The Procurement
Process (MM)
Introduction

The procurement process involves purchasing
goods from vendors through an internal
purchasing organization

These goods might be used





for resale
in a manufacturing process
as packaging
Goods are received into inventory
Invoices are verified
SAP Process Diagram
Materials Management Tasks







Vendor management
Purchasing
Physical inventory
 Inventory management (quantities)
 Inventory valuation
Invoice verification
Materials management (MM)
MRP
Product catalogs
Vendors (Introduction)

Vendors sell goods to us


Some information is pertinent to the company
Some applies only to a particular purchasing
organization
Vendors (Configuration)

Vendor information is divided into three
categories



General data
(applicable to the client)
Company code
(accounting) data
Purchasing data
(applicable to the
purchasing organization)
Vendor Data (Taxonomy)

Client data (LFA1)




Client / Account number keys
Contains name and address information
One-time account indicator
Contains the account group (KT0KK)

The vendor account group controls the
transaction types possible with the vendor
Vendor Data (Taxonomy)

Company code (LFB1)

Client / Account number / Company code keys



Reconciliation and bank account information
(accounting segment)
Co/Cd gives us the link to our G/L
Link to GL recon account (AKONT)
Vendor Data (Taxonomy)

Purchasing organization (LFM1)



Client / Account number / Purchasing
Organization keys
Sales person name
Currency of purchase order
Vendor (Account Group)

Every vendor is assigned to an account group


The account group defines which partner
functions are allowed
Partner functions for a
vendor
Partner Functions (Illustration)
Organizational Structure (1)

Purchasing Organization (PO)





An organizational unit in logistics
Manages the buying activities for a plant
Procures services and materials
A purchasing organization can be responsible for
many plants
Purchasing group

Group of buyers within a PO responsible for
certain activities
Organizational Structure (2)

Purchasing can be centralized or
decentralized



Centralized (one purchasing organization for
many plants)
Decentralized (many purchasing organizations)
Global bikes has a hybrid purchasing
organization

Global / US / DE
Purchasing Organizations
(GBI)
Organizational Structure
(Plants)

In plants, we make things or store things



A plant has a purchasing organization assigned to
it
There is a hierarchical relationship between the
following
A client has one or more plants (T001W)



A plant has one or more storage locations T001L
where goods are stored (logical or physical)
A plant belongs to a valuation area (T001K)
(where goods are valued)
A plant belongs to a purchasing organization
Plant Table T001W
• Global Bike has 5 plants
• Each plant is assigned a purchasing organization
Storage Location Table T001L
• Global Bike
uses logical
storage
locations
Valuation Table



Plants belong to a valuation area
A valuation area belongs to a company code
So materials can be valued at the plant or
company code level
GBI Organizational Structure
Materials Introduction

Materials are the things we buy from vendors





Supplies that we consume internally
Trading goods that we buy and resell
Raw materials that we use in production
Semi-finished goods that we make from raw
materials and use in the production of finished
goods
Finished goods that we make and sell using raw
materials and semi-finished goods
Material Types


SAP predefines several material types
A material’s type dictates what can be done
with the material
Material Types (Configuration)

Material types are configured through the
IMG (OMS2)
Material Types (Configuration)

And stored
in table T134T
Material Master Data


Everything our company needs to know about
the material
Data is stored in functional segments called
views






Basic data
Sales
Materials Management
Accounting
MRP
Etc.
Material Views
Material Master (Financial)

Financial data is maintained about a material



Valuation currency is the currency in which the
unit is priced
Valuation class – The inventory account
associated with the material
Price control


Moving average price – the average price of
materials in stock
Standard price – material prices are updated
periodically
Material Master (Financial)
Material Master (Purchasing)


Purchasing group
Goods receipt processing time


Time to move goods into inventory
Delivery tolerances
Material Master
(Purchasing)
Material Master (Plant)




Environmental requirements
Special storage containers or handling
Shelf life
Weight
Material Master (Plant)
Purchasing Information



We purchase materials from vendors
Purchasing information defines the
relationship between a vendor and a material
This information is used to create purchases
from


Quotations
Manually
Purchasing Information
Record


Determines which materials are supplied by
which vendors
Purchasing information




Pricing
Lead times
Availability periods
Order history
Purchasing Documents





Purchase requisition
Request for quotation
Purchase order
Goods receipt
Vendor invoice processing
Common Purchasing Sequence
Purchase Requisition



An internal rather than external document
It instructs purchasing to request specific
goods be purchased to arrive at a specific
time
A requisition gets created


Manually
Automatically through MRP, production orders,
or sales orders
Requisition Sourcing

Requisitions must be assigned a source of
supply

Internally


A list of sources


Vendors who provide the particular material
Outlined agreements


Get goods from our own plant or centralized
warehouse
Long-term purchasing agreements
RFQ
Request for Quotation



Use for very expensive goods or goods with
no known source
It’s an invitation for a vendor to bid
Quotations from vendors are legally binding
offers

Price, materials, shipping details are all defined
Vendor Evaluation

SAP allows you to evaluate vendors based on





Price
Quality
Delivery
You define scoring ranges
You define detailed criteria
Purchase Order


It’s really the acceptance contract for the
vendor’s quotation
A request to procure specific materials or
services and the conditions of procurement
Types of Purchase Orders

SAP supports different types of purchase
orders




Standard
For services
For consignment
And others
Purchase Order Structure

Remember the structure of a document

Header information


Item overview


Vendor / payment terms
Materials, quantities, item delivery dates
Line items

Item prices
Purchase Order Output


All is not printed
Purchase orders might be sent via




E-mail
EDI
Fax
XML
Goods Receipt


Here is where we receive the goods from the
vendor from our purchase order
Tasks




Determine whether order is correct
Update purchase order history with receipt of
goods
Updates physical inventory
Updates G/L account (Inventory)
Receipt of Goods (Events)

Several events fire when goods are received




Material document created
Accounting documents created
Inventory is updated
Purchase order status is updated
Vendor Invoice Processing

Invoices are validated against the
corresponding purchase order

Discrepancies might cause the invoice to be
blocked

When processed


The accounts payable liability is created
Payment process is initiated for financial
accounting
Financial Accounting
Processing

Accounting pays the invoice



Payment method
Bank
Items



It’s possible to pay all or part of an invoice
Medium
Can be done manually or automatically
Financial Accounting (G/L)
Transactions
Goods
Receipt
Inventory
Dr
Cr
$100
Invoice
Receipt
AP
(Vendor)
GR / IR
Dr
Cr
$100
$100
Payment
Program
Dr
Cr
$100
$100
Bank
Dr
Cr
$100
Material Movement (1)


SAP tracks the movement of goods in,
around, and out of a warehouse
They are depicted using three digit codes





101
103
122
231
561
–
–
–
–
–
goods receipt into warehouse
goods receipt into GR blocked stock
return delivery to vendor
consumption for a sales order
initial entry of stock
Material Movement (2)

Goods can be placed into different
destinations

Into the warehouse



Unrestricted use
Blocked use
Quality assurance