session14 (2)

session14 (2) - Unit 10 Materials Management (MM) ­ Rules...

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Unformatted text preview: Unit 10 Materials Management (MM) ­ Rules ­ Materials Management (MM) Business Process Integration Rules MM SAP Enterprise System Rules • Defines the parameters for Master Data and Transactions • Determines functionality for Master Data and Transactions • Relatively fixed • Changes as policy changes Materials Management (MM) SD FI Sales and Distribution Financial Accounting MM Materials Mgmt. PP Production SM Planning Service Mgmt. CO Controlling R/3 AM Fixed Assets Mgmt. EC Enterprise Client / Server Controlling QM Integrated Business PS Quality Project Mgmt. Solution System PM WF Plant Maintenance Workflow HR IS Human Resources Industry Solutions Materials Management (MM) Unit 10 Overview • Reservations • Tolerances – Purchasing – Goods Receipt – Invoice Receipt • Automatic Account Assignment • Invoice Verification Materials Management (MM) Reservations • A request to have a material ready for issue at a future date for a production order, sales order, etc. • The purpose of a reservation is to ensure that a material is available when required and not assigned to another use Materials Management (MM) Purchasing Tolerances • A tolerance limit is set for allowed variance before a warning/error message is displayed – Price variance • Compares the price in the purchase order with the valuation price stored in the material master – Maximum cash discount • This tolerance limit is set to assure that cash discounts do not exceed allowable discounts Materials Management (MM) Goods Receipts Tolerances • Purchase order price quantity – there are two tolerance levels maintained per item – The maximum percentage variance before a goods receipt postings is not allowed – A percent variance that generates a warning message but allows posting • Moving average price variance – the maximum allowable moving average price change allowed Materials Management (MM) Invoice Receipts Tolerances • Many tolerance limits that can be configured for invoice receipts: price, quantity, and blanket purchase orders These tolerances include: – – – – – – Amount for item with or without order reference Form small differences automatically Percentage Over/Under Quantity Variance Exceed amount: quantity variance Blanket purchase order – value and time limit Price variance Integration Materials Management (MM) Integration Automatic Account Assignment • Automatic account assignment is created to avoid manual postings of financial transactions which follow goods movements to reflect the values of transferred materials • Automatic account assignment is 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 Materials Management (MM) Integration Automatic Account Assignment (continued) • Automatic account assignment is a set of rules and master data which enable the financial tracking of logistics movement Materials Management (MM) Integration Automatic Account Assignment (continued) • Internal processing keys – Inventory Postings • BSX – Offsetting Entry for Inventory Postings • GBB – Materials Management Small Differences • DIF – Cost (price) differences (PPV) • PRD – Goods receipt / inv. receipt clearing acct • WRX Materials Management (MM) Integration Automatic Account Assignment (continued) • Rules to setup automatic account assignment – Internal processing key - GBB key to offset inventory postings – Valuation grouping code - groups valuation areas together • Example: valuation area is plant, five plants exist in the company, all five plants use the same accounts. • Multiple valuation groups are possible Materials Management (MM) Integration Automatic Account Assignment (continued) • Account modifier – modifies the internal processing key for various movement types • Valuation Class – points to the material type (from the material master) • Chart of Accounts – chart of accounts mapped to company code • General Ledger (G/L) Account – as defined by financial accounting Materials Management (MM) Integration Automatic Account Assignment (continued) • Account category reference: – Builds the link between material types and the valuation class(es) Material Type Account Category Reference Valuation Class ROH 0001 – Reference for Raw Materials 3000/3001/3002/3003 HIBE 0002 – Reference for Operating Supplies 3030/3031 HAWA 0005 – Reference for Trading Goods 3100 FERT 0009 – Reference for Finished Products 7920 Materials Management (MM) Integration Automatic Account Assignment (continued) What: Where Valued: Why 1: Why 2: Where Value is recorded: Material Valuation Area Goods Movement Additional Information Chart of Accounts Represented By: Valuation Class Valuation Grouping Code Transaction Event Key Account Modifier G/L Account Points To: Material Type Plant What: Where Valued: Why 1: Why 2: Where Value is recorded: BPEN000 Plant – P000 Good Issue Issued to Chart of Consumption Accounts -C000 Represented By: 3100 G000 GBB VBR Points To: HAWA Plant – P000 790000 Materials Management (MM) Integration Transaction Event Key: GBB – Inventory Posting Offsetting Entries Account Modifier Description of Usage of Account Modifier Key Material Movement Type Goods Receipt From Purchase Order with Account Assignment – post to consumption (exp.>rev.) – i.e., non-inventory purchases 101 > 102 GR from Purchase Order>Reverse AUF Goods Receipt From Production Order – post to production settlement 101 > 102 GR from Production Order>Reverse 122 RE return to order BSA Goods Receipt Into Initial Stock – only used once for posting inventory off-set for initial stock data load 561 > 562 GR to Initial Stock Unrestricted>Reverse 563 > 564 GR to Initial Stock Quality Insp>Reverse 565 > 566 GR to Initial Stock Blocked>Reverse VAX Goods Issue To Sales - post to Cost of Goods Sold (COGS) 231 > 232 GI to Sales Order (MM)>Reverse MM 531 GD, goods issue to delivery 623 > 624 GI cust. Returnable packaging>Reverse 633 > 634 GI customer consignment>Reverse Materials Management (MM) Goods Receipt • Materials can be received as stock items or non-stock items • Receipt is possible from external or internal sources • Individually / collectively • Tolerance limits can be set for goods receipt • Special movement type for initial inventory load Materials Management (MM) Integration Goods Receipt (continued) • Stock items can be received into restricted or unrestricted stock • 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 Materials Management (MM) Integration Invoice Verification • Set parameters for invoice verification – Quantity, price, receiving date, P/O quantity – Updates material master if moving average price – Automatic account assignment for price differences - if allowed • Verify actual versus target Materials Management (MM) 3-Way Match Purchase order - Target quantity - Target price - Invoice receipt - Actual price - Goods receipt - Actual quantity - Integration Financial Accounting (FI) Accounts Payable Settlement Purchase Order Payment Program Invoice Receipt Debit Credit Verification Goods Receipt Materials Management (MM) Integration Unit 10, Group 1 Exercises 1. 2. 3. 4. 5. 6. 7. Set Default Values for Inventory Management Reservations Maintain Purchasing Tolerance Limits Maintain Goods Receipt Tolerances Maintain Invoice Receipt Tolerances Set (Review) Valuation Control Assign Valuation Area Grouping Define (Review) Valuation Classes Materials Management (MM) Integration Unit 10, Group 2 Exercises 1. 2. 3. 4. 5. Configure Automatic Postings for Goods Movement Configure Automatic Postings for Taxes Set Parameters for Invoice Verification Create Default Values for Invoice Verification Maintain Company Code Settings for Material Movements Unit 11 Materials Management (MM) - Transactions - Materials Management (MM) Business Process Integration MM SAP Enterprise System Transaction Data • Includes internal and external exchanges that describe business activities • Unlike master data, aggregate transactional data is dynamic - it constantly changes, usually many times per day Materials Management (MM) SD FI Sales and Distribution Financial Accounting MM Materials Mgmt. PP Production SM Planning Service Mgmt. CO Controlling R/3 AM Fixed Assets Mgmt. EC Enterprise Client / Server Controlling QM Integrated Business PS Quality Project Mgmt. Solution System PM WF Plant Maintenance Workflow HR IS Human Resources Industry Solutions Materials Management (MM) Integration Procurement Process Purchase Requisition (Procure-to-Pay) Purchase Order 3Way Matc h Payment to Vendor Invoice Receipt Notify Vendor Vendor Shipment Goods Receipt Materials Management (MM) Integration Basic Procurement Process • Requirements Determination - Purchase Requisition • Vendor Selection • Order Processing - Purchase Order • Order Tracking • Goods Receipt and Inventory Management • Invoice Verification • Payment Materials Management (MM) Purchase Requisitions • Internal document • Requesting a certain quantity of material or service on a certain date • Can be created: – Manually – Automatically (Materials Requirements Planning (MRP), sales orders, etc.) • Release approval procedures are optional Materials Management (MM) Purchase Requisitions Sources • Manually created by user department – Office supplies – Projects – Prototype materials • Automatically created by – Planning (Material Requirements Planning (MRP), Master Production Schedule (MPS)) – Plant Maintenance – Production Orders – Sales Orders Materials Management (MM) Purchase Requisitions Processing • Create purchase requisition (manually or automatically) • Determine source of supply • Release procedure (optional) • Assign vendor and process Materials Management (MM) Integration Purchase Requisitions Creating • Default data for line items – Delivery dates, plants, purchasing groups, etc. • Maintain line item data – Materials, quantities, delivery dates, etc. • Maintain account assignment (if required) – Cost center, General Ledger accounts, project number, etc. • Check data • Save Materials Management (MM) Purchase Orders • Purchase Orders are: – A formal request to a vendor to provide materials or services – An internal planning and tracking tool • Purchase Orders identify: – – – – – Vendor Material and/or service Quantity and price Delivery dates Terms of payment Materials Management (MM) Purchase Order Structure • Header - information specific to the entire purchase order – Vendor – Currency – Payment terms Materials Management (MM) Purchase Order Structure (continued) • Line item details – – – – – – Account assignment Delivery schedule Materials or services quantity Price Description Item category Materials Management (MM) Purchase Order Output • Request for Quotations • Purchase Order • Order Acknowledgment Materials Management (MM) Purchase Order Output Format • • • • • Printed and mailed E-mail Electronic Data Interchange (EDI) Faxed (hardcopy or electronic) eXtensible Markup Language (XML) Materials Management (MM) Integration Goods Receipt • Goods receipt with reference to a purchase order – – – – – – Copy data from purchase order Delivery notification Invoice verification Updates purchase order history Inventory update Automatic update of General Ledger (G/L) accounts Materials Management (MM) Goods Receipt (continued) • You can search for the purchase order number with – Material number, vendor number, etc. Integration Materials Management (MM) Goods Receipt Destinations • Stock - given a storage location, can be posted to three different stock statuses – Unrestricted-use Quality inspection – Blocked stock (valuated) • Consumption - can be assigned a recipient or unloading point • Goods receipt for blocked stock - updates inventory, but material is not valuated (conditional acceptance) Materials Management (MM) Integration Goods Receipt Movement Types • Movement types - stock transactions – Goods receipt – Goods issue – Stock transfer • Movement type determines which – Quantity fields are updated – Stock types are updated – General Ledger (G/L) stock or consumption accounts are updated – Fields are displayed during document entry Materials Management (MM) Goods Receipt Movement Types (continued) • 101 - goods receipt for purchase order into warehouse/stores • 102 - reversal of goods receipt for purchase order into warehouse/stores • 122 - return delivery to vendor • 501 - receipt w/o purchase order into unrestricted-use stock Materials Management (MM) Integration Goods Receipt Account Postings • Inventory account is debited at standard price • Goods Receipt/Inventory Receipt (GR/IR) clearing account is credited at purchase order price • Price difference account is debited (credited) with difference between standard price and purchase order price Materials Management (MM) Integration Goods Receipt Effects • Purchase Order (PO) history and Purchase Order (PO) updated • Material Master - stock and value updated • Notification of goods receipt issued (optional) • Transfer request to Warehouse Management system (if active) Materials Management (MM) Goods Receipt Effects (continued) • Material and financial documents created and/or updated • Stock and consumption accounts updated • Inspection notification in Quality Management (QM) - if active Integration Materials Management (MM) Integration Invoice Verification • Matches the vendor’s invoice to the purchase order and the goods receipt (3rd part of 3-way match) • Matches price and quantity • Updates the purchase order and its history • Updates accounting information Materials Management (MM) Integration Invoice Payment • Selects invoices for payment based on the payment terms in the vendor master or purchase order • Generates payment for released invoices • Updates accounting information Financial Accounting (FI) 3-Way Match for Payment Purchase Order Payment Program Invoice Receipt Debit Credit Verification Goods Receipt Materials Management (MM) Accounts Payable Settlement Process • Determines: – – – – – Open items to be paid When they will be paid Bank from which payment will be made Payment medium Who will get paid • Payment process creates a financial accounting document to record the transaction Integration Materials Management (MM) Financial Accounting (FI) Materials Management (MM) Integration Points Goods Receipt Inventory Dr $100 Cr Invoice Receipt AP (Vendor) GR / IR Dr $100 Payment Program Cr $100 Dr $100 Cr $100 Bank Dr Cr $100 Integration Materials Management (MM) Integration Automatic Account Assignment • Debit posting $100 • Credit posting $100 • VBR goods issue • GBB offsetting to material expenses consumption raw inventory account material account 721### 201### • Movement type 251 (Goods issue to consumption – Sales Order) Materials Management (MM) Integration Unit 11 Exercises 1. 2. 3. 4. 5. 6. Create Purchase Order for Slick Pens Create Purchase Order for Premier Pens Create Purchase Order for Promotions, Ltd. Create Goods Receipt for Purchase Order Create Invoice Receipts from Vendors Post Payment to Vendors Unit 12 Materials Management (MM) - Transactions - Materials Management (MM) Business Process Integration MM SAP Enterprise System Transaction Data • Includes internal and external exchanges that describe business activities • Unlike master data, aggregate transactional data is dynamic - it constantly changes, usually many times per day Materials Management (MM) SD FI Sales and Distribution Financial Accounting MM Materials Mgmt. PP Production SM Planning Service Mgmt. CO Controlling R/3 AM Fixed Assets Mgmt. EC Enterprise Client / Server Controlling QM Integrated Business PS Quality Project Mgmt. Solution System PM WF Plant Maintenance Workflow HR IS Human Resources Industry Solutions Materials Management (MM) Unit 12 Overview • A company may want to establish a long term purchasing relationship with a vendor • Its is accomplished through a purchasing contract (outline agreement or blanket order) • Purchases of that material from that vendor are then simplified and streamlined Materials Management (MM) Buyer/Supplier Relationships Four Types • Antagonistic – parties view each other as the enemy (lose/lose) • Adversarial – each party attempts to maximize their gain (win/lose) • Cooperative – parties understand the benefits of working together (win/win) • Collaborative – parties look for opportunities to create value (win/win) Materials Management (MM) Buyer/Supplier Relationships • Long term partnerships are the objective of the supplier evaluation and selection process for contracts • Traditional purchasing process – Creates an environment of mistrust and low bidder mentality – Leads to higher total purchasing costs Materials Management (MM) Supplier Evaluation and Selection • • • • • • Identify need for long term supplier contract Determine specific sourcing requirements Identify potential suppliers Determine method of evaluating suppliers Select supplier for contract Negotiate and execute contract Materials Management (MM) Benefits of Managing the Supply Base • Contract with only world-class suppliers • The fewer suppliers the lower the purchasing overhead • Purchasing can pursue strategic sourcing issues, instead of clerical functions • Streamline the supply chain • Improved overall quality • Improved delivery performance Materials Management (MM) Outline Agreement • Long-term purchase agreements • Outline agreements can be subdivided into the following types: – Contracts – Scheduling agreements • Outline agreements can be subject to a release (approval or clearance) procedure Materials Management (MM) Contract Process Overview • Step one is to identify and evaluate suppliers • It may involve supplier development • The goals are: – Develop partnerships with good suppliers – Reduce total cost of purchased materials and services Materials Management (MM) Contracting Questions • How will potential suppliers be evaluated and selected? • What procedures will be required to manage the contracts (and suppliers)? • How will performance be measured? • How many are too many suppliers? – – – – – Too many suppliers cost money Supplier integration Collaborative agreements Supplier development Without material production shuts down • What is the risk? Materials Management (MM) Contract Management • Supplier performance metrics – – – – – On-time delivery Material and/or service quality Returned materials Expedite issues Pricing analysis • Problem resolution procedures – Improve or else – Continuous improvement process • When to end the contract Materials Management (MM) Creating a Contract • Is a long-term agreement with a vendor to provide a material or service – For an agreed upon period of time – At a negotiated price or quantity • Can be created manually or with reference to purchase requisition, Request for Quote (RFQ)/quotation etc. Materials Management (MM) Two Types of Contracts • Quantity contracts are agreements with a particular vendor to purchase a specific quantity of materials. Example: Target quantity of 50,000 meters of electrical wire at $2/meter. (MK) • Value contracts are similar to quantity contract except the agreement is to purchase an established monetary value of materials. Example: Target value of $100,000 for electrical wire. (WK) Materials Management (MM) Quotations/Contracts Process • Requirement for material is identified • Process followed to select a vendor – – – – – Request for Quotation (RFQ) Maintaining a Quotation Comparison of Prices Creating a Contract Creating a Release Order Materials Management (MM) Request for Quotation (RFQ) • Is an invitation to a vendor to indicate their terms and conditions (in particular, their price) for the supply of a material or the provision of a service by submitting a quotation • Identifies the required material, quantity, and delivery dates Materials Management (MM) Quotation • A quotation contains the vendor's pricing and conditions for providing the material or service stated in the Request for Quotation (RFQ) • In the SAP component Materials Management (MM) Purchasing, the RFQ and quotation are the same document. You enter the vendor's pricing and conditions in the original RFQ). Materials Management (MM) Maintaining a Quotation • Enter each vendor's quotation in the associated Request for Quotation (RFQ) • Compare prices using the price comparison list • Store the best quote in an info record • Optionally, send rejection letters to the losing bidders Materials Management (MM) Comparison of Prices • You can compare the prices from all quotations from the competitive bidding process using the price comparison list • The comparison list ranks the quotations by item from lowest to highest price Materials Management (MM) Creating a Release Order • Purchase order that references a contract is called a release orders, they specify: – Number of the contract – Quantity to be released – Delivery date • Release order documentation (open quantity, quantity released to date, total value) is automatically updated against the contract when a release order is created Materials Management (MM) Integration Creating a Release Order (continued) • The vendor data, price data, and the delivery terms and conditions are copied directly to the release order. • Release orders can be created from a proposed purchase requisition generated off an Materials Requirement Planning (MRP) run (net requirements). – Manually – Automatically Materials Management (MM) Unit 12 Exercises 1. 2. 3. 4. 5. 6. 7. Create Purchase Outline Agreement (Contract) for Stock Items Run Materials Requirements Planning – Single Item, Single Level Convert Proposed Purchase Requisition to Release Order Create Goods Receipt Review Outline Agreements Create Invoice Receipt from Vendor Post Payment to Vendor Integration ...
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session14 (2) - Unit 10 Materials Management (MM) ­ Rules...

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