SAP MM Training

SAP MM Training
Presented by: S2S InfoTech

Agenda
Introduction
Enterprise Structure
Master Data
Procurement Process
Pricing procedure
Release Strategy
Inventory management
Message Output determination
Special Procurement Process
Physical Inventory
Material Requirement Planning
Evaluation and account determination
Batch Management
Invoice Verification
Integration with Other Modules
Country Version India (CIN)
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Unit 1
Introduction
Introduction to ERP
Page 4
What is ERP?
Enterprise resource planning (ERP) is business process

management software that allows an organization to use a system of
integrated applications to manage the business and automate many
back office functions related to technology, services and human
resources.
ERP provides an integrated view of core business processes, often in
real-time, using common databases maintained by a
database management system
ERP Products
SAP
Oracle PeopleSoft
Oracle JDE
Microsoft-Dynamic ERP
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What is SAP ?
SAP is enterprise resource planning software developed by the German

company SAP AG. SAP incorporates the key business functions of an
organization. The latest version (SAP ERP 6.0) was made available in
2006. The most recent Enhancement Package (EHP7) for SAP ERP 6.0
was released in 2013.
Business Processes included in SAP ERP include Operations (Sales &

Distribution, Materials Management, Production Planning, Logistics
Execution, and Quality Management) Financials (Financial Accounting,
Management Accounting, Financial Supply Chain Management) and
Human Capital Management (Payroll, e-Recruiting).
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SAP Modules
Page 7
Which Industries are using SAP
Manufacturing Industries
Service Industries
Petroleum Industries ( Oil & Gas )
Mining industries
Insurance
Pharmacy
Banking & Telecommunications etc.,
Page 8
History of SAP
Company : SAP AG
When : 1972
Where : Walldorf, Germany
By Whom : 5 former IBM employees.
R/3 Introduction : 1992
Page 9
SAP R/3 Architecture
Page 10
SAP R/3 Architecture
SAP based the architecture of R/3 on a three-tier client/server model.
Presentation Server
The presentation server is actually a program named sapgui.exe. It
is usually installed on a users workstation.
Application Server
An application server is a set of executables that collectively interpret
the ABAP/4 programs and manage the input and output for them.
When an application server is started, these executables all start at
the same time.
Database Server
The database server is a set of executables that accept database
requests from the application server. These requests are passed on
to the RDBMS (Relation Database Management System).
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System Landscaping
SAP System landscape is
the group of systems that
company has installed, all
the systems are linked to
different transport routs to
main system, system
landscape may vary from
company to company or
business to business.
SAP is divided into three different landscape DEV, QAS and PRD.-
DEV would have multiple clients for ex: 110- Configuration, 120-
development, 130 - Unit Test.
- QAS may again have multiple clients for ex: 200- Integration Test, 210 to
240 Training.
- PRD may have something like a 300 Production
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Transport Management
SAP Transport Management
System (TMS) is a tool within
SAP ERP systems to manage
software updates, termed
transports, on one or more
connected SAP systems.
Customizing transports contains configuration and they are created when

functional team does the configuration of your SAP system.
Workbench transports contains development work like ABAP programs,
custom tables, etc. that your ABAP development team does in your system.
In general, not always, customizing is client-dependent and workbench is
client-independent transports.
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Role and responsibility of ABAP Consultant
Implementation & Upgrade
Conduct workshops and gather requirements
Prepare Business blueprint
Prepare functional Spec and configuration
Business process testing
UAT and end user training
Data migration strategy
User manual
Support
Receiving tickets/issues from business .
Analyzing the ticket .
Resolving the issue in time
Prepare functional spec for Change request
Unit testing and transport to QAS for UAT testing
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What is MM
The SAP MM module

handles the procurement
and inventory functions of
organizations that engage
in large volumes of
purchasing by giving them
hands-on control of
inventory management,
batch management,
purchasing, client
categorization, valuation,
invoice verification
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MM Process Flow
Unit 2
An organizational unit responsible for
procuring materials or services for one or
more plants and for negotiating general
Client is a self-contained unit in an
conditions of purchase with vendors
R/3 System with separate master
records and its own set of tables
This level represents an

independent accounting
unit within a client. Each
company code has its
own balance sheet and
its own profit and loss
statement.
An organizational
unit serving to
subdivide an
enterprise according
to production,
procurement,
maintenance, and
materials planning
aspects.
An
organization
al unit
allowing the
differentiati
on of
material
stocks
within a
plant.
Unit 3
Master Data
Master Data
Material Master Vendor master
Stock Non stock
Agreement Service
Purchase Info Service Master

Record
Source list
Master Data
Master data contains data records that are stored in the database for a long
period of time. These are stored centrally and used and processed on a cross-
application basis. This prevents the multiple storage (redundancy) of data.
The material master record and vendor master record are the most important
master data in the procurement process.
Material Master Tcodes: MM01/MM02/MM03

The material master database contains descriptions of all materials that an
enterprise procures, produces, and keeps in stock.
Vendor master Tcodes: XK01/XK02/XK03

The vendor master database contains information about the vendors that
supply an enterprise. This information is stored in individual vendor master
records
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Master Data in the Procurement Process Master Data
Views in a Material Master Master Data
The material master represents the central source

for releasing material-specific data. It is used by all
of the SAP Logistics components in the SAP
System.
Integrating all of the material data in one single
database object means that the problem of data
redundancy is not an issue. The stored data can be
used by all areas, such as purchasing, inventory
management, materials planning, invoice
verification, and so on.
The data contained in the material master is
required, for example, by the following functions in
the SAP Logistics component: Ordering in
Purchasing , Updating movement and consumption
of material and managing the physical inventory in
Inventory Management, Posting invoices in Invoice
Verification
Material Master: Organizational Level Master Data
Some material data is valid for all

organizational levels, while some is
only valid for certain levels.
The material master is designed to
reflect the structure of your
enterprise so that you can manage
the material data in your enterprise
centrally, without overloading your
datasets with redundant information.
Data at client level: General material
data that is valid for the whole
company is stored at client level.
Data at plant level: All data that is
valid within a plant, and for all
storage locations in it, is stored at
plant level.
Data at storage location level: All
data that is valid for a particular
storage location is stored at storage
location level.
Maintaining a Material Master Record: Screens Master Data
When editing material master data, you

go through a number of screens.
From the initial screen, you go to two

successive dialog boxes. In the first
dialog box, you specify the views you
want to process. In the second, you
specify the relevant organizational
levels. You then go to the data screens.
You can change the standard screen

sequence by changing the default
values.
Some screens are not integrated in the

standard screen sequence. You can only
access these screens by specifically
choosing them from the menu bar.
Material Key Master Data
You create a record in the material

master for each material that your
company uses. Each material master
record has its own unique material
number.
The type of material number
assignment can be internal or external.
You can use User Exits to change
material numbers as required.
The material type summarizes all
materials with the same properties. It
controls things such as screen setup,
screen sequence, procurement type or
number assignment
The branch indicates what line of
industry is assigned to the material. It
also controls screen setup and screen
sequence.
Material Type Master Data
You can assign materials with the same

characteristics to the same material type.
Material types include office supplies,
equipment, services, etc.The material type
controls:
The type of number assignment
(internal or external).
The permitted number range interval.
Which screens are displayed and in
which order.
Which user-department-specific data
(view) is suggested for entry.
Along with the plant, the material type
determines a material's inventory
management requirement; that is,
whether the system updates quantity
changes in the material master record
or updates changes in value in the stock
accounts in Financial Accounting.
The material type also determines
which accounts are posted when a
material is posted to stock or leaves the
warehouse.
Various material types are provided in

Control of the Material Type Master Data
Material Type: Quantity and Value Updating Master Data
Quantity Update:
If stock is possible, you
may choose if you order
materials for stock
(storage) or for
consumption.
Otherwise only
procurement for
consumption is possible.
Value Update:
If the stock is valuated, the
value is posted to
inventory/stock account.
Without value update you
have to use a non-blank
account assignment type.
In this case the value is
posted to consumption
account (and an
Accounting object).
Valuation Class
Master Data
You can use the valuation class to

combine materials for assigning G/L
accounts so that you do not have to
manage a separate stock account for
each material.
You maintain the valuation class in the

Accounting view of the material master
record. The valuation class allowed for a
material depends on the material type,
and can be configured in Customizing.
In automatic account determination, the

SAP System works with valuation
classes. The valuation class is used to
determine which stock account is to be
updated upon goods movements.
Material Valuation Procedures Master Data
Valuation of goods receipts depends on the

price control procedure you set in the material
master record. In the SAP System, material
valuation can be carried out according to the
moving average price procedure (V price) or
the standard price procedure (S price).
In the standard price procedure (price control
S), the system carries out all stock postings
at a price defined in the material master.
Variances are posted to price difference
accounts.
In the moving average price procedure (price
control V), the system valuates goods
receipts with the purchase order price and
goods issues with the current moving average
price. The system automatically calculates the
latter upon every goods movement by dividing
the total value by the total stock quantity.
Differences between the purchase order price
and the invoice are posted directly to the
relevant stock account if there is sufficient
stock coverage.
Vendor Master
Vendor master Tcodes: XK01/XK02/XK03
The vendor master database contains information about the vendors
that supply an enterprise. This information is stored in individual
vendor master records
General data:
This includes the vendor's address and bank details, for example.
This data is valid for the whole client.
Accounting data:
This comprises data such as the number of the reconciliation
account and the payment methods for automatic payment
transactions. This is maintained at company code level.
Purchasing data:
This includes the purchase order currency, incoterms, and the
vendor's tax data.
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Vendor Master Record Master Data
Vendor Master Record: Organizational Level Master Data
In Accounting, the vendor is

regarded as the company's
crediting business partner. The
vendor master record is
therefore maintained by
Accounting and Purchasing.
You can use the SAP System
authorization concept to define
how data maintenance should
be organized in the vendor
master record.
Each user department can
maintain both general data and
Purchasing and Accounting-
specific data centrally or de-
centrally. In addition, Purchasing
often maintains data at corporate
group level.
Vendor Master Record: Account Group Master Data
When creating a vendor master

record, you have to enter an
account group. The account group
has controlling characteristics.
You can create special master
records for vendors from whom
you only procure a material once
or very rarely. These are called
one-time vendor master records
and, in contrast to other master
records, you can use a vendor
master record for several vendors.
Therefore, no vendor-specific data
is stored for one-time vendors. You
can control this using the relevant
field selection for account groups
for one-time vendors.
One-Time Vendor Master Data
When creating a
purchasing document or
accounting document with
a one-time vendor, the
system automatically goes
to an additional data
screen. This is where you
enter specific data, such
as the vendor's name,
address, or bank details.
You can use a single one-
time vendor master record
to cover a number of
vendors. You normally use
one-time master records
for one-time vendors.
Purchasing Data in the Vendor Master Record Master Data
Vendor master records

contain information on the
vendors (external
suppliers) of an enterprise.
From the Purchasing view,
a vendor master record
has the organizational
levels client and
purchasing organization.
Control parameters for
purchasing operations are
defined at the purchasing
organization level.
Data that applies to a
purchasing organization
can be maintained
differently for a specific
plant.
Partner Roles Master Data
The vendor can have

various functions in its
interaction with your
company. For example,
during the procurement
transaction the vendor is the
order recipient, then the
supplier of goods, the
invoicing party, and finally,
the payee.
By maintaining partner roles
in the vendor master record,
you can distribute one or
more of these roles among
different vendor master
records.
Master Data
Purchase Info Record Tcodes: ME11/ME12/M13
The info record contains concise information about a vendor and a
material that Purchasing already procures from that vendor. An
info record thus represents a material-vendor relationship.
Types of Info record
Standard
Consignment
Pipeline
Subcontract
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Purchase Info Records Master Data
Purchasing info records contain concise

information on a vendor and the material
you procure from this vendor.
The purchasing info record is an important
source of information for the buyer, enabling
him or her to determine via list displays
which vendors offer a particular material, or
which materials can be procured from a
particular vendor.
You can store and maintain the following
data in info records:
Current and future prices and
conditions (for example, freight and
discounts)
Delivery data (for example, planned
delivery time and tolerances)
Vendor data (for example, contacts)
Texts.
When you create purchasing
documents (for example, purchase
orders or contracts), the system
displays data maintained in info
records as default values.
Purchase Info Records: Structure Master Data
A purchasing info record

contains general data that is
valid for every purchasing
organization or every plant.
It also contains data (for
example, prices and
conditions) that is only valid for
the relevant purchasing
organization or relevant plant.
You configure whether
conditions are permitted at
plant level.
When you create a purchase
order, the system searches for
an info record for the
purchasing organization/plant
combination. If there is no
such info record, the system
searches for the purchasing
organization only.
In the standard system, the

following type of texts are set
in the purchasing info record:
Internal info memo
Options to Maintain Purchase Info Records Master Data
You can maintain info records

manually or automatically from
quotations, purchase orders, or
outline agreements.
Info Update Indicator: Quotation, Outline Agreement Master Data
Master Data
Source list Tcodes: ME01
A source list specifies the possible sources of supply for a material
over a given period of time. It shows the time period in which a
material may be ordered from a given vendor or under a certain
long-term purchase agreement.
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Source of Supply Master Data
In MM Purchasing, the term source of

supply (or source) can mean a
vendor (external supplier) or an outline
purchase agreement.
An info record (short for purchasing
information record) provides
information for Purchasing. It contains
data on a certain material and the
vendor (supplier) of that material. For
example, the vendors current price for
the material is stored in an info record.
An outline purchase agreement is a
longer-term arrangement with a vendor
regarding the supply of materials or
performance of services according to
predefined terms and conditions. The
latter apply for a prearranged period
and a predefined total purchase
quantity or value.
Source List Master Data
The source list contains the allowed, preferred and/or

blocked sources of supply for a material in a plant that
are valid within a certain period. Each source is defined in
the source list by a source list record.
Source list records enables you to determine and check
sources.
Fixed sources are always preferred over other sources in
the relevant validity period. Only one fixed source may
exist for a material within a certain validity period.
Buyers are not allowed to procure from blocked sources.
Blocked sources are not taken into account in source
determination.
The MRP indicator in the source list stipulates how the
source defined in a source list record is taken into
account in materials planning.
If a source list requirement exists, a material may not be
procured from sources other than those included in the
Source list analysis enables you to list the source list. A source list requirement can be specified
materials of a plant for which no source list either for an individual material (in the material master),
records exist during a certain period. This function or for all the materials of a plant (using a Customizing
is useful in the case of a source list requirement parameter).
(use of source list mandatory).
).
Creating Source List Automatically
Master Data
You can have the system automatically create a

source list. This allows you to enter or update all
of a material's sources of supply.
In this procedure, the system creates a source
list record for each info record or outline
agreement item.
You can create a source list for several materials
(collective procedure) or for an individual
material (individual procedure).
There is a preview function for creating source
lists automatically. This allows you to simulate
the effects of the source list creation.
After update, the source lists can be restored to
their original status.
Source list cannot be generated from outline
agreement item carrying item category D
(Service).
Creating Source List for Material Group Master Data
Within the contract maintenance function, you can create source list records for a material
group for contract items with the item category M (material unknown) or W (material group).
Source list records for material groups define which materials can be released against a
contract item with item category M or W.
You can list either all disallowed materials (exclusion of materials) or all allowed materials
(inclusion of materials). To exclude materials, you must retain the standard setting of the
exclusion indicator. To include materials, you must deselect the exclusion indicator.
Blocking of Sources Master Data
Within the contract maintenance function,

you can create source list records for a
material group for contract items with the
item category M (material unknown) or W
(material group).
Source list records for material groups
define which materials can be released
against a contract item with item category
M or W.
You can list either all disallowed materials
(exclusion of materials) or all allowed
materials (inclusion of materials). To
exclude materials, you must retain the
standard setting of the exclusion
indicator. To include materials, you must
deselect the exclusion indicator.
Master Data
Service Master Tcodes: AS03
Conduct workshops and gather requirements
Prepare Business blueprint
Prepare functional Spec and configuration
Business process testing
UAT and end user training
Data migration strategy
User manual
Page 50
Service Master Record Master Data
A service master record contains a

service description and a unit of
measure, for example, hour.
You can assign a price to each service

master record via the conditions.
This data can be obtained from various

SAP applications like PM , PS.
Defining Price at Service Master Conditions Master Data
There are several ways of

storing long-term prices for
services in the form of service
conditions:
At the service level
(market price/own
estimate)
At the service and vendor
level
At the service, vendor,
and plant level
Prices stored in the

system are automatically
proposed in service
specifications.
Unit 4
Procurement Process
Procurement Process
Purchase
Stock
Non Stock Outline Service
material Import PO Asset PO
procurement agreement procurement
procurement
1.PR
2. RFQ
3. Quotation
Schedule
4. Purchase order Contract Agreement
5. Goods Receipt
6. Invoice
verification
Stock/Non-Stock Material Procurement
Material procurement is handled by purchasing
department of each plant at respective locations for
various materials like steel, spares, capital items etc.
These materials will be procured for stocking at respective
plants and also for consuming directly by various
departments.
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4.1 Stock/Non Stock
Procurement
Stock Material Procurement
3 4
Page 57
1. Procurement cycle starts with creation of Purchase requisition
manually by the requesting department or MRP.
2. Request for Quotation is created with reference to released purchase
requisition and is to be sent to desired/short listed vendors.
3. Receive quotations from vendors
4. Perform price comparison to choose the best vendor .
5. Purchase Order is created with reference to selected Quotation.
6. Once goods arrive at plant, Goods Receipt is done against
respective Purchase Order.
7. Invoice verification for vendor is done after receiving invoice and
clearance from Quality for payment.
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Transaction codes
ME51N Create PR
PR ME52N Change PR
ME53N Display PR
ME41 Create RFQ

RFQ ME42 Change RFQ
ME43 Display RFQ
Quotation
ME47 Maintain Quotation
ME48 Display Quotation
Price comparison ME49 - Price comparison
ME21N Create PO
Purchase Order ME22N Change PO
ME23N Display PO
Goods Receipt MIGO Goods Receipt /Reverse GRN
Invoice verification
MIR7 - Park Invoice
FBV0 Post Invoice
Page 59
Purchase Goods and Services
Purchase Requisition (PR)
Purchase requisitions are internal

documents which the requestor request the
Purchasing department to procure a
particular quantity of a material or a service
for a particular date.
Purchase requisitions are either created
manually by the department responsible or
automatically by MRP (for stock managed
items only).
When a purchase requisition is created for
materials that have a material master
record, the SAP System will transfer the
data in the material master record onto the
purchase requisition. Data such as unit of
measurement, description of the material,
purchase order unit, currency, etc. will be
copied from the reference material master.
Purchasing converts the purchase
requisition into a request for quotation
(RFQ), purchase order, or outline
agreement.
Request For Quotation (RFQ)
Purchase
Purchasing Order
Vendor A
Purchase RFQ Quotation
Requisition
Source
of Vendor B
Supply
Vendor C
Rejection
Letter
Master data
Create a Request For Quotation (RFQ) for the relevant material or the required
service. The request for quotation can be created: Manually (i.e. not referencing
any document) or With reference to a purchase requisition PR. The second option
(creation with reference to PR) has the advantage that the information already in
the purchase requisition is copied directly to the request for quotation.
Next, allocate the required vendors to the request for quotation. The system
determines the address from the data in the respective vendor master record.
The RFQs are then sent to the chosen vendors, who then send their quotations or
rejection letters.
After receiving the quotations from the vendors, their quotations are entered along
with the conditions (e.g. prices, discount, surcharges, freight, custom duty, etc.
which are given by the vendors) and delivery dates they contain with reference to
the corresponding RFQ.
Determines the most favorable items or quotation by means of a quotation
comparison (e.g. price comparison).
In addition, there is an option of saving as purchasing info records the conditions of
quotations. Purchasing info records here refers to the negotiated conditions agreed
between the buyer and the vendor for a particular material or service.
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Quotation
11
Enter price and conditions
Vendor A Vendor B Vendor C

Quotation for Quotation for Quotation for
RFQ 1 RFQ 2 RFQ 3
Item 10 Item 10 Item 10
Gross price: 400/t Gross price: 400/t Gross price: 500/t
Discount: 50 UNI Surcharge: 20% Fixed costs: 40 UNI
22
Compare quotation with price comparison list
Steel 2 t 350/t 480/t 520/t 450/t
Price
Quotation 1 Quotation 2 Quotation 3 Mean value
33 Quotation
Create info record or reject quotation
Purchase Piece Rejection

Market price
Order % Letter
UNI
Info record
Purchase Order (PO)
A purchase order is a formal request to a vendor to
supply certain goods or services under the stated
conditions.
You can create purchase orders without reference,
or with reference to a purchase requisition, a
request for quotation, or another purchase order.
When you enter the purchase order data, the
system suggests default values. For example, it
suggests the ordering address, as well as the
terms of payment and freight (incoterms) from the
vendor master record. If you have maintained a
material master for a given material in the SAP
System, the system suggests the material short
text or the material group, for example. If a
purchasing info record already exists in the
system, the system copies a price proposal to the
purchase order.
You either send the purchase order to a vendor or
you carry out a stock transport order in another
plant belonging to your company or group. With a
stock transport order, you can take into account
the associated freight costs in the purchase order.
Movement Types: Examples Inventory Management
The movement type is a three-digit key used to

differentiate between goods movements in the
SAP System. Examples of these goods
movements are goods receipts, goods issues or
transfer postings.
The movement type has important control

functions in Inventory Management. It plays a
central role in automatic account determination in
the SAP System. Together with other influencing
factors, the movement type determines which
stock or consumption accounts are updated in
Financial Accounting. The movement type also
determines the format of the screen when you
enter documents and how the quantity fields are
updated.
Invoice Verification: 3-Way Match
Vendor Invoice
$ 20.00
Vendor Open
Invoice Items
$ 20.00
Purchase Order
Goods Receipt
4.2 Outline Agreement
Contract/ Schedule Agreement

Contract/Schedule Agreement
Contract / Scheduling Agreement are created for material and vendor, on quantity
or value basis and will have predefined validity periods.
Scheduling Agreements are similar to contracts with difference that delivery orders
(schedule lines) against these agreements have very specific and detailed delivery
schedules in terms of time and quantity of deliveries.
A contract is a long-term
agreement with a vendor
concerning the supply of
material or performance of
services.
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.
Page 68
Contract
Contracts are outline
agreements. They do not
contain details of the
delivery dates for each of
the items.
To inform vendors of which
quantities you need for
which date, you enter
contract release orders for
a contract. A release
order is a purchase
order that references a
contract.
If an info record with
conditions exists for the
material and the vendor,
the system automatically
suggests the net price
according to these
conditions when you
create the contract
item.
Types of Contract
Contract : Item Categories
Item category W is
recommended for materials
belonging to the same material
group but with different prices.
When you create the contract
item, you enter the short text
and the material group, but no
price. This and the material
number are not entered until a
release order is created
against the contract.
Item category M is
recommended for similar
materials with the same price
but different material
numbers. When you create
the contract item, you enter
the short text, material group,
quantity and unit of measure,
but no material number. This
is not specified until a release
order for such a material is
created against the contract.
5
1
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1. This cycle starts with creation of contracts, it follows with source list is
updating for material and vendor combination so as to enable automatic
schedule creation via MRP.
2. Delivery orders / Schedule lines are created against contracts, either
manually or via MRP.
3. Once goods arrive at plant, Goods Receipt is done against respective
Release Order / Schedule Line. At this time all goods receipt are
checked for correctness with respect to quantity etc.
4. When material is procured for storing in stocks, goods is moved to
respective storage locations, or else, when material is procured to be
consumed directly, it is shown as consumed.
5. Invoice verification for vendor is done after receiving invoice and
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Transaction codes
ME51N Create PR
PR ME52N Change PR
ME53N Display PR
Contract/Schedule ME31K /ME31L Create contract/ Schedule agreement

ME32K/ME32L Change contract/ Schedule agreement
Agreement ME33K/ME33L Display contract/ Schedule agreement
ME21N Create PO
Purchase ME22N Change PO
Order/Schedule Line ME23N Display PO

ME38 Create Schedule Lines
Goods Receipt MIGO Goods Receipt /Reverse GRN
MIR7 - Park Invoice

Invoice verification FBV0 Post Invoice
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4.3 Service Procurement
Service Procurement
This process covers procurement of services from
external vendors. Service procurement is handled by
purchasing department of each plant at respective
locations for various objectives like construction,
maintenance and cleaning etc.
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Service Procurement
1
Page 77
Service Procurement
1. Service Procurement cycle starts with creation of Purchase requisition,
either manually by the requesting department or through Project
Systems and Plant Maintenance module.
2. Request for Quotation is created with reference to released purchase
requisition and is to be sent to desired/short listed vendors
3. Once quotations are received from the vendors, they are entered into
system with all terms and conditions as specified by the vendors. These
quotations are used for Price Comparison and short listing best vendor.
4. Service Purchase Order is created manually or with reference to an
approved purchase requisition.
5. Service is performed by the vendor against this PO and Service Entry
Sheet is created to confirm the quantum of services performed.
6. Invoice verification for vendor is done after receiving invoice from
vendor and acceptance of service entry.
Page 78
Service Specifications in the Purchasing Document Service Entry Sheet
You can format complex service

specifications clearly using outline
levels. You can assign any number
of service lines to each outline level.
Work that is not contained in the

outline or service lines cannot be
covered with value limits for
unplanned services.
Service Entry Sheet and Acceptance of Service Service Entry Sheet
The system stores services that have

been performed in service entry
sheets. The relevant postings are
made in Financial Accounting and Cost
Accounting when the service entry
sheets are signed off. Service entry
sheets can be entered and signed off
in one transaction or in two steps.
When entering services, you reference
the purchase order. You can copy
planned services directly from the
purchase order into the service entry
sheet. You do not give an exact
description of unplanned services or
their quantity and price details until you
enter them.
The system checks whether the
unplanned services adhere to the limit
defined in the purchase order.
You can set up release procedures for
service entry sheets.
Invoice Verification for Entry Sheet Service Entry Sheet
The invoice verification

procedure is carried out with
reference to the purchase order.
This means that all service entry
sheets signed off for this
purchase order are suggested for
invoice verification.
The system compares the prices
on the invoice with the prices
from the service entry sheets.
If there are no discrepancies, you
can enter and post the invoice.
If the system finds any
discrepancies, it blocks the
invoice for payment.
Service Entry Sheet
Purchase Order History Acceptance

The purchase order history
lists all the follow-on
activities for a particular
purchase order; that is, all
services that have been
performed, entered, and
written off, and all invoices
that have been entered.
Transaction codes
ME51N Create PR
PR ME52N Change PR
ME53N Display PR
ME41 Create RFQ

RFQ ME42 Change RFQ
ME43 Display RFQ

Quotation ME48 Display Quotation
ME21N Create PO
ME23N Display PO , ME9F - Print PO
Service ML81N - Service entry acceptance/Reverse GRN
Entry/Acceptance ML83 Print service entry sheet
MIR7 - Park Invoice

Page 83
4.4 Import Material
Procurement
Import Material Procurement
Import Material procurement is handled by centralized purchasing department
for various materials like steel, spares, capital items etc. required at each
plant.
Page 85
Import Material Procurement
1
Page 86
Import Material Procurement - steps
1. Procurement cycle starts with creation of Purchase requisition, either manually by
the requesting department or via MRP.
2. Import Purchase Order is created with reference to selected Quotation.
3. If advance payment is required to vendor, then either invoice verification is done
or payment is done through down payment request.
4. Inbound delivery is created with reference to PO after getting the intimation from
vendor for shipment of the material.
5. Goods receipt (movement type 103) is done against inbound delivery after receipt
of the material in bonded store at port. Invoice verification for vendor is done for
payment.
6. After receipt of physical material at plant, Goods receipt (105) is done against
import PO.
7. Excise credit is taken for Cenvat amount
8. Invoice verification for vendor is done after receiving invoice and clearance from
Quality for payment
Page 87
Transaction codes
ME51N Create PR
PR ME52N Change PR
ME53N Display PR
ME21N Create PO
Inbound delivery VL31N create inbound delivery
MIGO Goods Receipt/Reverse GRN

Goods Receipt ML83 Print GRN
Invoice MIR7 - Park Invoice
verification FBV0 Post Invoice
Page 88
Unit 5
Inventory Management
Goods Issue
Goods Issue is the process of handing over the materials placed in stores to
various departments as per their requests. The Inventory Management in MM
module system supports the following types of goods issues:
Withdrawal of material for production orders
Scrapping and withdrawal of material for sampling
Return deliveries to vendors
Other types of internal staging of material
Deliveries to vendors without the involvement of the SD Module
Generally goods are issued with reference to some documents like -
Reservations
Production orders
Bills of material
Page 90
Goods Issue
Page 91
Goods Issue
If a reference document (reservation/order) exists, it is important to enter the goods
issue with reference to this document, for the following reasons:
The goods issuing department can check whether what was requested is
actually issued.
During entry of goods issue, the system can suggest data from the reference
document (for example, account assignment, requested material, quantity,
etc.). This simplifies both data entry and checking (over deliveries and under
deliveries) when entering a goods issue.
After a withdrawal, the quantity withdrawn is updated in the reference
document and the reserved quantity is reduced accordingly. Thus, Inventory
Management can monitor the withdrawal process and Materials Planning can
update the stock/requirements list.
If reference documents are not available then Goods can be issued for
consumption against
Cost Center
project
Asset
Page 92
Goods Issue
Reservation
The Request to Stores to reserve a material for future use on a particular date
will be made through a reservation.
Reservations will be created automatically from Maintenance order, Production
Order or manually for material requested against breakdown and stock
transfers between plants.
Offline approval will be obtained prior to creating reservation manually.
The Goods Issue will be always done with reference to Reservation.
Cost Center
The Request to Stores request a material for its from store without creating
reservation.
The Goods Issue in such case will be posted as consumption directly against
cost center.
Page 93
Transaction codes Goods Issue
ME51N Create PR
PR ME52N Change PR
ME53N Display PR
ME41 Create RFQ

RFQ ME42 Change RFQ
ME43 Display RFQ

ME21N Create PO
MIR7 - Park Invoice

Page 94
Stock Transfer & Transfer Posting
This process is used to remove materials from storage in one storage location
and place them in another storage location. Stock transfers can occur either
within one plant or between two plants. Whereas, a transfer posting refers to a
change in a materials stock (for example, release from quality inspection,
accepting consignment material). In a transfer posting, the material can
remain in its original storage bin or be transferred. Stock transfers and transfer
postings are used to represent organizational-relevant transfers within the
company (for example, decentralized storage).
There are three different procedures for carrying out a stock transfer:
Stock transfer via stock transfer posting using the one-step procedure
Stock transfer via stock transfer posting using the two-step procedure
Stock transfer using stock transport order
Page 95
Page 96
Stock Transfers
The Receiving Plant will create the Stock Transport Order on the Issuing Plant /
Port.
The Raw materials from Issuing plant / Port to any plant will be transferred with
reference to Stock transport order.
Once goods arrive at plant, Goods Receipt is done against stock transport
order. Transporter Code is entered while doing GR.
The material will be valuated at the receiving plant when the good are issued
from the sending plant.
Transfer Postings
Transfer postings will occur for carrying out conversion of Stock to a different
Stock Type and to convert one material to another.
If reference documents are not available then Goods can be issued for
consumption against
Page 97
Transaction codes Stock Transfer
ME51N Create PR
PR ME52N Change PR
ME53N Display PR
ME41 Create RFQ

RFQ ME42 Change RFQ
ME43 Display RFQ

ME21N Create PO
MIR7 - Park Invoice

Page 98
Unit 6
Special Procurement
Special procurement Process
Four Types of special procurement process
Consignment
Subcontract
Pipeline
Returnable Transport Package
Page 100
Unit 6.1 Consignment
Procurement
Consignment Procurement
This process is the management of vendors stock in company premises. The
inventory is valued in the books of the vendor. The materials will be directly
issued for consumption from the vendors stock or will be transferred to Blue
Scope Steels stock.
Goods Issue
Request for issue of vendor-managed inventory (VMI) will be a
reservation.
The issue of Consignment stock will be done with reference to a
reservation.
The material will be directly issued for consumption from the Consignment
stock.
The settlement of liabilities of vendor will be carried out on the basis of the
issues for consumption.
Page 102
Transfer to Own Stock
The goods from vendor is received against the Purchase order and
classified as Consignment stock. The Receipt into consignment stock will
not be valuated.
The goods from the Consignment will be transferred to own stock through
transfer posting. Accounting entries are posted during this transaction and
the stock is valuated.
The above process will be done under specific considerations. For e.g.
After a fixed period based on the contract with the vendor.
Returns to Vendor
Vendor-managed materials will be returned to vendor if the material is not
required by the company, material is rejected in shop floor or the material
is needed by the vendor for his own use.
The return to Vendor will be carried out with reference to the Purchase
order against which it was received.
Page 103
The materials which are already issued to consumption will be returned after
reversing the issue transaction which will bring the stock back into
Consignment stock. This case is applicable in case of rejections at shop floor.
The Cenvat credit will be reversed for the Cenvatable materials returned from
Shop floor.
A debit note will be raised if the settlement is done for the vendor.
Page 104
Page 105
Transaction codes Consignment Procurement
ME51N Create PR
PR ME52N Change PR
ME53N Display PR
ME41 Create RFQ

RFQ ME42 Change RFQ
ME43 Display RFQ

ME21N Create PO
MIR7 - Park Invoice

Page 106
Unit 6.2 Subcontracting
Procurement
Subcontracting Procurement
Sub contracting process covers service procurement from an external vendor.
For this all the materials to is sent to subcontractor with all the accompanying
documents, which is subsequently processed by subcontractor and finished
product is sent back.
In this process material is sent by respective plants to a subcontractor and
handled by purchasing department from each plant at respective locations.
Excise invoice on the goods provided to subcontractor can be handled in
following two ways
Subcontracting without payment of excise duty
Subcontracting under full payment of duty
Page 108
Subcontracting without duty
Page 109
Subcontracting Procurement - steps
1. Procurement cycle starts with creation of Purchase requisition manually by the
requesting department.
2. Request for Quotation is created with reference to released purchase requisition
and is to be sent to desired/short listed vendors.
3. These quotations are used for Price Comparison and short listing best vendor.
5. Goods issue is done for vendor against subcontracting purchase order
6. Subcontracting challan is created with respect to goods issue document. This is the
consignment document that will be sent to the subcontractor along with the
materials that are to be processed.
7. Materials are sent to the subcontractor, along with a printout of the subcontracting
challan.
Page 110
Subcontracting Procurement - steps
8. The subcontractor processes the materials and returns the finished goods. When
the goods are delivered back to plant, the store person posts the goods receipt and
the challan.
9. The excise department reconciles the goods receipt against the challan, thereby
accounting for the return of the materials that were sent for subcontracting.
10. If subcontractor fails to return all the materials within the time allotted as per law,
the material is scrapped by specifying it as such in the bill of material for the parent
material then assigning the bill of material to the subcontracting purchase order. If
the scrap generated is not returned by the subcontractor, excise duty relevant to
the scrap generated has to be paid. If this scrap is returned after the duty has been
paid, an excise journal voucher should be created to reverse the excise duty paid.
11. Invoice verification for subcontractor is done after receiving invoice and clearance
from Quality for payment.
Page 111
Transaction codes Subcontracting without duty
ME51N Create PR
PR ME52N Change PR
ME53N Display PR
ME41 Create RFQ

RFQ ME42 Change RFQ
ME43 Display RFQ

ME21N Create PO
MIR7 - Park Invoice

Page 112
Subcontracting with duty
Page 113
Subcontracting with duty - steps
1. Procurement cycle starts with creation of Purchase requisition manually by the

requesting department.
2. Request for Quotation is created with reference to released purchase requisition
and is to be sent to desired/short listed vendors.
3. These quotations are used for Price Comparison and short listing best vendor.
5. Goods issue is done for vendor against subcontracting purchase order
6. Duty paid excise invoice is created with respect to goods issue document.
7. Materials are sent to the subcontractor, along with a printout of the excise invoice.
8. The subcontractor processes the materials and returns them, together with another
excise invoice.
Page 114
Subcontracting with duty- steps
9. GR is done against scheduling agreement/purchase order after manual gate entry.
Transporters code is entered while doing GR. Material goes to quality if required.
10. The excise clerk captures the subcontractors excise invoice, using the purchase
order as the reference document. The excise supervisor posts excise invoice.
11. Invoice verification for subcontractor is done after receiving invoice and clearance
from Quality for payment. Simultaneously, invoice verification for transporter is
done.
Page 115
Transaction codes Subcontracting with duty
ME51N Create PR
PR ME52N Change PR
ME53N Display PR
ME41 Create RFQ

RFQ ME42 Change RFQ
ME43 Display RFQ

ME21N Create PO
MIR7 - Park Invoice

Page 116
Unit 6.3 Pipeline
Unit 6.4 Returnable Transport
Package (RPT)
Returnable transport packaging (RTP) is a multi-trip packaging medium (for
example, pallets or containers) in which goods can be transported more than
once between vendors and customers.
Returnable transport packaging from a vendor that is stored at a location on

our premises is managed as special stock and clearly assigned as belonging
to the vendor. It is the property of the vendor and is therefore not included in
the customers valuated stock. RTP stocks from vendors are externally owned
and are not valuated. RTP stock is always unrestricted-use stock. The stock
can neither be in quality inspection nor blocked.
Following transactions are used for RTP

Transfer posting is done for trolley while goods are dispatched (movement
type 541)
Transfer posting is done for trolley while goods are received (movement
type 542)
Page 119
Page 120
Transaction codes Returnable Transport Package
ME51N Create PR
PR ME52N Change PR
ME53N Display PR
ME41 Create RFQ

RFQ ME42 Change RFQ
ME43 Display RFQ

ME21N Create PO
MIR7 - Park Invoice

Page 121
Unit 8
Physical Inventory
Physical Inventory
This process covers counting of companys warehouse stocks for balance
sheet purposes. Physical inventory can be carried out both for a companys
own stock and for special stock. Inventory for a companys stock and for
special stocks (such as consignment stock at customer, external consignment
stock from vendor, or returnable packaging) must be taken separately (in
different physical inventory documents).
The stock in a warehouse can be divided into stock types. In the standard
system, a physical inventory can be carried out for the following stock types:
Unrestricted-use stock in the warehouse
Quality inspection stock
Blocked stock
Page 123
Physical Inventory
Inventory of all stock types mentioned can be taken in a single transaction.
For the materials to be inventoried, one item is created in the physical
inventory document for every stock type. Physical inventory takes place at
storage location level. A separate physical inventory document is created for
every storage location.
If a material does not exist in a storage location, this means that no goods
movement has ever taken place for the material in the storage location. The
material, therefore, has never had any stock in this storage location. The
material does not exist at stock management level in the storage location. It is
therefore not possible to carry out a physical inventory for the material in this
storage location.
Physical Inventory Procedures
SAP R/3 supports the following physical inventory procedures:
Periodic inventory
Continuous inventory
Cycle counting
Inventory sampling
Blocked stock
Page 124
Physical Inventory
Page 125
Physical Inventory - steps
Physical Inventory Process
Regardless of the physical inventory method, the process of physical inventory can be
divided into three phases:
1. Physical Inventory Preparation

Create a physical inventory document.
Blocking Materials for Posting
Print and distribute the physical inventory document.
2. Physical Inventory Count
Counting stocks
Entering the result of the count on the physical inventory document printout
3. Physical Inventory Analysis
Entering the result of the count into the system
Initiating a recount, if necessary
Posting inventory differences
Page 126
Transaction codes Physical Inventory
ME51N Create PR
PR ME52N Change PR
ME53N Display PR
ME41 Create RFQ

RFQ ME42 Change RFQ
ME43 Display RFQ

ME21N Create PO
MIR7 - Park Invoice

Page 127
Unit 9
Material Requirement Planning

Unit 10
Evaluation and Account

assignment
Unit 11
Batch Management
Unit 12
Invoice Verification: Overview

Invoice Verification: 3-Way Match
Vendor Invoice
$ 20.00
Vendor Open
Invoice Items
$ 20.00
Purchase Order
Goods Receipt
Information in an Invoice
Invoice Verification with reference to Purchase Order (1 of 2)

Invoice Verification with reference to Purchase Order (2 of 2)

Entering Tax Data

Invoices in Foreign Currencies

Invoices with Variances

Invoices with Variances

Tolerances
Manual Block
Unit 13
MM Intergartion
Unit 14
Country version of India (CIN)

Unit 15
Real Time Scenarios

Release Procedure
Procurement cycle starts with creation of Purchase requisition
manually by the requesting department.
Request for Quotation is created with reference to released purchase
requisition and is to be sent to desired/short listed vendors.
These quotations are used for Price Comparison and short listing best
vendor.
Purchase Order is created with reference to selected Quotation.
Once goods arrive at plant, Goods Receipt is done against respective

Purchase Order.
Invoice verification for vendor is done after receiving invoice and

Page 146
Release Procedure (Approval)

Release of Purchase Requisition

Release of External Documents

Overview of the Release Process

User Authorization and Release Procedure

Agenda: Materials Management (Day 1 19 April)
1. Course Objectives 2 mins
2. Business Cycle: Introduction to Material Management 10 mins
3. Enterprise Structure 15 mins
4. Purchasing Group 5 mins
5. Purchase Goods and Services 1.5 hr

Request for Quotation (bids)
Purchase Requisition
Purchase Order
Contracts
Item Categories
6. Inventory Management 10 mins

Receipts of Goods and Services
7. Invoice Verification 20 mins
8. Service Entry Sheet 30 mins

Acceptance/ Rejection of Services from Contractors
Invoice Verification for Entry Sheet
Goods Receipt
Goods Receipt of Stock Item/ Service

Movement Types: Examples

Goods Receipt for Purchase Order Assigned to a Consumption Account
Automatic
Issue
Goods Receipt Consumer
Purchase
Order
2 swivel chairs
for Cost Center 1
Setting the Delivery Completed Indicator
Set
Set Delivery
Delivery Completed
Completed Indicator
Indicator
Purchase
Order
At time of
In the
Purchase Order Goods Receipt
Under - and Over-delivery
Purchase Order Quantity 100
No
NoMessage
Message
Underdelivery
Underdelivery within
withinthe
the Overdelivery
Overdelivery
Tolerance Tolerance
ToleranceRange
Range Tolerance
Tolerance Tolerance
20%
20% 20%
20%
70 80 90 100 110 120 130 140
Underdelivery Overdelivery
Warning Error Message

Purchase Order
Contracts
Item Categories



Purchase Order
Contracts
Item Categories


Service Entry Sheet
Stock Material, Services

Service Entry Sheet
Purchasing Document Layout

1. Review 20 mins
2. Returns to Vendor 30 mins

Return Purchase Order
Credit Memo
3. Key Master Data 40 mins

Vendor Master
Material Master
Purchase Info Records (Purchase price)
Source List/ Contract (Approved Vendors PVL)
Service Master
4. Safety Stock Planning 30 mins
5. Compliance Document Review with MapleTree Users 1 hr

Returns to Vendor
Returns from Purchase Order

Returns to Vendor
Reversal (Reversing Entry) - Return Delivery
Return
Delivery
Reversal
Reason for Movement

Reason for Movement (Mandatory entry)
(Optional entry)
(e.g., Damaged Material)

(e.g., Wrong Storage Location) With Return
Without Return xxxxx xxxx xx
Delivery Slip
xx xxxxxx xx
Delivery Slip xxxxx xxxx xx

xx xxxxxx xx xxxx x xxx
The return
xxxxxxxx xxxdelivery slip is sent
X
x
xxxx x xxx xxxxx x xx xxx
xxxxxxxx xxx x to the
xxx vendor with the material
xxxxx x xx xxx
xxx which is being sent back.
Returns to Vendor
Credit Memo
1. Review 20 mins

Credit Memo

Vendor Master
Material Master
Service Master

1. Review 20 mins

Credit Memo

Vendor Master
Material Master
Service Master

Safety Stock Planning
Safety Stock Planning: Consumption-Based Planning
Planning Procedures
Consumption-Based
MRP
Planning
Forecast-Based Reorder
Reorder Point
Point
Planning Planning
Planning
In MRP, the system compares available stock plus planned receipts with demand. If the available
quantity is less than the required quantity at a point in time, then an order proposal is created.
Maximum Stock level
Lot size
Reorder
point
Safety
stock
Reorder point Delivery time Time
Replenishment
lead time
1. Review 20 mins

Credit Memo

Vendor Master
Material Master
Service Master

About Deloitte
Deloitte refers to one or more of Deloitte Touche Tohmatsu, a Swiss As a Swiss Verein (association), neither Deloitte Touche Tohmatsu
Verein, its member firms and their respective subsidiaries and nor any of its member firms has any liability for each others acts or
affiliates. Deloitte Touche Tohmatsu is an organization of member omissions. Each of the member firms is a separate and independent
firms around the world devoted to excellence in providing legal entity operating under the names Deloitte, Deloitte & Touche,
professional services and advice, focused on client service through a Deloitte Touche Tohmatsu or other related names.
global strategy executed locally in nearly 140 countries. With access
to the deep intellectual capital of approximately 150,000 people
worldwide, Deloitte delivers services in four professional areas
audit, tax, consulting and financial advisory services and serves
more than 80 percent of the worlds largest companies, as well as
large national enterprises, public institutions, locally important clients,
and successful, fast-growing global growth companies. Services are
not provided by the Deloitte Touche Tohmatsu Verein, and, for
regulatory and other reasons, certain member firms do not provide
services in all four professional areas.
Copyright 2008 Deloitte Consulting. All rights reserved.

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Presented by: S2S InfoTech

Enterprise resource planning (ERP) is business process

SAP is enterprise resource planning software developed by the German

Business Processes included in SAP ERP include Operations (Sales &

Customizing transports contains configuration and they are created when

The SAP MM module

This level represents an

Material Master Vendor master

Stock Non stock

Purchase Info Service Master

Material Master Tcodes: MM01/MM02/MM03

Vendor master Tcodes: XK01/XK02/XK03

The material master represents the central source

Some material data is valid for all

When editing material master data, you

From the initial screen, you go to two

You can change the standard screen

Some screens are not integrated in the

You create a record in the material

You can assign materials with the same

Various material types are provided in

You can use the valuation class to

You maintain the valuation class in the

In automatic account determination, the

Valuation of goods receipts depends on the

In Accounting, the vendor is

When creating a vendor master

Vendor master records

The vendor can have

Purchasing info records contain concise

A purchasing info record

In the standard system, the

You can maintain info records

In MM Purchasing, the term source of

The source list contains the allowed, preferred and/or

You can have the system automatically create a

Within the contract maintenance function,

A service master record contains a

You can assign a price to each service

This data can be obtained from various

There are several ways of

Prices stored in the

ME41 Create RFQ

Price comparison ME49 - Price comparison

Goods Receipt MIGO Goods Receipt /Reverse GRN

Purchase requisitions are internal

Vendor A Vendor B Vendor C

Steel 2 t 350/t 480/t 520/t 450/t

Purchase Piece Rejection

The movement type is a three-digit key used to

The movement type has important control

Contract/ Schedule Agreement

Delivery of the total quantity

Contract/Schedule ME31K /ME31L Create contract/ Schedule agreement

Order/Schedule Line ME23N Display PO

Goods Receipt MIGO Goods Receipt /Reverse GRN

MIR7 - Park Invoice

You can format complex service

Work that is not contained in the

The system stores services that have

The invoice verification

Purchase Order History Acceptance

ME41 Create RFQ