measure the performance of your vendors on the basis of the main criteria.

The table below lists the criterion proposed

S.NOEXISTING CRITERIASAP MAIN CRITERIASUBCRITERIATYPE

1RatePricePrice historyAutomatic

2QualityQualityGoods ReceivedAutomatic / Manual

Quality AuditAutomatic / Manual

3DeliveryDeliveryOn-time deliveryAutomatic

conformation dateAutomatic

quantity reliabilityAutomatic

Compliance with shipping instructionsAutomatic

4ServiceServiceQuality of ServiceSemi automatic

Timeliness of ServiceSemi automatic

PROCESS FLOWCHART

5.9 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.

Material Document

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.

A material document consists of a header and at least one item. The header contains

general data about the movement (for example, its date). Each item describes one

movement.

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.

In some cases, several accounting documents are created for a single material

document. This might be the case, for example, if you have two material document items

with different plants that belong to different company codes.

The G/L accounts involved in a goods movement are updated through an automatic

account assignment.

Reference to a Purchase Order

If a material is delivered for a purchase order, it is important for all of the departments involved

that the goods receipt entry in the system references this purchase order, for the following

reasons:

Goods receiving can check whether the delivery actually corresponds to the order.

The system can propose data from the purchase order during entry of the goods receipt

(for example, the material ordered, its quantity, and so on). This simplifies both data

entry and checking (over-deliveries and under-deliveries).

The delivery is marked in the purchase order history. This allows the Purchasing

department to monitor the purchase order history and initiate reminder procedures in the

event of a late delivery.

The vendor invoice is checked against the ordered quantity and the delivered quantity.

The goods receipt is valuated on the basis of the purchase order price or the invoice

price

A goods receipt posting has the following results:

When you post a goods receipt 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 accounting document contains the posting lines (for the corresponding accounts) that are necessary for the movement.

When you enter the goods receipt, you can print the goods receipt/issue slip, If the GR message indicator has been set in the purchase order, the orderer automatically receives a message informing him of the delivery.

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.

If the goods are destined for consumption, only the consumption statistics are updated in

the material master record.

If the goods receipt is posted into goods receipt blocked stock The goods are recorded only in

goods receipt blocked stock of the purchase order history.

During goods receipt posting, a purchase order history record is automatically created.

This record contains data essential for Purchasing, such as: the delivered quantity, the

material document number and item, the movement type, and the posting date of the

goods receipt.

vendor evaluation data in Purchasing

Process Flow :

Movement typeSpecial indicatorDescription

101

GR for stock items & consumables

101Q (project stock)GR of Project stock

5.10 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.

Material Withdrawals for Production Orders

You enter withdrawals for production as goods issues with reference to the production orders for which the components are required.

Scrapping/Sampling

If a material is no longer usable, it must be scrapped. Scrapping of a material is entered in the

R/3 System as a goods issue. The withdrawal of samples must also be entered as a goods issue.

You can enter goods issue with/without reference document

when you enter a goods issue, you can reference

reservation

work order

A goods issue has the following results in the system:

Material document is created

Accounting document is created

Goods receipt/issue slip is created

Stock update

Update of G/L accounts

Consumption update

Reservation update

Order update

Movement typeSpecial stock IndicatorDescription

221

GI for stock item

221Q (Project stock)GI for project

Enhancement :

Screen shot to be developed for stock report with both size wise and dimensions wise (secondary UOM)

Material Name Weight with sizesWeight with Dimensions

5.11 Stock Transfer from project to project

The stock transfer process begins with a requirement to transfer material from one project to another project .This request, in form of a stock transfer requisition, created manually by a buyer.

There are no master data requirements beyond the material master to support the stock transfer process. The material master must be extended in both the procuring (receiving) storage location and the providing (issuing) storage location. Stock transfer purchase orders are not subject to approval like other purchase orders.

A buyer validates the accuracy of the stock transfer purchase requisition and convert it into a stock transfer purchase order.


Creating stock transport order

Post goods issue

Receipt of transferred material in receiving Storage location.

Key Points

Supports all required documents for stock transfers .

Supports all required master data aspects like batch management and serial numbers

Monitors stock in transit

5.12 Return to Vendor

The return to vendor process begins with a requirement to return an item to a vendor. The buyer then creates a return purchase order in the system. The return purchase order is similar to a standard purchase order except for the return flag which sets up the return delivery to enable shipment of the item(s) back to the vendor.

The return purchase order confirmation goes to the vendor and the return Delivery is sent to the shipping department where the item(s) are picked and shipped back along with a delivery note. When the shipping department creates the delivery the item(s) are relieved from inventory. A credit memo is generated which relieves the liability to the vendor.

Results of the Return Delivery Posting

Creating a Material Document

For the return delivery, the system creates a material document, which you can print as a

return delivery slip Since the return delivery is valuated, the system also creates an

accounting document.

Updating Stock and G/L Accounts

In the case of a return delivery, the system reverses all stock and G/L account updates

that occurred during the goods receipt posting.

Updates in the Purchase Order

The system cancels the updates posted as a result of the goods receipt. The open

purchase order quantity is increased by the returned quantity.


Creating return purchase order

Delivery due list for purchase orders

Picking confirmation

Goods issue

Creating Return Excise Invoice

Credit Memo

Key Points

Goods can be returned with a return reason captured in the document

All information for follow-on FI functions such as invoice reduction, rejection, and cancellation is provided

Process Flow:

Enhancement : Justification note in RETURN TO VENDOR

5.13 Stock Handling: Scrap and Blocked Stock

This scenario is triggered by the following different processes:

Rework from production

Other logistic processes and reasons


Block material stock transfer from unrestricted to blocked

Unblock material stock transfer from blocked to unrestricted

Unblock material stock transfer from blocked to quality inspection stock

Key Points

Scrapping

Transfer posting to blocked stock

Movement typeSpecial IndicatorDescription

343Q (project stock)Transfer posting project stock from Blocked to Unrestricted

344Q (project stock)Transfer posting project stock from Unrestricted to Blocked

321Q (project stock)Transfer posting Project stock from Quality to Unrestricted

349Q (project stock)Transfer posting Project stock from Blocked to Quality Inspection

415Q (project stock)Transfer posting from Project to project

5.14 Physical Inventory / Inventory Count and Adjustment

This scenario covers the periodic process making necessary adjustments to stock on hand after a physical count.

The process begins with the generation of the inventory count sheets. Furthermore, materials can be blocked here for posting during the physical inventory. Once the inventory sheets are printed out, the actual physical inventory count occurs for the given materials. Next, the count is entered in the system and then any discrepancies against the system quantities are reviewed. The inventory may be recounted until final counts are accepted and inventory differences are posted.


Planning phase of physical Inventory

Counting phase of Physical Inventory

Monitoring of Physical Inventory activities

Physical Inventory Procedures

The SAP System supports the following physical inventory procedures:

Periodic inventory

Continuous inventory

Cycle counting

Inventory sampling

5.14.1 Periodic Physical Inventory

In a periodic inventory, all stocks of the company are physically counted on the balance sheet key date. In this case, every material must be counted. During counting, the entire warehouse must be blocked for material movements.

5.14.2 Continuous Physical Inventory

In the continuous physical inventory procedure, stocks are counted continuously during the entire fiscal year. In this case, it is important to ensure that every material is physically counted at least once during the year.

5.14.3 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.

The Cycle counting method of physical inventory allows fast-moving items to be counted more frequently than slow-moving items.

5.14.4 Inventory Sampling

In 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.

Enhancement: Required approval for posting inventory difference

Process Flow:

1 6. Invoice verification

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.

An invoice can be processed in logistics invoice verification in following ways:

1. Invoices with purchase order reference

All the items in a purchase order can be settled. With purchase-order-based Invoice Verification, all the items of a purchase order can be settled together, regardless of whether an item has been received in several partial deliveries.

2. Invoices with goods receipt reference

Each goods receipt is settled separately.

3. Invoices without purchase order reference

Invoices can be posted directly to G/L accounts or material accounts.

The important data for invoice verification is:

Master data : Master data is permanent data on objects, every is given a unique number by which it can be identified in the system.

Material data : Material data provides information on materials bought. It includes material name, material unit of measure, stock data.

Vendor data : Vendor data provides information on vendors. it includes address, bank data, name of bank head office, terms of payment & terms of delivery.

Accounting data : Accounting data is used to define G/L accounts . it includes account name, account type, account currency in which account is managed, information on whether account may be posted directly, and which financial year it is allocated to.

Transaction data : Transaction data records transactions in the system. whenever we post a purchase order, scheduling agreement, goods receipt, or invoice, the system automatically creates a document.

Purchasing data : It contains information such as vendor number, the PO date, terms of delivery, material number ,& order quantity.

Material document : Material document is created when a goods receipt is posted. it includes the posting date, quantity delivered, delivery number & PO number that the goods receipt refers to.

Accounting document : An accounting document is created when a goods receipt (unless the goods receipt is not valuated) or an invoice is posted. it contains details of individual postings with account number, posting key, and the amount.

7. Batch Management

If materials were handled in batches it might be necessary to change batch master data or to find out where a batch was used, for example, to perform a batch recall or report to government.

Batch management fulfills the requirements for managing and tracking batches or production lots across the whole production process.In various industry sectors, particularly the process industry, you have to work with homogeneous partial quantities of a material or product throughout the entire quantity and value chain. In the SAP system, a batch is the quantity or partial quantity of a particular material or product that is manufactured according to the same recipe. There are various reasons for this:

Legal requirements, for example, guidelines on good manufacturing practice (GMP), or regulations on hazardous materials.

Defect tracing, recall activities, and recourse requirement.

Usability differences and the monitoring thereof in materials planning, sales and distribution, and production.

Production or technical requirements, for example, material quantity calculations on the basis of different batch specifications.


Maintain batch master record

Batch information cockpit

Key Points

Basic steps for setting up batch management are well documented

Examples of classes and search strategies are simple yet effective

Integration of batch management in all logistics processes

Setting up the batch-where-used-list to find out where a batch was used, for example, to perform a batch recall or government report

Detailed process steps how to maintain batch master records and how to use the batch information cockpit

8. Serial Number Management

Using serial numbers, you can track each individual material during goods movement. This building block includes the configuration settings for serial number management and shows the serial number handling on finished goods level.

The following functions are provided to support this building block:

Definition of serial number profile and serializing procedures

Equipment categories for serialization

Settings for physical inventory

Key Points

Integration of serial number management in all logistics processes

Integrated use of one serial number profile in logistics.

..........................1.1 9. SAP ERP Reporting

In SAP ERP various reports can be used to monitor and control your company processes. SAP

Material Management focuses on the following reports:

General Analysis: Purchase Orders, Contracts and Quotation.

Analysis of Purchase Order Values

Purchase Order by Material

Purchase Order by Vendor

Purchase Order by Service

Purchase Order by Document Number

Pending PR

Material Evaluation Report

Purchasing Group Analysis

Release Purchasing Documents

Assign and Process Purchase Requisitions

Stock Requirement List

SC Stock Monitoring for Vendor

Vendor Analysis

Material Document List

Display Warehouse Stocks of Material

Accounting Documents for Material

Material Documents with Reason for Movement

Batch Analysis

Availability Overview

Plant Analysis

Material Analysis

MRP report

Alerts for C forms & Vendor

List of GR/IR balances

Inventory Analysis.

Outline agreements by vendor/material

Fast & slow moving item

Reorder report

Project wise stock transfer report

ABC analysis

Payments from system

List of subcontracting challans

Stock by posting date

Purchase status

Previous Purchase rates

GAP : 1) Purchase budgeting & control is linked to FI module

2)PLA & C forms need to be developed

3)MRP With Project planning.

SHAPE

User

Department

Purchase

Requirement

ME51N

Release

Strategy

Call for

Discussion

Purchase

Department

Follow on

Documents

NO

Yes

Material analysis

Report

Classification

of Materials

Physical Inventory

Document creation

Block material for

Inventory posting

Count & record

physical Inventories

Record Inventory

Diff if any

Post inv diff

If any

Carry out Vendor evaluation (Set Criteria)

Compare Evaluation

Print Evaluation Sheet

START

Vendor Ranking List

END

Vendor Evaluation sheet

Vendor Ranking List

PO Process

Goods arrival

at stores

Goods Receipt

Tcode MIGO

Wrt PO

Material

Inspection

Is material

OK

Stock updation

in unrestricted

Invoice

Verification

PR

Source list

RFQ

Quotation

Comparison

vendor

Selection

PO

Follow on and

Remainders