Material Management MM

How the company procures and tracks the materials it uses and sells.

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The Module Concept

Material management describes
all purchasing activities for materials and services, all goods receipt functions, storing of materials and issuing materials and services for further use.

The MM module is fully integrated into any SAP business model and demands integrated thinking and planning.
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MM Functionality
Describes all materials and services All vendors are described in MM and FI Where all purchasing activities occur Stores material-supplier relationships Holds information and rules of how to issue material and services in SAP.

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Organizational Structures
Client Company Code Plant Storage Location Purchasing Group Purchasing Organization
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Client
Highest hierarchical level in an SAP system A complete database containing all the tables necessary for creating a fully integrated system Master records are created per client

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Company Code
A required structural element A legally independent entity The smallest organizational unit for which accounting can be carried out
Where

business transactions are processed Where accounts are managed Where legal individual financial statements, such as the balance sheet and the profit and loss statement, are created

Quarles: Flya Kite MM

The Plant
Lowest valuation area Organizational level where MRP runs Generally used to describe a production site, a distribution center or centralized warehouse May be a physical or logical unit

Quarles: Flya Kite MM

Storage Location
Subdivision of a plant Where materials are managed. May be a physical or logical unit.

Quarles: Flya Kite MM

Purchasing Group
Is responsible for specified purchasing activities Represents buyer(s) Used for reporting Optional element

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Purchasing Organizations
Organizational unit responsible for the procurement of materials and services for one or many plants and for negotiating prices and terms of delivery with a vendor Assignment to plant(s) is mandatory Assignment to company codes is possible Required element not optional

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Purchasing Organization

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Organizational Data
Flya Kite Corporation

Client ...... Flya Kite Corporation USA Company Code CC00 Plant 2000 Manufacturing site Storage location 0010 warehouse Storage location 0020 production Flya Kite Corporation Mexico CCMX Dist.Center 0001 Mexico City Storage location 0030 shipping Dist.Center 0002 Cancun

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Master Data

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Vendor / Supplier Master

In SAP, all pertinent information about a vendor is stored in the vendor master record.
Vendor data will be used by
MM purchasing FI/CO accounting and controlling PP - production

Vendors can be organized in vendor account groups.

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Vendor Account Group

Vendor masters are assigned to a vendor account group.
Through field status maintenance, vendor account groups can be setup for one-time vendors, regional vendors, internal vendors, etc. a management decision as to how to do this

The vendor account group controls both type and number range assignment for vendors.
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Vendor / Supplier Master

By editing the field statuses, a multitude of vendor account groups can be created. In MM the vendor account number will be created and used - additional functionality will be added in subsequent modules Vendor master data is maintained by both the A/P and the purchasing departments.
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Material Master
Each and every material in the system must have a material master record
Material related transactions cannot take place without this record Contains the material related pertinent data to track and process transactions throughout the system

DANGER WARNING BEWARE

Material master record is tedious, contains a lot of minute details, and is very, very critical to a great number of downstream transactions Mess this record up and you will pay at a future time and date in transactions in modules many light years away
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Material Master
The most integrated record in SAP
MM uses it to procure and track materials PP uses it in planning and carrying out production SD uses it in selling and distributing the product to customers FI/CO uses it invoice customers and track costs of sales/production

Users in these areas have different views of the master record

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Material Master - Views

Basic data Classification Sales: sales organization data Sales: general/plant data Sales text Purchasing Purchase order text Forecasting MORE
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Material Master - Views

MRP 1, 2 Work scheduling Storage Warehouse management Quality management Accounting Costing

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Material Types

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Material Type
Used to categorize materials.
Ex: raw materials, finished goods, trading goods, etc.

Defines the material attributes, e.g., valuation, procurement, price control Also controls screen sequence, number assignment field selection, account determination
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Material Type - Examples

ROH - raw materials, purchased externally only, no sales view HAWA - trading goods, always purchased externally, are sold without any change to the material, no manufacturing views exist

FERT- finished products are produced internally no purchasing view exists

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Purchasing Info Record

The purchasing info record provides continuously updated information about the relationship of a specific material with a specific vendor.
Order unit, price, price changes, tolerances, reminder infos, historic data, statistics, texts Once this record is created, the particular vendor is automatically selected when the specific material is to be purchased

Choice of automatic or manual updating

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Transactions

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Transactions
Transactions describe business activities in SAP. Number ranges are assigned to transactions to allow unique documents to be created for every single transaction. Every transaction follows preconfigured rules. Unlike master data transactional data is dynamic - it constantly changes, usually many times per day.
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Automatic Account Assignment

A a set of rules and master data which enable the financial tracking of logistics movements.

Created to avoid manual postings of financial transactions which follow goods movements to reflect the values of transferred materials.
Movements create journal entries
Ex: when physical movement of a quantity of a material is recorded by scanning a bar code, a journal entry with the appropriate debit and credit is entered by the system in the appropriate ledger(s)

Used across all modules to keep track of the values of materials that are being consumed (e.g., production), or transferred into other valuation areas of the company.
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Automatic Account Assignment

Example
-Debit posting $100 -VBR goods issue to consumption material expenses account 701000 -Movement type 261 -Credit posting $100 -GBB offsetting raw material inventory account 102000

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Goods Receipt
Materials can be received as stock items or non-stock items.
Stock: capitalize and track as used Non-stock: expensed but quantity may be tracked

Receipt is possible from external or internal sources.

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Goods Receipt
Stock items can be received into
unrestricted stock quality inspection stock blocked stock (for example, a vendor certification is missing), or restricted stock, when batch management is being used
For example: a particular batch must maintain its integrity due to specific attributes (for example, colors for batches of paint, batch numbers for pharmaceuticals )

Non-stock items are received into orders, projects, cost centers. Materials that are usually received into inventory can also be received into orders, projects, cost centers.
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Goods Receipt
Tolerance limits can be set for goods receipt.
How much variation from the data in the purchase order will be allowed

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Invoice Verification
Set rules for invoice receipt
Quantity, price, receiving date Updates material master cost if moving average price is used Automatic account assignment for price differences if allowed

Verify actual versus target

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Invoice Verification
Three Way Check

Purchase order target quantity target price Invoice receipt actual price

Goods receipt actual quantity

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FI - MM Integration Points
Goods Receipt
Inventory
D+ C-

Invoice receipt

Payment Program
Bank
D+ C-

GR / IR
D+ C-

AP (Vendor)
D+ C-

$100 $100

$100 $100 $100 Recon. Account

D+ C-

$100

$100 $100
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Procurement Activities
From requisition to purchase order
Requisition Material/Service Quantity Delivery Date Acct.Assn. Category Item Category Text Plant Purchase Order Order Type Vendor Material/Service Quantity Delivery Date Price Text Add. Terms

Goods Receipt

Inventory

Consumption

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Flya Kite MM Transactions

EXERCISE MM01: CREATE GENERAL LEDGER RECONCILIATION ACCOUNT We will create the control account in the general ledger that links to the accounts payable subledger where the individual amounts owed to vendors are tracked
Reconciliation account must exist before a purchase can be recorded

EXERCISE MM02: CREATE VENDOR MASTER ACCOUNTING RECORDS Must create a record of the basic data related to the vendor (name, address, etc.) before anything can be purchased from that vendor
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Flya Kite MM Transactions

EXERCISE MM03: CREATE VENDOR MASTER PURCHASING RECORD Creation of the purchasing views for the vendor created in the previous exercise
The previously created vendor master record will be extended to include the data necessary to make a purchae
Assignment to a purchasing organization within Flya Kite that will make all purchases from this vendor Specification of currency to be used Setting up payment termsd

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Flya Kite MM Transactions

EXERCISE MM04: CREATE VENDOR MASTER RECORDS CENTRALLY Creation of another vendor but rather than creating the various views individually (as in the previous two exercises) all views necessary to make the purchase are created at one time when done centrally

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Flya Kite MM Transactions

EXERCISE MM05: CREATE MATERIAL MASTER RECORD FOR RAW MATERIALS
Must have a material master record for a material before it can be purchased, managed, tracked, costed, etc. Creates all the views necessary
Basic data basic data for the material (name, description, unit of measure, etc) Purchasing data needed to make purchases of this material General Plant / Data Storage 1 must be able to track the material in the plant Accounting data to get the vendor paid Controlling data to transfer the cost of the raw material to the finished good it will be used to produce (in PP) for product costing

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Flya Kite MM Transactions

EXERCISE MM06: CREATE MATERIAL MASTER RECORD FOR TRADING GOODS*
Must have a material master record for a material before it can be purchased, managed, tracked, costed, etc. Creates all the views necessary
Basic data basic data for the material (name, description, unit of measure, etc) Purchasing data needed to make purchases of this material General Plant / Data Storage 1 must be able to track the material in the plant Accounting data to get the vendor paid Controlling data to transfer the cost of the material for product profitability determination

* Trading goods are goods that a bought in order to be resold unlike raw materials that
are bought to become components of finished goods (i.e., manufactured goods)

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Flya Kite MM Transactions

EXERCISE MM07: CREATE MATERIAL MASTER RECORD FOR FINISHED GOODS*
Must have a material master record for a material before it can be purchased, managed, tracked, costed, etc. Creates all the views necessary
Basic data basic data for the material (name, description, unit of measure, etc) Accounting data to get the vendor paid Controlling data to transfer the cost of the material for product profitability determination

Notice no Purchasing or General Plant Data Storage views these goods are manufactured, not purchased and are not tracked data storage wise in the same manner as raw materials or trading goods

* Finished goods are goods that are manufactured by the company from raw materials
(and in some cases, trading goods)

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Flya Kite MM Transactions

EXERCISE MM08: CREATE PURCHASING INFO RECORDS
Creates a linkage between materials to be purchased and a specific vendor from whom they will be acquired Vendor can be pre-certified and various factors (e.g., price, delivery time, standard quantity, etc.) can be predetermined so that purchasing activity time and cost can be reduced Only data needed to complete a purchase would be the material(s) needed and their quantities

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Flya Kite MM Transactions

EXERCISE MM09: CREATE PURCHASING REQUISITION FOR STOCK ITEMS
Purchase requisition is an internal document that notifies the purchasing organization of the need for materials, the quantity involved, delivery date required, and where the materials will be stored when they are delivered Although not completed in this case, the appropriate approval authority would approve the purchase of these materials and assume responsibility for their costs by approving the requisition

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Flya Kite MM Transactions

EXERCISE MM10: CREATE PURCHASE ORDER
Using the data from the purchase requisition, purchasing creates the purchase order to be sent to the vendor The purchase order is a legal offer to buy that commits the company to receive and pay for the materials ordered

Copying the Requisition data eliminates need to again input the specifics of the materials to be purchased Automatically assigning the source of supply utilizes the Purchasing Info Record to eliminate the need to input vendor data it is automatically loaded from to the purchase order
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Flya Kite MM Transactions

EXERCISE MM11: CREATE A GOODS RECEIPT
When the ordered goods are delivered, they must be received not only physically but the data related to that receipt must be entered into the system Referencing the purchase order number brings in the pertinent data related to the materials that were ordered and are being delivered The system can be set to automatically propose the receipt quantities as the quantities that were ordered
This can be changed if receipt quantities differ from ordered quantities

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Flya Kite MM Transactions

EXERCISE MM12: CREATE AN INVOICE RECEIPT
Vendors want to be paid for materials they have sent to the company so they send and invoice asking for that payment The invoice must be received by inputting the various data elements from the invoice into the system The invoice receipt must link to the appropriate purchase order so that the three way match can be accomplished Purchase Order = Goods Received = Invoice The actual payment of the invoice occurs in the FI module at some time after the invoice verification occurs in MM
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