Scm2008 Phelan Undocumented Advice To Help You Better Final

© 2008 Wellesley Information Services. All rights reserved.

Undocumented Advice to Help You Better Manage and Simplify the Purchasing Process Using SAP Materials Management (MM)

Dennis PhelanBlount International

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What We’ll Cover …

• Why are we here?• Your procurement process• Matching your org structure to your organization• Making your Vendor Master support your processes• Understanding the uses of SAP Purchasing documents • Wrap-up

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Why Are We Here?

• Several purchasing organizations continue to use methods that increase work for the users

• Many companies still process routine invoices through a manager sign-off process rather than using SAP matching capabilities

• Repeat purchases are still being manually requisitioned • Many SAP functionalities not understood or being used

“I thought SAP was supposed to save me work — I need more people just to do what I used to do”

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Why Are We Here? (cont.)

• This session covers methods and techniques using SAP standard functionality to simplify and automate a purchasing organization

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Know Your Procurement Process

• How many dollars are being paid to vendors without formal agreement? Why do I care?

The use of agreements (purchase documents) assists in controlling spending

Simplifies and standardizes transactions How do I find out?

Use transaction report MIR5 and select an invoice doc type Doc type RE = entered against purchase document Doc type KR = vendor payment without purchasing

document Use other selection criteria to narrow report

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Know Your Procurement Process (cont.)

• How do I reduce the amount without purchase documents? Consider SAP Invoicing Plans

An automated self-invoicing plan based on a schedule Look into SAP Limit Framework Orders

A purchase order without Goods Receipt for dollar amounts only, with limits

• Are different plants purchasing the same objects from different vendors at different prices? Consider using SAP Reference Purchasing Organization

Centralized contracts for use by other purchasing orgs

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Invoicing Plans

• Invoicing Plans Allow you to schedule desired invoicing dates for planned

procurements independently of the receipt. Should be used with a FO purchase order. Periodic Invoicing Plan

Can be used for regularly recurring procurement transactions (rentals, leasing, subscriptions, …)

System suggests dates based on configuration Uses Evaluated Receipt Settlement (ERS) (automatic

invoice creation) Partial Invoicing Plan

Can be used for procurement that is subject to staged payments (construction projects, …)

Manually maintain dates

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Invoicing Plans — Configuration Steps

1. Determine the date determination rule to use, or create a custom rule

2. Create invoicing plan type

3. Establish the date ID

4. Define default date category

5. Finish maintaining invoicing plan type created in step 2. Add starting date, end date, and horizon.

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1. Determine the Date Determination Rule to Use, or Create a Custom Rule

• Transaction OM7R

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2. Create Invoicing Plan Type


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3. Establish the Date ID


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4. Define Default Date Category


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5. Finish Maintaining Invoicing Plan Type Created in Step 2

• Transaction OM1R• Add starting date, end date, and horizon

• You have finished setting up Invoice Plan 12

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Setting Up ERS — Evaluated Receipt Settlement (ERS)

• Check the FI document type for ERS• Check the number range for ERS FI document type• Check the number range for ERS MM document type• Assign the number range for ERS MM document type• Assign the number range to RS line• Set the ERS checkboxes

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Check FI Document Type for ERS (First Screen)

• Use transaction OMR4; click on Document Types in Invoice Verification; double-click on MRRL

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Check FI Document Type for ERS (Second Screen)

• Check or correct default document type

Second screen

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Check the Number Range for ERS FI Document Type (Screen 1)• Use transaction OMR4; click on Document Type; double-

click on the document type

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Check the Number Range for ERS FI Document Type (Screen 2)

• Click on number range information to verify number range used

Second screen

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Check the Number Range for ERS MM Document Type

• Use transaction OMRJ; pick or create a number range to use

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Assign the Number Range for ERS MM Document Type

• Menu Path: SPRO Materials Management Logistics Invoice Verification Incoming Invoice Number Assignment Maintain Number Assignment for Logistics Documents Transaction – Assign Number Range

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Assign the Number Range to RS Line

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Set the ERS Checkboxes

• Vendor Master – Purchasing Data Check the boxes; AutoEvalGRSetmt Del. and AutoEvalGRSetmt

Ret

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The Framework PO

• The Framework Order (Blanket Order) Used for authorization to deliver a specified dollar amount of

goods or services Document type = FO No material numbers — text only No GR (can be allowed if desired) Has validity period in the header

Has limit functionality Defines maximum dollars allowed to be paid Allows a range (vendor sees one, the other is absolute) Requires a different invoice entry process

Transaction MIRO with layout 4_6310 account assignment (cost center)

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Using the Invoice Plan and ERS — The Framework PO

• Create the Purchase Order — Doc Type FO• Click on the Invoicing Plan Button — Choose a Plan• Create Invoicing Dates• Executing the ERS Run

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Create the Purchase Order — Doc Type FO

• With the GR box unchecked on Delivery tab

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Click on the Invoicing Plan Button — Choose a Plan

• This is what you will see:

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Create Invoicing Dates

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Executing the ERS Run

• Transaction MRRL actually creates and posts the ERS invoices

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Executing the ERS Run (cont.)

• Transaction MRRL — actual posting

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ERS Tips

• ERS is set on the Vendor Master; however can be controlled at the info record or on the PO

• If the ERS vendor is used for material master items, you may want to create a new vendor number for Framework Purchase Orders

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Understand the Sources of Demand

• Flowchart and document the process from requirement to delivery (Requisition to Check) First-time or infrequent buys

Look at SAP Request For Quotation (RFQ) functionality Repeat purchases

Manually generated Determine why these can’t be automated? Use Six Sigma techniques to simplify

System-created requirements Set up MRP to create requisitions Use SAP Source List to source requisition Consider SAP Scheduling Agreements Look at automated purchase orders

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Does Your Org Structure Match Your Organization?

• Procurement at the enterprise level Reference Purchasing Organization

Negotiates contracts and makes agreements Standard purchasing organizations must be assigned to

these to use the agreements• Procurement at the company-code level

Purchasing organizations are assigned to company codes A purchasing org may be assigned to more than one company

• Procurement at the plant level Purchasing organization not assigned to company codes but to

plants

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The Purchasing Group Code

• Used to designate “person or persons responsible for purchasing a single material, a range of materials, or a commodity group”

• Assigned to materials in the Material Master• Helpful in reporting or sorting requirements• Can be used as “checking objects” in release

procedures

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Tip

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Does Your Vendor Master (VM) Support Your Processes?

• VM is shared by the Purchasing and Finance orgs• Sections

General data Address, control data (customer = vendor)

Company Code data Accounting info

Purchasing data Settings unique for that vendor in that purchasing org

Currency, payment terms, Incoterms, … Extras Additional Purch. Data = vendor is a plant

Will override Material Master settings Hierarchy Sequence: Info record Vendor Master Material

Master

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Using Vendor Account Groups

• SAP requires vendors to be segregated into Account Groups. One Account Group per vendor number. Can determine vendor number range used Can determine internal number or external assignment Can determine input field requirements Can define type or class of vendor

Custom groups can be used to define partners Main Vendor (VN) Ordering Address (OA) Invoice present by (PI)

Assign vendors to groups and use them in Vendor Master partner relationships This allows multiple ordering addresses and payment addresses for

the same vendor

Tip

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Using One-Time Vendors

• This saves having to enter a Vendor Master for a vendor that probably will not be used again They have their own account group You use the same vendor number The actual address is controlled in the purchasing document

Enter on the address tab in the header of the purchase order

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SAP Purchasing Document: The Source List

• Used to assign sources to requisitions Can be automatically created by system Defines procurement sources for MRP

•

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SAP Purchasing Document: The Info Record

• Creates default data for the purchase order Note: This data will override Material Master data Can be used to link Vendor Part Numbers to internal SAP

material numbers

TipThis can help receiving match vendors material to internal material numbers on the MIGO transaction screen

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SAP Purchasing Document: The Requisition

• Document types Standard is NB, but custom types can be created

Must be linked to PO doc type in configuration• Release procedures

Classification method Can be at the item level or the header level

Can have only one release procedure at the header level• Layout

Can be changed to fit your operation Look at document type for field selection used, then go to

define layout at document level to modify (config) Columns can be moved (drag and drop) and the layout saved

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SAP Purchasing Document: The Requisition (cont.)

• Uses the source list to assign vendor Can assign to a contract or use info record

This will expedite the assign-and-process transaction• Requisitions can be created by sales orders, plant

maintenance orders, and production orders Usually will use account assignment “F” (orders) Will be hard-linked to the order document

Changes need to be made in the order document

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SAP Purchasing Document: The Purchase Order

• Document types and number ranges Each doc type will have its own number range NB = standard PO doc type

Used as the stock transport order across company codes, sub-contracting order, and release against contract

UB = stock transport order (inside company code) Will work across company code without billing

• Release procedures Same as requisitions

• Communication to vendor Print, fax, EDI, or email

• Can be created automatically (transaction ME59N)

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SAP Purchasing Document: The Purchase Order (cont.)

• Vendor confirmations Inbound vendor messages acknowledging receipt of purchase

order or advising shipment has been made (Advance Shipping Notification [ASN])

Usually automated (EDI); can be entered manually Has automated follow-up functionality (dunning messages) Updates schedule line dates and quantities

This updates the scheduled delivery MRP uses for planning Can be configured to create inbound deliveries

This aids receiving accuracy as it defaults the data into the MIGO screen

Works great when combined with ERS

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SAP Purchasing Document: The Outline Agreement

• Contracts Has validity dates Requires a purchase order as a release

Uses the contract pricing, terms, and conditions instead of the info record

• Scheduling Agreements A quantity purchase agreement similar to a contract, but the

releases can be automatically created by MRP or Kanban Type LPA

Schedule lines not transmitted to vendor until released Forecast or JIT delivery schedule

Type LP Schedule lines transmitted to vendor upon creation

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Resources

• http://help.sap.com/saphelp_erp2004/helpdata/en/e1/8e51341a06084de10000009b38f83b/frameset.htm Has detailed help describing most standard functions

• Martin Murray, SAP MM – Functionality and Technical Configuration (SAP PRESS, 2006). Excellent book describing the MM module functionalities

• ERPgenie.com http://erpgenie.com/index.php?

option=com_content&task=blogcategory&id=70&Itemid=93 Purchasing tables; detailed how-to on certain processes

• ITtoolbox.com Group name: [email protected]

Excellent discussion forum

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7 Key Points to Take Home

• Truly understand the business reasons for using your current procurement processes

• Consider upstream activities (requisition creation) and downstream activities (receiving and invoicing) when designing your procurement process

• Try to control spending by eliminating purchasing without formal agreement

• Attempt to automate manual processes — ask “Why?” five times

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7 Key Points to Take Home (cont.)

• Figure out the best way to do a procurement process and make that the standard — SAP has many ways to do the same thing

• Use standard SAP functionalities, but understand the uses of standard customization options

• Spend the time to understand how the SAP purchasing documents work

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Your Turn!

How to contact me:Dennis Phelan

[email protected]

Technology

Scm2008 Phelan Undocumented Advice To Help You Better Final