SAP MM /WM - Overview

Dilip Sadh
Procurement Cycle Workshop - Objectives

 Describe the basic business process of Procuring Materials

and Services in the SAP R/3 System.
 Discuss the integration points in procurement to Financial
Accounting and Inventory management.
 Discuss the reporting and analysis tools used in the
procurement cycle.
 Discuss the Company’s procurement process.
 Communicate scope expectations.
 SAP modules

SD : Sales & Distribution FI : Financial Accounting

MM: Material Management Finance FI-AM : Assets Management
WM : Warehouse Management CO : Controlling
PP : Production Planning PS : Project System
SD FI

MM CO
PP AM

Logistics SAP
QM PS
PM WF
IS Global tools
QM : Quality Management HR
PM : Plant Maintenance
WF : Workflow
Modules in PROJECT IS : Industry Solutions
Human
MM module Resources
 SD FI
MM CO
PP AM

QM
SAP PS
PM WF
IS
HR

MM Materials Management

MM is a component of Logistics in SAP that focuses on

inventory management, warehouse management, vendors and
purchases.
 MM overview

Material planning

Purchasing Production
External procurement Internal procurement

MM
Goods receipts Storage areas
Invoice MASTER
management
verification DATA
Inventory management •Materials
•Batches
Invoice entry Goods issue •Vendors
Stock transfers •Purchasing
info record
•Source list

Financial accounting Sales

Procurement Cycle Workshop

Agenda
Attendees:
 Business Managers, Process Owners

Topics:
 Master Data
 Procurement Process Overview
 Reporting
Procurement

Organizational and Master Data

Business Process for

Procurement

Reporting and Analysis

Procurement

The primary SAP R/3

SD FI
application modules that Sales & Financial
Distribution Accounting
support the Procurement MM
Materials
CO
process include: Manage- Controlling
PP ment AM
 Materials Management Production Fixed Assets
Planning
R/3 Manage-
ment
 Purchasing
QM Client / Server PS
 Goods Receipts Quality Project
Manage-
ment PM
ABAP/4 System
 Invoice verification WF
Plant Main- Workflow
tenance
HR IS
 Financial Accounting Human Industry
Resources Solutions
 Payment processing
 Materials Valuation
Organizational Elements

The SAP R/3 Procurement business process uses

the following R/3 organizational elements:

COMPANY CODE

Plant Storage Location

Company Code

Purchasing Organization Purchasing Group

Master Data

The following master data is used in the Procurement cycle:

 Material Master
 Vendor Master
Master Data: Material Master

 The material master record contains all data required to

define and manage material. It integrates data from
manufacturing, sales and distribution, purchasing,
accounting and other departments.
 The material master is used as a source of data for purchase
order processing throughout the procurement cycle.
Material Master Primary Views

Engineering/ Purchasing
Design
St

t MRP Sales

A Stocks in plant/ Work

B
storage location scheduling

Accounting Material
Master
Storage
Material Master Organizational Levels

General
Generaldata
data
Material number
Description
Client Units of measure

Plant-specific data
Planning data
Manufacturing data
Purchasing data
Plant Valuation data

Storage Location
location-
specific
specific data
data

Storage Location Stock

Stockquantities
quantities
Master Data: Vendor Master

 The vendor master includes all data necessary for processing

business transactions and corresponding with vendors.
 Information is shared between the accounting and purchasing
departments.
 Data is grouped into three categories.

• General data
• Accounting data
• Purchasing data
Procurement

Organizational and Master Data

Business Process for

Procurement

Reporting and Analysis

 Procurement Environment

1. Requirements
Purchase Order 8. Payment Determination
2. Source
Vendor Determination
invoice
?
RUHR
TRUCKING
7. Invoice Verification
3. Vendor Selection

6. Goods Receipt and

Inventory Management 5. Order Follow-up 4. Order Processing
The Procurement Process

Purchase Purchase Goods Invoice

Requisition Order Receipt Processing
for Goods/
Vendor
Services invoice
Purchase Purchase
Requisition Order

10 10
20 20
30 30

Planning, Reporting, and Analysis

Purchase Requisition

Purchase Purchase Goods Invoice

Requisition Order Receipt Processing
for Goods/
Vendor
Services invoice
Purchase Purchase
Requisition Order

10 10
20 20
30 30

Planning, Reporting, and Analysis

Purchase Requisitions:
 Request or instruction to the purchasing department to procure a
certain quantity of a material or service on or by a certain date.
 Are created directly by a requesting department or automatically via
material requirements planning (MRP).
 Are internal documents not used outside the company.
Purchase Requisition Processing

MRP Direct Entry

Purchase
Order

Purchase requisition Release strategy

Determine source of supply

Purchase Order

The Procurement Process

Purchase Purchase Goods Invoice
Requisition Order Receipt Processing
for Goods/
Vendor
Services invoice
Purchase Purchase
Requisition Order

10 10
20 20
30 30

Planning, Reporting, and Analysis

Purchase orders:
 Represent the formal approval of a purchasing transaction with a vendor.
 Identify the following items such as:
 Vendor
 Material and quantity ordered
 Price and terms
 Delivery date and location
Purchase Order Processing

Purchase
Order Statistics Order
• Standard
History
Direct Entry
or Purchase
Requisition
Purchase
Requisition

Stock Material
Consumable Material Account Assignment
Service (cost center, asset,
internal order)
Processing Purchase Orders

Purchase Reference Contract

requisition document

Purchase
Vendor order
10
20
30
One-time vendor
Goods Receipt

The Procurement Process

Purchase Purchase Goods Invoice
Requisition Order Receipt Processing
for Goods/
Vendor
Services invoice
Purchase Purchase
Requisition Order

10 10
20 20
30 30

Planning, Reporting, and Analysis

Goods receipts record the inward movement of goods or materials by:

 Verifying the receipt against the order.
 Valuating material at purchase order price.
 Creating material and accounting documents to record the event.
 Updating the purchase order history.
 Providing basis for invoice verification (2nd part of 3-way match).
Goods Receipt for Stock Material

Purchasing
Documents
Items Goods
1.
2.
Receipt
3.
RUHR
RUHR
TRUCKING
TRUCKING

Vendor Warehouse/Stores
Entering the goods receipt increases the inventory
level of a material that is procured for stock.
Results of a Goods Receipt Posting

G/L Accounts:

Accounting Document
Stock Account Stock Quantity
Consumption Account Consumption Statistics
GR/IR Account Goods
Receipt
Posting
Material
Document Point of Consumption
Cost center
Order

Purchasing Data:
Goods Receipt Order item
Slip Order history
Material Movements Through IM and WM

 Material Movements Flow:

 Transfer Requirement (TR)
 Transfer Order (TO)
 Confirm Transfer Order
Invoice Processing (1)

The Procurement Process

Purchase Purchase Goods Invoice
Requisition Order Receipt Processing
for Goods/
Vendor
Services invoice
Purchase Purchase
Requisition Order

10 10
20 20
30 30

Planning, Reporting, and Analysis

Invoice verification:
 Matches the vendor’s invoice to the purchase order and the
goods received (3rd part of 3-way match).
 Matches price, and quantity.
 Updates the purchase order and its history.
 Updates accounting information.
 Invoice Verification Environment

G/L
G/Laccounts:
Accounts
Vendor
Purchase Invoice
?
Order Assets
Invoice
Verification
Cost Centers

Vendor
Invoice Projects
Goods Receipt
Orders
Material Master

Vendor Master Posting an invoice in the SAP System

Conditions updates purchasing and accounting data

Invoice verification accesses data from purchasing, inventory

management, material master, and vendor master files.
Invoice Processing (2)

The Procurement Process

Purchase Purchase Goods Invoice
Requisition Order Receipt Processing
for Goods/
Vendor
Services invoice
Purchase Purchase
Requisition Order

10 10
20 20
30 30

Planning, Reporting, and Analysis

Invoice Payment:
 Selects invoices for payment based on the payment terms in
the vendor master or purchase order.
 Generates payment for released invoices.
 Updates accounting information.
Vendor Payment

Vendor Bank
Financial
Payment
Accounting 1000
program
1000

Motor Sports International

Released
invoice
Procurement Integration

PP FI FI
Purchase
requisition

Purchase Requisitions

Goods Receipt

? Invoice Verification

Released
invoice
Procurement

Organizational and Master Data

Business Process for

Procurement

Reporting and Analysis

Reporting and Analysis

 Standard Reporting provides List Displays by:

 Vendor
 Material
 Account assignment
 Material Group
 Purchase order number

 General Analysis
 Order Value Analysis
 Inventory Transaction Analyses
Logistics Information System

Logistics
Logistics Information Library Information
Systems
Sales Purchasing Shop Floor
Inventory
Information Information Information
Controlling
System System System

Sales and Materials Production

R/3 Logistics
Distribution Management Planning
Processing
(SD) (MM) (PP)
Systems
Thank you for your kind attention!

Dilip Sadh