Material Management

(MM)- Procurement

- Organizational Structures -

1
Business Process Integration

Org Data

MM

2
 Integration
Procurement Process
(Procure-to-Pay)

Purchase
Purchase
Requisition
Order

Notify
Vendor

Payment
to Vendor
Vendor
Shipment
Invoice
Receipt
Goods
Receipt

3
 Purchasing Process

• Create Purchase Requisition

– Where analysis/vendor selection occurs
• Create Purchase Order from Requisition
– Requisition items can be used to generate multiple purchase
orders
• Create Goods Receipt
• Create Invoice Receipt
• Post Outgoing Payment

• Unfortunately, there is no purchasing “document flow”

4
 Procurement Process

Internal Purchase Purchase

Demand Requisition Order

Vendor
Goods
Custome

Receipt

Invoice
Receipt
Pay
Invoice
r

5
Procurement Process
(Procure-to-Pay)

Purchase
Purchase
Requisition
Order

Notify
3-Way Vendor
Match
Payment
to Vendor
Vendor
Shipment
Invoice
Receipt
Goods
Receipt

6
 Organizational Data
• A hierarchy in which the organizational units
in an enterprise are arranged according to
tasks and functions
• Are static data and are rarely changed
• The definition of organization units is a
fundamental step, it is a critical factor in how
the company will be structured

7
 Materials Management (MM)

SD FI
Sales and Financial
Distribution Accounting
MM CO
Materials

R/3
Controlling
PPMgmt. AM
Production Fixed Assets
SM Planning Mgmt. EC
Service Client / Server Enterprise
Mgmt.
QM Integrated Business PS
Controlling
Quality
Project
Mgmt.
PM Solution WF System
Plant Maintenance Workflow
HR IS
Human Industry
Resources Solutions

8
 Overview

• Unit Concept
• Purchasing and SAP R/3
• Procurement Process
• Organizational Structures
• Organizational Relationships
• Warehouse Management

9
 Unit Concept
• The purchasing process involves the
acquisition of goods and services to support
the creation of goods and services in the
organization
• In this unit the structure required for the
purchasing process is presented

10
 Purchasing and SAP R/3
• The purchasing process exists in the Materials
Management (MM) module of SAP R/3 and
Finance (FI) module
• The structure includes elements of the Materials
Management (MM) and Finance (FI) modules
• Master data for the purchasing process exists in
the (MM) and (FI) modules
• The purchasing process can and does interface
with the Production Planning (PP), Warehouse
Management (WM), and Quality Management
(QM) modules
11
 Components of Materials
Management

Foreign
Valuation Trade/
Customs
Logistics
Service
Invoice
Master
Materials Verification
Product
Management Purchasing MRP
Catalog
(MM) Material
Service
Entry
Master
Sheet
Inventory Physical
Mgmt. Inventory

12
Procurement Process
(Procure-to-Pay)

Purchase
Purchase
Requisition
Order

Notify
3-Way Vendor
Match
Payment
to Vendor
Vendor
Shipment
Invoice
Receipt
Goods
Receipt

13
 Organizational Structures
• Plant
• Valuation Area
• Storage Locations
• Purchasing Organizations
• Purchasing Groups

14
 Organizational Elements
Plants

 A plant can be a manufacturing facility, distribution center or office.

 At least one plant must be defined.
 A plant is assigned to only one company code.
 to determine the shipping point.

11/01/23 15
 Plant
• Highest unit in MM
• Lowest valuation area
• Organizational level where Material
Requirements (MRP) runs
• Generally used to describe a production site, a
distribution center or centralized warehouse
• May be a physical or logical unit

16
 Valuation Area
• The valuation area determines at which level a
material is valuated (inventory value is
established)
• SAP R/3 allows valuation at the company code
or plant level, but recommends valuation area
be set at the plant level

17
 Organizational Elements
Storage Locations

Plant 00FS

100 200 300

Raw Work in Finished
Material Process Goods
• Storage Locations identify where material is stored. More than
one storage locations can be assigned to a plant to help in
managing material.
11/01/23 18
 Storage Location
• Subdivision of a plant
• Where materials are managed (inventory
management)
– Raw Materials
– Maintenance, Repair, and Other (MRO)
– Finished Product
• May be a physical or logical unit

19
 Organizational Relationships

• Plant/Storage Location

Plant P001

Storage Location Storage Location

10 - Inventory 20 - Quality

20
 Purchasing Organization
• Organizational unit responsible for the
procurement of materials and services.
• SAP requires that purchasing organizations be
assigned at the plant level
• A purchasing organization can be assigned to
more than one plant
• A purchasing organization can be assigned to
a company code

21
 Corporate-group-wide purchasing

Purch. Org.
1000

Company Code Company Code Company Code

1000 2000 3000

Plant Plant Plant Plant Plant Plant

1000 2000 3000 4000 5000 6000

11/01/23 22
 Company-specific purchasing
• A purchasing organization is responsible for
the purchasing activities of just one company
code.
• In this case, you assign a company code to the
purchasing organization. The purchasing
organization may procure only for this
company code. You assign only plants of the
company code concerned to the purchasing
organization.

11/01/23 23
 Company-specific purchasing

Purch. Org. Purch. Org. Purch. Org.

1000 2000 3000

Company Code Company Code Company Code

1000 2000 3000

Plant Plant Plant Plant Plant Plant

1000 2000 3000 4000 5000 6000

11/01/23 24
 Plant-specific purchasing
• A purchasing organization is responsible for
the purchasing activities of only one plant.
• In this case, you assign the plant and the
company code of the plant to the purchasing
organization. The purchasing organization
may procure for this plant only.

11/01/23 25
 Plant-specific purchasing

Purch. Purch. Purch. Purch. Purch. Purch.

Org. Org. Org. Org. Org. Org.
1000 2000 3000 4000 5000 6000

Company Code Company Code Company Code

1000 2000 3000

Plant Plant Plant Plant Plant Plant

1000 2000 3000 4000 5000 6000

11/01/23 26
 Organizational Relationships
• Plant/Purchasing Organization (1)

Plant P001

Purchasing Purchasing
Organization – P001 Organization – P002

One plant – multiple purchasing organizations

27
 Organizational Relationships
(Continued)

• Plant/Purchasing Organization (2)

Plant P001 Plant P002

Purchasing Purchasing
Organization – P001 Organization – P002

Each plant has its own purchasing organization

28
 Organizational Relationships
(Continued)
• Plant/Purchasing Organization (3)

Purchasing
Organization – P001

Plant – P001 Plant – P002

One purchasing organization for multiple plants

29
 Organizational Relationships
(continued)
• Plant/Purchasing Organization (4)

Purchasing
Organization – P001

Company Code Company Code

C001 C002

Plant – P001 Plant – P002

One purchasing organization for multiple company codes

30
 Purchasing Groups
• Organization of buyers into groups
• Usually based on materials
• Used for reporting
• Responsible for specified purchasing activities
• Often used to identify individual buyers

11/01/23 31
 Organizational Relationships

• Purchasing Organization/Purchasing Group

Purchasing
Organization – P001

Purchasing Group Purchasing Group

001 002

32
 Organizational Structure

Company Code
C001

Purchasing
Organization – P001
Plant P001

Purchasing Storage Location Storage Location

10 - Inventory 20 - Quality
Group
001

33
 Unit 4 – Exercises

28. Verify Valuation Area

29. Define Plant (P_ _ _)
30. Define Storage Locations for Inventory and Quality
31. Define Purchasing Organization
32. Create Purchasing Groups
33. Assign Plant to Company Code
34. Assign Purchasing Organization to Company Code
35. Assign Purchasing Organization to Plant
36. Setup Parameter ID

34
 Unit

Materials Management (MM)

- Master Data and Rules -

Business Process Integration

Master
Rules

Data
MM
MM

36
 Master Data
• Master data is relatively fixed
– Material master data
– Vendor master data
– Purchasing information record
– General Ledger master data

• Before making the master data configurations,

you must have completely defined the
organizational structures

37
 Materials Management (MM)

SD
SD FI
Sales
Salesand
and Financial
Distribution
Distribution Accounting
MM MM CO
Materials
Materials Mgmt. Controlling

SM
PP Mgmt.
Production
Planning
R/3 AM
Fixed Assets
Mgmt. EC
Service Client / Server Enterprise
Mgmt.
QM Integrated Business PS
Controlling
Quality
Project
Mgmt.
PM Solution WF System
Plant Maintenance Workflow
HR ISIS
Human Industry
Industry
Resources Solutions
Solution
s

38
 – Overview (Master Data)

• Unit Concept
• Procure-to-Pay Process
• Vendor Master Data
• Purchasing Information Record

39
 Unit Concept
• The purchasing process involves the
acquisition of goods and services to support
the creation of goods and services in the
organization
• Master data and rules required for the
purchasing process is presented

40
Procurement Process
(Procure-to-Pay)

Purchase
Purchase
Requisition
Order

3- Notify
Way Vendor
Matc
Payment h
to Vendor
Vendor
Shipment
Invoice
Receipt
Goods
Receipt

41
 Master Data – General
• Business rules and supportive information are
stored in master data records
• Each master data record is unique in name or
number
• Internal or external number ranges are possible
• Usually created or converted (legacy system) in
the beginning
• Maintained by numerous organizations

42
Master Data – General (continued)
• Vendor master records are maintained by
both accounts payable (A/P) and purchasing
• Material master records are maintained by
purchasing, sales, production, accounting, etc.
• Purchasing information records are
maintained primarily by purchasing

43
 Vendor Master Data
• Master records must be created for every vendor
– Contains centralized data for both MM (Materials Management)
and FI (Financial Accounting)
– Vendor master data can be entered from MM or FI modules, or
centrally
• Vendor Master Data is pulled from database when creating Purchase
Orders
Payment
Vendor Master Data Terms

Accounting Purchasing
Master Master
11/01/23 Records Records 44
 Vendor Master Data
• General Data:
– Client-level data: Applies to all company codes and
purchasing organizations
– Name, address, phone numbers, language
• Company code data
– Accounting data: Currency used, payment terms,
reconciliation account (a vendor is a creditor of the
enterprise)
• Purchasing data
– Data important for purchasing (contact persons, delivery
terms)
– Maintained at purchasing organization level
11/01/23 45
 Partner Roles

• In the procurement process, there may be

different business partners for different
roles in the transaction. These
Ordering Invoicepartner roles
are defined in vendor master
Address data
Presented
By

Vendor

Goods Payment
Supplier Received
11/01/23 By 46
 Vendor Master
Organization of the Data

Da ta :
l
er a
General Data e n
G r ess
Add Pu
r
Da chas
ta ing

Company Code Data

Financial Accounting (FI) Vendor 10001

Purchasing Organization
Data (MM)

47
 Vendor Master Data
• A master record must be created for every
vendor
• General data, Company Code data (Financial
Accounting - FI), and Purchasing Org data
(Material Management - MM)
General data Company code data Purch. org data
Address Account management Purchasing data
Control data Payment Partner functions
Payment transactions
transactions

48
 Vendor Master
• Includes all data necessary for processing
business transactions and corresponding with
vendors
• Information is shared between the accounting
and purchasing departments

49
Vendor Master – Typical Screens
• Address
• Control
• Payment Transactions
• Accounting Information
• Correspondence
• Purchasing Data
• Partner Functions

50
 Vendor Master
General Data – Address

General Data – Address

Address
Vendor Name
Search Term
Street address
City, Region Postal code
Country
Communication
Language
Telephone, Fax, E-Mail

51
 Vendor Master
General Data – Control Data
• Account Control
– Customer
– Authorization
– Trading partner
– Group key
• Tax Information
– Tax codes
– Fiscal address
– Country code
– City code
• Reference Data / Area
– International locator number
– Industry
– Transport zone

52
 Vendor Master
General Data – Payment
Transactions
• Bank Details
– Bank Key
– Bank Account
– Account Holder
– Partner Bank Type

• Payment Transactions
– Alternative Payee
– Instruction Key

53
Vendor Master – Company Code –
Accounting Information
• Accounting Information
– Reconciliation Account
– Sort Key
– Release Group
• Interest Calculation
– Interest Calculation Indication
– Interest Calculation Frequency
• Withholding Tax
– Withholding Tax Code
– Exemption Number
54
 Vendor Master – Company Code
–
Payment Transactions
• Payment Data
– Payment Terms
– Tolerance Group
– Check Double Invoice
– Check Cashing Time

• Automatic Payment Transactions

– Payment Methods
– Alternate Payee
– Payment Block

• Invoice Verification
– Tolerance Group

55
 Vendor Master – Company Code
–
Correspondence Accounting
• Dunning Data
– Dunning Procedure
– Dunning Block
– Dunning Recipient
– Date of Legal Dunning Procedure
• Correspondence
– Local Processing
– Accounting Clerk
– Account With Vendor
56
 Vendor Master – Purch. Org.
Data –
Purchasing Data
• Conditions • Control Data
– Order Currency – Acknowledgement
Required
– Terms of Payment – Returns to Vendor
– Incoterms – Automatic Purchase
– Minimum Order Order
Value • Default Data Material
• Sales Data – Purchasing Group
– Planned Delivery Time
– Salesperson

57
 Vendor Master – Purch. Org.
Data –
Partner Functions
• Partner Functions
– Partner Function
– Partner Name

58
Vendor Master – Purch. Org. Data
– Account Group
• Vendor masters are assigned to a vendor
account group
• Through field status maintenance, vendor
account groups can be setup for one-time
vendors, regional vendors, and internal
vendors
• The vendor account group controls both type
and number range assignment for vendors

59
 Purchasing Info Record
• The purchasing info record provides
continuously updated information about the
relationship of a specific material with a
specific vendor
• Order unit, price, price changes, tolerances,
reminder infos, historic data, statistics, texts
• Choice of automatic or manual updating

60
 Source List
• The source list stores information about
where to acquire a given material for a given
period of time
• It specifies whether this source should be
used by Materials Requirement Planning
(MRP)

61
 – Exercises

59. Vendor Account Groups

60. Create Vendor Master Accounting Record
61. Create Vendor Master Purchasing Record
62. Create Vendor Master Record Centrally
63. Create Vendor Master Record Centrally
64. Create Vendor Master Record Centrally

62
 – Overview (Rules)

• Fiscal Period
• Plant Parameters
• MRP

63
 Rules
• Defines the parameters for Master Data and
Transactions
• Determines functionality for Master Data and
Transactions
• Relatively fixed
• Changes as policy changes

64
 Fiscal Period
• In order to execute any material postings, the
current fiscal period has to be activated
• By initializing the company code for material
management, the first major integration
between Financial Accounting (FI) and
Logistics is completed

65
 Plant Parameters
• Material Requirements Planning (MRP)
controllers
– Individuals responsible for running and
maintaining Material Requirements Planning data
and reports
• Negative stock allowance
– If a material is allowed to go negative for
inventory stock

66
 Plant Parameters – (continued)
• Purchasing
– Special purchasing rules
– External purchasing only settings
• Planned orders
– Rescheduling
– Conversion to purchase requisitions

67
 Plant Parameters – (continued)
• Document number ranges
– Planned orders
– Purchase requisitions
– Material Requirements Planning (MRP) lists
– Reservations

68
 Material Requirements Planning
• Detailed planning level
• Primary Functions
– Monitor inventory stocks
– Determine material needs
• Quantity
• Timing
– Generate purchase or production orders

69
 Materials Requirements Planning
(continued)
• Integrates Production Planning (PP) module
with the Materials Management (MM)
module
• Prerequisites for Materials Requirement
Planning (MRP)
– Activate Material Requirements Planning (MRP)
for a plant
– Material Master created
• Material Requirements Planning view
• Material Requirements Planning type
70
 Material Requirements Planning
Basic Process
• Exploding the Bill of Material (if using
production)
• Netting Out Inventory
• Lot Sizing
• Time-phasing requirements

71
 Material Requirements Planning
Net Requirements
• Material Requirements Planning (MRP)
calculates the quantity of material needed, if
any, based on
– Sales Orders
– Material Reservations
– Repair Parts
– Inventory
– Purchase Orders
– Etc…
72
 Material Requirements Planning
Net Requirements – (continued)
• If adequate inventory is not available to meet
Material Requirements Planning (MRP) needs
then the system generates
– Planned Production Orders
– Planned Purchase Orders

73
 Material Requirements Planning
Lot Sizing
• Static
– Based on fixed values in the Material Master
• Periodic
– Groups net requirements together from multiple
periods
• Optimum
– Calculates the optimum lot size for a several
periods of net requirements

74
Unit 7, Group 2 – Exercises

65. Initialize Fiscal Period for Company Code

66. Maintain Plant Parameters for Material
Management
67. Activate Materials Requirements Planning

75
 Material Master Data
• An advantage of the SAP system is that it maintains one set of
data in real time. Material data is used by many functional
areas. In the SAP system, there is one set of related data for
each material. With non-integrated systems, each system
may contain material data, and this data is not always
consistent. In the SAP system, the data is consistently correct
or incorrect.
• Material Master data is organized by Views. Depending on
the type of material, only certain views need to be used. As
the system is configured, additional views can be added as
necessary.
• Many Material Master views are plant-specific

11/01/23 76
 Material Master Views
• Basic Data 1 • Forecasting
• Basic Data 2 • Work Scheduling
• General Plant Data/Storage 1
• Classification
• General Plant Data/Storage 2
• Sales: Sales Org Data 1 • Warehouse Management 1
• Sales: Sales Org Data 2 • Warehouse Management 2
• Sales: General/Plant Data • Quality Management
• Foreign Trade: Export Data • Accounting 1
• Accounting 2
• Sales Text
• Costing 1
• Purchasing • Costing 2
• MRP 1
• MRP 2
• MRP 3 Basic Data, Classification are
• MRP 4 not plant-specific
Other views are plant-specific
11/01/23 77
 Material Master Views

Basic NRG-A Bars

Data Base unit: CS
View
Gross wt: 72 lb.
Non-plant specific
Plant specific

Plant 1000 Plant 2000

NRG-A Bars MRP NRG-A Bars

Lead Time: 2 days Views Lead Time: 3 days
Std. Price: 244.80 Std. Price: 247.20

11/01/23 78
 Navigating Material Master
Views

Click on tabs to select

Use direction arrows to scroll
Use icon to get list
11/01/23 79
 Material Master Configuration

• Material Master Configuration allows a

company to customize the complicated
Material Master to make it easier for users
to use correctly
• Using Material Master Configuration, users
can
– Control screen sequences and fields
– Control access to screens/views
– Preset organizational level and industry sector
11/01/23 80
 Material Status and Field
Selection
• In addition to Industry Sector and Material Type, Material
Masters can be customized using:
– Material Status: Controls use of material
• Define whether certain functions are allowed for a
material (e.g. create BOM for material) and whether
warning messages are issued
– Field Selection: Suppress, Display, Optional or
Required
• Like Field Status Group/Variant in G/L Accounts

11/01/23 81
 Material Master Configuration

Material Master
Configuration is
complicated

11/01/23 82
 Industry Sector
• Industry Sector determines what industry-specific data
appears in the material master record
• Pre-defined industry sectors include:
– Aerospace and Defense
– Chemical Industry
– Food and Related Products
– Mechanical Engineering
– Pharmaceuticals
– Plant Engineering/Construction
– Retail
– Retailing
– Service Provider

11/01/23 83
 Material Types

• A Material Type is used to classify materials:

– Defines material attributes like:
• Valuation (value of material as market changes)
• Procurement (internal, external or both)
– Controls screen sequence and number assignment
– Can restrict access using authorization groups
– A number of material types are pre-defined
• Abbreviations are abbreviations of German terms
– Users can create their own material types
• Usually best to copy a pre-defined type, then modify
11/01/23 84
 Basic Material Types

• ROH: Raw material

– Externally purchased only, no sales view
– Oats, Wheat Germ, Honey, Cinnamon, etc.
• HALB: Semifinished Product
– No purchase or sales view
– Dough for NRG-A and NRG-B bars
• FERT: Finished Product
– Produced internally, has sales views, no
purchasing views
– NRG-A and NRG-B bars
11/01/23 85
 Other Material Types
• HAWA: Trading Goods
• HIBE: Operating Supplies
• VERP: Customer returnable packaging
• LEER: Empty containers
• KMAT: Configurable material
• ERSA: Spare parts
• DIEN: Services
• NLAG: Non-stock, non-valuated material
• UNBW: Non-valuated, stocked material
• FHMI: Production resources/tools
• WETT: Competitive products
• PROD: Product group
• IBAU: Maintenance assembly
11/01/23 86
 Material Group

• Material groups are another tool to allow

users to control the selection of materials
– Limit analyses to certain material groups
– Control searches in a simpler fashion than
classification

11/01/23 87
 Units of Measure
• A base unit of measure must be identified for each material
master
• Basically a label
• All data entered in Material Master (weight, cost, etc.) is
related to the base unit of measure
• Many standard units of measure are already defined in the
SAP R/3 system
• Alternate units of measure can be defined for different uses
with the appropriate conversion factor
• Base unit of measure should be smallest unit of measure
used anywhere in the system
11/01/23 88
 Units of Measure

1 Pallet = 15 Cases

11/01/23 89
 Pre-defined Units of Measure

11/01/23 90
Documentation in Material Master
• The SAP R/3 system documents all changes to
the material master:

Click for documentation

11/01/23 91
Documentation in Material Master

11/01/23 92
 Purchasing Info Record
• Provides continuously updated information
about the relationship of a specific material
with a specific vendor
• Provides default information for purchase
orders

Material Vendor
Purchasing
Info Record
11/01/23 93
 Purchasing Info Record
• Contains:
– Current price and delivery costs for purchasing
organization or plant
– Number of last purchase order
– Purchase order price history
– Tolerance limits for over/under deliveries
– Planned delivery time for material
– Vendor evaluation data

11/01/23 94
 Purchasing Info Record

• Purchasing info records can be created directly, as we will

do in this class, or can be created automatically when a
purchasing document (e.g. purchase order) is created or
changed.
• The Purchasing Info Record can be updated automatically
from purchase order data if the Info Update indicator is set
in the purchase order.
• Conditions is the SAP term for pricing in purchasing, which
can include discounts, freight costs, surcharges, etc.

11/01/23 95
 Unit 7, Part 3
Overview (Material Master)
• Industry Sector
• Material Type
• Maintenance Features
• Organizational Levels
• Primary Views

© SAP AG - University Alliances and The Rushmore

January 2008 Group, LLC 2008. All rights reserved. 96
 Material Master – Industry Sector
• Records are grouped according to industry
sector and material type
• Determines the industry specific data that will
appear on the master record

© SAP AG - University Alliances and The Rushmore

January 2008 Group, LLC 2008. All rights reserved. 97
 Material Master – Material Type
• Material types group materials with the same
attributes
• Material type information determines:
– What views are maintained
– Whether internal or external procurement is
allowed
– If changes in material quantity are updated
– Which general ledger accounts are updated

© SAP AG - University Alliances and The Rushmore

January 2008 Group, LLC 2008. All rights reserved. 98
 Material Master – Material Types
• Standard material types are used in all
industries.
– ROH: Raw Materials
• Purchased externally only
• No sales view
– HAWA: Trading Goods
• Always purchased externally
• Sold without any change to the material
• No manufacturing views exist

© SAP AG - University Alliances and The Rushmore

January 2008 Group, LLC 2008. All rights reserved. 99
 Material Master – Material Types
(continued)
– FERT: Finished Products
• Are produced internally
• Normally no purchasing views exist

© SAP AG - University Alliances and The Rushmore

January 2008 Group, LLC 2008. All rights reserved. 100
 Material Master
Additional Material Types
• HIBE: Operating Supplies
• VERP: Customer returnable packaging
• LEER:Empty containers
• KMAT: Configurable material
• ERSA: Spare parts
• DIEN: Services

© SAP AG - University Alliances and The Rushmore

January 2008 Group, LLC 2008. All rights reserved. 101
 Material Master
Additional Material Types
• NLAG:
(continued)
Non-stock, non-valuated material
• UNBW: Non-valuated, stocked
material
• FHMI: Production resources/tools
• WETT: Competitive products
• PROD: Product group
• IBAU: Maintenance assembly
(Plant Maintenance)
© SAP AG - University Alliances and The Rushmore
January 2008 Group, LLC 2008. All rights reserved. 102
 Material Master Maintenance
• Defaults - speeds entry of data by using the most
frequently used field values (plant, purchasing
organization, etc.)
• Reference Material - speeds entry of data by
copying data from existing material master
• Profiles - speeds entry of data by copying
standard data created in a profile into a selected
view Materials Requirements Planning (MRP)
• Collective entry of storage location data - speeds
creation of multiple storage locations
© SAP AG - University Alliances and The Rushmore
January 2008 Group, LLC 2008. All rights reserved. 103
 Material Master Data
• Material master data can be related to all
organizational levels
• General information of a material
(description, number, base unit of measure)
– Has to be related to the highest level of
organization - the client

© SAP AG - University Alliances and The Rushmore

January 2008 Group, LLC 2008. All rights reserved. 104
 Material Master – Levels
• Client
– Description
– Units of measure
– Material number
– Engineering data
• Plant
– Planning data
– Manufacturing data
– Purchasing data
© SAP AG - University Alliances and The Rushmore
January 2008 Group, LLC 2008. All rights reserved. 105
 Material Master – Levels
(continued)
• Storage Location
– Stock quantities

© SAP AG - University Alliances and The Rushmore

January 2008 Group, LLC 2008. All rights reserved. 106
 Material Master – Views
• Basic data 1, 2
• Classification
• Sales: sales organization data 1, 2
• Sales: general/plant data
• Sales text
• Purchasing
• Purchase order text
• Forecasting
© SAP AG - University Alliances and The Rushmore
January 2008 Group, LLC 2008. All rights reserved. 107
 Material Master – Views
(continued)
• MRP 1, 2, 3, 4
• Work scheduling
• Storage
• Warehouse management
• Quality management
• Accounting 1, 2
• Costing 1, 2

© SAP AG - University Alliances and The Rushmore

January 2008 Group, LLC 2008. All rights reserved. 108
 Material Master – Material
Management
• Basic Data
hasing
• Purchasing Pur
c
View MR
V ie P 1
• MRP 1,2,3 w

• General Plant Barrel Pen

Data/Storage
• Accounting 1

© SAP AG - University Alliances and The Rushmore

January
Group, LLC 2008. All rights reserved. 109
2008
 Material Master – Basic Data
• General data
– Basic Unit of Measure
• Unit of measure in which stocks of the material are
managed
– Material Group
• Key that you use to group together several materials or
services with the same attributes
– Division
• Used to determine the sales area and the business area
for a material, product, or service

© SAP AG - University Alliances and The Rushmore

January 2008 Group, LLC 2008. All rights reserved. 110
 Material Master – Basic Data
(continued)
• Dimensions/EANs
– Gross weight
• Used to check storage capacity in warehouse
– Net weight
• Weight excluding packaging and extras – this is needed
for sales and distribution
– Weight Unit
• Unit of Measure for weight
– Volume
• The space that the material occupies per unit of
volume

© SAP AG - University Alliances and The Rushmore

January 2008 Group, LLC 2008. All rights reserved. 111
Material Master – Purchasing View
• General Data
– Order Unit
• The unit of measure in which a company purchases the
product
– Purchasing Group
• Key for a buyer or a group of buyers, who is/are
responsible for certain purchasing activities.
• Purchasing Values
– Purchasing Value Key
• Define the reminder days and tolerance limits for
purchasing

© SAP AG - University Alliances and The Rushmore

January 2008 Group, LLC 2008. All rights reserved. 112
 Material Master – Plant
• General Data
Data/Storage 1
– Container Requirements
• Define the regulations that govern which type of container
the material must be stored and shipped in
– Storage Conditions
• Defines the conditions on how a material must be stored or
warehoused
• Shelf Life Data
– Minimum remaining shelf life
• Minimum time the material must keep upon goods receipt
for the goods receipt to be accepted by the system
– Total Shelf Life
• Period of time the material will keep in total, from the date
of production or receipt to the shelf life expiration date
© SAP AG - University Alliances and The Rushmore
January 2008 Group, LLC 2008. All rights reserved. 113
 Material Master – MRP 1
• General Data
– Purchasing Group
• The buyer(s) who are responsible for certain
purchasing activities
• MRP Procedures
– MRP Type
• Determines whether and how the material is planned
– Reorder Point
• If stock falls below this point, the system is flagged to
create a planned order
– MRP Controller
• The person(s) responsible for the material planning
© SAP AG - University Alliances and The Rushmore
January 2008 Group, LLC 2008. All rights reserved. 114
 Material Master – MRP 1
(continued)
• Lot Size Data
– Lot Size
• The lot sizing procedure to calculate the quantity to be
produced or procured
– Minimum Lot Size
• The smallest order quantity
– Fixed Lot Size
• The quantity to be ordered

© SAP AG - University Alliances and The Rushmore

January 2008 Group, LLC 2008. All rights reserved. 115
 Material Master – MRP 2
• Scheduling
– Planned Delivery Time
• Number of calendar days needed to obtain the
material
– Scheduling Margin Key
• Used to determine the floats required for scheduling
• Net Requirement Calculation
– Safety Stock
• Specifies the quantity whose purpose is to satisfy
unexpectedly high demand in the coverage period

© SAP AG - University Alliances and The Rushmore

January 2008 Group, LLC 2008. All rights reserved. 116
 Material Master – MRP 3
• Availability Check
– Specifies whether and how the system checks
availability and generates requirements for
materials planning

© SAP AG - University Alliances and The Rushmore

January 2008 Group, LLC 2008. All rights reserved. 117
 Material Master – Accounting 1
• Current Valuation
– Valuation Class
– Allows the stock values of materials of the same
material type to be posted to different G/L accounts.
– Allows the stock values of materials of different
material types to be posted to the same G/L account.
– Determines together with other factors the G/L
accounts updated for a valuation-relevant transaction
(Material Movements)
– Price Unit
– Number of units to which the price refers

© SAP AG - University Alliances and The Rushmore

January 2008 Group, LLC 2008. All rights reserved. 118
 Material Master – Accounting 1
(continued)
• Current Valuation
– Price Control Indicator
– The price control used to valuate the stock of a
material (e.g, Standard or Moving Average Price)
– Standard Price
– The valuation of material stocks at standard prices
means that all goods movements are valuated at the
same price over an extended period
– Moving Average Price
– The system calculates the moving average price
automatically by dividing the material value in the
stock account by the total of all storage location stocks
in the plant concerned
© SAP AG - University Alliances and The Rushmore
January 2008 Group, LLC 2008. All rights reserved. 119
 Overview (Material Master)

• Industry Sector
• Material Type
• Maintenance Features
• Organizational Levels
• Primary Views

120
 Material Master – Industry Sector
• Records are grouped according to industry
sector and material type
• Determines the industry specific data that will
appear on the master record

121
 Material Master – Material Type
• Material types group materials with the same
attributes
• Material type information determines:
– What views are maintained
– Whether internal or external procurement is
allowed
– If changes in material quantity are updated
– Which general ledger accounts are updated

122
 Material Master – Material Types
• Standard material types are used in all
industries.
– ROH: Raw Materials
• Purchased externally only
• No sales view
– HAWA: Trading Goods
• Always purchased externally
• Sold without any change to the material
• No manufacturing views exist

123
Material Master – Material Types
(continued)
– FERT: Finished Products
• Are produced internally
• Normally no purchasing views exist

124
 Material Master
Additional Material Types
• HIBE: Operating Supplies
• VERP: Customer returnable packaging
• LEER:Empty containers
• KMAT: Configurable material
• ERSA: Spare parts
• DIEN: Services

125
 Material Master
Additional Material Types
• NLAG:
(continued)
Non-stock, non-valuated material
• UNBW: Non-valuated, stocked
material
• FHMI: Production resources/tools
• WETT: Competitive products
• PROD: Product group
• IBAU: Maintenance assembly
(Plant Maintenance)
126
 Material Master Maintenance
• Defaults - speeds entry of data by using the most
frequently used field values (plant, purchasing
organization, etc.)
• Reference Material - speeds entry of data by
copying data from existing material master
• Profiles - speeds entry of data by copying
standard data created in a profile into a selected
view Materials Requirements Planning (MRP)
• Collective entry of storage location data - speeds
creation of multiple storage locations
127
 Material Master Data
• Material master data can be related to all
organizational levels
• General information of a material
(description, number, base unit of measure)
– Has to be related to the highest level of
organization - the client

128
 Material Master – Levels
• Client
– Description
– Units of measure
– Material number
– Engineering data
• Plant
– Planning data
– Manufacturing data
– Purchasing data
129
 Material Master – Levels
(continued)
• Storage Location
– Stock quantities

130
 Material Master – Views
• Basic data 1, 2
• Classification
• Sales: sales organization data 1, 2
• Sales: general/plant data
• Sales text
• Purchasing
• Purchase order text
• Forecasting
131
 Material Master – Views
(continued)
• MRP 1, 2, 3, 4
• Work scheduling
• Storage
• Warehouse management
• Quality management
• Accounting 1, 2
• Costing 1, 2

132
 Material Master – Material
Management
• Basic Data
as ing
ch
• Purchasing Pur
Vie
w MR
Vie P 1
• MRP 1,2,3 w

• General Plant Barrel Pen

Data/Storage
• Accounting 1

133
 Material Master – Basic Data
• General data
– Basic Unit of Measure
• Unit of measure in which stocks of the material are
managed
– Material Group
• Key that you use to group together several materials or
services with the same attributes
– Division
• Used to determine the sales area and the business area
for a material, product, or service

134
 Material Master – Basic Data
(continued)
• Dimensions/EANs
– Gross weight
• Used to check storage capacity in warehouse
– Net weight
• Weight excluding packaging and extras – this is needed
for sales and distribution
– Weight Unit
• Unit of Measure for weight
– Volume
• The space that the material occupies per unit of
volume

135
Material Master – Purchasing View
• General Data
– Order Unit
• The unit of measure in which a company purchases the
product
– Purchasing Group
• Key for a buyer or a group of buyers, who is/are
responsible for certain purchasing activities.
• Purchasing Values
– Purchasing Value Key
• Define the reminder days and tolerance limits for
purchasing

136
 Material Master – Plant
Data/Storage 1
• General Data
– Container Requirements
• Define the regulations that govern which type of container
the material must be stored and shipped in
– Storage Conditions
• Defines the conditions on how a material must be stored or
warehoused
• Shelf Life Data
– Minimum remaining shelf life
• Minimum time the material must keep upon goods receipt
for the goods receipt to be accepted by the system
– Total Shelf Life
• Period of time the material will keep in total, from the date
of production or receipt to the shelf life expiration date

137
 Material Master – MRP 1
• General Data
– Purchasing Group
• The buyer(s) who are responsible for certain
purchasing activities
• MRP Procedures
– MRP Type
• Determines whether and how the material is planned
– Reorder Point
• If stock falls below this point, the system is flagged to
create a planned order
– MRP Controller
• The person(s) responsible for the material planning
138
 Material Master – MRP 1
(continued)
• Lot Size Data
– Lot Size
• The lot sizing procedure to calculate the quantity to be
produced or procured
– Minimum Lot Size
• The smallest order quantity
– Fixed Lot Size
• The quantity to be ordered

139
 Material Master – MRP 2
• Scheduling
– Planned Delivery Time
• Number of calendar days needed to obtain the
material
– Scheduling Margin Key
• Used to determine the floats required for scheduling
• Net Requirement Calculation
– Safety Stock
• Specifies the quantity whose purpose is to satisfy
unexpectedly high demand in the coverage period

140
 Material Master – MRP 3
• Availability Check
– Specifies whether and how the system checks
availability and generates requirements for
materials planning

141
 Material Master – Accounting 1
• Current Valuation
– Valuation Class
– Allows the stock values of materials of the same
material type to be posted to different G/L accounts.
– Allows the stock values of materials of different
material types to be posted to the same G/L account.
– Determines together with other factors the G/L
accounts updated for a valuation-relevant transaction
(Material Movements)
– Price Unit
– Number of units to which the price refers

142
 Material Master – Accounting 1
(continued)
• Current Valuation
– Price Control Indicator
– The price control used to valuate the stock of a
material (e.g, Standard or Moving Average Price)
– Standard Price
– The valuation of material stocks at standard prices
means that all goods movements are valuated at the
same price over an extended period
– Moving Average Price
– The system calculates the moving average price
automatically by dividing the material value in the
stock account by the total of all storage location stocks
in the plant concerned
143
 Review Exercises

68. Define Attribute for Material Types (Set

Updating/Deselect Classification)
69. Create Material Master for Trading Goods
70. (Optional Exercise) Create Material Master for
Operating Supplies

144
 Unit

Materials Management (MM)

- Rules -
Business Process Integration

Rules

MM

146
 Rules
• Defines the parameters for Master Data
and Transactions
• Determines functionality for Master Data
and Transactions
• Relatively fixed
• Changes as policy changes

147
 Materials Management (MM)

SD FI
Sales and Financial
Distribution Accounting
MM CO
Materials Controlling

SM
PPMgmt.
Production
Planning
R/3 AM
Fixed Assets
Mgmt. EC
Service Client / Server Enterprise
Mgmt.
QM Integrated Business PS
Controlling
Quality
Project
Mgmt.
PM Solution WF System
Plant Maintenance Workflow
HR IS
Human Industry
Resources Solutions

148
 Unit 11 – Overview

• Reservations
• Tolerances
– Purchasing
– Goods Receipt
– Invoice Receipt
• Automatic Account Assignment
• Invoice Verification

149
 Controlling Materials
• An ERP system like SAP can help provide important control
functions for material movements.
• Expensive materials can “disappear” from the production
floor
– Special problem in the pharmaceutical industry
• If material is released to the production floor too early, in
addition to disappearing, it may get damaged or misplaced
• Too much material on the production floor makes the
management task more difficult
 Reservations
• A Reservation is a “claim” on material to make sure it is available when
needed.
• A reservation for goods issue can be requested by various departments
for various account assignment objects (such as cost center, production
order, etc.)
• In a reservation, information is stored that is relevant for the goods
issue and materials planning, including:
– What? (which material?)
– How much? (in which quantity?)
– When? (for which requirement date?)
– From where? (from which plant or warehouse?)
– To where? (to which recipient or customer?)
 Reservations
• A request to have a material ready for issue at
a future date for a production order, sales
order, etc.
• The purpose of a reservation is to ensure that
a material is available when required and not
assigned to another use

152
 Days Movement Allowed
• If the requirement date (date when material
needed) of a reservation is further in the
future than the number of days specified here,
no movements of the material are allowed
• Example
– Current date : 06/01/2006
Number of days: 30.
– All material with a requirement date of
07/01/2006 or earlier can be moved
 Retention Period
• If a material reservation is created, but the material is
never used, then the reservation should be removed so
that the material is available for other uses
• The retention period setting
determines how long after
the reservation date system
should wait before deleting
the reservation
(set deletion indicator)
 MM Tolerances
• The SAP R/3 system checks to make sure that data entered in
the MM system are within allowable ranges. For example,
when material that is purchased from a vendor (supplier)
arrives at the loading dock, the quantity should match what
was ordered.
• Small differences should be tolerated as the cost to correct
them is probably greater than the cost of the difference.
• MM Tolerances determine how small is close enough for
various data entries in materials management (MM).
 MM Tolerances
• The SAP R/3 system allows for a number of
tolerances to be set in MM related to:
– Purchase Price
– Purchase Cash Discount
– Goods Receipt Tolerance
• Warning Message (B1)
• Error Message (B2)
– Inventory Receipt
– Numerous tolerances (Tolerance Keys)
 Purchasing Tolerances
• A tolerance limit is set for allowed variance
before a warning/error message is displayed
– Price variance
• Compares the price in the purchase order with the
valuation price stored in the material master
– Maximum cash discount
• This tolerance limit is set to assure that cash discounts
do not exceed allowable discounts

157
 Goods Receipts Tolerances
• Purchase order price quantity – there are two
tolerance levels maintained per item
– The maximum percentage variance before a
goods receipt postings is not allowed
– A percent variance that generates a warning
message but allows posting
• Moving average price variance – the
maximum allowable moving average price
change allowed
158
 Invoice Receipts Tolerances
• Many tolerance limits that can be configured
for invoice receipts: price, quantity, and
blanket purchase orders These tolerances
include:
– Amount for item with or without order reference
– Form small differences automatically
– Percentage Over/Under Quantity Variance
– Exceed amount: quantity variance
– Blanket purchase order – value and time limit
– Price variance
159
 Automatic Account Assignment
• Automatic account assignment is created to
avoid manual postings of financial
transactions which follow goods movements
to reflect the values of transferred materials
• Automatic account assignment is used across
all modules to keep track of the values of
materials that are being consumed (e.g.,
production), or transferred into other
valuation areas of the company

160
 Automatic Account Assignment
(continued)
• Automatic account assignment is a set of
rules and master data which enable the
financial tracking of logistics movement

161
 Automatic Account Assignment
Components
• Components of Automatic Account
Assignment
– Chart of Accounts
– Valuation Grouping Code
– Transaction Key
– Modifier for Transaction Key
– Valuation Class

162
 Automatic Account Assignment
Valuation Grouping Code
• Valuation grouping code - groups valuation
areas together
– Example: valuation area is plant, five plants exist
in the company, all five plants use the same
accounts.
– Multiple valuation groups are possible

163
Automatic Account Assignment
Valuation Grouping Code
Grouping Code Grouping Code
G001 G002

Plant – P001 Plant – P004

Plant – P002 Plant – P005

Plant – P003

164
 Automatic Account Assignment
Transaction Keys
• Transaction Keys
– The transaction keys are used to determine
accounts or posting keys for line items which are
created automatically by the system.
– The transaction keys are defined in the system.

165
 Automatic Account Assignment
Transaction Keys
• Transaction Keys
– Inventory Postings
• BSX
– Offsetting Entry for Inventory Postings
• GBB
– Materials Management Small Differences
• DIF
– Cost (price) differences (PPV)
• PRD
– Goods receipt / inv. receipt clearing acct
• WRX
166
 Automatic Account Assignment
Modifier
• Modifier – modifies the transaction key for
various movement types
– Blank – Goods receipt from purchase order with
account assignment
– VBR – Goods issue to consumption
– VAX – Goods issue to sales – post to cost of
goods sold
– AUF – Goods receipt from a production order –
post to production settlement
– Etc. – Many others
167
Material Types & Valuation Classes
• Account category reference:
– Builds the link between material types and the
valuation class(es)
Material Type Account Category Reference Valuation Class

ROH 0001 – Reference for Raw Materials 3000/3001/3002/3003

HIBE 0002 – Reference for Operating Supplies 3030/3031

HAWA 0005 – Reference for Trading Goods 3100

FERT 0009 – Reference for Finished Products 7920

168
Material Types & Valuation Classes

Valuation Class
3000
(Steel)

Valuation Class
Material Type Acct Cat. Ref
3001
ROH (Raw Material) 0001 – Raw Materials
(Paper)

Valuation Class
3003
(Plastics)

169
 Automatic Account Assignment

Plant P001

Plant P002

Plant P003
Valuation Class Valuation Class Valuation Class
3100 (Trading Good) 3100 (Trading Good) 3100 (Trading Good)

Grouping Code Grouping Code Grouping Code

G000 G000 G001

Goods Movement Goods Movement Goods Movement

GBB (Goods Issue) GBB (Goods Issue) GBB (Goods Issue)

Account Modifier Account Modifier Account Modifier

VBR (Iss. To Cons.) VBR (Iss. To Cons.) VBR (Iss. To Cons.)

Account Account
790000 790001
170
 Automatic Account Assignment
Where Value
What: Where Valued: Why 1: Why 2: is recorded:

Goods Additional Chart of

Material Valuation Area Movement Information Accounts

Represented Valuation Valuation Transaction Account

By: Class Grouping Code Event Key Modifier G/L Account

Points To: Material Type Plant

Where Value
What: Where Valued: Why 1: Why 2: is recorded:
Chart of
Issued to Accounts -
BPEN000 Plant – P001 Good Issue Consumption C000
Represented
By: 3100 G000 GBB VBR 790000

Points To: HAWA Plant – P001

171
 Goods Receipt
• Materials can be received as stock items or
non-stock items
• Receipt is possible from external or internal
sources
• Individually / collectively
• Tolerance limits can be set for goods receipt
• Special movement type for initial inventory
load
172
 Goods Receipt – (continued)
• Stock items can be received into restricted or
unrestricted stock
• Non-stock items are received into orders,
projects, cost centers
• Materials that are usually received into
inventory can also be received into orders,
projects, cost centers

173
 Invoice Verification
• Set parameters for invoice verification
– Quantity, price, receiving date, P/O quantity
– Updates material master if moving average price
– Automatic account assignment for price
differences - if allowed
• Verify actual versus target

174
 3-Way Match
Purchase order
- Target quantity -
- Target price -

Invoice receipt Goods receipt

- Actual price - - Actual quantity -

175
Accounts Payable Settlement
Purchase
Order
Payment
Program
Invoice Debit Credit

Receipt

Verification

Goods
Receipt

176
 Review Exercises

89. Set Default Values for Inventory Management

Reservations
90. Maintain Purchasing Tolerance Limits
91. Maintain Goods Receipt Tolerances
92. Maintain Invoice Receipt Tolerances
93. Set (Review) Valuation Control
94. Assign Valuation Area Grouping
95. Define (Review) Valuation Classes

177
 Review Exercises

96. Configure Automatic Postings for Goods Movement

97. Configure Automatic Postings for Taxes
98. Set Parameters for Invoice Verification
99. Create Default Values for Invoice Verification

178
 Unit

Materials Management (MM)

- Transactions -
Business Process Integration

MM

180
 Transaction Data
• Includes internal and external exchanges that
describe business activities
• Unlike master data, aggregate transactional
data is dynamic – each transaction is unique

181
 Materials Management (MM)

SD FI
Sales and Financial
Distribution Accounting
MM CO
Materials Controlling

SM
PPMgmt.
Production
Planning
R/3 AM
Fixed Assets
Mgmt. EC
Service Client / Server Enterprise
Mgmt.
QM Integrated Business PS
Controlling
Quality
Project
Mgmt.
PM Solution WF System
Plant Maintenance Workflow
HR IS
Human Industry
Resources Solutions

182
Procurement Process
(Procure-to-Pay)

Purchase
Purchase
Requisition
Order

3- Notify
Way Vendor
Matc
Payment h
to Vendor
Vendor
Shipment
Invoice
Receipt
Goods
Receipt

183
 Basic Procurement Process
• Requirements Determination - Purchase
Requisition
• Vendor Selection
• Order Processing - Purchase Order
• Order Tracking
• Goods Receipt and Inventory Management
• Invoice Verification
• Payment
184
 Purchase Requisitions
• Internal document
• Requesting a certain quantity of material or
service on a certain date
• Can be created:
– Manually
– Automatically (Materials Requirements Planning
(MRP), sales orders, etc.)
• Release approval procedures are optional

185
 Purchase Requisitions Sources
• Manually created by user department
– Office supplies
– Projects
– Prototype materials
• Automatically created by
– Planning (Material Requirements Planning (MRP),
Master Production Schedule (MPS))
– Plant Maintenance
– Production Orders
– Sales Orders
186
Purchase Requisitions Processing
• Create purchase requisition (manually or
automatically)
• Determine source of supply
• Release procedure (optional)
• Assign vendor and process

187
 Purchase Requisitions Creating
• Default data for line items
– Delivery dates, plants, purchasing groups, etc.
• Maintain line item data
– Materials, quantities, delivery dates, etc.
• Maintain account assignment (if required)
– Cost center, General Ledger accounts, project
number, etc.
• Check data
• Save

188
 Purchase Orders
• Purchase Orders are:
– A formal request to a vendor to provide materials
or services
– An internal planning and tracking tool
• Purchase Orders identify:
– Vendor
– Material and/or service
– Quantity and price
– Delivery dates
– Terms of payment

189
 Purchase Order Structure
Header
• Header - information specific to the entire
purchase order
– Vendor
– Currency
– Payment terms

190
 Purchase Order Structure
Line Items
• Line item details
– Account assignment
– Delivery schedule
– Materials or services quantity
– Price
– Description
– Item category

191
 Purchase Order
• Request for Quotations
• Purchase Order
• Order Acknowledgment

192
 Purchase Order – Output Format
• Printed and mailed
• E-mail
• Electronic Data Interchange (EDI)
• Faxed (hardcopy or electronic)
• eXtensible Markup Language (XML)

193
 Goods Receipt
• Goods receipt with reference to a purchase
order
– Copy data from purchase order
– Delivery notification
– Invoice verification
– Updates purchase order history
– Inventory update
– Automatic update of General Ledger (G/L)
accounts
194
 Goods Receipt (continued)
• You can search for the purchase order number
with
– Material number, vendor number, etc.

195
 Goods Receipt – Destinations
• Stock - given a storage location, can be posted
to three different stock statuses
– Unrestricted-use
– Quality inspection
– Blocked stock (valuated)
• Consumption - can be assigned a recipient or
unloading point
• Goods receipt for blocked stock - updates
inventory, but material is not valuated
(conditional acceptance)
196
Goods Receipt – Movement Types
• Movement types - stock transactions
– Goods receipt
– Goods issue
– Stock transfer
• Movement type determines which
– Quantity fields are updated
– Stock types are updated
– General Ledger (G/L) stock or consumption accounts are
updated
– Fields are displayed during document entry
197
Goods Receipt – Movement Types
(continued)
• 101 - goods receipt for purchase order into
warehouse/stores
• 102 - reversal of goods receipt for purchase
order into warehouse/stores
• 122 - return delivery to vendor
• 501 - receipt w/o purchase order into
unrestricted-use stock

198
 Goods Receipt – Account Postings
• Inventory account is debited at standard price
• Goods Receipt/Inventory Receipt (GR/IR)
clearing account is credited at purchase order
price
• Price difference account is debited (credited)
with difference between standard price and
purchase order price

199
 Goods Receipt – Effects
• Purchase Order (PO) history and Purchase
Order (PO) updated
• Material Master - stock and value updated
• Notification of goods receipt issued (optional)
• Transfer request to Warehouse Management
system (if active)

200
 Goods Receipt – Effects
(continued)
• Material and financial documents created
and/or updated
• Stock and consumption accounts updated
• Inspection notification in Quality Management
(QM) - if active

201
 Invoice Verification
• Matches the vendor’s invoice to the purchase
order and the goods receipt (3rd part of 3-
way match)
• Matches price and quantity
• Updates the purchase order and its history
• Updates accounting information

202
 Invoice Payment
• Selects invoices for payment based on the
payment terms in the vendor master or
purchase order
• Generates payment for released invoices
• Updates accounting information

203
 3-Way Match for Payment
Purchase
Order
Payment
Program
Invoice Debit Credit

Receipt

Verification

Goods
Receipt

204
 Accounts Payable Settlement
Process
• Determines:
– Open items to be paid
– When they will be paid
– Bank from which payment will be made
– Payment medium
– Who will get paid
• Payment process creates a financial accounting
document to record the transaction

205
 Goods Receipt / Invoice Receipt
Reconciliation Account

Purchase requisition No impact on

Financial Accounting (FI)
Purchase order
Materials Management (MM)
and Financial Accounting (FI)
Goods receipt via automatic account
assignment

Inventory GR / IR
Dr Cr Dr Cr
$100 $100

206
 Goods Receipt / Invoice Receipt
Reconciliation Account

Amount owed is
Invoice receipt assigned and transferred to
vendor account payable

GR / IR Vendor A/P
Dr Cr Dr Cr
$100 $100

207
 Vendor Payment

Amount owed is paid to

Bank vendor and account payable
is reduced

Bank Vendor A/P

Dr Cr Dr Cr

$100 $100

208
 (FI – MM) Integration Points

Goods Invoice Payment

Receipt Receipt Program
AP
Inventory GR / IR (Vendor) Bank
Dr Cr Dr Cr Dr Cr Dr Cr

$100 $100 $100 $100 $100 $100

209
 Automatic Account Assignment

• Debit posting $100 • Credit posting $100

• BSX - inventory • WRX goods receipt
posting to trading posting to GR/IR account
goods inventory 310XXX
account 201XXX

210
 Unit 12 – Exercises

100. Create Purchase Order for Slick Pens

101. Create Purchase Order for Premier Pens
102. Create Purchase Order for Promotions, Ltd.
103. Create Goods Receipts for Purchase Orders
104. Create Invoice Receipts from Vendors
105. Post Payment to Vendors
106. Display Vendor Line Items

211