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Sample- MM Business Blue Print Document for
Chemicals/ Polymers for New Consultants
August 26, 2017 | 2,062 Views |
1.Introduction
1.1 Objective of this report
The report initially gives an overview of the Materials management Module purview along with CIN
and Warehouse Management. This would essentially help in defining the boundaries of the module
and also in identifying the activities to be performed within Materials management Module in SAP.
Subsequently, the report discusses in detail, the proposed coverage of SAP at ZZZ, in terms of
organisational entities and business processes. Each business process has been described with all
the variations. The authorisation requirements would be identified and configured during the
configuration phase.
The industrial market consisting of industrial users of oils who buy the products in bulk on
regular basis. These include private sector as well as public sector companies.
The retail market consisting of small users of oils to whom products are sold through multiple
levels of demand chain (C&F Agents, Dealers and Retailers).
Export market
Transformer oils
Light Liquid Paraffin
Heavy Liquid Paraffin
White Oils
Speciality Oils
Lube Oils with a focus on retail users
ZZZ has about 350 stock keeping units, consisting of Product, Grade, Brand and Pack
size.ZZZ’s business units are:
Head office in BANGALORE
Two factories – HYDERABAD & CALCUTTA
One packing unit at BANGALORE
Five branch offices
About 40 C&F Agents spread all over India.
Inventory Management component of Material management deals with the following tasks:
Logistics Invoice Verification is a part of Materials Management (MM). It is situated at the end of the
logistics supply chain that includes Purchasing, Inventory Management, and Invoice Verification. It is
in Logistics Invoice Verification that incoming invoices are verified in terms of their content, prices,
and arithmetic. 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.
Business Process Scope:
The Materials Management (MM) module will cover the following business processes:
Organization Structure (Related to Materials)
Consumption Based MRP – Planning of material either based on Reorder Point or Forecast based.
Purchase Requisition Processing – Generation of Requisitions for materials and services based on
MRP, Real time (manual), sales order and projects.
RFQ/Quotation Processing – Generation of Request for Quotation (RFQ), Quotation processing and
comparison.
Purchase Order Processing – Creating Purchase Orders (PO) for materials and services with
respect to PR, Quotation, Contracts, direct PO, Stock Transfer Order, Sub-Contracting, Releasing
the PO to vendors.
Inventory Management – Managing material receipt, Issues and transfers in the plants, and Physical
Inventory.
Inventory Valuation – Material Valuation based on moving average price and standard price based
on inventory transactions.
Invoice Verification – Bill passing for the vendors for materials and services, Credit Note.
A Plant can be assigned to several combinations of Sales Organisation and Distribution Channel.
A Plant can have several Shipping Points. A Shipping Point can be assigned to several Plants A
plant has an Address, Language, and Country.
A plant has its own material master data. You can maintain data at plant level for the following views
on a material master record in particular: MRP, Purchasing, Storage, Work scheduling, Production
resources/tools, Forecasting, Quality management, Sales, Accounting and Costing.
The plant plays an important role in Material Valuation, Inventory Management, MRP, Production,
and Costing & Plant Maintenance.
ZZZ Chemicals
Trichy Plant – 1100
Chennai Plant – 1200
Salem Plant – 1300
ZZZ
mohali Plant – 2100
SSSS Plant – 2200
Head Office – 2300
Dependencies
One additional logical plant of Head office has to be created as the procurement activities for ZZZ
chemical and ZZZ polymer is handled centrally from head office.
SSSS Plant 2200 attached to company ZZZ will be used only for managing initial assets and
inventory. Transactions for this plant will not be mapped.
The procurement of administrative and Service items at head office will have to be identified as per
the companies.
All the material stored in the outside locations will have to be identified as per the company code and
will be accounted in one Plant for each company code i.e. Outside Locations
For identification of stock at various Storage Locations and tanks within the storage locations will
done through ware house management.
As materials are stored at A&B and each A&B has its own valuation, the same will be created as
Plants.
A Purchasing Organization can be divided into several purchasing groups that are responsible for
different operational areas. Each purchasing organization has its own –
Purchasing Organisation for ZZZ Group: ZZZ group will have one Central Purchase Organisation
which will be responsible for procurement for ZZZ Chemical and ZZZ Polymers.
ZZZ Group will also have plant wise Decentralised Purchase Organisation to cater miscellaneous
procurement handled independently by each plant.
T001 – Central Purchase Org (handled by Head office)
These purchasing organisations will cater to all the procurement activities required for the plants.
For example all the plant specific raw materials/spares/tools etc. will be bought by the plant
procurement department using the respective purchasing organisation.
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.
H03 – Engineering & capital & consumables purchase – Presently the person responsible
Mr ffffff
P01 – Trichy Plant – Presently the person responsible is Plant Head Trichy
P02 – Salem Plant – Presently the person responsible is Plant Head Salem
P03 – Mangalore Plant – Presently the person responsible is Plant Head Mangalore
P03 – Madras Plant – Presently the person responsible is Plant Head Madras.
S010 Scrap
S014 R&D
S015 TO Godown.
S101 Scrap
S102 Rejected
S213 Scrap
Dependencies
Each plant will have minimum one storage location to monitor inventory related transaction
For ZZZ company
Delhi Plant, A & B Plants, Wind Mill Plants and HO will have one Storage location each
2.1.5 Warehouse
The Warehouse Management (WM) application provides flexible, automated support to assist you in
processing all goods movements and in maintaining current stock inventories in your warehousing
complex.
WM supports warehousing processes by making it possible for you to
Define and manage complex warehousing structures
Optimize material flow using advanced put away and picking techniques
Process goods receipts, goods issues and stock transfers quickly and easily
Assumptions
1. In ZZZ Group Ware House Management will activated only for Tanks in the respective
plants.
2. All the tanks will be created as BIN.
1.Process Architecture
3 Material Master
The material master contains information on all the materials that a company procures or produces,
stores, and sells. It is the company’s central source for retrieving material-specific data. This
information is stored in individual material master records.
Material Management
Production Planning
Sales and Distribution
Accounting and Controlling
Creation of material code is always with reference to the material type for which it is created Material
number generation is at the Level of Material Type.
Each material type will be identified with a different number range series.
Uniform material codification has to be maintained across all the plants of ZZZ
Material code has to be maintained on which CENVAT is allowed as per CIN requirement.
Raw Materials
Stores and Spares
Packing Material
Semi-Finished goods (Intermediate Goods)
Finished goods
Scrap
Trading goods
Engineering for capital goods
Administration
3.1.2 Assumptions
1. ZZZ will follow the external numbering for material codification system.
2. The numbering will be restricted to maximum 6 characters
3. Material Code will unique across all plants
4. Raw material e.g. Base oil will be batch managed
5. Raw Material, Stores and Spares, Packing Material and Trading Goods will have Moving
Average Price (MAP)
6. Semi Finished, Finished and Scraps goods will have Standard Price (SP)
7. If the same material is sourced from local and foreign vendors, it will have a separate code
and valuations
8. Bonded and Ex-bonded material will have a unique code and hence one valuation
9. Each material type will have a valuation class and a G/L A/c linked to it for inventory
postings.
For any entry of UOM other than base unit of measurement, a conversion factor with respect to the
base UOM will have to be maintained. At The material transactions the appropriate conversion will
be carried out. For e.g. base UOM is KG however Issue UOM is L & the Conversion rate is 1kg=2L
then if 100kg of material is issued the stock will be reduced by 200L.The stock overview report can
be seen in both UOM’s.
SAP standard reports provide the information in the Base Unit of Measurement.
The relation between base unit of measure and alternative unit of measure has to be identified
properly and relationship will be unique for the material. The material cannot have multiple values for
an alternative unit of measure with respect to the base unit of measure.
For ZZZ
Domestic Vendors
Import Vendors
Service Vendors
Employees
FI vendors
For advanced licence tracking
3.2.1 Assumptions
1. Vendor numbering will be alpha-numeric linked to Account Groups and the number ranges
will be externally generated with separate no. range assigned to various account groups
2. If a vendor is supplying from multiple location, separate vendor codes shall be created for
each of the vendor location.
3. Dummy Vendors will be created for each of the Advance License. A separate reconciliation
account will be identified for these type of vendors created per advance license
4. The vendors are maintained at company code and purchasing organisation level and cannot
be identified by plant level.
Batch will be at plant level, while transferring the material from one plant to another; same batch
number shall be identified at the receiving plant.
Batches will be identified manually during issue. There will be no batch for SFG. All FG’s except
lubes will be batch managed.
The batches Number will be captured at the time of GRN preparation which will be entered
manually. Batch number can be maintained as vendor wise, make wise, date wise etc. as per
requirement.
ZZZ will use vessel wise batch numbers for imports raw material.
Chapter ID Descriptions
Material Chapter ID combination
Material Assessable values
Modvat determination
Vendor Excise details
Customer Excise details
Excise rates
Exceptional Excise rates
Additional Excise rates
4.Procurement
In SAP the procurement process can be broadly defined as per the eight steps defined below. In
ZZZ the Material requirement planning (MRP) of raw material will be derived based on Bill of
Material of finished goods. The forecast for the finished goods will be indicated in the Sales and
operation planning (SOP). The requirement of the raw material will be net of the available stock,
open purchase order and open purchase requisition.
PR to RFQ/ PO
The user can also create a Manual Requisition for specific requirement and will be created by
authorised personnel.
RFQ’s will be issued to each of the approved vendors for a particular material. Based on the
numbers of vendors the same number of RFQ’s will be issued i.e. A unique RFQ will be issued to
each of the approved vendors for a particular material.
RFQ will be created with reference to the Purchase requisition if it exists as per the PR procedure
earlier defined e.g. PR created manually or through MRP. RFQ’s also will be created without any
reference if no PR exists.
Each individual RFQ created will have Header and Item Information.
Header Information will capture vendor details based on the Vendor Master and General
Information in the form Text.
Item Information will capture the details of the material, the quantity required and delivery
dates.
Purchasing Organisation
Purchase Group
Deadline for Submission of quotation
Material and Quantity
Plant for which the material is required.
All the RFQ issued to different vendors for the procurement of the same material will be identified
with a same and unique collective number. The collective number will be identified by the user as it
will form a base for comparison of quotation from different vendors for the same material
A tracking number also can be identified by the user for each of the RFQ’s for the his operating
convenience
The detail price break up will be identified in the quotation. For e.g. some of the details are stated
below.
Basic Rate
Discount
Packing and Forwarding
Excise Duty
VAT
Freight (Inward and Outward)
Assumptions
The above price break-up will be the form pricing condition in the Price Schema which will be
attached in the Vendor master.
Quotation compare
The quotation compare will be based on the collective number identified in the RFQ. All the RFQ
identified with a unique collective number will be compared. The system will calculate the net
effective price after taking into consideration the secondary elements in the price i.e. Discount,
Freight, packing etc.
The system will consider the taxation during calculate the effective / net price. I.e. The net price will
be net of excise, but the sales tax will not be taken into account.
All quotation comparisons will be on the net landed price. If the user wants to refer the detail pricing
of each quotation, then on the same screen the user will have to click on the quotation and the data
will be furnished.
All the quotations also can be compared with reference to ideal quotation which will have a best
price.
The system will rank the compared quotation based on the landed price.
Based on the RFQ generated in the SAP, the vendor sends his quotation this is captured in the RFQ
made for the vendor in the SAP.
The details of the quote, i.e. the conditions (like Basic price, freight, discounts etc) are keyed into the
system. Quotations received from the various suppliers shall be entered into the system with
reference to RFQ generated in the system. Quotation comparison can be carried out using various
Quotation numbers or using the Collective number.
In SAP the RFQ & Quotations shall have the same number.
The quotation shall be compared based on the pricing conditions entered in the system.
4.3.2 Gaps / Issues Identified and Solutions
The system does not compare the quotations based on payment terms, Inco terms and technical
aspects of the material.
The user will create 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
If purchase order is created with reference the vendor details e.g. Vendor Address, Payment Terms,
Inco terms will be copied from the vendor master.
Purchase Order can also be created with out any reference, in this case the user will have to enter
all the details e.g. Vendor, material, pricing condition etc
Purchase Order will be made by ZZZ Group for those material for which the price is negotiated for
each transaction are subject to change for ever new transaction e.g. Base Oils , Additives etc.
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.
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 posted against PO.
Material and Vendor related Excise and Sales tax details shall be identified using the Tax Code at
the Item level in PO. The tax codes will have to be entered in the PO at the item level and contain
the following information:
Excise Duty
Additional Excise duty
Special Excise duty
Sales Tax applicable / VAT related condition
Surcharges over tax as applicable for a specific region
Turnover tax
The excise duty shall be populated in the PO based on the Excise masters maintained for the
material code in the CIN version of SAP to be entered in the PO at an item level. Excise rate master
and material excise detail has to be maintained for proper excise duty calculation and CENVAT
claim.
The user shall specify the Plant, Purchasing organisation, Purchasing group, Material code, quantity
of the material in the purchase order.
Over delivery tolerances will be maintained in the purchase order as per the requirements for e.g.
imported material 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.
Header text and Item text shall be maintained to communicate the vendor regarding specific terms
and conditions which are specific to the purchase
ZZZ will have the following document types for a purchase order.
The number ranges will be different for each of the above document types and company code this
will help the user identify the Purchase order at a glance.
The system will create a purchase order number which will be system generated and the series of
the number will based on the document type and Company Code which is specified during creation
of the purchase order.
The PO will be amended for quantity as per the receiving plant on the receipt of the material before
the GRN
Condition types for CVD, Cess on CVD, Basic customs duty, Cess on customs duty and ADC will be
percentage based and in foreign currency for which the invoice verification for delivery costs will be
made in INR.
All the condition types will be copied to the new PO from the old PO along with the percentage or
value or quantity based rate.
The unwanted condition types will be deleted from the new PO.
All the secondary cost conditions will be identified in the PO with some vendor as no condition can
be added nor the value can be changed once a GRN is prepared.
Contracts will be prepared on the secondary vendors for transportation, barging, CHA, insurance,
etc and will be only used as reference; no data will be copied from the contract in the PO by the
system.
The secondary vendors will be changed at the time of GRN if different than that identified in the PO.
Importing against Advance License: If the import receipts are against an Advance License where no
Custom Duty and CVD has to be paid, the amount liable against the Custom and CVD conditions will
to be identified against a Dummy Vendor in the PO. This vendor number will be same as AL number,
which will be same as the Advance License Number. For creation of these liabilities, all the duties
and taxes will be identified in the PO (like any normal import PO). This vendor will be credited with
the duty liability and which will be subsequently settled against an income clearing account.
On the sales side, a report will be generated to track exports obligations to help Finance create the
necessary entries.
Basic Price
Discount
Surcharge
Freight
Cess i.e. Market Cess for NMMC
Survey Charges
Insurance
Barging
Clearing and Forwarding
Wharfage
Pricing procedure is a summation of the condition type in a set sequence which helps the
system calculate the net priceThere will two pricing procedure for ZZZ i.e. Local and Imports.
Freight Supplier can be changed at the GRN stage only if the planned delivery conditions
have been identified in PO. However the value of the delivery cost can be changed vat the
time of bill passing only.
Delivery Charges cannot be changed /amended in GRN
Any changes in the value of delivery charges (e.g. freight, Clearing, Insurance) can be
carried out at the time of invoice verification. Thus vendor can be paid based on the actual
invoice amount.
4.4.6 Excise and Sales tax related Details
User shall identify relevant tax codes in PO based on which the Excise Duty and Sales Tax shall be
calculated.
Specific requirement of any department can be booked using the account assigned PO and
identifying a cost centre linked to the department in the PO.
At the time of Goods receipt for such materials, stock of the material will not be updated and
directly the total cost of the procured material shall be debited to an identified account
assignment i.e. cost centre Mechanical, Civil, Electrical or internal order.
Purchase Requisition
Purchase Orders
In case of Purchase Requisitions only Engineering Purchase Requisitions will follow a release
procedure as the engineering specification are to be vetted out.
In case of Purchase Order the entire PO will follow a Release Procedure. Release procedure will be
different for each of the Purchasing Groups as per the person responsible (i.e. Imports, Local,
Service, Admin and Plant Purchases). The entire POs will be finally released by the MD. All types of
PO will have a release procedure including STO.
A statistical GRN will be made in the system causing the following accounting entries:
Dr. Cost of Goods Sold
Cr. GR/IR Account
This entry will eliminate the need for taking the material into stock, making customer delivery and
posting goods issue.
Customer invoice can be raised once the statistical GRN and the invoice verification are posted.
5.Inventory Management
5.1 Material Receipt
A goods receipt is a goods movement with which the receipt of goods from a vendor or from
production is posted. A goods receipt leads to increase of material stock.
Material shall be received at the plants or the delivery address other than the plant identified
in the PO.
In case of Subcontracting PO, the finished goods shall be received at the plants from where
raw material was issued for processing.
Amendments will have to done in the PO, for quantity splitting as per receiving plant and any other
condition if required
The break up of the pricing elements (i.e. freight, Barging, CVD etc) will be copied from the last PO
If the material is received at Outside Storage location, Stock transfer Order will be used to transfer
the material to the manufacturing plant.
Scenario IIA: Goods Receipt for imports at Outside Storage Locations
Preparation of PO
Release of PO
The invoice verification shall be carried out for CVD before the goods receipt of the material
in the system.
Posting of invoice verification for duty charges as delivery costs
The excise invoice (i.e. CVD) shall be captured and posted in CIN.
The GRN shall be prepared with respect to PO.
Posting of part 2 in dummy excise registration
Preparing of Transfer order & confirmation for warehouse
Placing in Bin
Preparation of PO
Release of PO
The invoice verification shall be carried out for CVD before the goods receipt of the material
in the system.
Posting of invoice verification for duty charges as delivery costs
The excise invoice (i.e. CVD) shall be captured and posted in CIN.
The GRN shall be prepared with respect to PO.
Posting of part 2 in respective plants excise registration
Preparing of Transfer order & confirmation for warehouse
Placing in Bin.
Accounting Entry:
Invoice Verification for Custom Duty when material not purchased against Advance License
Dr. Cenvat Clearing Account
Invoice Verification for Custom Duty when material purchased against Advance License.
Dr. Custom Clearing Account
Cr. License Vendor Account (Recon A/c-adv license receivable A/c)
Goods receipt when the material is not purchased against advance License
Dr. Stock Account
Capture Excise Part II when the material is not purchased against advance License
Dr. BED Account
Scenario IIC: Goods Receipt for imports in Manufacturing Plant from Outside Storage
Locations (Stock Transport Order)
Creation of Stock transport order with supplying plant as Outside Storage Location and
receiving Plant as Manufacturing Plant
Creation of Replenishment Delivery
Preparing of Transfer order and Confirmation for warehouse
Creation of Post Good issue to reduce the inventory at Outside Storage Location
Pro-forma Invoice
Excise Invoice at Supplying Plant (i.e. Outside Storage Locations)
Good receipt at Receiving Plant (i.e. Manufacturing Plant)
Preparing of Transfer order and Confirmation for warehouse
Excise Invoice post and capture in receiving plant.
The cycle of local /import GRN holds good for capital materials.
The type of material (Asset) shall be specified while capturing the excise invoice.
The GRN shall be prepared with respect to excise invoice. The system shall update RG23C
Part I after the GRN has been posted.
The excise invoice shall be posted and the system shall pass an entry for claiming 50%
Modvat for the current year updating RG23C Part II. In the subsequent year remaining 50%
Modvat shall be claimed.
The regular GRN cycle holds well for the consumable materials with the exception that
system shall not update the stock of the material.
It shall be assumed that the material is consumed after good receipt no separate goods
issue transaction needs to be carried out.
Goods shall be received in the concerned plant and storage location with respect to
production order. This shall result into converting of stocks from work in progress to semi
finished material or finished good. This shall result into increase of stocks in the storage
location.
Service PO will be created for the repairs to be made along with the charges
The inventory of the asset eg pump or motor will be generated against a non valuated
material code
A transfer posting to the subcontractor stock will be entered in SAP to keep a track of the
stock
The material will be sent out of the gate against a printed copy of Returnable gate pass from
SAP.
On receipt of the repaired asset the transfer posting made earlier will be reversed
Service entry sheet will be posted for the repair charges and the invoice verification will be
done for the same. The GRN for the services will be posted automatically in the background.
Scenario VII: Goods Receipt for Subcontracting Purchase Order and Material received in
Plant and transferred to Subcontractor
Scenario VIII: Goods Receipt for Subcontracting Purchase Order material is directly received
at Subcontractor.
The PO shall be prepared on the subcontractor for the End Product (incoming material)
The components (outgoing material) required for the manufacture of the end product shall be
specified in the PO manually or based on the Bill of Material and will be supplied by ZZZ.
The components shall be issued to the vendor with respect to the subcontracting PO through
transfer posting. This will result in the posting and identification of stocks at the vendor location. The
raw materials can also be received directly at the subcontractor by
posting a GRN for the PO in which the subcontractor has been identified in the delivery
address of the PO.
No Accounting transactions shall take place when stocks (components) are transferred to the
vendor location.
A 57F4 document (Excise Challan) shall be generated and printed (optional) based on the
transfer-posting document in CIN.
On the receipt of the End Product from the vendor (subcontractor) at plant, the GRN shall the
prepared with respect to the subcontracting PO and 57F4 document.
This shall result in the posting of the consumption entries for the components lying at the
vendor location.
The 57F4 document shall be reconciled & completed in CIN after final receipt of the End
Product.
Logistics Invoice Verification shall be carried out for the labour charges for the end product
supplied by the Vendor.
The subcontracting PO shall have the Labour charges as the price component.
5.1.5 Interfaces
Weigh Bridge Interface will be developed to meet the business requirement of identifying the
quantity in weight and volume of the raw materials (e.g. Oils) which are received in Tankers.
The major material transfers that can be carried out in SAP are
Plant to Plant
Storage Location to Storage Location
Stock to Stock i.e. unrestricted to blocked
Batch to Batch
Bin to Bin
Material to Material.
To transfer stock of a material from one storage type to another, you can display the bin stock of the
source storage type (same as with the bin status report). From this display you can select the stock
to be transferred and create the respective transfer orders.
ZZZ will use the bin to bin transfer posting for transferring the material from bonded to ex bonded
location.
The quantity of material in the bonded and the ex bonded location can be reviewed in the bin status
report for the section type bonded or ex bonded.
Return to vendor after good receipt or if the material fails in the production
Return of excess material to stores/storage location from production or cost centre.
The excise duty shall be reversed and gate pass shall be generated using the Excise for other
movement transaction of SAP.
Using the Return PO, user can send many materials back to vendor. However, the return PO will not
refer to any specific GRN or material document.
The excise duty shall be reversed and gate pass shall be generated using the Excise for other
movement transaction of SAP. The user shall manually enter the excise duty.
For vendor returns,
If the bill of the vendor has been passed and later the material is rejected on shop floor, the
vendor liability is not reduced automatically.
At the time of vendor return, system credits the stock account and debits the GR/IR account
but vendor does not get debited automatically.
A separate FI entry needs to be passed in financial accounting system if the vendor is not
providing with the replacement for the rejected material.
If the vendor is replacing the rejected material, create the FI entry for debiting the vendor
liability. Create a new PO for the replacement material and carry out the receipt and bill
passing procedure for the same.
Second route is returning the material without the reference of the original issue document. In this
case material will be posted at moving average price of the material at that point of time. This
procedure can also be used for scrap return and serviceable items from shop floor.
ZZZ can use the material reservation for raw materials, spares and engineering stores materials
related items to take care of non-availability of the material. If the material stock goes below the
reserved quantity, the system will result into generation of Purchase Requisition after running the
MRP, based on the reorder level / material planning norms set in the material master.
The system creates a reservation document, which serves as proof of the request.
In the material master record, total stock and unrestricted-use stock of the material remain
unchanged. Reserved stock is increased by the reserved quantity and can be seen in the
stock overview (MMBE).
In MRP, available stock is reduced by the reserved quantity. This is visible in the current
stock/requirements list (MD04). The reservation causes an entry to be made in the
requirements planning file.
F Note: The procedure of creating the reservation does not mean hard reservation of the material. If
the stock exists for the material, it can be issued to another entity irrespective of the material is
reserved or not, i.e. system does not take into the consideration the priority of the reserved
materials.
By transfer posting however the material may be allocated from unrestricted use stock to
specific sales order or project stocks.
The purpose of reservation is only limited to consider the stocks of the materials for MRP
purpose and create Purchase Requisition for the material to avoid the situation of non-
availability of the material.
All the reservations get automatically closed after the material is issued to the order or
reservation.
All the open reservations for which the materials have not to be issued must be closed
manually.
All the reservations that are created automatically for production order must be closed (if
open material issue exists) during final confirmation of the order.
On periodic basis the open reservations may be closed.
When transferring the raw material, semi finished goods like oil for packing to Mohali; finished goods
to A&B, spares etc. from one plant to another or various depots, the stock transfer order shall be
used.
The requesting plant shall raise the stock transport order on the supplying plant for example, in case
of transfer of oil for packing from Trichy to Chennai; Chennai will raise a Stock Transport Order,
which is a form of a purchase order on Trichy, the material to be transferred using the stock
transport route needs to be maintained in the Sales area view of the plants.
The material shall be transferred at the current valuation rate of the material in the supplying plant.
While transferring the common raw material between the plants, excise will be debited in one plant
and shall be credited in the receiving plant.
TIME PERIOD: The days to be considered for vendor evaluation e.g. 365 or 180 days. The system
shall consider the history data pertaining to last 12 or 6 months from the date of evaluation.
WEIGHTAGE: The weightage to be specified for each evaluation criteria. (Could be equal or
unequal)
E.g. Price: 30
Quality: 20
Delivery: 50
Total: 100 %
Each criterion can have more than one sub criteria
Quantity reliability: 40
Each criteria /sub criteria shall have different scoring pattern based on the deviation of each
criteria/sub criteria from the standard.
99 1
80 20
60 40
40 60
20 80
00 100
-20 80
-40 60
-60 40
-80 20
-100 1
Explanation: a) if the deviation of the actual delivery date and planned delivery date is 80%, the
vendor shall score 20. b) If the deviation of the actual delivery date and planned delivery date is –
40%, the vendor shall score 60.
The max (+/-) Deviation permitted for a material shall be specified in the purchasing value key
configuration. The purchasing value key has to be maintained in the material master e.g. Key A1: 20
days as delivery variance
The A1 key denotes if the vendor delivers a material before/after 20 days from the planned delivery
date then the vendor shall be awarded zero score. If the vendor delivers a material 5 days after
planned delivery date, the score shall be based on the percentage deviation with respect to 20 days
i.e. 5X 100/20 = 25%. The system shall find out from the configuration the nearest value if
percentage deviation for the said criteria and allocate a score. In the mentioned scenario vendor
shall score 80.
To determine a vendor’s price level, the system compares the vendor’s effective price with
the market price for the material.
The system first checks whether the buyer has maintained a market price for the material.
(Special condition record)
If not, the system calculates the market price, which is equal to the average of the effective
prices for all vendors supplying this material. The system then applies the effective price for
the vendor from the conditions.
The vendor’s effective price is then compared with the market price and the percentage
variance determined.
The system then assigns a score to the variance in accordance with the settings made in
Customizing.
The limitation of the vendor evaluation for ‘price’ criteria is that system does not take into
consideration PO price but it always compares material market price with effective price
maintained in the info Record.
When goods are received against a purchase order, the system checks whether the quantity
received are the same as the quantity ordered. If this is not so, the system works out the
difference and converts it into a percentage variance using the following formula:
GR quantity – order quantity / order quantity x 100
The system issues a score for this percentage variance as defined in Customizing.
The new score is then included in the vendor’s previous score for the sub criterion. To
calculate the new score for the sub criterion from the already existing composite score and
this new individual score the system applies the smoothing factor Quantity variance defined
in Customizing.
When user run a new evaluation, the system calculates the average of the individual scores
for all materials to obtain a score for the vendor for adherence to the confirmation date.
delivery quantity % specified in the material master purchasing value key plays an important
role in the evaluation. The min. delivery qty. % signifies that min. qty. to be delivered in the
order for the goods receipt to be included in the evaluation. In this way, user can prevent a
vendor from receiving a good score for a punctual delivery, where the quantity delivered was
insufficient. If this value is not maintained in purchasing value key of material master, the
system shall pick up the average value specified in the customisation irrespective of material
and vendor.
The score for on time delivery shall be calculated as under
At the time of a goods receipt against a purchase order, the system checks whether the
delivery was on time or late:
GR date – delivery date / delivery date = date variance
If the delivery was on time, the system checks whether a minimum delivery quantity is to be
taken into account.
It checks the Minimum delivery quantity/standardising value for delivery time variance from
material indicator.
If the indicator has been selected, it checks whether a value has been maintained in the
material master record:
If a value exists, it is used. If no value exists, the value from the Minimum delivery
percentage field is used. If there no such value in this case either, goods receipts of fractions
of the order quantity are included in the calculation of the score.
If the indicator has not been selected, the value from the Minimum delivery percentage field
is used. If no value exists, goods receipts of fractions of the order quantity are included in the
calculation of the score.
If the minimum delivery quantity is not reached, the system does not determine a score for
the goods receipt.
If the minimum delivery quantity is reached and the delivery date adhered to, the variance is
zero and the system awards the highest points score for the relevant goods receipt.
If the delivery is not on time, the system calculates the date variance in days and converts it
into a percentage variance.
In the process, the system searches for the standardising value as follows:
It checks the Minimum delivery quantity/standardising value for delivery time variance from
material indicator.
The system then awards the score user defined in Customizing for this percentage variance.
The new score is then included in the vendor’s previous score for the sub criterion. To
calculate the new score for the sub criterion from the already existing composite score and
this new individual score the system applies the smoothing factor Date variance defined in
Customizing. When user run a new evaluation, the system calculates the average of the
individual scores for all the materials to obtain a score for the vendor’s on-time delivery
performance.
If a goods receipt covers several schedule lines, the Vendor Evaluation system performs this
calculation for each schedule line.
The score for incoming goods receipt subjected to inspection is calculated as follows:
If a material is subject to incoming inspection, part of the delivered material is checked by the
quality assurance department when goods are received against a purchase order.
An inspection lot is created. After the inspection or testing, the person responsible in Quality
Management then enters a result and makes a decision as to whether the material can be
used. (Usage decision code has a value attached to it. based on which the score will be
calculated. minimum score has to be one)
All the incoming inspection lots are stored in a file with their scores.
When user run an automatic re-evaluation for a vendor, the system selects all the incoming
inspection lots for the vendor that lies within the validity period and calculates the average of
the score.
The result is the vendor’s score for the quality of goods received.
The data required from ZZZ for carrying out vendor evaluation:
Market price for each material and score to be awarded based on the percentage deviation
that shall be considered as a reference for calculating the deviation of the vendor’s average
price for evaluation.
Usage decision codes with the respective quality scores. (Taken care in quality module)
Purchasing value key (material) specifying the maximum deviation permitted for a material in
terms of days and values in terms of percentage of deviation and respective score (please
refer the above mentioned table with the example). Please note that purchasing value key
can have under delivery / over delivery tolerance along with maximum tolerable deviation
allowed for a delivery.
Purchasing value key is used in Material master with each of the Item code.
5.6.1 Assumption
All the criteria’s & sub criteria are with weightage will be finalised on discussion in the configuration
phase. Vendor rating will be calculated for a vendor and purchasing organisation combination
Periodic inventory
Cycle counting
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 same document shall be printed for easy verification.
In case of differences, material can be recounted.
The posting of the differences shall be a separate activity based on which the stocks shall be
reorganised- both quantity and value terms. The posting of differences in the inventory shall
be booked to a separate account code. The posting of differences will be subject to approval
of the higher authority.
Stocks shall be blocked for Posting during Physical inventory process.
Posting Block indicates that no goods movements involving the materials listed in the
physical inventory document can be posted for the duration of a physical inventory count.
User will enter the actual physical stock in the system (MI10) the system will create the PID
and post the difference at the same time in the background. An accounting document will be
generated along with the PID.
indicator set for the materials. The Cycle Counting Method of Physical Inventory allows fast-moving
items to be counted more frequently than slow-moving items.
Regardless of the physical inventory method, the process of physical inventory can be divided into
three phases:
Counting stocks
Entering the result of the count on the physical inventory document printout
6.Excise JV’s
Excise JVs can be used for the following functions:
Scrapping of material,
Posting any difference in excise amount arising out of wrong data entry,
Making adjustment postings for materials not used in Production,
Making adjustment postings for money transferred to PLA and
Making adjustment postings for additional excise paid by vendors.
Adjustment of CENVAT at later date (say disputed matters).
Each plant and A&B shall be identified as excise group in SAP. The excise registers are
maintained at excise group level.
The external locations will be attached to a dummy plant which will have a dummy excise
registration and excise group
Accounting Entries for excise in FI during Scrapping through material write off
Dr. Cenvat clearing A/c
Accounting Entry when liability is more than Cenvat Receivable during utilization
Accounting Entry when liability is less than Cenvat Receivable during utilization
Dr. Cenvat Payable Account
The accounting entries for additional excise through excise JV will be similar to the entries as in the
case of excise entries for GRN of local or import purchase.
The accounting entries for reducing the excess duty posted wrongly through the other adjustment
transaction of excise JV will be same as that of the scrapping entries shown above.
7.Scrap Identification
7.1.1 Process flow
In some cases material gets rejected or becomes useless due to expiry or damage. The scrap shall
be identified as non-valuated material in the system. A separate material code shall be maintained
for each material to be treated as a scrap in the system. Scrap yard or store shall receive scrap, as a
scrap material or from cost centre. Scrap shall be tracked only on quantity basis. Non-stock material
will be brought into stocks just before the sale transaction occurs. In ZZZ such kind of materials can
undergo following treatment
Material is scrapped but can be sold: The sale of scrap will be handled through SD module of
SAP.
Material is destroyed
The material that has to be scrapped will be reduced from the stock using the scrap movement.
Stock will be reduced and the cost of the destroyed material shall be accounted in a special account
code and a cost centre
CENVAT claimed for all such materials will have to be reversed using Excise JV with reference to
the original excise invoice number.
production returns unfit for regular use/ unfit for return to vendor
non salvage sales returns
Customer returns beyond repairs
Inspection sample from QM department
Damaged stocks in warehouse
8.Information System in MM
The following reporting requirements are met directly from standard SAP.
Material shortage report i.e. actual GRN quantity vs. BOE quantity or delivery challan
quantity
Exception Report for overdue quantity i.e. PO for which the delivery date has expired and
open quantity exists
Quotation comparison report with price break-up, payment terms, Inco terms
Outturn i.e. weight report captured at different stages
PO layout
Contract layout
PR status report along with RFQ no, PO no, Release details
Bonded BOE number against Ex bonded BOE number for STO
Stock out report for a period
GRN quantity Vs BOE quantity for a PO with 2% variation in quantity with ED and Ecess
values and the total PO quantity
Control chart report for time tracking for each activity
Returnable Gate Pass
Non Returnable Gate Pass.
9.2.2 Balances
Inventory
I hope this blog well explains Materials Management Business blue Print Document Preparation
when working in Client Projects to New Consultants.
Please find my previous blog post on SAP WM
Sure. We have many documents related to SAP ALE-IDOC for function consultant. Please find
below Link. Hope it is useful.
IDOC
https://blogs.sap.com/2012/12/31/idoc-basics-for-functional-consultants/
https://wiki.scn.sap.com/wiki/display/ABAP/ALE%2CIDOC
https://help.sap.com/saphelp_46c/helpdata/en/15/3cf334c20ccc52e10000009b38f83b/frameset.htm
?current_toc=/en/19/3cf334c20ccc52e10000009b38f83b/plain.htm&show_children=true
https://wiki.scn.sap.com/wiki/display/ABAP/7+Steps+For+ALE+Configuration
https://wiki.scn.sap.com/wiki/display/ABAP/Handling+Idoc+Acknowledgements
https://wiki.scn.sap.com/wiki/display/ABAP/Outbound+Idoc+Through+ALE
https://wiki.scn.sap.com/wiki/display/ABAP/IDOC+Steps
https://wiki.scn.sap.com/wiki/display/ABAP/Modify+IDOC+Status+by+Program
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