SAP IMPLEMENTATION PROJECT

1. EXECUTIVE SUMMARY 6

1.1 ABOUT REZAYAT GROUP 6

1.2 OBJECTIVE OF THIS REPORT 7
1.3 STRUCTURE OF THE DOCUMENT 7
1.4 MATERIAL MANAGEMENT SCOPE 7

2. ORGANIZATION 10

2.1 BUSINESS REQUIREMENT 10

2.2 ORGANIZATIONAL ELEMENTS 10
2.2.1 ORGANIZATIONAL STRUCTURE FOR REZAYAT 11

3. MASTER DATA 25

3.1 BUSINESS REQUIREMENT 25

3.2 MASTER DATA 25
3.2.1 MATERIAL MASTER DATA 27
3.2.2 SERVICE MASTER 33
3.2.3 VENDOR MASTER 36
3.2.4 PURCHASING MASTER DATA 40
3.2.5 VENDOR EVALUATION 43

4. BUSINESS PROCESSES FOR PROCUREMENT 49

4.1 BUSINESS REQUIREMENT 49

4.2 PROCUREMENT PROCESS 49
4.2.1 PURCHASE REQUISITION 51
4.2.2 REQUEST FOR QUOTATIONS (RFQ): 71
4.2.3 CONTRACT 78
4.2.4 PURCHASE ORDER 81
4.2.5 SERVICE ENTRY SHEET 92

5. INVENTORY MANAGEMENT 95

5.1 BUSINESS REQUIREMENT 95

5.2 INVENTORY MANAGEMENT 95
5.2.1 GOODS RECEIPT 98
5.2.2 MATERIAL RESERVATION 105
5.2.3 GOODS ISSUE 107
5.2.4 TRANSFER POSTING 111
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5.2.5 BATCH MANAGEMENT & SHELF LIFE EXPIRATION 116
5.2.6 PHYSICAL INVENTORY 118

6. INVOICE VERIFICATION 120

6.1 SCENARIO OVERVIEW 120

6.2 BUSINESS PROCESS OVERVIEW 120
6.3 BUSINESS PROCESS SOLUTION 120
6.4 CONFIGURATION CONSIDERATIONS 123
6.5 GAP ANALYSIS 123
6.6 AUTHORIZATION CONSIDERATIONS 123

7. REPORTS FOR PURCHASING 124

8. REPORTS FOR INVENTORY MANAGEMENT 128

9. DEVELOPMENTS 130

10. APPENDIX 134

10.1 LIST OF SYMBOLS 134

10.2 MATERIALS MANAGEMENT INTEGRATION WITH PROJECTS SYSTEMS (MATERIAL PROCUREMENT) 136
10.3 MATERIALS MANAGEMENT INTEGRATION WITH PROJECT SYSTEMS (SERVICE PROCUREMENT) 137
10.4 MATERIALS MANAGEMENT INTEGRATION WITH PLANT MAINTENANCE 138
10.5 FINANCE AND CONTROLLING INTEGRATION WITH MATERIALS MANAGEMENT 139
10.6 GLOSSARY 140

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1. Executive Summary

The Purpose of the Materials management Business Blueprint, which is the main deliverable of
Business Blueprint Phase, is to serve as conceptual master plan for materials management processes
for Rezayat Group.

This Blueprint has been developed by documenting all inputs gathered from the business team by
scheduling meetings and workshops with the business process owners, power users and core team
members from all the businesses of Rezayat Group as well as from cross modular meetings. This
document shows the business requirements for materials management in detail, and serves as the
basis for organization, configuration and development activities.

The following are summarized requirement of materials management processes mapped to SAP:

• Every business will have its own purchasing organization, purchasing groups ,plant & storage
locations mapped as per the processes
• All the procurement processes of stock, non stock & services are mapped
• Requisition approval, RFQ approval, purchase order & service entry sheet approval will be
configured
• Project stock will be visible as the stock assigned to the WBS
• Reorder point planning procedure will be used to plan the stock materials in the stores
• Intercompany Stock transfer of materials from one plant to another plant
• All goods receipts and issues will be mapped

1.1 About Rezayat group

Rezayat group has multiple holding and subsidiary companies at highest level and group companies,
divisions and projects at the lowest level. The major divisions under few companies are operationally
independent, having separate authority controls, document sequencing and management reporting

Every business in Rezayat group will have its own procurement team who will be responsible for all
the purchases for that business.

The procurement takes place across multiple countries, multiple locations, Rezayat is expecting to
consolidate the common spending across the group and Rezayat Group Central Sourcing team will
be supporting all the Rezayat company specific purchasing departments, in the sourcing process.

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1.2 Objective of this Report

During the course of this phase of the assignment, consultants held business process workshop for
the business team to discuss and deliberate the business requirements at the corporate level. The
objectives of the workshop were to discuss the materials management processes in detail. During
the workshops, the business team was acquainted with the capabilities and functionality of the SAP
solution.

Following issues were deliberated and discussed at length to define the requirements in detail:

1. Organization Structure for the respective business in SAP

2. All Purchasing processes
3. All inventory management processes
4. Current challenges and expectations / improvements

The purpose of this document

1. To agree on the design and related details at the corporate level

2. Confirm the understanding of the business processes and scenarios, which would form the
basis for system specifications
3. List requirements which cannot be addressed by the standard SAP system
4. Form the basis for all subsequent projects activities to be conducted

1.3 Structure of the Document

The document provides an overview of materials management processes at REZAYAT. This would
help in defining the boundaries of the module and also in identifying the activities to be performed
within Material Management module in SAP. Subsequently, the report discusses in detail, the
proposed coverage of SAP at REZAYAT, in terms of organizational entities and business processes.

The structure of the document as far as practicable addresses the expectations set forth.

1.4 Material Management Scope

The document provides an overview of Materials Management at Rezayat Group. This would help in
defining the boundaries of the module and also in identifying the activities to be performed within
Materials Management and other modules in SAP. Subsequently, the report discusses in detail, the
proposed coverage of SAP at Rezayat Group, in terms of organizational entities and business
processes. This document captures in detail the processes and the conditions associated to the
extent it has been discussed.

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Materials Management (MM) module is a component within the SAP that enables the optimization
of procurement process, ensures the accurate control of inventory and better management of
externally procured services. The processes are tightly integrated with other components.

In order to perform procurement activities and manage the inventory the following processes have
been identified:-

Master Data

Data that is stored in the database for long periods of time is referred to as master data. Master
data is the set of data which is commonly used across the entire organization and all business
processes. Master data is shared by different people for different purposes at the same time.
The following master data will be used in Materials Management.

• Material Master
• Vendor Master
• Service Master
• Source List
• Purchasing Info Record

Purchasing

Purchasing is a component of Materials Management (MM). Purchasing integrates with other

modules in the SAP System to ensure a constant flow of information. Purchasing component is
tightly integrated with the following modules like Controlling (CO), Financial Accounting (FI),
Sales and Distribution (SD), Project systems (PS), Plant Maintenance (PM), Quality Management
(QM), Production Planning (PP), Customer Service (CS).

The following purchasing documents will be used in Material Management.

• Purchase Requisition
• Request For Quotation
• Quotation Comparison
• Contract
• Purchase Order

External Services Management

External Services Management is integrated into the purchasing application within the
Materials Management module, and indicates the interfaces to other applications. MM External
Services Management is an application component within the Materials Management (MM)
module. It supports the complete cycle of bid invitation, award/order placement phase, and
acceptance of services, as well as the invoice verification process.

The following External Services documents will be used in Material Management.

• Service Entry Sheet

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Inventory Management

Inventory Management is a component of Materials Management. In inventory management

the stocks are managed not only on a quantity basis but also by value. The system automatically
updates Quantity and value for Inventory Management, Account assignment for cost
accounting and G/L accounts for financial accounting each time there is a goods movement. All
transactions that bring about a change in stock are entered in real time, as are the stock
updates resulting from these changes. You can obtain an overview of the current stock situation
of any given material at any time.

Inventory Management component of Material management deals with the following tasks:

• Management of material stocks on a quantity and value basis

• Management of Project stock

• Planning, Entry, and Documentation of all Goods Movements

• Carrying out the Physical Inventory.

Logistics Invoice Verification

This is the last part of the procurement cycle; the vendor invoice is verified and entered in the
system. When the invoice is posted, the invoice data is saved in the system. The system updates
the data saved in the invoice documents in Materials Management and Financial Accounting.

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2. Organization

2.1 Business Requirement

• To define Rezayat as organization units in SAP.

• Organizations setup – The divisions are working mostly independent of each other and have
their individual hierarchy indifferent from other divisions. In Rezayat divisions are working
like separate organizations under the different company code.
• Material cost – The plant (organizational unit) controls how the valuation of each material in
the system. If a material need to be costs differently in all organizational units, then a
separate plant is required for each organizational unit in the system.
• Authorization control – The standard application is set to control accessibility at plant level
i.e. user assigned to one plant will not be able to access data of another if the relevant rights
are not granted.
• To have a de-centralized as well as centralized procurement for all divisions of Rezayat.
2.2 Organizational Elements

The initial setting that enables the usage of the system starts with the definition of the
organizational structure within SAP system. This is to define how a company’s structure is mapped
and designed as organizational units in SAP system.

The organizational units significant for procurement & inventory management functions through
SAP MM module includes:

• Company Code

• Plant

• Storage Location

• Purchasing Organization

• Purchasing Group

This section contains the detailed explanation & mapping of organizational levels, significant for
Procurement & Inventory Management processes.

SAP Organizational definition and purpose:

Organizational
Definition & Purpose
Unit

Company Code Company Code is the central organizational unit of external accounting within
the SAP System. At least one company code has to be defined to implement the

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Organizational
Definition & Purpose
Unit

Financial Accounting component. The business transactions relevant for

Financial Accounting are entered, saved, and evaluated at company code level.
A company code is used to represent a separate legal entity. Company Codes
are defined in FI Module and MM Module use these organizational units.

In SAP, the plant refers to an operational unit within a company code, which
Plant
plays an important role in material valuation, inventory management, project
management, costing, sales, production and plant maintenance. It can be a
facility where either material is procured, managed, sold or goods and services
are provided. Several Plants can be assigned to a company code

Storage Location A storage location is the place where stock is physically kept within a plant.
Stocks are managed only on a quantity basis and not on a value basis at storage
location level. Physical inventories are carried out at storage location level.
Storage locations are always created for a plant.

Purchasing In SAP a Purchase Organization is an organizational unit within logistics, which is

used to handle purchasing process. The form of procurement is defined by the
Organization
assignment of purchasing organizations to company codes and plants.

Purchase Organization can be created Group wide to procure for all the
company codes belonging to a client.

Purchasing A purchasing group is a buyer or a group of buyers, which communicates with

Groups the vendor and responsible for day-to-day buying activities.

The purchasing group is internally responsible for the procurement of a material

or an external service. This organization will help in reporting purposes.

Following is organizational structure for each company code in diagrams -

2.2.1 Organizational Structure for Rezayat

Organizational Structure for Company code 1001 - RCIC KSA Head Office

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Organizational Structure for Company code 1002 - RTCL KSA Head Office

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Organization Structure for Company code 1003 - RTCL KSA Catering

Company Code
1003 - RTCL KSA – Catering

Plant Purchasing Org Central Sourcing

1003 - RTCL KSA - Catering 1003 - RTCL KSA - Catering 1000

Storage Location
S001

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Organizational Structure for Company code 1004 - RTCL KSA Commercial

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Organizational Structure for Company code 1005 - RTCL KSA - IT and Communications

Organizational Structure for Company code 1006 - RTCL KSA Travel and Tourism

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Organizational Structure for Company code 1011 - NCC KSA Head Office

Company Code
1011 - NCC KSA - Head Office

Plant Purchasing Org. Central Sourcing

1011 - NCC KSA - Head Office 1001- Central Procurement 1000

Storage Location
S001

Organizational Structure for Company code 1012 - NCC KSA - PPD

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Organizational Structure for Company code 1013 - NCC KSA - T&D

Organizational Structure for Company code 1014 - NCC KSA - CD

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Organizational Structure for Company Code 1040 - RCL KSA Maintenance

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Organizational Structure for Company code 1041 - RCL KSA Construction

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Organizational Structure for Company code 1043 - RCL KSA - Electromechanical

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Organizational Structure for Company code 1044 - Crescent Transportation Co Ltd - KSA

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Organizational Structure for Company code 1046 - Saudi Arabian Fabricated Metals Ind Ltd (SAFAMI)

Organizational Structure for Company code 1078 - PROLOG - Project Logistics - KSA

Company Code
1078 - PROLOG - Project Logistics - KSA

Plant Purchasing Org Central Sourcing

1078 - PROLOG - Project Logistics - KSA 1078 - PROLOG - Project Logistics - KSA 1000

Storage Location
S001

Warehouse
Number
100

Storage Type 101 Storage Type 102

– Consumable - Spares

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2.2.1.1 Purchasing Groups:

The purchasing organization is further subdivided into purchasing groups (buyer groups), which are
responsible for day-to-day buying activities. A purchasing group is an entity, which communicates
with the vendor.
The purchasing group is internally responsible for the procurement of a material or an external
service and as a rule the principal channel for a company's dealings with its vendors.
Following purchasing groups will be used in Rezayat:

Following table shows the list of the purchasing groups required for companies which are covered in
the first phase of implementation.
SAP
Purchasing
Co Purchase Purchase Organization Purchasing Group
Name of Company Code Group
Code Organization Description Description
Code
#
1001 RCIC KSA - Head Office 1001 Central Procurement 201 Central Procurement
1002 RTCL KSA - Head Office 1001 Central Procurement 201 Central Procurement
202 RTCL -Catering -Food
203 RTCL Kitchen Equipment
1003 RTCL KSA - Catering 1003 RTCL KSA - Catering 204 RTCL – Maintenance
205 RTCL - Imported Foods
206 RTCL- General
RTCL- Commercial-
207
Railways
RTCL- Commercial -
208
Military
RTCL- Commercial –
209
Engineering
RTCL-Commercial-
210
Industrial Supplies
211 RTCL-Commercial-HVAC
1004 RTCL KSA - Commercial 1004 RTCL KSA - Commercial
RTCL-Commercial-
212
Valves& Pumps
213 RTCL-Commercial-E&I
RTCL-Commercial -
214
Waste Water Treatment
RTCL-Commercial -
215
Oil & Gas
RTCL-Commercial-
216
Business Development
1005 RTCL KSA - IT & Communications 1005 RTCL - IT & Communications 217 IT Purchase group
1011 NCC KSA - Head Office 1001 Central Procurement 201 Central Procurement
222 NCC-PPD-Mechanical
223 NCC-PPD-Electrical
1012 NCC KSA - PPD 1012 NCC KSA - PPD 224 NCC-PPD-Civil
225 NCC-PPD-General
226 NCC-PPD-Instrument
NCC-T&D-KSA Sub
227
stations
1013 NCC KSA - T&D 1013 NCC KSA - T&D NCC-T&D-KSA
228
Transmission Lines
229 NCC-T&D-KSA General
1014 NCC KSA - CD 1014 NCC KSA - CD 230 NCC KSA Consumables

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SAP
Purchasing
Co Purchase Purchase Organization Purchasing Group
Name of Company Code Group
Code Organization Description Description
Code
#
231 NCC KSA - CD Tool

232 NCC KSA - CD Asset

233 NCC KSA - CD Projects

1039 RCL KSA - Head Office 1001 Central Procurement 201 Central Procurement
251 RCL MD Maintenance
252 RCL MD Office Supplies
1040 RCL KSA - Maintenance 1040 RCL KSA - Maintenance
253 RCL MD Garage
254 RCL MD Service contract
255 RCL CD - Yanbu
1041 RCL KSA - Construction 1041 RCL KSA - Construction
256 RCL CD - Jubail
230 NCC KSA Consumables

RCL KSA - Electro 231 NCC KSA - CD Tool

1043 RCL KSA - Electro Mechanical 1043
Mechanical 232 NCC KSA - CD Asset
233 NCC KSA - CD Projects
258 CTC KSA Capex

Crescent Transportation Co Ltd - Crescent Transportation - 259 CTC KSA Spares

1044 1044
KSA KSA 260 CTC KSA Services
261 CTC KSA Operations

Saudi Arabian Fabricated Metals Ind Saudi Arabian Fabricated 263 SAFAMI- Projects
1046 1046
Ltd - [ SAFAMI ] Metals Ind - [ SAFAMI ] 264 SAFAMI-Consumables
PROLOG - Project Logistics - PROLOG-KSA–Project
1078 PROLOG - Project Logistics - KSA 1078 284
KSA Logistics

Following table shows the list of the purchasing groups required for companies which are covered in
the second phase of implementation. These purchasing groups may find generic as of now but will
be configured specific as per business requirement in future.
SAP
Purchasing
Co Purchase Purchase Organization Purchasing Group
Name of Company Code Group
Code Organization Description Description
Code
#
1006 RTCL KSA - Travel And Tourism 1001 Central Procurement 201 Central Procurement
1007 RTCL KSA - Automotive 1007 RTCL - Automotive 218 Automotive Purchase
1008 RTCL KSA - Power Rental 1008 RTCL KSA - Power Rental 219 Aggreko Purchase
Crescent Transportation Co Ltd - Crescent Transportation -
1045 1045 262 CTC UAE
UAE UAE

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3. Master Data

3.1 Business Requirement

Following business requirements have been considered which are addressed by the standard
features of SAP Master Data:
• Unique Material Codification to identify the material

• Material description to be maintained in English & Arabic

• Centralized repository of master records which should be accessible to different

departments throughout the organization

• Should be free from duplications, errors and contain consolidated information for business
activities

• Unique source of information used by different business functions to integrate their

business activities

• Classification of materials, vendors & services according to their usage, characteristics and
processing

• Efficient source of information for purchaser for reducing the processing time of purchasing
requirements into purchase orders

3.2 Master Data

Master data are centralized records of objects which are accessed repeatedly during business
processing events and transactions postings in SAP. The business process activities that are carried
out in SAP are called Transactions. Every transaction makes use of Master Data. During transaction
processing the system accesses master records and the data stored in them. The processed data
(Transaction Data) forms the basis of reports in Logistics Information System. Master data in SAP is
not limited to a specific business function / module; rather it is used throughout the system for
different business functions & modules.

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For procurement & inventory management processes through SAP Materials Management following
master data is used:

• Material Master
• Service Master
• Vendor Master

This master data is not limited to procurement and inventory management functions only, but it can
be accessed and processed by other concerned functions / departments.

In addition to the above, SAP provides two additional master records which are specific to
procurement functions. These functions are:
• Info. Record
• Source List

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3.2.1 Material Master Data

In SAP, material master is a centrally shared data used by all SAP modules. Information captured in
the material master record can be descriptive or can have functional control depending on usage.

In Rezayat, materials that are used for projects, production, maintenance as well as sales and
marketing processes will be created as material master in the system.

3.2.1.1 Description, Significance and Dependencies

The material master contains descriptions of the materials a company procures, produces, and
stores. The material master is the central repository of material information for the enterprise. The
integration of all material data in a single database eliminates redundant data. The data stored in
the material master is used by Inventory Management, as well as by other components such as
Purchasing, Materials Planning and Invoice Verification.

3.2.1.2 Design of Material Master

Material Master Characteristic To be Design
Material Number Will be unique across the group

Material Codification Uniform across all plants in group

Numbering Internal numbers will be generated

Material Description Standardized across the group for all the materials. Below is the
formulation:
• Main Description
• Property
• Material
• Size
• Unit of dimensions
Ex: Conduit flexible metal 21.5 IN

Material Type Configured, taking into consideration materials used across the
group
Material Group CPV code will be configured for material group

3.2.1.3 Material Type

Definition:

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Materials with the same basic attributes are grouped together and assigned to a material type. This
allows business to manage different materials in a uniform manner in accordance with company's
requirements.

Use:

Material Type has the following attributes:

• Whether the material number can be assigned internally or externally

• The number range from which the material number is taken

• Which screens appear and in what sequence

• Together with the plant, the material type determines the material's inventory management
requirement; that is:
o Whether changes in quantity are updated in the material master record.
o Whether changes in value are also updated in the stock accounts in
Financial Accounting

• In addition, the GL accounts affected by any material movement in the inventory depend on
the material type

To be Structure:
Material types are configured in SAP based on the requirement from each and every company of the
Rezayat group considering the processes involved across all modules.

The following material type will be configured based on the materials used across the group.

SAP SAP Number ranges

Material Material SAP Description
Type From To
Agricultural, farming,
Agri/Farm/Fish/Forest
fishing, forestry and 1003 1000000000 1099999999
related products
Petroleum products,
Petro/Fuel/Elec/Othr Sour
fuel, electricity and 1009 1100000000 1199999999
other sources of energy
Mining, basic metals
1014 Mining/Metal/Related Prod 1400000000 1499999999
and related products

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SAP SAP Number ranges

Material Material SAP Description
Type From To
Food, beverages,
Food/Bev/Tab/Related Prod
tobacco and related 1015 1500000000 1599999999
products
Agricultural machinery
1016 Agricultural Machinery 1600000000 1699999999
Clothing, footwear,
Cloth/Footwear/Lugg/Acces
luggage articles and 1018 1800000000 1899999999
accessories
Leather and textile
Leath/Textil/Plastic/Rubb
fabrics, plastic and 1019 1900000000 1999999999
rubber materials
Printed matter and
1022 Printed Matter/Relat Prod 2200000000 2299999999
related products
Chemical products
1024 Chemical Product 2400000000 2499999999
Office and computing
machinery, equipment
and supplies except 1030 Office Equipment & Supply 3000000000 3099999999
furniture and software
packages
Electrical machinery,
apparatus, equipment
1031 3100000000 3199999999
and consumables; Elect Machine/Equip/Consu
lighting
Radio, television,
communication,
telecommunication and 1032 Radio/TV/TeleCom Equipmnt 3200000000 3299999999
related equipment
Medical equipments,
Medical Equip/Pharma Prod
pharmaceuticals and 1033 3300000000 3399999999
personal care products
Transport equipment
Transport Equipment
and auxiliary products 1034 3400000000 3499999999
to transportation
Security, fire-fighting,
Security/Fire/Defen Equip
police and defense 1035 3500000000 3599999999
equipment
Musical instruments,
sport goods, games,
toys, handicraft, art 1037 Music/Sport/Game/Toys 3700000000 3799999999
materials and
accessories
Laboratory, optical and
Lab/Opticl/Precision Euip
precision equipments 1038 3800000000 3899999999
(excl. glasses)

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SAP SAP Number ranges

Material Material SAP Description
Type From To
Furniture (incl. office
furniture), furnishings,
domestic appliances 1039 Furniture & Appliances 3900000000 3999999999
(excl. lighting) and
cleaning products
Collected and purified
1041 Collectd & Purified Water 4100000000 4199999999
water

Industrial machinery 1042 Industrial Machinery 4200000000 4299999999

Machinery for mining,
Machine/Mine/Quarry/Const
quarrying, construction 1043 4300000000 4399999999
equipment
Construction structures
and materials; auxiliary
products to 1044 Const Struc/Auxiliary Pro 4400000000 4499999999
construction (except
electric apparatus)
Software package and
1048 Software & IT 4800000000 4899999999
information systems

All services 1050 Services 5000000000 5099999999

3.2.1.4 Material Group

Definition:

Materials can further be grouped together according to the same features using material groups.

In SAP, the material group can be defined up to a maximum of nine-digit alphanumeric key. Each
material must be assigned to exactly one material group for identification.

Use:
• Facilitates the scope of analyses of stock, purchases, inventory turnover and etc.
• Search specifically for material master records via Search helps
• Group together materials

To be Structure:

CPV (Common Procurement Vocabulary) code is international standard of material classification and
has been developed by the European Union specifically for public procurement.

Rezayat has decided to use CPV (Common Procurement Vocabulary) with built in logic for material
classification using the material group in SAP.

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The material group is a maximum of nine characters alphanumeric key. The first eight characters of
the material group will be the CPV code up to the category level. The below example explains the
CPV coding and hierarchy.

Divisi Material
Group Class Category CPV Code Description
on Group

31 31000000 310000000 Electrical machinery, apparatus,

equipment and consumables; lighting

312 31200000 312000000 Electricity distribution and control

apparatus
3121 31213 31213000 312130000 Distribution equipment
31213100 312131000 Distribution boxes
31213200 312132000 Distribution transformers
Distribution transformer
31213200 312132001
33kv/380v/300kva
Distribution transformer
31213200 312132002
33kv/380v/500kva
Distribution transformer
31213200 312132003
33kv/380v/1500kva
Distribution transformer
31213200 312132004
33kv/380v/1600kva

3.2.1.5 Gap Analysis

• Rezayat has requirement that when material will be created by BU Procurement, initially it
will be blocked for use. Central master data team will check the material master and release
it for use. For this requirement development is required. (Gap Code: RZ_GP_01)
• Rezayat has requirement that once material code is validated and released by central master
data team automatic e-mail notification to be sent to material creator for information that
material is validated and released. This process is not possible in standard SAP;
customization is required for this requirement. ( Gap Code : RZ_GP_02 )
• Rezayat has requirement to trigger notification to manager if user changes MRP related data
in material master. This functionality is not available in standard SAP; customization is
required for this requirement. ( Gap Code : RZ_GP_03 )

3.2.1.6 Material Master Data Maintenance in Rezayat

• Material group will be centrally configured. All the required CPV codes will be available
based on the current materials across the group. If in future any new grouping is required
then the IT core team will configure the material groups.
• While creating the material master the relevant material group has to be assigned to it.
• Requester of individual BU will communicate the requirement of creation of material master
to BU procurement by filling the standard material master template.

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• Material master will be created by the individual business unit procurement department as
well as central sourcing and once created it will get blocked.
• The central team will then check the material and release the block for the material to be
used.
• Once the item is validated and unblocked by the designated central team, the creator of the
item will not be allowed to either edit or delete the item from the database.

3.2.1.7 Authorization Consideration

A centralized Master Data Management Team (CDMT) will be responsible for maintaining and
validating the Material Master Records for all plants. If business unit procurement will have a
requirement of new material master record creation or receive request from user then they can
create it themselves, for any changes in the existing material master, a formal request will have to
be initiated. Extension of existing material code from one plant to other plant will be done by
individual Business Unit procurement. The person responsible for material master data maintenance
in CDMT shall check for the duplications and errors before creating/ changing a new master record.
As the new material is created / modified, CDMT will inform the requester with the SAP Material
Master Number. The CDMT will only have a change or validate authorization of material master.
They will not be able to create any material.

Transaction
Activity Role Org Element
Codes

Designated user in BU procurement All Rezayat

Creation MM01
/ Central sourcing user companies

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Transaction
Activity Role Org Element
Codes

Only Change Central Data Management Team Group Purchasing MM02

Only Display MM Common Role Plant MM03 & MM60

The role ‘Central Data Management Team (CDMT)’ is a new concept in Rezayat as currently no such
central level activity is being performed for master data management. The Central Data
Management Team (CDMT) should be preferably from central group purchasing.

Since the master data management will be centralized and the BU will be sending the requirements
for maintenance of master data to CDMT, the team should have close contact with different BU. This
will ensure the correct understanding of requirements and liaison between the activities. MM
Common Role will be used for the MM users who will only have display to material master.

* Note: Material Master Data Fields are added as the Addendum File.

3.2.2 Service Master

The service master contains information about all the services that a company procures. It is the
company's central source for retrieving service-specific data. This information is stored in individual
service master records.

3.2.2.1 Description, Significance and Dependencies

In Rezayat service master will be required for any service procurement. Service master is a better
way in SAP to pass the true information of the service required so it is recommended that service
master should be created for all service procurement.

3.2.2.2 Design Considerations:

Service Categories

Services / works with the same basic attributes are grouped together and assigned to a Service
Category. This allows business to manage different services/ works in a uniform manner in
accordance with company's requirements.

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Numbering for Service Master will be according to the service category and it will be internally
generate by the system.

Following are service Category finalized for Rezayat.

Service
Category Description as service category description
2050 Repair and maintenance services
2051 Installation services (except software)
2055 Hotel, restaurant and retail trade services
2060 Transport services (excl. Waste transport)
2063 Supporting and auxiliary transport services; travel agencies services
2064 Postal and telecommunications services
2065 Public utilities
2066 Financial and insurance services
2070 Real estate services
2071 Architectural, construction, engineering and inspection services
2072 IT services: consulting, software development, Internet and support
2073 Research and development services and related consultancy services
2075 Administration, defense and social security services
2076 Services related to the oil and gas industry
2077 Agricultural, forestry, horticultural, aqua cultural and apicultural services
2079 Business services: law, marketing, consulting, recruitment, printing and security
2080 Education and training services
2085 Health and social work services
2090 Sewage, refuse, cleaning and environmental services
2092 Recreational, cultural and sporting services
2098 Other community, social and personal services
1000 Bill of services for Rezayat

3.2.2.2.1 Gap Analysis

• Rezayat has requirement that when service code will be created by BU Procurement, initially
it will be blocked for use. Central master data team will check the service code and release it
for use. For this requirement development is required. (Gap Code: RZ_GP_04)
• Rezayat has requirement that once service code is validated and released by central master
data team automatic e-mail notification to be sent to material creator for information that
service code is validated and released. This process is not possible in standard SAP;
customization is required for this requirement. ( Gap Code : RZ_GP_05 )

3.2.2.2.2 Service Master Data Maintenance in Rezayat

• Service master will be created for frequently used services since in case of contracting
business service master will have many verities.

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• If there are many variations in service procurement, service text can be used rather than
creating service master every time.
• In Rezayat, creation and maintenance of service Master Records in SAP will be the
responsibility of respective business procurement or in some cases central sourcing.
• Requester of any BU or central sourcing will identify the requirement of creation of service
master. Requisitioner will first check the service code availability in SAP.
• If service code is not available in SAP, requester will request BU procurement to create
service master by providing the data in template for service master. Apart from the BU
procurement user, central sourcing will also have access to create service master. In case
required central sourcing user can also create service master.
• BU procurement will create the service master as per the template received from requester.
• On creation of service master, it will be blocked for the use. Central sourcing team will
validate the service master created and release it.
• Also, it will ensure that the master records are free from any duplication & errors.
Whenever there is a need to create / update a Service master record, the respective
business will create the masters.

A centralized Master Data Management Team (CDMT) will be responsible for maintaining and
validating the service Master Records for all plants. If any business unit will have a requirement of
new service master record creation in the system they can create it themselves, for any changes in
the existing service master, a formal request will have to be initiated. The personnel responsible for
service master data maintenance in CDMT shall check for the duplications and errors at the time of
validating of new service master. As the new service master is created / modified, CDMT will inform

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the requester with the SAP service Master Number. The CDMT will only have a change authorization
of service master. They will not be able to create any service.

3.2.2.2.3 Authorization Considerations

Activity Role Org Elements Transaction Codes

Business Procurement All Business

Creation
/ Central sourcing user Purchasing AC01

Organization

change by central data

Only Change Group Purchasing AC02
management team
Only Display Rezayat Purchasing
Purchasing officer AC03
Organization

3.2.3 Vendor Master

The vendor master database contains information about the vendors that supply an enterprise.
This information is stored in individual vendor master records. Vendor master records contain
important data on your vendors. You can also store data in the vendor master record that
applies to certain specific organizational levels (e.g. company code, purchasing organization,
plant) within your enterprise.

3.2.3.1 Description, Significance and Dependencies

As the Accounting and Purchasing have different information needs, each is presented with a
different view of the vendor master file. In the Accounting view, the accountant has access to
the general and accounting data, and in the Purchasing view the purchasing agent has access to
the general data and the purchasing data.
The data in the vendor master record is subdivided into the following categories:
• General Data :
General data is the data that applies to all company codes within the client. It includes such
information as address, phone number, and the language spoken by the vendor.
• Purchasing Data :
Purchasing data is maintained for each purchasing organization. It includes the purchase order
currency, Inco-terms, terms of delivery, contact persons and various control data pertaining to
the vendor.
• Accounting Data:

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Accounting data is maintained at company code level. It includes accounting specific information
such as the number of the reconciliation account and the payment methods for automatic
payment transactions.

3.2.3.2 Design Considerations

Currently, there is a common database to store all supplier records for business. The vendor master
database contains information about the vendors that supply material or services to Rezayat. This
information is stored in individual vendor master records.

Rezayat requires Vendor Pre Qualification for adding a vendor as approved vendor in SAP but this
functionality is not available in SAP. So Rezayat can create vendor which will be blocked initially by
SAP. On approval users can use vendor.

3.2.3.3 Vendor Account Group for Vendors

The account group is a classifying feature within vendor master records, account group determines:

• The number interval for the account number of the vendor.

• Which specification is necessary and/or possible in the vendor master, like the fields that are
mandatory or optional
When creating a vendor master record, Business user must decide which account group business is
going to assign to this supplier. The account group has control functions.

Following table and description gives details of vendor account groups to as per their
purpose

Vendor Account groups for purchasing purpose -

Account Group Description From number To number

1000 Local 10000000 19999999
2000 Import 20000000 29999999
3000 Intercompany External Number Range External Number Range
4000 One time 50000000 59999999
• 1000 - Local Vendor
Local vendors who supply material or services to Rezayat will be created under this account
group.
• 2000 - Import Vendor
International vendors who supply materials or service to Rezayat will be created under this account
group.
• 3000 - Intercompany
Companies in Rezayat group who supply material or service to other group companies will be
created as vendor in this account group.
• 4000 - One time
Any one time material or service supplier will be created under this account group.

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Vendor Account groups for financial purpose -

Account Group Description From number To number

5000 Other Expense 60000000 69999999
6000 Employee External Number Range External Number Range
• 5000 - Other Expense
Vendors for which only financial transactions will be posted; those vendors will be created in this
account group.
• 6000 - Employee
All employees in Rezayat will be created as vendor in this account group for tracking of advances or
settlement purpose.
Vendor Account group for Manufacturers -

Account Group Description From number To number

7000 Manufacturer 40000000 49999999
• 7000 - Manufacturer
Actual manufacturer of material will be created as vendor in this account group since it is required to
specify manufacturer code in material master for identifying brand of material.

3.2.3.4 Gap Analysis

• Rezayat has requirement that when Vendor code will be created by BU Procurement,
initially it will be blocked for use. Group purchasing will first validate the vendor data and
release. Secondly Group Internal Audit will validate the data and release. After Internal Audit
release Group finance will check the vendor data and release the vendor for use. For this
requirement development is required. (Gap Code: RZ_GP_06)

• Rezayat has requirement to enter vendor category, vendor credit limit, vendor tier and
agencies who have approved vendor (ARAMCO / SABIC / SEC) in vendor master. These fields
will be entered for information only. Standard SAP does not have functionality to enter
these fields. Development is required for this requirement. ( Gap code : RZ_GP_07 )

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3.2.3.5 Vendor Master Maintenance

• Whenever there is a need to create / update a vendor master record by the business unit or
central sourcing they will start the vendor enrollment process.
• New Vendor enrollment eligibility (Vendor Pre Qualification) process has to be handled out
of SAP.
• All the documents related to the vendor will be scanned and uploaded in the document
management system and linked to the respective vendor master.

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• Once the data is collected the vendor master is created in SAP by the respective business
unit users. User will enter cpv code of materials supplied by vendor and vendor category ( i.e
trading or manufacturer).Vendor classification will be used to enter these details. As soon as
the vendor is created it will be blocked for use until it is validated.
• The validation and release of the vendor master will follow through a series of release
starting with group purchasing, then the group internal audit department and last by the
group finance. Only after it is validated and approved by all the three departments will the
vendor code be used.

3.2.3.6 Authorization Considerations

Activity Role Org Element Transaction Codes

Designated Business
Creation Purchasing
User / Central sourcing XK01
Organization
user

Group Purchasing,
Only Central Data
Group Internal Audit, XK02 & MKVZ
Validation/Change Management Team
Group Finance

BU Purchasing
Only Display Procurement Officer XK03 & MKVZ
Organization

The role ‘Central Data Management Team (CDMT)’ in Rezayat is part of central level activity being
performed for master data management. The CDMT will only have change authorization for the
vendor master. They will not be able to create any vendors.

Since the master data management will be centralized and the departments will be sending the
requirements for maintenance of master data to CDMT, the team should have close contact with
different departments. This will ensure the correct understanding of requirements and liaison
between the activities

3.2.4 Purchasing Master Data

In addition to vendor and material master data, Purchasing is supported in its everyday work by the
following additional types of master data:

• Purchasing Info record

• Source List
• Conditions

Purchasing Info Record

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The Info Record in SAP is a purchasing specific master data that is based upon Vendor-Material
relationship. Purchasing info record contains all vendor specific purchasing conditions for a material.
This includes price, terms of payments, planned delivery time etc.

3.2.4.1 Description, Significance and Dependencies

Info record is short for Information record. The info record contains concise information about a
supplier and a material that Rezayat already procure from that supplier.

An info record thus represents a material-supplier relationship. For example, the info record
indicates the units of measure in which materials are ordered from the supplier, and the applicable
reminder levels. It also shows price changes made by the supplier for the material. This information
can be useful in the process of evaluating quotations to determine the successful bidder.

3.2.4.2 Design Considerations

The purchasing info record is an important source of information for the buyer. When Rezayat
creates the purchasing documents, the data from the info record is copied into the document as
default values (When Rezayat orders a material the Info records are created automatically).

Rezayat can also use the list displays for the info records to determine which supplier/subcontractor
offers a required material/service or which materials can be procured from a particular
supplier/subcontractor and conditions like price, payment terms and etc.

When Rezayat creates an info record, data is pulled from the material and vendor master records
and inserted in the info record as default values.

The info record also allows buyers to quickly determine;

• Which materials have been previously offered or supplied by a specific supplier
• Which suppliers have offered or supplied a specific material.

The info record also contains information data such as:

• Current prices, future prices and pricing conditions (for example, freight and discounts).
• The number of the last purchase order.
• Tolerance limits for over deliveries and under deliveries.
• The planned delivery time (lead time required by the supplier to deliver the material).
• Vendor evaluation data.
• An indicator as to whether the supplier counts as the regular supplier for the material.
• The supplier sub-range to which the material belongs.
• The availability period during which the supplier can supply the material.
• Texts.

In Rezayat there are two types of info record:

• Info records with a material master record (e.g. for stock material). This type of info record
represents the relationship between a material and a supplier/subcontractor.

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• Info records without a material master record (e.g. for consumable materials).This type of
info record represents the relationship between a material or service (for which no master
record exists) and a supplier/subcontractor.

If a purchasing info record exists for the requested material, it will serve as a possible source of
supply. The prices and conditions in the info record are suggested during creation of a requisition.
In purchase requisition creation, user will enter the material and create purchase requisition. BU
procurement will then click on the 'source of supply' button. This will pull the info record (This is
data for material-vendor combination details) and the contracts if it exist in the system. BU
procurement will choose the best option among them.

The system automatically updates the required information for the materials requested in the
purchase requisition.

Following process will be used for the creation of info record.

• Group purchasing will consolidate the common spending across the group.
• Central sourcing will get the details like Vendor Name, material code , price , standard
quantity , minimum quantity , planned delivery time , payment terms etc
• Central sourcing will check for availability of material code in SAP. If material code does not
exist it will be created by following business process number RZ_MM_MD_01.
• If material code exists, central sourcing will check for the vendor code availability in SAP. If
vendor code does not exist it will be created by following business process number
RZ_MM_MD_02.
• Once material code and vendor code is available in SAP, central sourcing will create
purchasing info record.

3.2.4.3 Authorizations Considerations

Since info records are purely related to purchasing functions therefore maintenance of info records
will be within the procurement department.

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Activity Role Org Elements Transaction Codes
Creation / Change Central sourcing team Central Purchasing Org ME11 / ME12

Source List

The Source List in SAP forms the basis of optimized purchasing. It contains the pre-selected sources
of supplies for a material that can be picked-up automatically during Source Determination activities
through purchasing transactions.

3.2.4.4 Description, Significance and Dependencies

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 supplier or under a long-
term agreement.

3.2.4.5 Design Considerations

In Rezayat, Source Lists will be used for such vendors which have been selected to supply a material
for a certain period so that whenever a purchase requirement arise from the projects, maintenance
and general consumption, it will be processed into purchase orders in less time. Alternatively, when
a certain supplier/contractor will be black listed for supplying a specific material in a division, it will
be blocked in the source list by this automatically vendor is blocked for all transactions in Rezayat.

Rezayat can use the source list to administer their sources of supply. The source list contains a list of
sources for a material in a particular plant and for particular time periods. Each source is defined by
a source list record. The source list has the following purposes:

• Restricting the selection of sources during source determination process

• Defining source as fixed source.
• Blocking source.

3.2.4.6 Authorizations Considerations

Since source list maintenance purely related to purchasing functions therefore maintenance of info
records will be within the procurement department.

Activity Role Org Elements Transaction Codes

Creation / Change Central sourcing team Central Purchasing Org ME01 / ME02 / ME03

3.2.5 Vendor Evaluation

The Vendor Evaluation component helps Rezayat to select sources of supply and facilitates continues
monitoring of existing supply relationships. It provides Rezayat group with accurate information on
prices, and terms of payment and delivery. By evaluating vendors, Rezayat group can improve its
enterprise's competitiveness.
On the basis of detailed information, and in collaboration with the relevant vendors, Rezayat can
quickly identify and resolve any procurement problems that may crop up from time to time.

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3.2.5.1 Description, Significance and Dependencies
Vendor Evaluation is completely integrated into the MM Purchasing component within Materials
Management. Delivery dates, prices, and quantities can be taken from purchase orders. Quality data
are taken from Quality Management Module. Rezayat can determine and compare the performance
of suppliers and subcontractors by reference to their overall scores.

3.2.5.2 Design Considerations

In Rezayat standard vendor evaluation will be implemented. Vendor evaluation will be done on the
criteria's such as Price, Quality, Delivery and Service.
The standard SAP System offers you a scoring range from 1 to 100 points, which is used to measure
the performance of your vendors on the basis of five main criteria. You can determine and compare
the performance of your vendors by reference to their overall scores.
The main criteria available in the standard system are:
• Price
• Quality
• Delivery
• General service/support
These four main criteria serve as a basis for evaluating vendors from whom you procure materials.
• External service provision
This main criterion serves as a basis for evaluating those vendors you employ as external service
providers.
All above said main criteria are further divided in sub criteria as follows -

Sr No Main Criteria Sub-criteria

1 Price Price level

Price history

2 Quality Goods receipt

Quality audit

Complaints/rejection level

3 Delivery On-time delivery performance

Quantity reliability

Compliance with shipping instructions

Confirmation date

Following diagram shows the how system calculates score for vendor

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In the above diagram total score represents the general evaluation of a vendor. It is a combination of
the scores the vendor has achieved for all the main criteria. The system calculates a score for the
relevant main criterion based on the scores a vendor receives for the various sub criteria
Following are the scoring methods available in SAP.

Scoring method Description

Fully automatically Scores are calculated by the system on the basis of existing data.

You enter individual scores for important materials, or for the quality and
Semi-automatically time lines of a service performed, yourself. The system then calculates
Higher-level score from these.

Manually You enter a blanket score for a sub criterion per vendor.

Rezayat will use fully automatic and semi automatic scoring method.

Price Level
This subcriterion compares relationship of a vendor's price to the market price. If the vendor's price
is lower than the market price, he/she receives a good score; if it is higher than the market price
he/she is assigned a poor score.

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On the basis of the subcriterion Price Level you can compare a vendor's price to the current market
price at a certain point in time.

Price History
This subcriterion compares the development of the vendor's price with the market price. On the
basis of the subcriterion Price History, you can determine whether the vendor's price has increased
or decreased over a certain period in comparison with changes in the market price over the same
period.

Goods Receipt
This subcriterion is used to evaluate the quality of the material that the vendor delivers. Quality
inspection takes place at the time of goods receipt.

Quality Audit
This subcriterion is used to evaluate the quality assurance system used by a company in
manufacturing products.
Complaints/Rejection Level
This subcriterion is used to evaluate whether the materials delivered by the vendor are regularly
found to be faulty subsequent to incoming inspection (for example, on the shop-floor) leading to
additional expense and loss of time (due to loss of production, reworking etc.).
The score (QM key quality figure) is calculated in QM Quality Management and the data passed on
to MM Vendor Evaluation. This key quality figure is converted for use in the Vendor Evaluation
scoring system.
On-Time Delivery Performance
This subcriterion is used to determine how precisely a vendor has adhered to the specified delivery
dates.
Quantity Reliability
This subcriterion is used to determine whether a vendor has delivered the quantity specified in the
purchase order.
Compliance With Shipping Instructions
This subcriterion is used to determine how precisely a vendor complies with your instructions for the
shipping or packing of a material.
Confirmation Date
This subcriterion is used to determine whether a vendor adheres to a previously confirmed delivery
date (that is, whether the goods are actually received on the date previously confirmed by the
vendor).

Calculating Overall Score/Scores for Main Criteria

For each automatic subcriterion in the SAP Standard System there is a specific pre-defined scoring
method. These methods cannot be changed by the user.

This section describes how the Vendor Evaluation system calculates a vendor's overall score and the
scores for the main criteria

Calculating the Overall Score

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The system derives the overall score from the scores for the various main criteria, taking the
weighting factors assigned by Purchasing in the system settings for each main criterion into account.
The following example explains this process:
Example
The table below shows the scores for a vendor and their weighting factors:
Main criterion Score Weighting factor
Price 70 40
Quality 85 25
Delivery 50 10
General service/support 50 5
Converting Weighting Factors into Percentages
To make the weighting factors clearer to the user, the system converts them into percentages.
1. The system adds the factors together and equates the total with 100 %:
2. 40 + 25 + 10 + 5 = 80 equals 100 %
3. To express the individual weighting factors as percentages of 100%, the system first divides
100% by the sum of the weighting factors:
4. 100 / 80 = 1.25 %
5. Then the system multiplies the weighting factors the buyer assigned to the main criteria by
this figure:
6. 40 x 1.25 = 50.00 %
25 x 1.25 = 31.25 %
10 x 1.25 = 12.50 %
5 x 1.25 = 6.25 %
7. The following table shows the results as a percentage of the overall score:
Main criterion Score Percentage of overall score
Price 70 50.00 %
Quality 85 31.25 %
Delivery 50 12.50 %
General service/support 50 6.25 %
However, internally, the system uses the weighting factors to compute the overall score.
1. The scores for the main criteria are multiplied by their weighting factors.
2. 70 x 40 = 2800 points
85 x 25 = 2125 points
50 x 10 = 500 points

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50 x 5 = 250 points
3. Total points = 5675.
4. This total is divided by the sum of the weighting factors: 5675 / 80 = 70.94 points
The vendor is awarded an overall score of 71 points.
Calculating the Score for a Main Criterion
The scores for the individual main criteria are determined in the same way as the overall score:
The system calculates the scores for all the subcriteria for a main criterion according to the
weighting factors assigned to them.

The system derives the overall score from the scores for the various main criteria, taking the
weighting factors assigned by Purchasing in the system settings for each main criterion into account

Note: In order to understand the technical part of calculation of scoring how the system carries out
with respect to Vendor Evaluation process, an Addendum file is provided separately

3.2.5.3 Data Migration Considerations

NA

3.2.5.4 Configuration Considerations

• Vendor evaluation to be configured.

• When the system calculates the scores for automatic subcriteria, it uses the control
parameters defined in Customizing

3.2.5.5 Authorization Considerations

Activity Role Org Elements Transaction Codes
Rezayat Purchasing
Manuel Scoring BU procurement ME61
Organization
Vendor Evaluation
Rezayat Purchasing
Sheet Display and BU procurement ME6H
Organization
Print

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4. Business Processes for Procurement

4.1 Business Requirement

• A system to identify and process all the procurement requirements that are generated
directly through different planning and execution activities of all divisions of Rezayat.
• Existence of a data base for all available / short listed / approved suppliers, vendors,
subcontractors and manufactures which can be accessed during the source of supply
selection.
• A system that can track, control and monitor all the activities and milestones in different
stages of procurement process.
• A system that can process, monitor and record the procurement of services / materials and
provide tools to facilitate the repeated procurement of similar services / materials and their
monitoring in terms of completion.
• To facilitate procurement of stock as well as non-stock items, consumables, assets and other
spot requirements however keeping control of the expenses and associated accounting
impacts.
• An integrated environment where purchasing activities should be linked with accounting and
controlling functions.
• A set-up for online approval of purchasing requirements and documents for efficient
processing of requirements into orders.
• A comprehensive but secured system with necessary tools to optimize the procurement
processing time.
• An information system that can generate reports based on purchase statistics for analysis of
order values, price history and vendor’s performance during a certain time period.

4.2 Procurement Process

This section documents the Procurement functionality available in SAP Materials Management
Module and how it can be used to cover the current processes in Rezayat. The basic task of
Procurement component in SAP is to facilitate and optimize the activities for external procurement
of materials and services.

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The typical procurement cycle for a service or material consists of the following phases:

1. Determination of Requirement

Materials or Services requirement are identified either in the projects, user departments or via
planning activities in other modules. A purchase requirement can be created manually or it can be
generated automatically.

2. Source Determination

The Purchasing component helps in identifying potential sources of supply based on existing Source
List, info records or longer-term purchase agreements. This speeds the process of creating requests
for quotation (RFQs), which can be sent to vendors for collecting Quotations.

3. Vendor Selection and Comparison of Quotations

The system is capable of simulating pricing scenarios and enables the comparison of a number of
different quotations. Rejection letters (Appreciation letter) can also be generated automatically.

4. Purchase Order Processing

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The Purchasing system adopts information from the requisition and the quotation to facilitate the
creation of purchase order. Information can also be copied from a previous PO by using referencing
technique.

5. Purchase Order Monitoring

Standard functions are available to monitor the shipments and confirmations from vendor. It also
provides an up-to-date status of all purchase requisitions, quotations, and purchase orders.

6. Goods Receiving and Inventory Management

Goods Receipt in SAP is as simple as by entering the PO number and confirming the delivery. By
specifying permissible tolerances, buyers can limit over- and under deliveries of ordered goods. This
section is covered in Inventory Management of blueprint.

7. Invoice Verification

The system supports the checking and matching of invoices. The accounts payable clerk is notified of
quantity and price variances because the system has access to PO and goods receipt data. This
speeds the process of auditing and clearing invoices for payment.

Purchasing communicates with other modules in the SAP System to ensure end-to-end
integrity of process and a constant flow of information between different business functions. For
example, it works side by side with the following modules:

• Project Systems
• Plant Maintenance
• Sales and Distribution
• Customer Service
• Quality Management
• Production Planning
• Financial Accounting
• Controlling

Good communication between all personnel / divisions / departments involved in the procurement
process is necessary for it to function smoothly.

4.2.1 Purchase Requisition

In Rezayat, the Purchase Requisition will serve as a formal request or instruction to procure a certain
quantity of a material or a service so that it is available at a certain point and date. It will be treated

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as the notification of requirements for materials and/or external services and to keep follow up /
track of such requirements.

Item Category
Special identifiers are available in SAP to indicate the characteristic of each line item in the
purchasing document. These are known as Item categories.

The item category determines whether the material defined in a purchase order item:

• Requires a material number

• Requires an account assignment
• Is to be managed as a stock item
• Requires a goods receipt (GR) and/or an invoice receipt (IR)
Following standard item categories will be used

Item Category Description Purpose

blank Standard item For standard stock / non stock item

For subcontracting requirements where materials are

L Subcontracting
provided to subcontractor, free of cost.

For transfer of stocks from one division to another

U Stock Transfer
division

Stock provided by
C For stock provided by customer
customer
For procurement of external services where
D Services additional field will be required to maintain the
details of services

Account Assignment Category

As best business practice, the identification and allocation of expense should be known at the time
of initiation of purchasing request. In SAP PR, account assignment keys are provided for the same
purpose. It determines automatically the necessary GL accounts and necessary cost elements that
need to be provided during creation of purchase requisition. Following standard account assignment
categories will be used in Rezayat

Account
Assignmen Description Purpose Account Assignment Object
t Category

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Account
Assignmen Description Purpose Account Assignment Object
t Category

For the procurement of those

Blank materials which will be Not Applicable
received in inventory

For materials procured as

A Asset Assets. Example: equipments, Asset Number
vehicles, machinery etc.

Plant Maintenance Order /

For materials and services
F Order Customer Service Order /
charged directly to the orders
Production Order
For the Service Purchase
Requisition created
C Sales Order Not Applicable
automatically through Sales
Order
For directly consumable items
K Cost Centre which will not be kept as Cost Center Number
stocks. Example: stationery
Items which will be required
Project - Make for projects and maintained in Project work breakdown
Q
to Order special stock type (project Structure ( WBS of Project )
stocks)
For non-stock project items
Project work breakdown
P Project which are directly consumed
Structure ( WBS of Project )
on projects

For non-stock project items

N Network which are directly consumed Project Network
on networks in projects

Customer For the Material Purchase

E Individual requisition created through Not Applicable
Requirement Sales Order

Following table gives idea of combination of item category and account assignment to be used for
different nature of procurements

Sr No Procurement Scenario Item Category Account Assignment

1 Procurement of asset Blank A - Asset

2 Procurement of stock material Blank Blank

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Sr No Procurement Scenario Item Category Account Assignment

3 Procurement of service for cost center D - Service K - Cost center

4 Procurement of service for Plant D - Service F - Plant maintenance order

maintenance order / customer service / customer service order
order

5 Procurement of material for cost center Blank K - Cost center

6 Procurement of material for plant Blank F - Plant maintenance order

maintenance order / customer service / customer service order
order

7 Procurement of material for project Blank Q - Project - Make to Order

stock

8 Procurement of service for project D - Service P - Project

9 Procurement of material for project Blank P - Project

consumption

10 Back to back procurement Blank E - Customer Individual

Requirement

11 Sub contracting work for material L - Blank

Subcontracting

12 Stock transport order U - Stock Blank

transfer

13 Receive stock provided by customer C - Stock Blank

provided by
customer

4.2.1.1 Scenario Overview

Various Purchase Requisition scenarios are with as is and to be process are explained below.

4.2.1.1.1 Scenario 1 - Purchase Requisition Capex Procurement

Capex procurement will be carried in SAP as per the process flow diagram shown below.

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Following is process flow chart for Capex budget approval process. This flow chart is shown for
understanding purpose.

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Capex budget approval process

Event
Start End
Department Head /
Project Manager

Provide the inputs

for annual Capex
budget in the
specified format
Manager
Finance

Collect inputs for Prepare Capex budget based on Submit the annual Create Internal Order
Corrections as per for each asset class or
Annual Capex the inputs from Department Capex budget for
the comments
budget Heads / Project Managers review and approval supplement budget if
existing
Manager /
Executive
General

Director

Capex budget
Review the Capex approved or
Correction required
budget correction required
?

Approved
Group Finance
Controller

Capex budget
Review the Capex approved or
budget
Correction required
correction required
?

Approved

Capex budget
Group General

Review the Capex approved or

Correction required
Manager

budget correction required

?

Approved

To be process:

• For Capex procurement approved capex budget is mandatory.

• Initially requisitioner will check for approved capex budget. If capex budget is not approved
user will follow process of raising request for capex budget approval is covered in Finance
Module BBP (Asset Accounting ).

• On approval from the finance department, requisitioner will get asset code from finance
department.

• Once the capex budget is approved from finance or if it is pre approved, requisitioner will
follow the process mentioned in the following points.

• Requisitioner will check for the material code for the asset to be procured. If the material
code exists requisitioner can go ahead with creation of Purchase Requisition. If required
material code does not exist requisitioner will follow the business process number
RZ_MM_MD_01 for creation of new material code.

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• Requisitioner will then create a purchase requisition with account assignment "A", Item
category "blank" and asset number. Requisitioner will enter budgeted price and
requirement priority in purchase requisition. Asset number is required as there is check
against the budget for every asset that is to be procured.

• Once the asset number is entered system will check for the budget with corresponding
internal order.

• The business unit management will review the Purchase Requisition.

• If Purchase Requisition is correct, BU Management will approve the Purchase Requisition.

• If Purchase Requisition is not correct, BU management will send the requisition back to
requisitioner. Requisitioner will change the Purchase Requisition and resend to BU
management.

• If Purchase requisition is of higher value, top management will also approve the Purchase
Requisition after BU Management approves.

• Once the Purchase Requisition is approved by all approvers, BU purchasing department will
initiate procurement process as per business process number RZ_MM_PC_03.

4.2.1.1.2 Scenario 2 - Procurement of Stock Materials – Non Project

All stock materials which are stored at central store will follow the following process for
procurement.

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To Be Process
• Requisitioner will identify the requirement of the material. First requisitioner will check for
the required material code in the SAP. If material code does not exist requisitioner will
follow the business process number RZ_MM_MD_01 for creation of Material Code

• If material code exists in SAP, requisitioner will check create reservation for the required
quantity of material.

• Create reservation will follow the approval process as per business process number
RZ_MM_IM_02_01.

• Reservation created will follow the approval process as per business process number
RZ_MM_IM_02_01.

• Store keeper will check stock of material if stock of the material is available, store keeper will
issue the material against the reservation as per business process number RZ_MM_IM_03.

• If stock of the material is not available, requisitioner will discuss with the Store Manager for
the strategy of the stock keeping.

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• If material is relevant to MRP , process of MRP run will be carried out as per business
process number RZ_MM_PC_01_10

• If material is not relevant to MRP, store keeper will create Purchase Requisition with item
category and account assignment both as blank. Store keeper will enter budgeted price and
requirement priority in purchase requisition.

• One creation of the Purchase Requisition approval process will be triggered. BU

management will review the Purchase Requisition. If purchase requisition is faulty, BU
management will reject the approval of Purchase Requisition for requisitioner corrections.

• If the Purchase Requisition is correct, BU management will approve the Purchase

Requisition.

• Once the Purchase Requisition is approved , BU Purchase will initiate the procurement
process as explained in business process number RZ_MM_PC_03

4.2.1.1.3 Scenario 3 - Procurement of Services – Non Project

This process will be used for procurement of services except projects. Following is process flow
chart shown.

To be process
• Requisitioner will identify the requirement of the service to be procured.

• Requisitioner will check for the required service code availability in SAP.

• If service code exists in SAP, requisitioner can go ahead with creation of Purchase
Requisition.

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• If service doe does not exist in SAP , requisitioner will follow the process of creation of
service code as per the business process number RZ_MM_MD_03

• After creation of new service code or after choosing the required service code from the
available service master, requisitioner will create Purchase Requisition with account
assignment "K - Cost center", item category "D - Service" and correct cost center.
Requisitioner will also enter the budgeted price and requirement priority in purchase
requisition.

• Once the Purchase Requisition is created approval process will be triggered.

• BU Management will review the Purchase Requisition at the time of approval. If Purchase
Requisition is faulty, approving authority will refuse the Purchase Requisition approval.

• Faulty Purchase Requisition will be corrected by the requisitioner and will be sent for
approval.

• If the Purchase Requisition is correct, BU management will approve the Purchase

Requisition.

• Once the Purchase Requisition is approved , BU purchase will initiate the procurement
process as per the business process number RZ_MM_PC_03

4.2.1.1.4 Scenario 4 - Procurement of material Non stock – Non Project

This process will be followed for procurement of materials which on receipt will be posted as
consumed.

To be process
• Requisitioner will identify the requirement of the non - stock materials.
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• Requisitioner will first check for the availability of the required material master in SAP. If the
material is available requisitioner can proceed further for the creation of the Purchase
Requisition.

• If required material is not available in SAP, requisitioner will follow the process of creation
of Material code as per the business process number RZ_MM_MD_01

• Once the material code is available , Purchase Requisition will be created by flowing two
ways -

a) Requisitioner will create manual Purchase requisition with account assignment category
"K - Cost Center" and item category as "blank ".

b) Purchase Requisition will be created automatically form the Plant Maintenance Order or
Customer Service Order. This Purchase Requisition will have account assignment category "F
- Order"

Requisitioner will enter budgeted price and requirement priority in purchase requisition.

• Once the Purchase Requisition is created. It is subjected to approval. BU Management will

review the Purchase Requisition at the time of approval. If the Purchase Requisition is faulty,
approving authority will refuse the approval. Requisitioner will correct and resend it for
approval.

• If Purchase Requisition is correct, BU Management will approve the Purchase Requisition.

• Purchase Requisition approval will be done as per the approval matrix.

• After the Purchase Requisition is completely approved, BU Purchase will initiate

procurement process.

4.2.1.1.5 Scenario 5 - Procurement of Stock – Project

This process will be used for procurement of the material for project stock.

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To be process
• Requisitioner will identify the requirement of the material. Once the requirement of the
material is finalized. Requisitioner will check for the suitable material code in SAP.

• If material code is not available in SAP , requisitioner will follow the process of creation of
material code as per business process number RZ_MM_MD_01

• If material code is available requisitioner will check the stock of the material in SAP. If stock
of the material exists, requisitioner will create reservation for the material.

• Reservation will be approved by the concern approving authority and either material will be
issued or material will be transferred from central stores to project or from other project.

• If the stock of material is not available Purchase Requisition will be created in flowing two
ways -

a) Purchase Requisition will be created manually with account assignment category "Q",
item category "blank" and correct WBS element.

b) Purchase Requisition will be automatically created through Material Requirement

Planning for the materials planned in Project.

Requisitioner will enter budgeted price and requirement priority in purchase requisition.

• Once the Purchase Requisition is created. It is subjected to approval. BU Management will

review the Purchase Requisition at the time of approval. If the Purchase Requisition is faulty
, approving authority will refuse the approval. Requisitioner will correct and resend it for
approval.

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• If Purchase Requisition is correct, BU Management will approve the Purchase Requisition.

• Purchase Requisition approval will be done as per the approval matrix.

• After the Purchase Requisition is completely approved, BU Purchase will initiate

procurement process.

4.2.1.1.6 Scenario 6 - Procurement of Services – Project

This process will be used for Procurement of services for Project.

To be Process
• Requisitioner will identify the requirement of the service to be procured.

• Requisitioner will check for the required service code in SAP.

• If service code exists in SAP, requisitioner can go ahead with creation of Purchase
Requisition.

• If service doe does not exist in SAP , requisitioner will follow the process of creation of
service code as per business process number RZ_MM_MD_03

• After creation of new service code or after choosing the required service code from the
available service master , Purchase Requisition will be created with flowing two ways -

a) Purchase Requisition with account assignment "P - Projects", item category "D - Service"
and correct WBS element.

b) Purchase Requisition will be automatically created for the services planned in Project.
This Purchase Requisition will have account assignment category "N - Network" and item
category "D - Service".

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Requisitioner will enter budgeted price and requirement priority in purchase requisition.

• Once the Purchase Requisition is created approval process will be triggered.

• BU Management will review the Purchase Requisition at the time of approval. If Purchase
Requisition is faulty, approving authority will refuse the Purchase Requisition approval.

• Faulty Purchase Requisition will be corrected by the requisitioner and will be resent for
approval.

• If the Purchase Requisition is correct, BU management will approve the Purchase

Requisition.

• Once the Purchase Requisition is approved , BU purchase will initiate the procurement
process as per business process number RZ_MM_PC_03

4.2.1.1.7 Scenario 7 - Procurement of materials for Non Stock – Project

This process will be used for procurement of non stock materials for project which on receipt will be
consumed for project.

To be Process
• Requisitioner will identify the requirement of the material. Once the requirement of the
material is finalized. Requisitioner will check for the suitable material code in SAP.

• If material code is not available in SAP , requisitioner will follow the process of creation of
material code as per business process number RZ_MM_MD_01

• Once material code is available Purchase Requisition will be created in flowing two ways -

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a) Purchase Requisition will be created manually with account assignment category "P", item
category "blank" and correct WBS element.

b) Purchase Requisition will be automatically created through Material Requirement

Planning for the materials planned in Project.

Requisitioner will enter budgeted price and requirement priority in purchase requisition.

• Once the Purchase Requisition is created. It is subjected to approval. BU Management will

review the Purchase Requisition at the time of approval. If the Purchase Requisition is faulty,
approving authority will refuse the approval. Requisitioner will correct and resend it for
approval.

• If Purchase Requisition is correct, BU Management will approve the Purchase Requisition.

• Purchase Requisition approval will be done as per the approval matrix.

• After the Purchase Requisition is completely approved, BU Purchase will initiate

procurement process.

4.2.1.1.8 Scenario 8 - Purchase Requisition for Back to Back Orders

This process will be used specifically for RTCL - Commercial and RITCCO. In this process purchase
requisition will be created automatically through sales order. Automatically generated purchase
requisition will be converted to Purchase Order and material will be procured only for sale purpose
not for stock.

To Be Process

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• In this process Customer will send inquiry for buying material.

• Sales person will receive the inquiry from the customer. Sales person will create sales inquiry
in SAP. Sales person will create vendor RFQ for the same material for which inquiry has been
received from customer.

• Sales person will print or download the RFQ created and it will be sent to Vendor.

• Vendor will send the quoted price. Once the quotation is received sales person will maintain
the price in RFQ created. Sales person will attach the soft copy of the quotation received to
the RFQ created in SAP.

• On the basis of the price received from the Vendor sales person will prepare the quotation
to the customer

• BU management will review the customer quotation. If the customer quotation is not
correct sales person will change it. After correcting quotation BU management will approve
it.

• Once the quotation is approved, sales person will print the quotation and send the
quotation to customer.

• Once the customer sends the order confirmation in the form of purchase order, sales person
will create Sales Order in SAP with reference to Purchase order received and quotation.
After saving the sales order Purchase requisition will be created automatically with account
assignment "E" and item category "blank" will be created.

• Purchase Requisition created is subjected to approval. BU Management will review the

Purchase Requisition at the time of approval.

• BU Management will approve the Purchase Requisition.

• Purchase Requisition approval will be done as per the approval matrix.

• After the Purchase Requisition is completely approved, BU Purchase will initiate

procurement process.

• procurement process.

4.2.1.1.9 Scenario 9 - Purchase Requisition for Sub Contracting works

In this process component materials will be issued to vendor for preparing finished goods out of
components. Once finished goods are prepared, vendor delivers finished goods and scrap if left out
during processing. This process will be used in SAFAMI. Process of sub-contracting in SAP will be
carried as per the process mentioned in the following process flow chart.

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Event
Requisitioner
Management
BU
Procurement
BU

To be Process:

• Requisitioner will identify the requirement of Sub-contracting work needed.

• If material code is not available in SAP , requisitioner will follow the process of creation of
material code as per business process number RZ_MM_MD_01

• Once the material is created or required material is chosen, requisitioner will check for the
Bill of Material. If Bill of Material exists, requisitioner can proceed for creation of Purchase
Requisition.
• If Bill of Material does not exist, requisitioner will create bill of material.
• Once the Bill of Material is available, requisitioner will create Purchase Requisition with
account assignment as "blank" and item category " L - Sub contracting ". Requisitioner will
also enter budgeted price and requirement priority in purchase requisition.
• Once the Purchase Requisition is created. It is subjected to approval. BU Management will
review the Purchase Requisition at the time of approval. If the Purchase Requisition is faulty,
approving authority will refuse the approval. Requisitioner will correct and resend it for
approval.

• If Purchase Requisition is correct, BU Management will approve the Purchase Requisition.

• Purchase Requisition approval will be done as per the approval matrix.

• After the Purchase Requisition is completely approved, BU Purchase will initiate

procurement process.

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4.2.1.1.10 Scenario 10 - Purchase Requisitions through MRP for Stock Materials

• In Rezayat for some material such as spare part and the regular consumable stock item is
always maintained in the stores
• MRP concept using reorder point planning procedure will be used for such material in
Rezayat. Safety stock of the material will be specified in the Material Master of such
material. In the Reorder point planning procedure once the stock falls below the reorder
point, it triggers the procurement proposal requirement
• Periodic MRP run will be performed by the store manager at central stores. After MRP run
requirement of material will be calculated by system and purchase requisitions will be
generated for shortage quantity
• Following flow chart diagram will explain the process overview in SAP

To be process

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• Store manager or MRP Controller will identify the materials to be kept in stock and
replenished through MRP.
• After identifying the material Store Manager or MRP Controller will maintain the details of
MRP in material master.
• Once the details of MRP are maintained, Store manager or MRP Controller will run the Stock
requirement list for MRP in SAP
• Stock requirement list report will give the current status of the material and the deficit
stock. Deficit stock will be calculated on the basis of the Safety stock level entered for the
material in the material master
• From the stock requirement list the decision will be taken by the store manager or MRP
Controller to go ahead with MRP run or not
• Store manager or MRP Controller will run the MRP for material; as a result system will
generate planned order for the deficit stock
• Store Manager or MRP Controller will review the planned orders generated and discuss with
operations for converting planned orders into purchase requisition.
• As per the requirement store manager or MRP Controller will convert the planned orders to
Purchase Requisition.
• Purchase Requisitions created will be having account assignment and item category as "
blank "

• Once the Purchase Requisition is created. It is subjected to approval. BU Management will

review the Purchase Requisition at the time of approval. If the Purchase Requisition is faulty,
approving authority will refuse the approval. Requisitioner will correct and resend it for
approval.

• If Purchase Requisition is correct, BU Management will approve the Purchase Requisition.

• Purchase Requisition approval will be done as per the approval matrix.

• After the Purchase Requisition is completely approved, BU Purchase will initiate

procurement process.

4.2.1.2 Configuration Considerations

• Following document types will be configured for Purchase Requisition with internal number
range.

Description of Document
Document Type Number Range ( From - To )
type

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Description of Document
Document Type Number Range ( From - To )
type

CX Capex Requisition 1300000000 to 1399999999

NB Auto Purchase Requisition 1000000000 to 1099999999

PR Manual Purchase Requisition 1100000000 to 1199999999

SR Service Requisition 1200000000 to 1299999999

• Release strategy for Purchase Requisition will be configured.

• MRP to be configured.

• Following requirement priority options will be configured for Purchase Requisition

1. Low

2. Medium

3. Urgent

4. Very Urgent

4.2.1.3 Gap Analysis

• Rezayat requires budget check for Capex procurement. Requirement of budget check will be
fulfilled referring internal order in Purchase Requisition. This internal order will be proposed
automatically in Purchase Requisition once the asset is entered in PR. Development is
required to propose the internal order automatically in the PR. ( Gap Code : RZ_GP_08 )

• Rezayat has requirement that when requisitioner is creating Purchase Requisition, SAP
should not allow requisitioner to select Manufactures Part Number. Instead user should
enter master material code. But for few materials this blocking of MPN materials should be
exempted. Development is required for this requirement. ( Gap Code : RZ_GP_09 )

• Rezayat has requirement of printing of Purchase Requisition. There is no provision of

purchase requisition in print out in standard SAP. For this requirement layout of purchase
requisition needs to be developed. ( Gap Code : RZ_GP_10 )

4.2.1.4 Authorization Consideration

Activity Role Org Elements Transaction Codes
Material Master BU Procurement BU MM01 / MM03 /
Create / Display MM60
Material Master BU User BU MM03 / MM60
Display

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Activity Role Org Elements Transaction Codes
PR Creation / Change / BU User BU ME51N / ME52N /
Display ME53N
DMS Attachment BU User / BU BU CV01N / CV02N /
Management CV03N
PR Release BU Management BU ME54N
PR Release Top Management BU ME54N

4.2.2 Request for Quotations (RFQ):

Request for Quotation (RFQ) will be the main tool used in Rezayat for getting quotations from one or
more vendor. Upon receiving the responses from the vendors in the form of quotations, the data
including prices, terms of payment, terms and conditions accepted and delivery dates will be
updated in the quotation record for evaluation and selections.

If RFQ has been issued to several vendors, the purchaser can use the reporting from the system to
determine the most favorable quotation submitted. An item by item comparison report can be
generated from the system.

4.2.2.1 Scenario Overview

In Rezayat there are following triggering points for RFQ

• RFQ for approved Purchase Requisitions

• RFQ for Estimation Purpose
• RFQ to create new centralized contract

Apart from the above triggering process of RFQ, process of Quotation Comparison is also mentioned.

Above scenarios are explained in the following process flow charts:

4.2.2.1.1 Scenario 1 - RFQ for Approved Purchase Requisitions

Following process will be followed in SAP for the RFQ creation for the approved Purchase
Requisitions

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To be Process:

• Approved Purchase Requisition will be received by BU procurement.

• BU procurement will check for the agreement or contract in the SAP for the supply of
material or services
• If agreement or contract exists BU Procurement will create purchase order with reference to
agreement or contract as per business process number RZ_MM_PC_03. If agreement or
contract does not exist, BU purchase will check for the info record in SAP.
• If purchasing info record exists, BU purchase will check for RFQ created by estimation
department for estimation purpose.
• If purchasing info record does not exist, BU procurement will choose vendors if vendor
master exist.
• If vendor master does not exist , BU procurement will follow the process of creation of
Vendor as per the business process number RZ_MM_MD_02
• Once the vendor is created, BU procurement will create RFQ.
• If vendor master exist BU procurement will check for the RFQ created by estimation
department for estimation purpose.

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• If estimation RFQ exists in system create a new RFQ with reference to the existing
estimation RFQ.
• If the RFQs created are within BU limit, no approval is required. BU procurement will print or
send the soft copy of RFQ to Vendor.
• If RFQ is not within BU limit, approval by central sourcing is required. RFQ will be sent to
central sourcing. If RFQ is correct, central sourcing will approve the RFQ.
• If RFQ is not correct, central sourcing will refuse the approval. BU procurement will correct
the RFQ and resend it for approval.
• Vendor will send the offers to BU procurement. BU procurement will check for the
Quotation received and check for the brand quoted.
• BU procurement will check for the Material code for the brand in SAP. If the brand exist BU
procurement will maintain the prices in the Quotation.
• If material code for brand does not exist , BU procurement will follow the process of
material master creation as per the business process number RZ_MM_MD_01
• Once the material master is created, BU procurement will maintain prices in Quotation.
• Soft copies of the offers sent by Vendor will be attached to the RFQs created in SAP using
DMS.
• Quotation Approval process will be carried out of SAP as per business process number
RZ_MM_PC_02_04
• Once the RFQ is finalized, soft copy of quotation comparison will be attached to finalized
RFQ in DMS.

4.2.2.1.2 Scenario 2 - RFQ for Estimation Department

RFQ process for estimation department will be carried out in SAP as per the following process flow
chart.

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To be process:

• Estimation department will first list the items to be included in estimation.

• BU estimation team will check for the agreement or contract available in SAP. If the
agreement or contract exists in SAP BU estimation will decide whether directly maintain the
RFQ as per rates in agreement or create RFQ in SAP. Accordingly RFQ will be done in SAP.
• If Agreement or contract does not exist in SAP. BU team will check for the Purchasing Info
record. If purchasing info record exists, BU estimation will create RFQ.
• If a Purchasing Info record does not exist, BU estimation will check for the vendor master in
SAP. If vendor exist in SAP, BU estimation will create RFQ.
• If vendor master does not exist in SAP, BU estimation will follow the process of creation of
vendor master as per the business process number RZ_MM_MD_02
• Once the RFQ is created, BU estimation will print or download the soft copy of RFQ. This soft
copy or print will be sent to the vendor for getting offer.
• Once the offers are received from the vendor, BU estimation will check the offer and the
brand quoted by vendor.

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• BU estimation will check for the material code of the brand in SAP. If material code exists for
the brand, BU estimation will maintain the RFQ in SAP.
• If material code for the brand does not exist, BU estimation will create the material code in
SAP as per the business process number RZ_MM_MD_01
• BU estimation will attach the soft copies of the offer to maintained RFQs in SAP Document
Management System (DMS).
• As per the offers received from the vendor, BU estimation will create Customer quotation in
SAP.

4.2.2.1.3 Scenario 3 - RFQ for New Contract

RFQ process for contract creation will be carried out in SAP as per the following process flow chart.

To be process:

• BU procurement or central sourcing will identify the requirement to create Contract in SAP.
• BU procurement or central sourcing will check for contract exists in SAP if contract exist,
there is no need for further process. Same contract can be used.
• If contract does not exist, BU procurement or central sourcing will check for Purchasing Info
record. If purchasing info record exists, BU procurement or central sourcing will create RFQ
for material or service in SAP.
• If purchasing info record does not exist, BU procurement or central sourcing will choose
vendors. If the chosen vendors exist in SAP, BU procurement or central sourcing will create
RFQ in SAP.

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• If vendor master does not exist in SAP, BU procurement or central sourcing will follow the
process of vendor master creation in SAP as per the BBP process number RZ_MM_MD_02
• After creation of RFQ, system will check if the RFQ created is within BU value limit. If RFQ is
in BU value limit, no approval of RFQ is required. BU procurement or central sourcing will
print or download the RFQ and it will be sent to the vendor for getting offer. In case RFQ is
created by central sourcing RFQ, there will be no approval to RFQ and RFQ will be printed or
downloaded and it will be sent to the vendor for getting offer.
• If the RFQ value is beyond BU limit, approval of central sourcing is required. RFQ will be sent
to the approval of central sourcing.
• Central sourcing will review the RFQ .If RFQ is found correct, central sourcing team will
approve it. If RFQ is not correct, central sourcing team will send back the RFQ to BU
procurement or central sourcing user for corrections.
• After corrections RFQ will be resent by BU procurement or central sourcing user for
approval.
• Vendor will submit the offers to BU procurement or central sourcing. BU procurement or
central sourcing will check for the material code of brand in SAP system. If the material code
for brand exists, BU procurement or central sourcing will maintain the RFQ prices.
• If material code for brand does not exist, BU procurement or central sourcing will follow the
process of material code creation as per the process mentioned in BBP process number
RZ_MM_MD_01
• After maintaining the prices in RFQ, BU procurement or central sourcing will do the
Quotation Comparison as per business process number RZ_MM_PC_02_04

4.2.2.1.4 Quotation Comparison Process

Quotation Comparison process in SAP will be followed as per the process flow chart shown below.

To be process:

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• RFQ creation process will be followed as per the business process number RZ_MM_PC_02 in
BBP.
• Received quotations will be attached to the individual RFQs in SAP using Document
Management System by BU procurement.
• BU procurement will send the RFQs in DMS to technical approval.
• Requisitioner will review the Quotations in DMS and analyze them. After analysis
requisitioner will update the status in DMS as technically compliant or non - compliant.
• If requisitioner updates RFQs as non-compliant, process of RFQ creation will be restarted if
required.
• BU procurement will choose technically compliant Quotations and generate Quotation
Comparison Report in SAP.
• BU procurement will download the Quotation Comparison Report.
• Quotation Comparison Report will be approved by BU management outside SAP.
• BU procurement will close the line items of the rejected quotations.
• The process of creation of Purchase Order with reference to approved RFQ will be followed
as per the business process number RZ_MM_PC_03.

4.2.2.2 Configuration Considerations

• Following document types will be configured for RFQ with internal number range.

Document Type Description of Document Type Number Range

Capex RFQ 6100000000 to 6199999999

AN
Non Capex RFQ 6200000000 to 6299999999
NC
Estimation RFQ 6300000000 to 6399999999
ES

• Release strategy will be configured for the RFQ.

• Output determination configuration required.

4.2.2.3 Gap Analysis

• Rezayat has requirement that when individual BU procurement will create RFQ and if RFQ is
beyond the limit of approval of BU, central sourcing team will approve the RFQ. As per
standard SAP process when RFQ is created, initially it will not have the price. But to trigger
the approval process on the basis of value RFQ must have price. To satisfy this requirement
development is needed to pass the value to RFQ line items from the Purchase Requisition
when the RFQ is created. Also group purchasing has requirement that RFQ approval limit will
be combination of cpv code and value of item in RFQ. Consultant will do feasibility study for
this requirement in Realization phase. (Gap Code: RZ_GP_11)

• Standard RFQ format will not satisfy the requirement of Rezayat so new RFQ format will be
developed as per the requirement of Rezayat. (Gap Code: RZ_GP_12)

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• Quotation Comparison report in SAP does not match the requirement of Rezayat.
Development is needed to develop the format of Quotation Comparison Report suitable for
Rezayat. (Gap Code: RZ_GP_13)

4.2.2.4 Authorization Considerations

Activity Role Org Elements Transaction Codes
Material Master BU Procurement BU MM01 / MM03 /
Create / Display MM60
Material Master BU User BU MM03 / MM60
Display
RFQ Creation / Change BU User / BU BU ME41 / ME42 / ME43
/ Display Management / Central
Sourcing
Maintain RFQ BU Procurement BU ME47
RFQ Comparison BU Procurement/ BU BU ME49
Management / Central
Sourcing
RFQ release ( Central Sourcing BU ME45
Applicable if RFQ
value is not within BU
limit )
DMS Attachment BU User / BU BU CV01N / CV02N /
Management CV03N

4.2.3 Contract

A Contract is a type of outline purchase agreement against which release Purchase orders (releases)
can be issued for agreed materials or services as and when required during a certain overall time-
frame. The contract consists of items defining the individual materials or services with prices and in
many cases quantities. Contract can be created for specific validity periods.

Rezayat can use SAP Contract to enter into longer-term purchasing arrangements with vendors
regarding the supply of materials or the performance of services. Contract in SAP are same as
catalog in legacy of Rezayat.

Whenever a new rate contract is finalized, a new Contract shall be prepared. Based on the recurring
requirement of some material / service, the purchase department can start a contract finalizing
activity and finally enter into a contract with some supplier for supplying the services / material as
and when required.

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In Rezayat centrally agreed contracts will be created to avail the benefit of the best deal. Specific
dates or quantities for individual deliveries are not set out in the outline agreement. This
information is separately provided in Release Orders. The items of a contract can relate to a single
plant or all the plants covered by a purchasing organization (centrally agreed contract).

4.2.3.1 Scenario Overview

• Currently Rezayat uses unit rate contract for procurement of materials or service.
• In Rezayat currently the contracts are made by individual Business Units for best prices
negotiations or to get critical material form market depending upon the requirement of
materials or services for individual business unit.
• Central sourcing also creates some contract as per the requirement.

4.2.3.1.1 Creation of Value / Quantity Contract

In the SAP MM Purchasing component, a contract is a type of outline purchase agreement against
which release orders (releases) can be issued for agreed materials or services as and when required
during a certain overall time-frame.

Following process will be followed in SAP for creation of contracts as per the process flow chart
shown below.

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To be process:

• As per the business process number RZ_MM_PC_02 of RFQ creation, RFQ will be created.
• Final approved RFQ will be used for the creation of Contract.
• BU procurement or central sourcing will create the Contract with reference to the selected
RFQ in SAP.
• Soft copy of the Quotation Comparison sheet will be attached to the Contract using
Document Management System in SAP.
• On saving the contract in SAP, approval process will be initiated as per the approval matrix.
• If the Contract is created by central sourcing it will be first approved by central sourcing and
finally by top management.
• In case Contract is created by BU procurement then BU management will approve the
Contract at first level. If contract is within BU limit it will be approved only by BU
management and BU procurement will print contract and send it to Vendor.
• If contract is not within BU limit, Central Sourcing will approve the Contract at second level.
Final approval to the contract will be given by top management.
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• Once the contract is approved by final approving authority in SAP, BU procurement or
central sourcing will print the contract and send the hard copy to Vendor.
• Since the contract is centrally agreed, other Business units also can use this contract for
creating Purchase Order to get best deal.
• Purchase Order process has to be followed using business process number RZ_MM_PC_03

4.2.3.2 Configuration Considerations

• Approval process for Contract needs to be configured.

4.2.3.3 Gap Analysis

NA

4.2.3.4 Authorization Considerations

Activity Role Org Elements Transaction Codes
Contract Creation / BU User / BU BU ME31K / ME32K /
Change / Display Management / Central ME33K
Sourcing
Contract release BU BU ME35K
Management/Central
Sourcing / Top
Management
DMS Attachment BU User / BU BU CV01N / CV02N /
Management CV03N

4.2.4 Purchase Order

A purchase order (PO) is a formal request or instruction from a purchasing organization to a vendor
or a plant to supply or provide a certain quantity of goods or services at or by a certain point in time.

It forms part of the procurement process where requirement is converted into a commitment to
purchase. However, it is not necessary to start the process from requirement processing as it can be
created directly in the system dependent on the operation need.

• Purchase Order can be created with reference to the RFQ or Last Purchase Order, this will
help the system to copy all the details in the RFQ on to the purchase order and the relation
of the RFQ and the purchase order is set in the system.
• Vendor details like Vendor Address, Payment Terms, Inco-terms will be copied from the
vendor master to PO.
• For a particular transaction if the Payment Terms and Inco term are different from the
vendor master, the same can be changed in the Purchase order.

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• The pricing related conditions will be copied from the RFQ and also can be independently
maintained in the Purchase Orders. The pricing conditions shall be assigned a value either in
percentage terms, value terms or per quantity basis.
• The different conditions (primary and secondary price elements) get defaulted in the
Quotations or purchase order based on the pricing schema attached to the schema group
field of vendor master. New pricing conditions can also be added and existing condition shall
be changed only before first goods receipt entry is posted against PO.
• The user shall specify the Plant, Purchasing organization, Purchasing group, Material code,
quantity and price of the material in the purchase order.
• Over delivery or under delivery tolerances will be maintained in the purchase order as per
the requirements, e.g. materials where excess receipts are expected to certain extent. In
case if there is an excess stock receipt beyond the over delivery tolerance identified in PO,
receipts can be made only after changing the quantities in PO or if the over delivery
tolerance is set as unlimited in the PO.
• Header text and Item text shall be maintained to communicate the vendor regarding specific
terms and conditions which are specific to the purchase.
• The PO print output release will be done through fax/mail. The PO can also be taken as a pdf
file and send it to vendor.

4.2.4.1 Scenario Overview

In Rezayat following four scenarios will be used for Purchase Order or Stock Transport Order
processing.

• Purchase Order with reference to RFQ or Contract

• Purchase Order for Cash Purchase
• Intra Company Stock transfer (Between two plants of same company code )
• Inter Company Stock transfer (Between two company codes )
• Stock Transport Order for Scrap

Above scenarios are explained in the following process flow charts:

4.2.4.1.1 Purchase Order with reference to RFQ or Contract

Following process flow chart process will be followed in SAP for creation of Purchase Order

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Event
BU Procurement
Management
BU
Management
Top

To be process:

• Process PR creation and approval will be followed as per the business process number
RZ_MM_PC_01 in BBP.
• BU procurement will receive the approved Purchase Requisition. BU procurement will check
if contract exist for the material or service. If contract exist, BU procurement will assign the
contract number to the Purchase Requisition and create the Purchase Order.
• If contract number does not exist, BU procurement will follow the process of RFQ creation as
explained in the business process number RZ_MM_PC_02_01 in BBP.
• The process of Quotation Comparison will be flowed as per the business process number
RZ_MM_PC_02_04 in BBP.
• On finalization of RFQ, Purchase Order will be created with reference to approved RFQ.
• BU procurement will attach the relevant documents to the Purchase Order using Document
Management System. On saving the Purchase Order in SAP, Purchase Order approval will be
initiated.
• BU management will review the Purchase Order. If Purchase Order is correct, BU
management will approve the Purchase Order as per the approval matrix.
• If Purchase order is faulty, BU management will refuse Purchase Order release.
• After approval of BU Management, purchase order will be approved by top management as
per the approval matrix.
• After the approval of final authority. BU procurement will print the purchase Order and send
the Purchase Order to Vendor.

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• On arrival of Goods or after completion of services, goods receipt or service entry sheet will
be entered in SAP.

4.2.4.1.2 Purchase Order for Petty Cash Purchase

Process of Petty cash purchase will be carried out as per the following process flow diagram in SAP.

RZ_MM_PC_03_02 - Regularization of Petty Cash Purchase

Event

Start Requirement of Items to End

be purchased from
Pettycash
Requisitioner
Site buyer /

Prepare List of Items Purchase the

to be Purchased by Item and Create Purchase
Pettycash and Send Send Invoice Requisition
for Approval to Accounts
Management
BU

Approve the Yes Approve Purchase

List Requisition
BU Accounts
Team

Petty Cash Invoice Receipt

Regularization
Posting No Process
Required
Process (RZ_MM_IV_01)
Procurement

Create Purchase
BU

Order for Petty Cash

Regularization
Management
Procurement
BU

Approve Purchase
Order
requisitioner
Stores /

Goods Issue Goods Receipt

Process(RZ_ Process(RZ_MM_IM
MM_IM_03) _01_01)

To be process:

• Requirement for petty cash purchase will be determined by user.

• Site buyer or requisitioner will prepare the list of the items to be purchased by petty cash
and send for approval to BU management.
• On approval of BU management, site engineer or requisitioner will send invoices to the
finance to approval.
• BU accounts team will check and decide to regularize it using Purchase order or not.
• If petty cash purchase need not to be regularized, BU accounts team will follow the process
of petty cash as per the business process in finance BBP.

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• If petty cash needs to be regularized through purchase order, site buyer or regquisitioner
will create purchase requisition.
• BU management will approve the purchase requisition and BU procurement will create
Purchase Order with reference to purchase requisition for petty cash regularization.
• BU procurement management will approve the purchase order.
• After approval of purchase order store keeper or requisitioner will process Goods Receipt
and Goods Issue as per the business process numbers RZ_MM_IM_01_01 and
RZ_MM_IM_03 respectively.
• BU accounts will process the Invoice of the vendor as per the business process number
RZ_MM_IV_01.

4.2.4.1.3 Intra Company Stock transfer

Following process flow chart process will be followed in SAP for creation of Intra Stock Transfer
Order

To be process:

• Store Keeper at receiving plant will identify the requirement of material.

• If stock exists in other plant for the material, user will create the stock transport order.
• If stock of the material is not available in other plant, user will create Purchase Requisition as
per the business process number RZ_MM_PC_01_02.
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• After creating stock transport order, first approving authority of receiving plant will approve
the Stock transport order. Secondly approving authority of supplying plant will approve the
stock transport order.
• Once the stock transport order is approved Store Keeper of the supplying plant will create
outbound delivery with reference to the Stock transport order.
• After creation of outbound delivery, store keeper of supplying plant will post goods issue
with reference to outbound delivery.
• Once the goods are issued from supplying plant, stock will be shown as stock in transit until
goods receipt is posted at receiving plant.
• On receiving material at receiving plant, store keeper at receiving plant will post goods
receipt.

4.2.4.1.4 Inter Company Purchase Order

Following process flow chart process will be followed in SAP for creation of Inter Company Stock
Transfer Order.

To be process:

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• Process of Purchase Requisition creation and approval will be followed as per the business
process number RZ_MM_PC_01
• BU procurement of the receiving company will create Intercompany stock transport order
with reference to approved Purchase Requisition.
• BU management of receiving company and supplying company will approve the stock
transport order raised.
• Store Keeper of supplying plant will create outbound delivery with reference to stock
transport order.
• Store Keeper of the supplying plant will post the goods issue in outbound delivery.
• Until the goods receipt at receiving plant, stock will be shown as stock in transit
• Accounts of supplying plant will create billing for the document as per the process in SD BBP.
• Goods Receipt and Invoice will be created at receiving plant as per the business process
number RZ_MM_IM_01 and RZ_MM_IV_01 respectively.

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RITCCO Intercompany Material Procurement

Following process flow chart process will be followed in SAP for RITCCO Inter Company Material
Procurement. The process shown for RITCCO intercompany procurement is a generic end to end
process formed by combining sub processes such as purchase requisitions, RFQ, purchase order,
goods receipt and invoice verification. This process is included for understanding purpose whereas
approvals for individual sub processes remains same as mentioned in individual process flowcharts
and descriptions.
RITCCO Intercompany Material procurment

Start End

Create Purchase
Requisition
(RZ_MM_PC_01)

Goods Receipt
with reference to
Outbound Delivery
RZ_MM_IM_01

Invoice
Payment
Verification
RZ_MM_IV_01
RZ_MM_IV_01

Approve Purchase
Approve PO
Requisition
RZ_MM_PC_03
(RZ_MM_PC_01)

Maintain
Create RFQ for Create
Send RFQ Quotation for Send PO to
Vendor RITCCO Intercompany PO
to RITCCO RITCCO RITCCO
RZ_MM_PC_02 RZ_MM_PC_03
RZ_MM_PC_02

Approve PO
RZ_MM_PC_03

Maintain Compare Create Purchase

Receive Enquiry Create RFQ for
Quotations as per Quotations and Receive PO Order against Send PO to
from BU external Vendor
Procurement offer finalize Vendor from BU external Vendor Vendor
RZ_MM_PC_02
RZ_MM_PC_02 RZ_MM_PC_02 RZ_MM_PC_03

Software or
Hardware
Insallation

Goods Receipt
Create Outbound Create Post Goods
with reference to
Delivery for Issue with reference to
PO
Intercompany PO Outbound Delivery
RZ_MM_IM_01

Create Sales Send Create Billing with

Quotation for Quotation to reference to
customer BU BU Intercompany PO

Invoice Payment to
Verification Vendor End
RZ_MM_IV_01 RZ_MM_IV_01

Offer Receive PO
and deliver
material

Note: Process codes (for Eg: like RZ_MM_PC_01 / RZ_MM_PC_02 / RZ_MM_PC_03) mentioned
in the above flow chart refers to the procurement process approved by Management in the BBP
version 11.

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RITCCO Intercompany Service Procurement

Following process flow chart process will be followed in SAP for RITCCO Inter Company Service
Procurement

Note: Process codes (for Eg: like RZ_MM_PC_01 / RZ_MM_PC_02 / RZ_MM_PC_03) mentioned
in the above flow chart refers to the procurement process approved by Management in the BBP
version 11.

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4.2.4.1.5 Stock Transport Order for Scrapping Material

Following process flow chart process will be followed in SAP for creation of Stock Transfer Order for
scrapping material.

To be process:

• Store Keeper will identify the items to be scrapped and create Stock Transport Order.
• General Manager will review the stock transport order. if stock transport order is not correct
general manager will send back the order to the requisitioner. If corrections are required,

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requisitioner will do the corrections and send back the order for approval. If order is
genuinely rejected, requisitioner will close stock transport order.
• If stock transport order is correct, BU Manager will approve the stock transport order. After
approval of General Manager, Finance manager will review the stock transport order. if
order is not correct finance manager will send back the order to the requisitioner.
Requisitioner will close the stock transport order.
• After review of Finance manager, top management will review the stock transport order. if
order is not correct top management will send back the order to the requisitioner.
Requisitioner will close the stock transport order.
• If stock transport order is correct, top management will approve the stock transport order.
• On approval of top management, store keeper of the supplying storage location will create
outbound delivery against Stock transport order and post goods issue against outbound
delivery.
• On posting the goods issue with reference to outbound delivery material will be sent to
scrap storage location.
• Store keeper at scrap storage location will post the goods receipt with reference to stock
transport order and receive material.
• Once the material stock is received scrap storage location, process of selling the scrap will be
performed as per the process in SD business blue print.

4.2.4.2 Configuration Considerations

• New document types will be configured for Purchase Order and number range will be
internal.
Document Type Description of Document Type Number Range

Cash Purchase - Purchase order 4900000000 - 4999999999

CP
Capex Purchase order 4400000000 - 4499999999
CX
Local Purchase order 4200000000 - 4299999999
LP
Import Purchase order 4300000000 - 4399999999
IP
Service Purchase order 4500000000 - 4599999999
SR

• Release strategy to be configured for Purchase Order.

• Output determination configuration required.

4.2.4.3 Gap analysis

• Purchase order layout in standard SAP does not suit requirement of Rezayat. Development
of new form of purchase order form is required. (Gap Code: RZ_GP_14)
• Rezayat has requirement to send reminder mail to top management if purchase order
approval is pending for approval for certain duration of time. This functionality is not

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available in standard SAP; customization is required to fulfill this requirement. (Gap Code:
RZ_GP_15)
• Rezayat has requirement that whenever buyer will amend delivery date, quantity and price
in purchase order; requisitioner should get email notifying changes. This functionality is not
available in standard SAP; customization is required to fulfill this requirement. (Gap Code:
RZ_GP_16)

4.2.4.4 Authorization Considerations

Activity Role Org Elements Transaction Codes
Purchase order Create BU Procurement BU ME21N / ME22N /
/ Change / Display ME23N
Release PO BU Management BU ME29N

DMS Attachment BU User / BU BU CV01N / CV02N /

Management CV03N

4.2.5 Service Entry Sheet

Entering and accepting services in external services management is the same as a goods receipt
posting when procuring materials.

4.2.5.1 Scenario Overview

In Rezayat, service entry sheet will be entered by requisitioner or site engineer at project site.
Service entry sheet entered is subjected to the acceptance. The acceptance for the service entry
sheet will be given as per the approval mechanism.

4.2.5.1.1 Service Entry sheet process

Process of service entry sheet will be performed as per the process flow diagram shown below.

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RZ_MM_PC_05_01 - Service Entry Sheet process ( Receipt of Services )

Start
Invoice
Event
Receipt
Received the End Process
invoice from vendor (RZ_MM_IV_
for Service 01)
Performed
Site Engineer / Requisitioner

Enter the score for

Check the Invoice Services as
Create Service timeliness of Print Service Entry
of Vendor with per Purchase Yes
Entry Sheet service and quality Sheet
Purchase Order Order ?
of service

No

Attach the Invoice

or progress sheet
Inform BU
procurement
Approving
Authority

Review the
Approve Service
Service Entry
Entry Sheet
Sheet posted
procurement

Clarify with Vendor

BU

and arrange to
resend Invoice

To be process:

• Site engineer or requisitioner will receive the invoice for the service performed or vendor
may submit the progress sheet.
• Site engineer or requisitioner will check the progress sheet of vendor with the purchase
order. If service are not as per the purchase order, requisitioner or site engineer will inform
to the BU procurement.
• BU procurement will clarify with the vendor and arrange to re send the correct invoice.
• If services are as per the purchase order site engineer or requisitioner will create service
entry sheet in SAP.
• Required documents will be attached to service entry sheet.
• Requisitioner or site engineer has to enter the score for the timeliness and quality of the
services performed while creating service entry sheet.
• Requisitioner or site engineer will take print out of service entry sheet performed and send
the same to approving authority.
• Approving authority will review the service entered and approve service entry sheet in SAP.

4.2.5.2 Configuration Considerations

• Release strategy for service entry sheet needs to be configured.

• Output determination for service entry sheet to be configured.

4.2.5.3 Gap Analysis

NA

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4.2.5.4 Authorization Considerations
Activity Role Org Elements Transaction Codes
Service Entry Sheet BU User / Site Engineer BU ML81N
Create / Change / / Requisitioner
Display
Release Service Entry Project Manager / BU ML85
Sheet Department head

DMS Attachment BU User / Site Engineer BU CV01N / CV02N /

/ Requisitioner / CV03N
Project Manager /
Department Head

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5. Inventory Management

5.1 Business Requirement

• A system that can record and track materials on both quantity and value basis.
• To monitor all the goods movements across company.
• To plan the inventory based on the previous consumption.
• To manage and record the transfer of materials from stores to projects and from projects to
projects, and to manage the existing stock as well as on order stock procured by purchasing
and stock in transit.
• To facilitate the creation of physical inventory for all stock types in a single transaction,
recording the inventory steps that have been carried out, automatically, adjust the inventory
difference and to be monitored as well.
• To have the system to carry out accounting automatically which would be free from errors
and would provide authentic data for reporting purpose.
• To perform accounting automatically as the stocks are received, issued, consumed or
transferred etc.
• To allow different grades / types of stocks of same materials to be managed at different
values.
• To have the system dynamically update the price of stocks in hand, according to market
fluctuations.
• To provide the functionality of absorbing direct adjustments due to additional expenses on
material stocks.
• To verify purchase order and goods received at the time of performing invoice Receipt.
• To segregate and identify materials with respect to usability like available for consumption
or blocked with different types of stock.

5.2 Inventory Management

Inventory Management is part of the Materials Management module and is fully integrated in the
entire logistics system:
As a part of Materials Management, Inventory Management is directly linked with Material
Requirements Planning, Purchasing, and Invoice Verification. Inventory Management provides
information for MRP, which takes into account not only physical stocks but also planned movements
(requirements, receipts).
During all transactions, Inventory Management accesses both master data (such as Material Master
Data) and transaction data (such as purchasing documents) shared by all Logistics components.
Inventory management deals with the following tasks:

• Management of material stocks on a quantity and value basis

• Planning, Entry, and Documentation of all Goods Movements
• Carrying out the Physical Inventory

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Inventory Management

• Managing Stocks by Quantity

All transactions that bring about a change in stock are entered in real time, as are the stock
updates resulting from these changes. Rezayat can obtain an overview of the current stock
situation of any given material at any time. This, for example, applies to stocks that:
1. Are located in the warehouse

2. Have already been ordered, but have not yet been received

3. Are located in the warehouse, but have already been reserved for consumption to
projects, production or a customer

4. Are in quality inspection

5. Are transferred to other projects

• Special Stocks

Special stocks are stocks that are managed separately as a result of being stored at a
particular location and allocated for a WBS or their not belonging to company. Inventory
Management can manage various types of a company’s own special stocks like project stock
and externally owned special stocks separately like stock at subcontractor from standard
stock.

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• Managing Stocks by Value

The stocks are managed not only on a quantity basis but also by value. The system
automatically updates the following data each time there is a goods movement:

1. Quantity and value for Inventory Management

2. Account assignment for cost accounting

3. G/L accounts for financial accounting via automatic account assignment

4. Respective project stock value will only be updated without changing the value of other
projects
The valuation area is the organizational level at which a material's stock value is managed. The
valuation area in Rezayat is at the plant level. So in Rezayat a material can have different valuation in
different plants of Rezayat. In Rezayat Materials in Project Stock ‘Q’ of different projects can also
have different value on each WBS level because in Rezayat same materials will be used in different
projects. These materials can have different valuation in different projects.

• Planning, Entry, and Documentation of all Goods Movements

Goods movements include both "external" movements (goods receipts from external
procurement, goods issues for sales orders) and "internal" movements (goods receipts from
production, withdrawals of material for internal purposes, stock transfers, and transfer
postings).

For each goods movement a document is created which is used by the system to update
quantities and values and serves as proof of goods movements.

Goods Movement
Goods movements are transactions resulting in a change in stock;
1. Goods receipt
A goods receipt (GR) is a goods movement with which the receipt of goods from
a supplier or from production is posted. A goods receipt leads to an increase in
Warehouse stock
2. Goods issue
A goods issue (GI) is a goods movement with which a material withdrawal or material issue,
a material consumption, or a shipment of goods to a customer is posted. A goods issue
leads to a reduction in warehouse stock
3. Stock transfer

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A stock transfer is the removal of material from one storage location and its transfer to
another storage location. Stock transfers can occur either within the same plant or
between two plants and between different projects.
4. Transfer posting
A transfer posting is a general term for stock transfers and changes in stock type or stock
category of a material. It is irrelevant whether the posting occurs in conjunction with a
physical movement or not. Examples of transfer postings are:
- Release from quality inspection stock

- From special stock like Project Stock to own stock

- Unrestricted to Quality Inspection or to Blocked stock

5.2.1 Goods Receipt

A goods receipt (GR) is a goods movement with which the receipt of goods from a supplier is posted.
A goods receipt leads to an increase in warehouse stock. Material shall be received at the plants or
the delivery address other than the plant identified in the PO. There shall be only one internal
number range for the all types of Goods Receipt across all the plants and will be continuous.

5.2.1.1 Scenario Overview

Following are the scenarios for the Goods Receipt in Rezayat.

5.2.1.1.1 Goods Receipt

Following process will be followed in SAP for creation of Goods Receipt

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To be process:

• Vendor will deliver the material as per the purchase order.

• Store Keeper will check the goods and compare with the vendor's delivery note. If any
discrepancy found, store keeper will inform the store manager. Store manager will check
with the procurement team or requisitioner regarding the material supplied.
• If there is no discrepancy, store keeper will view the purchase order in SAP and compare
vendor's delivery note with purchase order.
• If quantity of ordered materials and delivered are matching, store keeper will create GRN.
While creating GRN if material is subjected to batch management or serial number profile,
store keeper will enter the details for the same.
• If there is discrepancy in quantity of ordered materials and delivered, store keeper will check
with vendor for under delivery of material. If vendor is going to delivery remaining quantity
of material, store keeper will create GRN. If Vendor is not going to deliver balance quantity,
store keeper will check with requisitioner. If requisitioner is Ok with under delivery, store
keeper will create goods receipt note and will mention in goods receipt note as final
delivery. If requisitioner is not ok with under delivery, store keeper will inform store
manager. Store manager will contact vendor for clarification.
• In case of discrepancy in quantity of ordered materials where vendor has done over delivery,
store keeper will check with requisitioner for accepting over delivery. If over delivery of

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materials is accepted, store keeper will post goods receipt note. If over delivery is not
accepted, store keeper will return excess goods to vendor and post goods receipt of
materials as per quantity mentioned in purchase order.
• After entering all the details in the GRN, store keeper will hold the GRN. (I.e. GRN will be
held, it is not posted). Holding GRN functionality will be done using authorization concept.
• Store manager will review the GRN held by store keeper and if GRN is correct, store manager
will post the GRN.
• In case of the Goods Receipt against the sub-contracting order finished goods will be
received along with byproduct produced at the time of sub-contracting.
• After posting the GRN if material is subjected to Quality inspection and pre-requisites are
maintained, SAP will automatically generate quality inspection lot. If material is not
subjected to Quality inspection stock will get posted in unrestricted use. For keeping
material to the correct storage bin, warehouse management process will be used.
• Material posted in Quality inspection stock will be released by Quality Inspection
department as per the business process number explained in QM BBP.
• Stock received in unrestricted use will be moved to storage bin using warehouse
management process.

5.2.1.1.2 Vendor Return process

Following process will be followed in SAP for vendor returning material to vendor.

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Event
BU Quality
Team
BU Store
Keeper
BU Stores
Manager
BU Finance

To be process:

• Goods will be received from the vendor and Goods Receipt will be posted in SAP as per the
business process number RZ_MM_IM_01_01.
• BU quality team will do the quality inspection as per the business process explained in QM
BBP
• BU Quality team will create QM notification for the rejected material.
• As per the notification from BU quality team, store keeper will create goods return order.
• BU store manager will approve the goods return order.
• On approval of goods return order, BU store keeper will create Goods Issue for return
delivery and print the material document.
• BU store keeper will send the items back to the vendor.
• If any payment (can be advance as well) is made to vendor, BU finance will book credit
memo against return purchase order.

5.2.1.1.3 Goods Receipt for Material provided by Client (for installation)

Following process will be followed in SAP for creating goods receipt for the material provided by
client.

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RZ_MM_IM_01_03 - Goods Receipt for Material provided by client

Event Create Create

Material Vendor
Start End
Master Master
(RZ_MM_MD (RZ_MM_MD
_01) _02)

Prepare the list of the

materials to be received
from Client

No

Check the material

code in SAP
Project Engineer

Master Data exist ?

Yes

Create Customer
Receipt Order
Manager
Project

Approve Customer
Receipt Order
Store Keeper

Put the material

Create Goods Print Goods
separately in
Receipt Receipt Slip storage location
Customer

Send
materials to
project site

To be process:

• In case of project construction industry, few materials will be supplied by the client for
installation purpose.
• In such cases materials will be received in SAP as non valuated and only for quantity
reconciliation purpose.
• Project Engineer at project site will prepare list of the material to be received from client.
• Once the list of the material is prepared, project engineer will check required master data in
SAP ( i.e material master and vendor master )
• For this process customer will be created as vendor in SAP.
• Once the master data is available, project engineer will create Customer receipt order in
SAP.
• Customer receipt order will be approved by project manager.
• On approval of customer receipt order, project engineer can post goods receipt for the
materials delivered by client.

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• Once goods are issued by client for installation, project engineer will do the visual inspection
of the materials and store keeper will create goods receipt in SAP.
• Once the goods receipt is posted, store keeper will take the print of Goods receipt posted
and acknowledge the receipt of goods.
• Store keeper will keep these goods in storage location separated as material is received is
customer stock.

5.2.1.1.4 Goods Receipt for Excess or Unplanned materials

Following process will be followed in SAP for creating goods receipt for the material received in
excess than the purchase order quantity (above the tolerance level) or which is unplanned.

RZ_MM_IM_01_04 - Goods Receipt for unplanned materials

Event

Start Vendor Delivers End

excess material

Material quantity within Goods Receipt Post goods receipt with

tolerance limit as per Yes Process reference to New purchase
Purchase Order ? (RZ_MM_IM_01_01) order

Excess qty should not

be allowed for
Store Keeper

consumption till new

Purchase order is
Post goods receipt for the Post goods receipt for excess raised in system
Inform Vendor to take Yes
quantity mentioned in quantity of material to block
back the excess
Purchase Order with reference stock without reference to
No quantity of material
to Purchase Order Purchase Order

Yes

Inform requestor to
Cancel goods receipt posted
Inform store create Purchase
Is it Possible to without reference of Purchase
manager about Requisition for excess
No separate Rejected Order
excess delivery of quantity of material
Qty
material

No
Store Manager

Inform the
Inform and check store
with requestor for Keeper
Reject Total Qty
excess delivery of
material

No
Requestor

Inform Create Purchase

Ready to accept
Yes store requisition for excess
excess material ?
manager quantity of material
Management

Communicate to
BU

Approve Purchase store keeper

requisition using SAP
Internal mail
Procurement

Create a New Purchase

Inform
BU

order for excess quantity

store
with reference to Purchase
keeper
requisition

To be process:

• Vendor will deliver the material as per the purchase order.

• In case of discrepancy in quantity of ordered materials where vendor has done over delivery,
Store keeper will check with Stores Manager for accepting over delivery.
• Stores Manager will inform and check with requestor for the excess delivery of material.
• If requestor is not ready to accept the excess qty of material and want to reject.

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• Stores Manager will check with Store keeper if the excess qty can be separated
• If the qty can be separated then Store keeper informs vendor to take back the excess qty
• If the Quantity of excess material cannot be separated, then stores manager will check with
requestor on the acceptance of excess quantity.
• If requestor accepts the excess quantity, he then informs stores manager.
• Storekeeper will post goods receipt for the quantity mentioned in the purchase order
• Storekeeper will post goods receipt for the excess quantity without purchase order
• Excess qty should not be allowed for consumption till new Purchase order is raised in system
• Store keeper then inform requestor to raise a new purchase requisition for the excess
quantity
• Requestor create a new purchase requisition which needs to be approved by Bu
management.
• BU procurement team then need to create a new purchase order with reference to above
purchase requisition
• Store Keeper need to do Goods receipt with respect to new purchase order raised by BU
Procurement for excess quantity.
• Simultaneously Store keeper need to cancel the material document in system which is
posted against without reference to purchase order earlier.

5.2.1.2 Configuration Considerations

• Output determination for Material document needs to be configured.

• New document types will be configured for certain Purchase Order and number range will
be internal.
Document Type Description of Document Type Number Range

Customer Receipt Order 5300000000 - 5399999999

CR

5.2.1.3 Gap Analysis

• Rezayat has requirement to print the details of Goods Receipt Note posted. Standard SAP
format does not suit the requirement of Rezayat. New form needs to be developed as per
the requirement of Rezayat. ( Gap Code: RZ_GP_17)

5.2.1.4 Authorization Considerations

Activity Role Org Elements Transaction Codes
Goods Receipt Store Keeper / Store BU MIGO
Creation / Display Manager

Print Goods Receipt Store Keeper / Store BU MB90

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Activity Role Org Elements Transaction Codes
Note Manager

5.2.2 Material Reservation

With this component, Rezayat can make a request to the warehouse to keep materials ready for
withdrawal at a later date and for a certain purpose. This simplifies and accelerates the goods issue
process. A reservation for goods issue can be requested by various departments for various account
assignment objects (such as cost centre, order, asset, etc.).

5.2.2.1 Scenario Overview

Following are scenarios for which reservation will be made in SAP.

Sr No Mode Of Creation Description

1 Automatic Reservation from project At the time of planning of material in project this
reservation gets generated automatically. So on
arrival of goods, materials can be issued against
this reservation for consumption.

2 Automatic Reservation from Plant This reservation gets generated automatically

Maintenance Order from Plant Maintenance order. On arrival of
materials, materials will be issued to Order
against this reservation.

3 Reservation for stock transfer from This reservation will be created by user, when
Central Store to Project material is required to be transferred from
central store to project site.

4 Reservation for stock transfer from This reservation will be created by user, when
project to Central Store excess material is to be transferred from project
site to central store at the time of project
closure.

5 Reservation for stock transfer from one This reservation will be created by user for
project to other project transferring material from one project to other
project, when other project is having excess
material.

6 Reservation for Material transfer from This reservation will be created by user, when
central store to workshop store material is required to be transferred from
central store to workshop store.

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Sr No Mode Of Creation Description

7 Reservation for Material Issue to Cost This reservation will be created by user for
Center consumable items like stationary; pantry items
etc. to book consumption for certain cost
centers.

5.2.2.1.1 Reservation Creation and approval

Process of reservation will be followed as per the following process flow diagram.

• Requisitioner will identify the requirement of material and create reservation in SAP with
required quantity of the material.
• Approving authority will review reservation and check the need of material. If reservation is
Ok, approving authority will approve reservation.
• If reservation is Not Ok, approving authority will delete reservation.
• Once the reservation gets approved, store keeper will run the report of approved
reservations pending for issue.
• Store keeper will check for the stock of the material in SAP. If stock exists, store keeper will
issue material as per business process number RZ_MM_IM_03.
• If stock of material does not exist, store keeper will consolidate all such requirements and
create purchase requisition as per business process number RZ_MM_PC_01.

5.2.2.2 Configuration Considerations

• NA

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5.2.2.3 Gap Analysis

• Rezayat has requirement for the reservation approval process prior to issue the material.
Standard SAP does not have this functionality. Development is required to satisfy this
requirement. ( Gap Code: RZ_GP_18 )

5.2.2.4 Authorization Considerations

Activity Role Org Elements Transaction Codes
Create / Change / Requisitioner BU MB21 /MB22/ MB23
Display Reservation
Open Reservation Store Keeper BU MB25
Report

5.2.3 Goods Issue

A goods issue (GI) is a good movement with which a material withdrawal or material issue, a
material consumption or a shipment of good to a customer is posted. A good Issue leads to
reduction of the stocks. Material shall be issued to project consumption and various departments.

5.2.3.1 Scenario Overview

Following are the scenarios where goods issue process will be used.

5.2.3.1.1 Goods Issue to Cost Center / Plant Maintenance Order / Project Consumption

Good issue to cost center / plant maintenance order / project consumption will be done in SAP as
per the following process flow diagram.

To be process:

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• In Rezayat, material will be issued for cost center, Plant maintenance order or for project
consumption.
• For all these scenarios common process of goods issue will be followed in SAP.
• Store keeper will run the report of open reservations in SAP.
• If goods issue has to be made against Plant maintenance order, it will be done using 261
movement.
• For goods issue against cost center, 201 movement will be used.
• For goods issue for project, it will be either done using 281 movement or 221 movement.
SAP supports both.
• All goods issue will be done with reference to reservation.
• Store keeper will run the list of approved open reservations in SAP.
• Depending on the stock availability, goods issue document will be posted by store keeper
with reference to approved reservation.
• Once the goods issue is done, store keeper will take print of goods issue slip.
• Store keeper will hand over material to material requestor and get a signature on goods
issue slip for acknowledgement.
• Soft copy of the signed goods issue slip will be attached to goods issue document using DMS.

5.2.3.1.2 Issue tools to employee

Process for issuing tools to employee will be done in SAP as per the process flow diagram shown
below.

• Store keeper will create PRT equipment for tool box or bigger tools in SAP.
• After creation of the equipment of tool box, store keeper will create the equipment bill of
material to represent the list of the tools in a tool box.

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• After creation of Bill of material for the tool box, store keeper will create reservation for
tools either against cost center or project.
• On approval of reservation for the tool box by Store Manager, goods issue for tool box will
be posted by store keeper as per business process number RZ_MM_IM_03_01.
• Store keeper will maintain the PRT equipment number in goods issue document and
maintain the functional location in PRT equipment toolbox as stores.
• Store keeper will maintain the person responsible in PRT equipment tool box as store
keeper.
• Whenever request will come from employee for tool box or a bigger tool, supervisor and
store manager will approve the request out of SAP.
• On approval of request store keeper will issue the tool box to employee and change the
functional location in PRT equipment tool box as either project site or employee.
• Once the details are maintained, store keeper will hand over the tool box to employee.

5.2.3.1.3 Goods Issue for Scraping

Process of scrapping material in SAP will be carried out as per the process flow diagram shown
below.

To be process:

• Initially goods will be transferred to scrapping storage location as per the business process
number RZ_MM_PC_03_05
• Store keeper will verify the materials to be scrapped.
• After verification of the material to be scrapped, store keeper will post goods issue for
scrapping using 551 movement in SAP.
• Once the goods issue is posted, stock of the material will be reduced from SAP.
• Store Keeper will take the print of the material document for record.
• The further process of selling of scrap will be followed as per the business process shown in
Head office SD blue print document.

5.2.3.1.4 Goods Issue for Sub-contracting

Goods will be issued to Sub- contractor as per the process shown in the below process flow chart.

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To be process:

• Initially Sub - Contracting order will be created in SAP.

• Once the purchase order is approved, requisitioner will create outbound delivery note
against the Purchase Order for the components to be issued.
• Requisitioner will email the details of outbound delivery to store keeper.
• Store keeper will update the picking details in outbound delivery and will arrange the
components to send to vendor for subcontracting.
• Store manager will post goods issue against outbound delivery and print delivery report.
• Once the finished product will be sent by the vendor, store keeper will post goods receipt in
SAP as per the business process number RZ_MM_IM_01_01

5.2.3.2 Configuration Considerations

• Output determination needs to be configured for Goods Issue documents.

• New document types will be configured for Purchase Order and number range will be
internal.

Description of Document Type Number Range

Document Type
Sub Contracting Purchase order 4800000000 – 4899999999
SC
Stock transport order for Scrap 5100000000 – 5199999999
SP

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5.2.3.3 Gap Analysis

• Rezayat has requirement to print the details of Goods Issue slip posted. Standard SAP format
does not suit the requirement of Rezayat. New form needs to be developed as per the
requirement of Rezayat. ( Gap Code: RZ_GP_19)

5.2.3.4 Authorization Considerations

Activity Role Org Elements Transaction Codes
Goods Issue Creation / Store Keeper / Store BU MIGO
Display Manager

Print Goods Issue Note Store Keeper / Store BU MB90

Manager

5.2.4 Transfer Posting

During the normal business activity it may be essential to move the material physical from one place
to the other within the same company code, or within the same plant or move it from one stock type
to another or from one material to another. These can be done in SAP by transfer posting.

5.2.4.1 Scenario Overview

Following are the different scenarios in Rezayat for transfer posting.

• Stock transfer from Central Store to Project Store

• Stock transfer from Project to Central Store
• Material transfer from one project to another project.

5.2.4.1.1 Stock Transfer from Central Store to Project Store

Process of Stock transfer will be followed as per the following process flow diagram

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To be process:

• Requirement of material at project site will be recognized by Store Keeper.

• Reservation is the basis for the issue of material at project site
• Store keeper at project site will check the stock overview of central stores in SAP. If the stock
of material is available store keeper at project site will create stock transport order.
• On creation of stock transport order, first it will be approved by project manager and then it
will be approved by store manager of BU main store.
• Once stock transport order is approved, store keeper of BU Main store will post outbound
delivery and arrange to send materials to project site.
• Store keeper of BU main store will create goods issue with reference to outbound delivery.
• Once goods issue is posted from the main store, stock will be shown as stock in transit until
the goods receipt at project site.
• On receiving the material at project site, store keeper of project site will post goods receipt
against stock transport order.

5.2.4.1.2 Stock Transfer from Project Store to Central Store

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Process of Stock transfer will be followed as per the following process flow diagram

To be process:

• Store keeper at project site will identify the materials to be transferred from project stores
to main store.
• Once materials are identified, store keeper will prepare list of the items to be transferred to
main store.
• Project manager will check the list of the materials to be transferred to main store.
• Store keeper of project site will first transfer materials from project stock to normal stock
and create stock transport order.
• Once stock transport order is created it will be approved by project manager first and later
by store manager of main store.
• On approval of stock transport order, store keeper at project site will post outbound delivery
and goods issue with reference to outbound delivery.
• Store keeper at project site will arrange to send the material to main store.
• Stock will be shown in transit until goods receipt is posted at main store.
• On arrival of material at main store, store keeper of main store will post goods receipt as per
business process number RZ_MM_IM_01_01.

5.2.4.1.3 Stock Transfer from one project to another project

Process of Stock transfer will be followed as per the following process flow diagram

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To be process:

• Store keeper at the receiving project will identify the requirement of material and create
stock transport order.
• Project manager of receiving project and supplying project will approve the stock transport
order.
• On approval of the stock transport order, store keeper of supplying project will create
outbound delivery and post goods issue with reference to outbound delivery.
• On posting of the goods issue from the supplying project, stock will be shown as stock in
transit until the receipt at receiving project.
• One arrival of material at receiving project site, store keeper of receiving project site will
post goods receipt.

5.2.4.1.4 Stock Transfer from Central Store to Workshop Store

Process of Stock transfer from central store to workshop store will be followed as per the following
process flow diagram. This process is CTC specific.

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To be process:

• Store keeper at workshop store will analyze the requirement of material

• Store keeper at workshop stores will create a stock transport order in the system
• Work shop manager and stores manager at central stores will approve the stock transport
order
• On approval of the stock transport order, the store keeper of the central stores will create
outbound delivery with respect to stock transport order and post goods issue with reference
to outbound delivery
• On posting of the goods issue from the central stores, stock will be shown as stock in transit
until the receipt at workshop stores
• On arrival of material at work shop stores, store keeper of work shop stores will post goods
receipt

5.2.4.2 Configuration Considerations

• Output determination needs to be configured for the Material Document.

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• New document types will be configured for Purchase Order and number range will be
internal.
Document Type Description of Document Type Number Range

STO Storage Location 5200000000 - 5299999999

SL
STO Plant 4600000000 - 4699999999
UB
Intercompany Purchase order 4700000000 - 4799999999
IC

5.2.4.3 Gap Analysis

• Rezayat has requirement to print the details of Goods Issue slip posted. Standard SAP format
does not suit the requirement of Rezayat. New form needs to be developed as per the
requirement of Rezayat. ( Gap Code: RZ_GP_20)

5.2.4.4 Authorization Considerations

Activity Role Org Elements Transaction Codes
Transfer Posting Store Keeper / Store BU MIGO
Creation / Display Manager

Print Material Transfer Store Keeper / Store BU MB90

Note Manager

5.2.5 Batch Management & Shelf Life Expiration

Batch Management

Batch Management can be defined as tagging a code to the material produced or material procured.
Every batch number has an inventory quantity associated with it. This code in SAP helps in uniquely
identifying a material and the quantity associated with it.
A partial quantity of production or procurement can be tagged with a batch number that clearly
makes that material inventory unique.
The Batch number generated for the material quantity not only helps in uniquely assorting
the material inventory, but it also stores the characteristics values or the product specifications at
the time of its production or procurement. Material should be activated for batch management
Shelf Life Expiration Date

The system calculates the shelf life expiration date the first time a batch is received. It is calculated
from the date of production plus the total shelf life. You specify the date of production when making
the goods receipt posting. If the total shelf life has not been stored in the material master record,
you must enter the shelf life expiration date at this point. The difference between the shelf life
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expiration date and the posting date is the remaining shelf life of the goods received. It must not be
less than the minimum remaining shelf life from the material master record. If it were less, the
system would respond with an error message.
All the perishable materials in Rezayat group will be activated for batch management and shelf life
expiration tracking of each of the food materials.
When the goods receipt for a batch managed material from a Purchase order is posted batch
number needs to be entered before saving the goods receipt. During receipt the shelf life details
should also be entered. These data are stored in the batch after the posting of goods receipt.

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5.2.6 Physical Inventory
Physical Inventory is a business process in which physical stock is matched with book (system) stock.
It is legal requirement to carry out physical inventory at least once in a year.

Physical inventory can be carried out both for a company's own stock (Unrestricted, Quality, Blocked
Stock) and for special stocks (Customer Consignment stock, Vendor consignment stock from vendor,
Returnable packaging). This inventory is carried out separately for both type of stocks.

5.2.6.1 Scenario Overview

Periodic Physical inventory procedure shall be carried out in the system; User will create a physical
verification document in SAP system. Based on the actual physical stock, user shall enter the actual
count of material with reference to the physical verification document number. The counts can be
entered in the system and the differences can be reconciled between physical and book balance.
The required accounting effect is provided through this reconciliation.

5.2.6.1.1 Physical Inventory process

Physical inventory process will be carried in SAP as per the process flow diagram shown below.

To be process:

• Store Manager will identify the requirement of physical inventory.

• Store manager will create physical inventory document for the materials to be counted.
• At the time of creation of physical inventory document store keeper will select the tick for
blocking the goods movement of material so that goods receipt and goods issue of the
materials will be blocked for posting.

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• Store keeper will print the physical inventory document created.
• Store keeper will physical check the material count and write the material count on the
document printed.
• Store keeper will submit the physical inventory document along with the counts entered to
store manager for approval.
• Store manager will review the document and provide the approval on paper.
• Approved physical inventory document counts will be entered by store keeper.
• Finance will review the physical inventory document and post the document in SAP.

5.2.6.2 Configuration Considerations

• Physical inventory document number range will be configured.

• Account determination for physical inventory variance to be configured

5.2.6.3 Gap Analysis

• NA

5.2.6.4 Authorization Considerations

Activity Role Org Elements Transaction Codes

Physical Inventory Store Manager BU MI01 / MI02 / MI03 /

document Creation

Print Physical Store Keeper BU MI21

Inventory Document

Enter Inventory Store Keeper BU MI04/ MI05 / MI06

Count

Post Difference Store Manager BU MI07 / MI20

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6. Invoice Verification

6.1 Scenario Overview

This is the last part of the procurement cycle; the vendor invoice is verified and entered in the
system. System will perform the three way match for invoice verification by comparing the details of
Purchase order and Goods Receipt with Invoice Receipt.

6.2 Business Process Overview

• In Rezayat most of the invoices are submitted to the accounts department.

• Accounts department sends the invoices to the respective authorities for verification
purpose.
• After getting the confirmation from the vendor the bill of the vendor is processed.
• In case the freight vendor is involved for transporting material, separate purchase order is
issued to the freight vendor. As of now the cost of the freight is not loaded on the material.
• While processing invoice of the vendor if any variation found in invoice submitted by Vendor
and Purchase Order, finance department sends the PO to the procurement department for
amendment.

• Any retention or Bank guarantee or Letter of Credit (LC) are checked manually before
making payment to the vendor.
6.3 Business Process Solution

• Rezayat shall use Logistics Invoice Verification (LIV) and no changes in the proposed account
codes shall be carried out.
• Bill Passing or Logistics Invoice Verification shall be GR / Service based Invoice Verification
default. Only in certain exceptional cases like Import PO, the Logistics invoice verification
(LIV) can be PO based.
• The import PO bill passing shall be carried out based on the exchange rate of the posting
date. It is assumed that the Exchange rate conversions will be entered on periodic basis
(daily recommended) to reflect the exact rate on the date of posting. The defaulted rate can
be changed in the Logistics invoice verification (LIV) transaction.

• Invoices presented by the supplier can have variances from the system proposed values. The
user can accept the rate differences by increasing the rate as proposed by the system.
However, system identifies such invoices as having variances and checks for the various
tolerance limits identified in the system.

• If there are any differences between the amount proposed by the system and the actual
amount in the vendor invoice, user can change the amount and post these differences.
• To accept the difference, user shall change the value suggested by the system and Quantity
Changes is not recommended by the system.
• While posting the invoice, the system will post the differences to the stock account if the
material is having the price control as moving average and stock is available. The system also
updates the purchase order history with the changed data. If the stock is unavailable the
differences are posted to the Price difference account.

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• Invoices containing variances within defined tolerance limits shall be accepted by the
system. Invoices exceeding the Tolerances limits shall get blocked for payment.
• The differences arising due to foreign currency exchange rate variation at the time of Invoice
Verification (not Bill Payment) shall get loaded to inventory (if there is sufficient stock
coverage). Foreign Currency Exchange variations can be identified only at the LIV stage. (And
not at GR stage). In case of insufficient stock, the differences will go to Price difference
account.
• Credit note on vendor shall be generated through FI module if Bill has been passed and paid
to the vendor and later the adjustment needs to be paid.

• Credit Memo will be raised when there is a change in quantity and value. If there is only
change in the value we can use subsequent credit or subsequent debit from the vendor. For
more details of the payment process, please refer to FI blueprint.
• When the materials are purchased with two purchase orders, i.e. one is for materials and
the other is for delivery of the material, then refers the purchase order for freight and goes
to material posting tab in invoice receipt to load the freight value to material.
• As per the terms and conditions negotiated with the Vendor, retention amount will be
entered in the header of the purchase order. The retention amount will be considered while
processing invoice of vendor.

Following process will be followed in SAP Materials Management module for Invoice Verification.

Following process will be followed in SAP Finance module for making payment to vendor. This
process is shown here for understanding purpose.

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To be process:

• Vendor will submit the invoice to the Accounts department.

• BU accounts will send the copy of Vendor Invoice to the concern person to check and
confirm.
• Site engineer or requisitioner will check and confirm the vendor invoice to BU finance.
• On confirmation from the concern person, BU accounts will park vendor Invoice in SAP.
• BU accounts will attach the soft copy of Vendor Invoice to the parked Invoice using
Document Management System.

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• Accounts Manager will review the invoice parked and post the invoice in SAP.
• After posting invoice in SAP, BU accounts will make vendor payment as per business process
number explained in Finance Business Blue Print.

6.4 Configuration Considerations

NA

6.5 Gap Analysis

NA

6.6 Authorization Considerations

Activity Role Org Elements Transaction Codes

Park Invoice BU Accounts BU MIR7

Post Invoice Accounts Manager BU MIRO / MRBR

DMS Attachment BU Accounts BU CV01N / CV02N / CV03N

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7. Reports for Purchasing

Following is list reports available in SAP for the requirement of reports by purchasing
Sr Report Availability
Name of report
No
Not Available Need to be developed in
1 Number of Vendors created
ECC
Purchase analysis for direct ME2L ECC
2
suppliers and traders
Total spending by BU, supplier , ME2N ECC
buyer , material , service , buyer
3
group , material group ( category
)
Period in which dealing with ME2N ECC
4
vendor started
Capex vs Expenses spending per ME2N ECC
BU , supplier , buyer , material ,
5
buyer group , material group (
category )
Biggest items ( 70 - 30 ) spending ME2N ECC
6
within BU, by supplier ,
Common supply items across BU's ME2M ECC
7 a) By item
b) By value
Biggest spending with suppliers ME2N ECC
8
within BU
Saving achieved by BU , supplier , Available in BI BI
material , material group (value
and percentage ) , buyer
9 a) Negotiated
b) Market Average
c) Budget
d) Last price brought
10 Number new suppliers by BU Available in BI BI
Best supplier rating by BU , ME65 / ME6B ECC
supplier
a) Number of claims vs Number of
order percentage
b) Quantity claimed vs order
11
quantity percentage
c) Amount compensated against
claim percentage
d) Ordered quantity vs received
quantity
Payment above 90 days ( Supplier ME2L ECC
12
wise )
Realization and reliability report ( ME2M / ME2L / ME2J ECC
13 percentage of booked against
demand )

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Sr Report Availability
Name of report
No
Purchase Order completion rate ( ME2M / ME2S ECC
14
percentage of completed order )
Purchase Requisition ME5A
transformation to Purchase Order
15
rate ( by percentage and
requester )
Purchase Order Status report by ME2M / ME2L / ME2J / ECC
16 BU , supplier , material , service , ME2N / ME2B / ME2S
material group ( category )
17 Payment status report by supplier FBL3N
Approval processing time for each Available in BI BI
18
approval stage
19 Number of high priority orders ME2N ECC
Supplier bid report Available in BI BI
a) Number of the bids
participated by supplier
20 b) Number of bids won by
supplier
c) Number of bids in which
supplier has second ranking
Price trend for a material within Available in BI BI
21
range
Payment terms used by BU for ME2M / ME2L / ME2J / ECC
22 material ,service , material group ME2N / ME2B / ME2S
( category )

Following is the list of the standard reports availability in SAP.

Broad Options available T-code Report
Remarks Used by
level for in SAP area
report
Report
execution

Purchase By delivery ME80FN This report can be Purchase Purchase

order schedule used for displaying
analysis the information of
By purchase order purchase orders
details created and the
transactions that has
taken place.
By purchase order
history

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Broad Options available T-code Report
Remarks Used by
level for in SAP area
report
Report
execution

Purchase By supplier ME2L Facility available to Purchase Purchase

order restrict the viewing
display By material ME2M based on the status of
PO viz. Partly
received,
By buyer Closed, No GR
made
By plant Bill passing not
done , etc.
Analysis of
By Material ME81N Totals analysis Purchase Purchase
order
& Finance
values

By buyer Analysis using

By supplier comparison period
Frequency analysis
Vendor This report can
By Supplier MKVZ Purchase Purchase
master list give you the list of
By Purchase group suppliers

Status of This report can be

By indent ME5A Purchase Purchase
indents used to seek the
By material ME5K information of Stores
status of indent
By buyer
raised, purchase
order number,
goods receipt
Quotations This report is
By suppliers ME4L Purchase Purchase
listing useful to view /
Executive s
By material ME4M extract
information on
By commodity group ME4C
quotations from
supplier in case
the quotations are
invited for a
particular indent

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Broad Options available T-code Report
Remarks Used by
level for in SAP area
report
Report
execution

All Displays all the

SAP1
Standard
SAP Reports Standard report
-- Module available in SAP in
wise each module

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8. Reports for Inventory Management

Name of Report Transaction code Remarks

This report provides you with a list of the
Material document
MB51 material documents which were posted
listing
for one or more materials
The report Accounting documents for
Account document material produces a list containing all
MR51
listing accounting documents available for a
selected material
The stock overview provides you with an
Stock Overview MMBE overview of the current stocks of a
material at all places within plant
This report will help you to analyze
Stock requirement list MD04 material requirement plan considering
stocks and future requirements
This report provides an overview of the
MB52
stock situation of a given material in
MB53
selected plants. If there are multiple
Plant Stock availability MCBA
plants where the same material exists,
MCBE
this report can give the information on
MCBR
stocks at various places
This report provides an overview of the
Expiration date list MB5M
remaining shelf life of batches
The report Stock for posting date lists a
Stock on posting date MB5B company's own stocks in a particular
time period
This report issues a list with all stocks
that are located in a plant's stock in
Stock in transit MB5T transit. This information is useful when
interplant material transfer is taking
place

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Name of Report Transaction code Remarks

The report compares the GR quantities

and values relating to a purchase order
with the invoice quantities and values for
List of GR / IR balances MB5S the same PO. The report can thus be
used to check goods and invoice receipts
when purchasing documents show some
discrepancy

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9. Developments

Following developments are identified at the time of requirement gathering and will be added
further or will be removed as per requirement.

Sr Gap Code Sub Area Description

No

1 RZ_GP_01 Material Master Rezayat has requirement that when material will
be created by BU Procurement, initially it will be
blocked for use. Development will be done so
that on creation of material master, system will
pass fill the field X - plant material status and set
block the material master for all use.

2 RZ_GP_01 Material Master Rezayat has requirement that once material code
is validated and released by central master data
team automatic e-mail notification to be sent to
material creator for information that material is
validated and released. This process is not
possible in standard SAP; customization is
required for this requirement.

3 RZ_GP_03 Material Master Rezayat has requirement to trigger notification

to manager if user changes MRP related data in
material master. This functionality is not
available in standard SAP; customization is
required for this requirement.

4 RZ_GP_04 Service Master Rezayat has requirement that when service code
will be created by BU Procurement, initially it will
be blocked for use. Development will be done so
that on creation of material master, system will
pass fill the field X - plant material status and set
block the material master for all use.

5 RZ_GP_05 Service Master Rezayat has requirement that once service code
is validated and released by central master data
team automatic e-mail notification to be sent to
material creator for information that service
code is validated and released. This process is
not possible in standard SAP; customization is
required for this requirement.

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Sr Gap Code Sub Area Description

No

6 RZ_GP_06 Vendor Master Rezayat has requirement that when Vendor code
will be created by BU Procurement, initially it will
be blocked for use. Group purchasing will first
validate the vendor data and release. Secondly
Group Internal Audit will validate the data and
release. After Internal Audit release Group
finance will check the vendor data and release
the vendor for use. Development will be done for
this requirement so that system will block the
vendor on creation.

7 RZ_GP_07 Vendor Master Rezayat has requirement to enter vendor

category, vendor credit limit, vendor tier and
agencies who have approved vendor (ARAMCO /
SABIC / SEC) in vendor master. These fields will
be entered for information only. Standard SAP
does not have functionality to enter these fields.
Development is required for this requirement

8 RZ_GP_08 Asset Budget check Rezayat requires budget check for Capex
procurement. Requirement of budget check will
be fulfilled referring internal order in Purchase
Requisition. This internal order will be proposed
automatically in Purchase Requisition once the
asset is entered in PR. A custom transaction and
table will be created in SAP. Custom table will be
accessible through custom transaction in which
asset class and internal order combination will
be maintained. System will automatically pass
the internal order number at the time of creation
of Purchase Requisition.

9 RZ_GP_09 MPN Number check Rezayat has requirement that when requisitioner
is creating Purchase Requisition, SAP should not
allow requisitioner to select Manufactures Part
Number. Instead user should enter main
material. A enhancement will be done in the
code so that while creation of Purchase
Requisition system will check the material

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Sr Gap Code Sub Area Description

No

selected and will not allow user to use MPN

material code.

10 RZ_GP_10 Purchase Requisition Rezayat has requirement of printing of Purchase

print Requisition. There is no provision of purchase
requisition in print out in standard SAP. For this
requirement layout of purchase requisition
needs to be developed.

11 RZ_GP_11 Enhancement for RFQ Rezayat has requirement that when individual
approval BU procurement will create RFQ and if RFQ is
beyond the limit of approval of BU, central
sourcing team will approve the RFQ. As per SAP
standard process when RFQ is created, initially it
will not have the price. But to trigger the
approval process on the basis of value RFQ must
have price. In the enhancement the price from
the purchase requisition will be passed to RFQ
line items.

12 RZ_GP_12 RFQ Format RFQ format has to be developed as per the

Rezayat requirement.

13 RZ_GP_13 Quotation Comparison Quotation Comparison Report needs to be

Report developed as per requirement of Rezayat.

14 RZ_GP_14 PO Layout Purchase order layout in standard SAP does not

suit requirement of Rezayat. Development of
new form of purchase order form is required.

15 RZ_GP_15 Notification for the PO Rezayat has requirement to send reminder mail
Approval Pending to top management if purchase order approval is
pending for approval for certain duration of
time. This functionality is not available in
standard SAP; customization is required to fulfill
this requirement

16 RZ_GP_16 Notification to Rezayat has requirement that whenever buyer

Requisitioner for the PO will amend delivery date, quantity and price in
Changes made purchase order; requisitioner should get email

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Sr Gap Code Sub Area Description

No

notifying changes. This functionality is not

available in standard SAP; customization is
required to fulfill this requirement

17 RZ_GP_17 GRN Layout Rezayat has requirement to print the details of

Goods Receipt Note posted. Standard SAP
format does not suit the requirement of Rezayat.
New form needs to be developed as per the
requirement of Rezayat.

18 RZ_GP_18 Reservation Approval Rezayat has requirement for the reservation

process approval process prior to issue the material.
Standard SAP does not have this functionality.
Development is required to satisfy this
requirement.

19 RZ_GP_19 GI Layout Rezayat has requirement to print the details of

Goods Issue slip posted. Standard SAP format
does not suit the requirement of Rezayat. New
form needs to be developed as per the
requirement of Rezayat.

20 RZ_GP_20 Transfer Issue Slip Rezayat has requirement to print the details of
Transfer Issue slip posted. Standard SAP format
does not suit the requirement of Rezayat. New
form needs to be developed as per the
requirement of Rezayat.

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10. Appendix

10.1 List of Symbols

Symbol Description Use

Business Activity / Event: Identifies an

action that either leads into or out of the Does not correspond to a task
scenario, or an outside Process that step in the document
happens during the scenario

Does not generally correspond

to a task step in a document;
instead, it is used to reflect a

Manual Process : Covers a task that is task that is manually

manually done performed, such as unloading a

truck in the warehouse, which
affects the process flow.

Unit Process: Identifies a task that is

Corresponds to a task step in
covered in a step-by-step manner in the
the document
scenario

Process Decision: Identifies a decision /

Does not usually correspond to
branching point, signifying a choice to be
a task step in the document;
made by the end user. Lines represent
Reflects a choice to be made
different choices emerging from
after step execution
different parts of the diamond.

Process Reference: If the scenario Corresponds to a task step in

references another scenario in total, put the document
the scenario number and name here.

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Symbol Description Use

Document Attachment: Indicates the Indicates the attachment of the

attachment of documents. document to unit step.

Flow line (solid): Line indicates the Connects two tasks in a

normal sequence of steps and direction scenario process or a non-step
of flow in the scenario. event

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10.2 Materials Management Integration with Projects Systems (Material Procurement)

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10.3 Materials Management Integration with Project Systems (Service Procurement)

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10.4 Materials Management Integration with Plant Maintenance

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10.5 Finance and controlling integration with Materials Management

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10.6 Glossary

SAP Organizational Description

Unit Terminology

A grouping or combination of legal, organizational, business and/or

Client
administrative units with a common purpose.

Example: a corporate group.

This level represents an independent accounting unit within a

Company code Client. Each company code has its own balance sheet and its own profit and
loss statement.

Example: a subsidiary company, member of a corporate group.

Plant Operational unit within a company code.

Example: production facility, branch office.

An organizational unit responsible for procuring materials or services for

one or more plants and for negotiating general conditions of purchase with
Purchasing
vendors. The purchasing organization assumes legal responsibility for all
Organization
external purchase transactions.

The purchasing organization is further subdivided into purchasing groups

Purchasing group
(buyer groups), which are responsible for day-to-day buying activities.

SAP Terminology Description

A data record containing all the basic information required to manage a

Material Master
material.

Material Group A grouping of materials and services according to their characteristics.

Material Valuation Stock Valuation & accounting depends upon many factors. Some of these

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SAP Terminology Description

factors are controlled through system settings and others are dependent
upon the settings / entries in Master Data. The most significant setting at
the master data level is Material Price Control.

Two types of Material Price Controls are provided by SAP:

• Moving Average Price control “V”

• Standard Price control “S”

This is the unit of measure in which the stocks of a material are managed.

Base Unit of Measure The system converts all quantities entered in other units to the base unit of
measure.

Individual plants/departments may have their own units of measure. For

example, Purchasing may use a different unit than Sales. All units of
Alternative Unit of
Measure measure other than the base unit of measure are referred to as “alternative
units of measure”. The SAP System supports the following alternative units
of measure

Allow a material to be ordered in a unit of measure differing from the base

Order unit unit of measure (stock keeping unit of measure). The order unit is proposed
automatically in purchasing functions, where it can be changed.

Allow a material to be sold in a unit of measure differing from the base unit
Sales Unit of measure (stock keeping unit of measure). The sales unit is proposed
automatically in the sales order, where it can be changed.

Unit of issue is the unit in which the material is issued from the Storage
locations. It allows consumption, stock transfers, transfer postings, and
Unit of issue
physical inventories to be recorded in a unit differing from the base unit of
measure and from the stock keeping unit.

Inventory Management is part of the Materials Management module and is

Inventory
Management (IM) fully integrated in the entire logistics system:

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SAP Terminology Description

As a part of Materials Management, Inventory Management is directly

linked with Material Requirements Planning, Purchasing, and Invoice
Verification. Inventory Management provides information for MRP, which
takes into account not only physical stocks but also planned movements
(requirements, receipts).
During all transactions, Inventory Management accesses both master data
(such as Material Master Data) and transaction data (such as purchasing
documents) shared by all Logistics components.
Inventory management deals with the following tasks:
Management of material stocks on a quantity and value basis
Planning, Entry, and Documentation of all Goods Movements
Carrying out the Physical Inventory
A goods receipt is a goods movement with which the receipt of goods from
a supplier or from production is posted. A goods receipt leads to an increase
in warehouse stock.
Goods receipt (GR)
A goods issue is a goods movement with which a material withdrawal or
material issue, a material consumption, or a shipment of goods to a
customer is posted. A goods issue leads to a reduction in warehouse stock.

A goods issue is a goods movement with which a material withdrawal or

Goods issue (GI) material issue, a material consumption, or a shipment of goods to a
customer is posted. A goods issue leads to a reduction in warehouse stock.

A stock transfer is the removal of material from one storage location and its
Stock transfer (ST) transfer to another storage location. Stock transfers can occur either within
the same plant or between two plants and between different projects.

A transfer posting is a general term for stock transfers and changes in stock
type or stock category of a material. It is irrelevant whether the posting
Transfer posting (TP)
occurs in conjunction with a physical movement or not. Examples of transfer
postings are:
• Transfer posting from material to material

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SAP Terminology Description

• Release from Quality Inspection Stock

• From special stocks like project to own stock
• Unrestricted to Quality Inspection or block stock
Periodic Physical inventory procedure shall be carried out in the system;
User will create a physical verification document in SAP system. Based on
the actual physical stock, user shall enter the actual count of material with
Physical Inventory
(PI) reference to the physical verification document number. The counts can be
entered in the system and the differences can be reconciled between
physical and book balance. The required accounting effect is provided
through this reconciliation.

Consumption-based planning is based on the past consumption values and

uses the forecast or other statistical procedures to determine future
requirements. The procedures in consumption-based planning do not refer
Consumption based to the master production schedule. That is, the net requirements calculation
planning
is not triggered either by planned independent requirements or dependent
requirement. Instead, it is triggered when stock levels fall below a
predefined reorder point or by forecast requirements calculated using past
consumption values.

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