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The Procurement Process (MM). Slide 2 Introduction The procurement process involves purchasing goods from vendors through an internal purchasing organization.

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Presentation on theme: "The Procurement Process (MM). Slide 2 Introduction The procurement process involves purchasing goods from vendors through an internal purchasing organization."— Presentation transcript:

1 The Procurement Process (MM)

2 Slide 2 Introduction The procurement process involves purchasing goods from vendors through an internal purchasing organization These goods might be used for resale in a manufacturing process as packaging Goods are received into inventory Invoices are verified

3 Slide 3 SAP Process Diagram

4 Slide 4 Materials Management Tasks Vendor management Purchasing Physical inventory Inventory management (quantities) Inventory valuation Invoice verification Materials management (MM) MRP Product catalogs

5 Slide 5 Vendors (Introduction) Vendors sell goods to us Some information is pertinent to the company Some applies only to a particular purchasing organization

6 Slide 6 Vendors (Configuration) Vendor information is divided into three categories General data (applicable to the client) Company code (accounting) data Purchasing data (applicable to the purchasing organization)

7 Slide 7 Vendor Data (Taxonomy) Client data (LFA1) Client / Account number keys Contains name and address information One-time account indicator Contains the account group (KT0KK) The vendor account group controls the transaction types possible with the vendor

8 Slide 8 Vendor Data (Taxonomy) Company code (LFB1) Client / Account number / Company code keys Reconciliation and bank account information (accounting segment) Co/Cd gives us the link to our G/L Link to GL recon account (AKONT)

9 Slide 9 Vendor Data (Taxonomy) Purchasing organization (LFM1) Client / Account number / Purchasing Organization keys Sales person name Currency of purchase order

10 Slide 10 Vendor (Account Group) Every vendor is assigned to an account group The account group defines which partner functions are allowed Partner functions for a vendor

11 Slide 11 Partner Functions (Illustration)

12 Slide 12 Organizational Structure (1) Purchasing Organization (PO) An organizational unit in logistics Manages the buying activities for a plant Procures services and materials A purchasing organization can be responsible for many plants Purchasing group Group of buyers within a PO responsible for certain activities

13 Slide 13 Organizational Structure (2) Purchasing can be centralized or decentralized Centralized (one purchasing organization for many plants) Decentralized (many purchasing organizations) Global bikes has a hybrid purchasing organization Global / US / DE

14 Slide 14 Purchasing Organizations (GBI)

15 Slide 15 Organizational Structure (Plants) In plants, we make things or store things A plant has a purchasing organization assigned to it There is a hierarchical relationship between the following A client has one or more plants (T001W) A plant has one or more storage locations T001L where goods are stored (logical or physical) A plant belongs to a valuation area (T001K) (where goods are valued) A plant belongs to a purchasing organization

16 Slide 16 Plant Table T001W Global Bike has 5 plants Each plant is assigned a purchasing organization

17 Slide 17 Storage Location Table T001L Global Bike uses logical storage locations

18 Slide 18 Valuation Table Plants belong to a valuation area A valuation area belongs to a company code So materials can be valued at the plant or company code level

19 Slide 19 GBI Organizational Structure

20 Slide 20 Materials Introduction Materials are the things we buy from vendors Supplies that we consume internally Trading goods that we buy and resell Raw materials that we use in production Semi-finished goods that we make from raw materials and use in the production of finished goods Finished goods that we make and sell using raw materials and semi-finished goods

21 Slide 21 Material Types SAP predefines several material types A material’s type dictates what can be done with the material

22 Slide 22 Material Types (Configuration) Material types are configured through the IMG (OMS2)

23 Slide 23 Material Types (Configuration) And stored in table T134T

24 Slide 24 Material Master Data Everything our company needs to know about the material Data is stored in functional segments called views Basic data Sales Materials Management Accounting MRP Etc.

25 Slide 25 Material Views

26 Slide 26 Material Master (Financial) Financial data is maintained about a material Valuation currency is the currency in which the unit is priced Valuation class – The inventory account associated with the material Price control Moving average price – the average price of materials in stock Standard price – material prices are updated periodically

27 Slide 27 Material Master (Financial)

28 Slide 28 Material Master (Purchasing) Purchasing group Goods receipt processing time Time to move goods into inventory Delivery tolerances

29 Slide 29 Material Master (Purchasing)

30 Slide 30 Material Master (Plant) Environmental requirements Special storage containers or handling Shelf life Weight

31 Slide 31 Material Master (Plant)

32 Slide 32 Purchasing Information We purchase materials from vendors Purchasing information defines the relationship between a vendor and a material This information is used to create purchases from Quotations Manually

33 Slide 33 Purchasing Information Record Determines which materials are supplied by which vendors Purchasing information Pricing Lead times Availability periods Order history

34 Slide 34 Purchasing Documents Purchase requisition Request for quotation Purchase order Goods receipt Vendor invoice processing

35 Slide 35 Common Purchasing Sequence

36 Slide 36 Purchase Requisition An internal rather than external document It instructs purchasing to request specific goods be purchased to arrive at a specific time A requisition gets created Manually Automatically through MRP, production orders, or sales orders

37 Slide 37 Requisition Sourcing Requisitions must be assigned a source of supply Internally Get goods from our own plant or centralized warehouse A list of sources Vendors who provide the particular material Outlined agreements Long-term purchasing agreements RFQ

38 Slide 38 Request for Quotation Use for very expensive goods or goods with no known source It’s an invitation for a vendor to bid Quotations from vendors are legally binding offers Price, materials, shipping details are all defined

39 Slide 39 Vendor Evaluation SAP allows you to evaluate vendors based on Price Quality Delivery You define scoring ranges You define detailed criteria

40 Slide 40 Purchase Order It’s really the acceptance contract for the vendor’s quotation A request to procure specific materials or services and the conditions of procurement

41 Slide 41 Types of Purchase Orders SAP supports different types of purchase orders Standard For services For consignment And others

42 Slide 42 Purchase Order Structure Remember the structure of a document Header information Vendor / payment terms Item overview Materials, quantities, item delivery dates Line items Item prices

43 Slide 43 Purchase Order Output All is not printed Purchase orders might be sent via EDI Fax XML

44 Slide 44 Goods Receipt Here is where we receive the goods from the vendor from our purchase order Tasks Determine whether order is correct Update purchase order history with receipt of goods Updates physical inventory Updates G/L account (Inventory)

45 Slide 45 Receipt of Goods (Events) Several events fire when goods are received Material document created Accounting documents created Inventory is updated Purchase order status is updated

46 Slide 46 Vendor Invoice Processing Invoices are validated against the corresponding purchase order Discrepancies might cause the invoice to be blocked When processed The accounts payable liability is created Payment process is initiated for financial accounting

47 Slide 47 Financial Accounting Processing Accounting pays the invoice Payment method Bank Items It’s possible to pay all or part of an invoice Medium Can be done manually or automatically

48 Slide 48 Financial Accounting (G/L) Transactions Invoice Receipt Payment Program Goods Receipt AP (Vendor) Dr Cr GR / IR $100 Bank Dr Cr Inventory $100 Dr Cr $100

49 Slide 49 Material Movement (1) SAP tracks the movement of goods in, around, and out of a warehouse They are depicted using three digit codes 101 – goods receipt into warehouse 103 – goods receipt into GR blocked stock 122 – return delivery to vendor 231 – consumption for a sales order 561 – initial entry of stock

50 Slide 50 Material Movement (2) Goods can be placed into different destinations Into the warehouse Unrestricted use Blocked use Quality assurance

51 Slide 51


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