1. The Procurement Process (MM)

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. SAP Process Diagram

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

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

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

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. Partner Functions (Illustration)

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. 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. Purchasing Organizations (GBI)

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

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

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. GBI Organizational Structure

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

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

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

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. Material Views

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. Material Master (Financial)

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

29. Material Master (Purchasing)

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

31. Material Master (Plant)

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

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

35. Common Purchasing Sequence

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

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

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

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

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