SAP MM Organizational Levels in Procurement Process

SAP MM Organizational Levels in Procurement Process

In SAP system organizational levels are structures that represent the organization views of a company. We can describe levels as given below:

• Client 
• Company code 
• Plant 
• Storage location 
• Purchasing Organization

Client

The Client is the highest hierarchical level unit within a SAP system. We can say that it represents an Enterprise. We can also say that within this Enterprise, there might be more than 1 companies, which leads us to the next level, Company Code. It is represented in the system by a 3-digit numeric key.

Company Code

A Company Code is the organizational unit that allows you to structure your enterprise from a financial accounting perspective. It represents an independent unit producing its very own balance sheet, e.g a company within an Enterprise (Client). It is represented in the system by a 4-character alphanumeric key. This includes the entry of all events that require posting to the accounts and the creation of a complete audit trail for balance sheets and profit and loss statements. A company code represents an independent unit producing its own balance sheet, for example, a company within a corporate group (client).

Plant

The plant is an organizational unit where Operations are concerned. When I say operations, I mean Production, Procurement, Materials Planning and Maintenance locations. It is represented in the system by a 4-character alphanumeric key.

Storage location

The storage location is an organizational unit where we differentiate stocks of materials within a warehouse/plant. If further breakdown is required, we can use Storage Bins. It is represented in the system by a 4-character alphanumeric key.

Purchasing Group

Purchasing Group is a key to identify a buyer or a group of buyers responsible for a particular type of purchase. It is however not related to other units in the company structure.

Purchasing Organization

A Purchasing Organization is a unit which is responsible for the procurement of services/materials, and condition negotiations with vendors.

For SAP ERP Training or SAP Organizational Levels in Procurement Process Module Training please visit the links. 

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MM Inventory Management

Inventory Management 

Inventory Management in SAP (SAP MM-MI) deals with goods. Actually the process of Procurement starts with collecting the business requirement for goods and goes to getting the goods from Vendors in SAP MM.

Once received; Goods have to be place on premise of the company in order to be accessible for consumption or reselling. Here Inventory Management helps dealing with Goods Placement and management of SAP Stocks

The key points about inventory management are as follows:

• Inventory management deals with management of stock either on value or quantity basis.
• Planning, entry and keeping records of all goods movement comes under inventory management.
• Goods movement will create a document that will update all stock quantity and value in inventory that is known as material document.
• Material document will be referred by a document number and document year.

Inventory management deal with the following terms which are as follows:

• Movement Type
• Goods Receipt
• Reservation
• Goods Issue

Movement Type:

Movement type describes the type of stock posting in inventory. It represents the posting in stock is due to which type of order like whether stock is posted against goods receipt or goods issue.

Goods Receipt:

Goods receipt is the phase in which the material is received by the ordering party and the condition and quality are verified. Depending upon the movement type stock is posted in inventory with the help of goods receipt. Goods receipt will show increase in warehouse stock.

Reservation:
Sometimes, stock need to be blocked in advance so that it can be available at a particular point of time. This is known as reservation. Reservation ensures that stock is available and it can be used when required. Reserved quantity can be viewed by TCode MMBE. Provide the material number and plant.

Goods Issue:
Goods issue means moving stock out of inventory that may be due to several reasons like withdrawing of material for sampling or returning the goods back to vendor. So, goods issue will result in decrease in quantity in warehouse.

For SAP  ERP Training or SAP Inventory  Management  Module Training please visit the links.

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SAP MM Master Data

What is Master Data?

Master data is the core data that is used as a base for any transaction. If you are producing, transferring stock, selling, purchasing, doing physical inventory, whatever your activity may be, it requires certain master data to be maintained.                                                                                      Example of Master Data

• Material master data 
• Customer master data 
• Vendor master data
• Pricing/conditions master data 
• Warehouse management master data (storage bin master data).

Material master data:

Material master data, the basic details on materials an enterprise procures externally or produces in-house. The unit of measure and the description of a material are examples of the data stored in a material master record. Other SAP Logistics components also access the material data.

The material master database (often referred to simply as the “material master“, and comprising all the individual material master records stored in the system) contains descriptions of all materials that an enterprise procures, produces, and keeps in stock. It is the central repository of information on materials (such as inventory levels) for the enterprise.

The integration of all material data in a single materials database eliminates the problem of data redundancy and permits the data to be used not only by Purchasing, but by other applications (such as Inventory Management, Materials Planning and Control, Invoice Verification, and so on).

Vendor master data                                                                                                                          called as Information about external suppliers. The vendor’s name and, the currency the vendor uses, and the vendor number (stored in the SAP system as an account number) are typical vendor data.

The vendor master database contains information about the vendors that supply an enterprise. It consists of a large number of individual vendor master records, each containing the relevant vendor’s name and address as well as data such as:

• The currency used for ordering from the vendor
• Terms of payment
• Names of important contact persons (sales staff)

In Accounting, the vendor represents an account payable, the vendor master record also contains accounting information, such as the relevant control account (reconciliation account) in the general book keeping system.

For SAP ERP Training or SAP Master Data Module Training please visit the links.

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SAP MM Procurement Process (Procure to Pay)

SAP Procurement Process (Procure to Pay)
Procure to Pay: is an integral part of any business. Businesses need to procure material and or services, this procurement can be in-house (internal) or from external source. In this session we will be taking a look at external procurement.
The procurement process cycle is triggered by requirements either from MRP or Request of the material or service from a business process, followed by vendor selection, purchase order, receipt of goods, vendor payment.

Purchase Orders (PO)

Purchase Order is a legal and confirmed document between the organization and the vendor or supplier for procurement of material and or services. The document contains the vendor information, material or service required, quantity, price per unit, date of delivery.

Goods Receipt (GR)

Based on Purchase Order, the goods shipped by vendor ships are recorded in the system and the process is termed as goods receipt (GR). 

When goods receipts are posted against a purchase order, the quantity & value of inventory is affected and at the same time a liability towards the vendor is created.

Invoice Verification & Vendor Payment

On receipt of goods against a purchase order, the vendor presents an invoice for payment of delivery of goods or services rendered. The invoice received is posted in the system and on verification of the invoice against the purchase order, accounts payable will release the payment to vendor.

For SAP ERP Training or SAP Procurement Process Module Training please visit the links.

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