The Procurement
Process (MM)
Introduction (1)
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The procurement process involves purchasing
goods from vendors through an internal
purchasing organization
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These goods might be used
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for resale
in a manufacturing process
as packaging
Introduction (2)
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Processes
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Vendors must be managed
Purchase orders are issued
Goods are received into inventory
Invoices are verified
Payments are made
SAP Process Diagram
Materials Management Tasks
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Vendor management
Purchasing
Physical inventory
 Inventory management (quantities)
 Inventory valuation
Invoice verification
Materials management (MM)
MRP
Product catalogs
Vendors (Introduction)
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Vendors sell goods to us
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Some information is pertinent to the company
Some is accounting related
Some applies only to a particular purchasing
organization
Vendors (Configuration)
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Vendor information is divided into three
categories
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General data
(applicable to the client)
Company code
(accounting) data
Purchasing data
(applicable to the
purchasing organization)
Vendor Data (Taxonomy)
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Client data (LFA1)
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Client / Account number keys
Contains name and address information
One-time account indicator
Contains the account group (KT0KK)
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The vendor account group controls the
transaction types possible with the vendor
Vendor Data (Taxonomy)
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Company code (LFB1)
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Client / Account number / Company code keys
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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)
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Purchasing organization (LFM1)
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Client / Account number / Purchasing
Organization keys
Sales person name
Currency of purchase order
Vendor (Account Group)
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Every vendor is assigned to an account group
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The account group defines which partner
functions are allowed
Partner functions for a
vendor
Partner Functions (Illustration)
Organizational Structure (1)
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Purchasing Organization (PO)
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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
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Group of buyers within a PO responsible for
certain activities
Organizational Structure (2)
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Purchasing can be centralized or
decentralized
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Centralized (one purchasing organization for
many plants)
Decentralized (many purchasing organizations)
Global bikes has a hybrid purchasing
organization
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Global / US / DE
Purchasing Organizations
(GBI)
Organizational Structure
(Plants 1)
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In plants, we make things, store things, or do things
 A plant has a purchasing organization assigned to
it
 There is a hierarchical relationship between the
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Company
It’s plants
The storage locations within a plant.
Organizational Structure
(Plants 2)
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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
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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
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Materials are the things we buy from vendors
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Supplies that we consume internally
Trading goods that we buy and resell
Raw materials that we use in production
Semi-finished goods (assemblies) 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 (assemblies)
Material Types
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SAP predefines several material types
A material’s type dictates what can be done
with the material
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We don’t sell raw
materials for
example
Material Types (Configuration)
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Material types are configured through the
IMG (OMS2)
Material Types (Configuration)
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And stored
in table T134T
Material Master Data
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Everything our company needs to know about
the material
Data is stored in functional segments called
views
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Basic data
Sales
Materials Management
Accounting
MRP
Etc.
Material Views
Material Master (Financial)
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Financial data is maintained about a material
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Valuation currency is the currency in which the
unit is priced
Valuation class – The inventory account
associated with the material
Price control
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Moving average price – the average price of
materials in stock
Standard price – material prices are updated
periodically
Material Master (Financial)
Material Master (Purchasing)
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Purchasing group
Goods receipt processing time
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Time to move goods into inventory
Delivery tolerances
Material Master
(Purchasing)
Material Master (Plant)
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Environmental requirements
Special storage containers or handling
Shelf life
Weight
Material Master (Plant)
Purchasing Information
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We purchase materials from vendors
Purchasing information defines the
relationship between a vendor and a material
This information is used to create purchases
from
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Quotations
Manually
Purchasing Information
Record
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Determines which materials are supplied by
which vendors
Purchasing information
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Pricing
Lead times
Availability periods
Order history
Purchasing Documents
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Purchase requisition
Request for quotation
Purchase order
Goods receipt
Vendor invoice processing
Common Purchasing Sequence
Purchase Requisition
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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
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Manually
Automatically through MRP, production orders,
or sales orders
Requisition Sourcing
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Requisitions must be assigned a source of
supply
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Internally
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A list of sources
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Vendors who provide the particular material
Outlined agreements
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Get goods from our own plant or centralized
warehouse
Long-term purchasing agreements
RFQ
Request for Quotation
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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
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Price, materials, shipping details are all defined
Vendor Evaluation
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SAP allows you to evaluate vendors based on
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Price
Quality
Delivery
You define scoring ranges
You define detailed criteria
Purchase Order
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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
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SAP supports different types of purchase
orders
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Standard
For services
For consignment
And others
Purchase Order Structure
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Remember the structure of a document
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Header information
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Item overview
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Vendor / payment terms
Materials, quantities, item delivery dates
Line items
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Item prices
Purchase Order Output
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All is not printed
Purchase orders might be sent via
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E-mail
EDI
Fax
XML
Goods Receipt
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Here is where we receive the goods from the
vendor from our purchase order
Tasks
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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)
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Several events fire when goods are received
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Material document created
Accounting documents created
Inventory is updated
Purchase order status is updated
Vendor Invoice Processing
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Invoices are validated against the
corresponding purchase order
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Discrepancies might cause the invoice to be
blocked
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When processed
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The accounts payable liability is created
Payment process is initiated for financial
accounting
Financial Accounting
Processing
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Accounting pays the invoice
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Payment method
Bank
Items
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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)
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SAP tracks the movement of goods in,
around, and out of a warehouse
They are depicted using three digit codes
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101
103
122
231
561
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–
–
–
–
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)
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Goods can be placed into different
destinations
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Into the warehouse
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Unrestricted use
Blocked use
Quality assurance