Lesson 1-Materials Management
Lesson 1-Materials Management
Presented by
Tripta Nair
Definition
Materials Management can be defined as that
function of business that is responsible for the
coordination of planning, sourcing,
purchasing, moving, storing and controlling
materials in an optimum manner so as to
provide service to the customer, at a pre-
decided level at a minimum cost.
Interlinked Sub Functions
• Materials planning and control
• Purchasing
• Stores
Materials planning and control
• Sales Forecasts and
• Production Plans
Purchasing
• To provide materials to user Departments
based on 5 R’s of Materials Management
– of the right quality
– in the right quantity
– at the right time
– from the right source
– at the right price
Stores
• Physical Control
• Preservation ,
• Minimization of damage
• Efficient handling,
• Maintenance of records,
• Proper locations and
• Stocking.
Inventory control
Setting inventory levels, doing various analyses
such as :
• ABC analysis ,
• Fixing economic order quantities (EOQ),
• Setting safety stock levels,
• Lead time analysis and
• Reporting.
Lifecycle of Procurement
• Requirement and Information Gathering
• Supplier Contact
• Background Review
• Negotiation
• Order fulfillment
• Consumption, Maintenance and Disposal
• Contract Renewal
Basic Procurement Activities
Types of Procurement
Stock/Consumables One Time
Basic Procurement
External/Internal Contracts
Scheduling
Consignment
Agreements
Types of
Procurement
Third Party
Pipeline
Special Procurement
Returnable
Transport Stock
Subcontracting
Mas
ter
Org
Data
Dat
s
Rule
a
FI FI
M FI M
M M M
SD M SD
SD
SAP Enterprise System
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
SAP Enterprise System
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
SAP Enterprise System
Rules
• Defines the parameters for Master Data and
Transactions
• Determines functionality for Master Data and
Transactions
• Relatively fixed
• Changes as policy changes
SAP Enterprise System
Transaction Data
• Includes internal and external exchanges that
describe business activities
• Unlike master data, aggregate transactional
data is dynamic – each transaction is unique
Types of Data in SAP System
Organizational Master Data Rules Transaction Data
Data
- Organizational Structures -
Materials Management (MM)
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
Materials Management (MM) Integration
Purchasing
• The purchasing process exists in the Materials
Management (MM) module 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
Materials Management (MM)
M
M
Financial Accounting (FI)
Client
• Highest hierarchical
level in an SAP
environment
• A complete database
containing all the tables
necessary for creating a
fully integrated
information system
• Master records are
created at the client
level
• Tcode : SCC4
• Table: T000
Financial Accounting (FI)
Company
• Consolidated financial
statements are created at
the company level
• A company can include one
or more company codes
• All company codes must
use the same chart of
accounts and fiscal year
• Company is not required in
the definition of an
enterprise (optional)
• Table:T880
Financial Accounting (FI)
Company Code
• A legally independent entity
• The smallest organizational
unit for which accounting
can be carried out
• Business transactions are
processed at this level
• Accounts are managed at
this level
• Legal financial statements,
such as the balance sheet
and the income statement,
are generated at this level
using the General Ledger
balances
• Table : T001
Financial Accounting (FI)
Client
Company
Company
Code
Materials Management (MM) Integration
Organizational Structures
• Plant
• Valuation Area
• Storage Locations
• Purchasing Organizations
• Purchasing Groups
Materials Management (MM) Integration
Plant
• Lowest valuation area
• Organizational level where Material Requirements (MRP) runs
• Plant in SAP is a physical location of company, where the finished
goods are stored for easy distributing the goods to the customers.
• May be a physical or logical unit
• Generally used to describe a production site, a distribution center or
centralized warehouse
• Depending upon the usage, you can define 4 types of plants:
– Production Plant: Where the production facility available
– Inventory Plant: Where the stock of materials are managed
– Maintenance Plant: Where the maintenance of goods take place.
– Distribution Plant :
• Table Name :T001W
Plant
Materials Management (MM) Integration
Valuation Area
• The valuation area determines at which level a
material is valuated (inventory value is established)
• SAP allows valuation at the company code or plant
level, but recommends valuation area be set at the
plant level
Materials Management (MM)
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
• Table Name: T001L
Storage Location
Materials Management (MM)
Organizational Relationships
• Plant/Storage Location
Plant DL00
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
• Table : T024E
Purchasing Organization
Back - End
Front - End
Materials Management (MM)
Organizational Relationships
• Plant/Purchasing Organization (1)
Plant DL00
Purchasing Purchasing
Organization – P001 Organization – P002
Organizational Relationships
(continued)
• Plant/Purchasing Organization (2)
Purchasing Purchasing
Organization – P001 Organization – P002
Organizational Relationships
(continued)
• Plant/Purchasing Organization (3)
Purchasing
Organization – P001
Organizational Relationships
(continued)
• Plant/Purchasing Organization (4)
Purchasing
Organization – P001
Purchasing Group
• Responsible for specified purchasing activities
• Often used to identify individual buyers
• Used for reporting
• Table Name : T024 (Back-End)
Front - End
Materials Management (MM)
Organizational Relationships
• Purchasing Organization/Purchasing
Group
Purchasing
Organization – P001
purchasing group MG 1, 4
purchasing group MG 2, 5
purchasing group MG 6
plant
purchasing group MG 7, 8, 9
Inventory Management with a Warehouse
Management System
client 0001
0001––ABC
ABCinc.
inc.
Organizational Structure
Company Code
C001
Purchasing
Plant P001
Organization – P001